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Wednesday, February 16, 2005

Tax Reform

Mort Kondracke has an article in Real Clear Politics about how the democrats have an opportunity to come up with some new propossals on tax reform. He also has a few examples of some interesting ideas floating around out there. This one peaked my interest:

To do this, she would eliminate the payroll tax and replace it with taxes on the difference between what a person earned and what he or she saved - a consumption tax like sales taxes and value added taxes, but more progressively imposed. Her idea is that people would pay no tax on the first $25,000 of spending, 10 percent on spending from $25,000 to $100,000 and 15 percent on spending above $100,000. 'The less you spent, the lower your tax rate would be,' she wrote. Low-income earners would for the most part be taxed less onerously, since they spend less. Middle- and high-income earners would have an incentive to save their money, preparing for retirement and bolstering the country's long-term economic prospects.'
I'll probably want to think about this a little more, but it seems like a very interesting idea and certainly workable. The biggest deal for me with reform though, is it should simplify the tax code, reducing the paperwork involved which is, I believe, an intrinsically regressive factor. Currently, only those who can afford good tax advice get to take advantage of loopholes. I prefer to just make it simple and fair. This is probably a dream though, as I doubt politicians will have any real motive to make things easier for average people. Update: Cube has his own post on this topic.


Blogger Bill said...

I agree with you that it's an interesting idea, but I'd like to see how investment spending and savings are incorporated into it. At face value, this seems to be targeted at people who don't own stocks or inventment property (rentals). How do capital gains play into it?

Just my two cents.

2/16/2005 01:06:00 PM  
Blogger Dave Justus said...

It seems that this is only designed to replace our personnal income tax and wouldn't affect capital gains or corportate income taxes.

I think that the idea could be expanded to include more than that, particularly capital gains, but determining how much a person 'spent' would be difficult.

2/16/2005 01:23:00 PM  
Blogger tsykoduk said...

When I think about simplicity in the tax structure, I think about a few things - Everyone paying their fair share, and me not doing any paperwork at all.

"but determining how much a person 'spent' would be difficult."

I think that a flat sales tax on all non-food things would take care of that. Jack it up to about 12 or 14% - but level it out. So, anytime that you buy a thing, you pay the taxes. If you buy lots of things, you pay lots of taxes. If you are a spendthrift, you dont. Determining how much you spend is a non-issue. Just sales tax it.

The only problem, is that I think the tax attornies and CPA's would revolt if they saw something like this. No complicated tax code? they would be out of a job.

2/16/2005 01:59:00 PM  
Blogger Cubicle said...

I was a very strong proponet of the sales tax and only the sales tax with the exemption for food.

I still think that would be fairer, but it would open up the chance for the goverment to decide which foods were taxed and how much they were taxed. The could in effect enact fat taxes easier.

I am afraid that the sales tax would be come more and more complicated as time when on, with it taking on purposes such as sin taxes, and gasoline taxes have in some cases.

The flat tax seems the easiest to impplent (saving time and money), though a very large amount of money is going to be lost from the rich and will have to be made up by rasing the general flat tax.

In other words, this will in effect be rasing the taxes on a very large percent of the population (which actually is 100 percent fair, but i doubt the democrats will let bush play it off that way).

I doubt that a flat tax would have the intended effect of lowing goverment spending that some say it would, because people would just expect the rich to pay more, just like they are now. I also doubt with these problems the flat tax would last very long. (not to mention all the people out of a job).

I see serious problems (not in theory) but in application with both of these ideas.

2/17/2005 09:02:00 AM  
Blogger Cubicle said...

sorry for the lenght

2/17/2005 09:04:00 AM  
Blogger Dave Justus said...

No length limit on this blog!

Write as much as you want, comments are always appreciated and some things take a bit of space to say.

2/17/2005 01:07:00 PM  

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