How to Decrease Taxes.

Originally posted by QRQ 30

If it is not made attractive for the wealthy to invest their wealth and create jobs, they have every right to sit on their money and spend it as they see fit. Personally, I could live out the rest of my life quite comfortably with a cool million in the Bank of Costa Rica.

Flat tax is attractive to the wealthy. Very attractive.

While self-employed in NYC and making a decent living, I paid a total of 52% of my income in various taxes (including SS). Now, if a flat tax reduced that load to say: 35%? I'd be thrilled.

Now maybe some of those who make higher numbers can take advantage of various tax loopholes, etc. and get their actual tax load down from where it would be based purely on their gross income... probably quite a few can. But that means they are investing a significant amount in accountants and possibly lawyers to manage those loopholes. So a flat tax still appeals to them, for two reasons.... 1. It reduces their overhead as regards those accountants and lawyers. 2. It makes it easier to plan since they can know exactly what their tax load will be.

Originally posted by NousDefionsDoc
'Mornin' sir.

Evening here, Doc.

[NousDefionsDoc]

It makes it easier to plan since they can know exactly what their tax load will be.

I agree. This is a key factor for new hires, capital purchases, etc.

[NousDefionsDoc]

Originally posted by Greenhat
Evening here, Doc.

But Morning in the US, and that's where our hearts are, no?

[QRQ 30]

Well Folks: This illustrates my point on another thread yesterday. Taxes will never be cut. The source and method of collection merely changes. It's kind of like a bladder. You may push it in at one point but it will pop out at another.

I disagree QRQ,

I have actually seen my taxes go down, and stay down (until I chose to move). As an Army Officer who claimed residence in Ohio (because of where I went to school) during Reagan's administration, I saw my tax load drop and stay down. After I left the service and moved to NYC my tax load jumped (being self-employed in NYC will do that to anyone), but that was my doing. Of course, then GHW Bush increased taxes as well...

But I think you are missing the point. A flat tax will reduce taxes. It does so by reducing the beaurocracy required to collect taxes and reduces tax load by reducing the cost to citizens to file taxes (your tax load is not just what you pay, but what it costs you to prepare your return) and reducing the costs of refunds (as a flat tax should require very few if any refunds).

[QRQ 30]

Assuming you are correct Greenhat, how does one go about determining what a person's taxable worth is. It seems that one of the problems today is "hidden assets". Do we go on the honor system or do we keep the present beaurocracy in place? If we believe that a flat 15% tax against Corporation A will work, bear in mind that corporation A can raise its prices and increase "productivity" in order to cover it.

Again, they are going to get your money in one way or another -- taxes, fees, sur-charges and anything else they can put a name other than "tax" on.

If all the beaurocracy needs to do is check on what income is, it's a lot smaller of a bearocracy than one that needs to audit and evaluate and judge the legality and appropriateness of deductions. Especially since we live in an age where movement of money is pretty much done by computer and all accessible.

As for corporations, what do you think they do now? At least with a flat tax, we aren't spending huge amounts of tax dollars doing audits on what is costs and deductable and what is profit and the corporations can actually plan for their tax load.

[Roguish Lawyer]

Originally posted by Greenhat
A flat tax will reduce taxes. It does so by reducing the beaurocracy required to collect taxes and reduces tax load by reducing the cost to citizens to file taxes (your tax load is not just what you pay, but what it costs you to prepare your return) and reducing the costs of refunds (as a flat tax should require very few if any refunds).

Well, assuming you set it at a certain rate. You could increase the overall tax burden with a high flat tax, as I'm sure you know.

[Valhal]

Originally posted by Greenhat
There are three groups of people who don't benefit from a flat-tax:

1. Politicians, since they no longer have tax exemptions and loopholes to use as bargaining chips.

2. The beauracrats of the IRS and other tax agencies who no longer have any reason for the excessive size or complexity of their organization.

3. Those who work in the tax industry, primarily accountants and lawyers, since a flat tax is simple enough for almost anyone to work out (also unlikely to get a return if your employer is simply withholding 17% of your income). Related to this group are corporate accountants and lawyers whose job is to ensure that the corporation they work for adhers to the tax code.

Simpler, fairer and in all liklihood, brings in a greater tax revenue to the government. Isn't the best solution (I think our founding fathers had the best solution), but it sure beats what we have now which is discriminatory, obviously unfair, and which impedes the economic growth of the country.

Well said GH, but what about all those unemployed accountants and lawyers, their families need to eat too.

Also being self employed, it amazes me how much I have to shell out every year both to the Feds and State, not to mention the accountants bill. It makes it hard to get ahead. And then when I die what I am able to accrue will be taxed again, leaving my son to fight uphill just like dad.

A flat tax would be much more simple. But like you said the complexity of the system is a major source of lncome, in the form of penalties and interest in improper filing.

One more point, A flat tax would make it much harder for crooks to get away with tax fruad.

[Roguish Lawyer]

I disagree with QRQ's views on taxes never being cut, but I agree that we are spending too much money.

[Valhal]

Originally posted by NousDefionsDoc
I'm just messing with GreenHat. He hates it when I talk like this. LOL

I do agree with a flat tax. If you want to hit the rich a little, a flat sales tax will work. Rich people buy more stuff.

I would go for a flat 20%.

We have IVA. Flat 16% on most everything except milk and vegatables. Works well, but they put "profit" tax on top of that. Then steal the money.

In a statement I read today Jesse Ventura wants to run for the presidency in 2008 on that platform.

[Ockham's Razor]

I have to head out right now, GH. Though, I promise before this day is out to address every question you posed and show you exactly how a flat tax will favor the rich in more ways than you are letting on. Specifically, how it only taxes certain aspects of income and does not address accumulated wealth.

If we are all ok with people in the lower tier paying the bulk of taxes and those with the ability to hide their assets and shirk the responsibility of paying the fair (fair does not always mean equal) share then yes, the flat tax is the way to go.

There is a great cost to have the nation that we reside in. We do not enjoy a $400 billion dollar military without people paying for it. Also, whether we agree with it of not, we also enjoy, after the incredibly misguided addition of prescription drugs, a trillion dollar federal health assistance program. All of these things must be paid for. Those that have ammassed and earned the wealth are always going to pay more into the system than those who cannot. Otherwise we will always be begging foreign governments to buy our debt so that we can afford the systems we currently have.

If you are advocating cutting the social systems, military budget, and broadly, the overalll budget, I will concur with you that then we can reduce our need for revenue. However, that has not and will never happen. Until that time, we need massive amounts of money to keep our system going. Unfortunate as it may seem, the wealthy are a ready source of revenue to keep our system in the black. We can see recently from the tax cuts what happens when we do not collect from them enough revenue, we live in the world of red ink.

I'll be back later on to answer all of your questions to my accusations on the flat tax.

[QRQ 30]

It all sounds good but I have to revert to my 1st grade arithmatic. If we spend more than we make we die. Spending is increasing so income must increase. I believe one Tomahawk costs $5 million and one JDAM is aone million. To those of you who have really experienced a cut in taxes, fees, sur charges etc. how much additional money were you able to save? On the other hand, how much did you lose in services? The Employment Security Commission in SC recently laid off a large portion of their force who were actiively seeking work for the unemployed. Now they have joined the ranks of the unemployed.

Let's get rid of the tax collecting beaurocracy. Good idea!! The govt. saves that payroll. Of course input to FUI, MediCare, Social Security also decreases. I would guess that initially 100K will become unemployed. There is already near double digit unemployment in some areas. I know a List member who was a CFO for a large company and has been unemployed for almost a year now. It hits everyone.

Less payroll equals less spending. This reduces the income of states and local government.

Less payroll means les consumer spending which leads to less need for sales personnel, which leads to further un-employment.

Less spending leads to reduced production, again increasing un-employment and goverrnment income. It's a horrible tail-spin. The solution may eventually be to return to an agrarian society. The question will no longer be: "How are you going to keep them down on the farm?"

Originally posted by Ockham's Razor
I have to head out right now, GH. Though, I promise before this day is out to address every question you posed and show you exactly how a flat tax will favor the rich in more ways than you are letting on. Specifically, how it only taxes certain aspects of income and does not address accumulated wealth.

If we are all ok with people in the lower tier paying the bulk of taxes and those with the ability to hide their assets and shirk the responsibility of paying the fair (fair does not always mean equal) share then yes, the flat tax is the way to go.

There is a great cost to have the nation that we reside in. We do not enjoy a $400 billion dollar military without people paying for it. Also, whether we agree with it of not, we also enjoy, after the incredibly misguided addition of prescription drugs, a trillion dollar federal health assistance program. All of these things must be paid for. Those that have ammassed and earned the wealth are always going to pay more into the system than those who cannot. Otherwise we will always be begging foreign governments to buy our debt so that we can afford the systems we currently have.

If you are advocating cutting the social systems, military budget, and broadly, the overalll budget, I will concur with you that then we can reduce our need for revenue. However, that has not and will never happen. Until that time, we need massive amounts of money to keep our system going. Unfortunate as it may seem, the wealthy are a ready source of revenue to keep our system in the black. We can see recently from the tax cuts what happens when we do not collect from them enough revenue, we live in the world of red ink.

I'll be back later on to answer all of your questions to my accusations on the flat tax.

Flat taxes increase federal spendable income, not decrease it. One reason is because of the reduction in expenses the gov't pays in collecting tax (any idea how large that taxpayer's burden is?). Second, it reduces the opportunity to hide income, because it eliminates all the loopholes. You seem to think that only under a flat-tax system do certain people have the wherewithal to hide assets and income. If they would have that ability under flat-tax, they have that ability now. And if they are of the bent that will do so, they are doing so now. A lot easier under the current system to hide income legally than under a flat-tax scheme.

A flat-tax is fairer. Each and every person pays a % of their gross income after a basic amount which is exempt (say first $5000). Those who make more, pay more. Let's say the rate is the 20% NDD suggests (by the way, SS is a flat tax - 15%). You make $10,000, I make $100,000. You pay $1000 tax (probably about the same as under the current tax code...but you don't have to pay H&R block and you probably don't get a return, you just kept your money in the first place). I pay $19,000. Of course, under the current system, I may choose to pay $5000 to an accountant and end up paying $6500 taxes... ($11500 cost to me, $6500 to the gov't) or I might just say the heck with it and pay $24,000. Which way do you think most people who make money choose to pay their taxes?