Currently AFAIK, U.S. taxes are composed of a mix of the following: 1) Consumption Tax - Tax on spending on good or services. 2) Property/Wealth Tax -Tax on assets you own (most common is real estate and automobile registration based on its value). Sometimes this tax is levied when assets are transferred to another person (gift or estate tax). 3) Capital Gains Tax - Tax on profit from sale of assets (real estate, stocks, bonds, etc) If held short term, it is taxed just like regular income but if held long term it is taxed at a low 15% rate. There is an exemption for residences. 4) Income Tax - Tax on earnings from work, interest/dividends, etc Taxes are on a progressive rate (ex. 10%: from $0 to $7,550. 15%: from $7,551 to $30,650, etc). There are all sorts of deductions and credits as well. I may be missing some other categories but this is basically the complete list. This is the current U.S. tax regime (including state and local level). Is the current tax regime the best or can we do better. What alternative to the current regime might be better?
If we don't wage war and spend only half of what we do now on defense. Then we can do: 16% flat income tax 0% capital gain tax 0% sales tax If I remember correctly, that's the tax system of Hong Kong. This is not going to happen as long as our military industrial complex remains alive and kicking. I think an even better system would be a consumption tax only system which is progressive such that luxury goods are charged higher percentage.
why could we not have a flat sales tax of say 20-25%. drop income tax, property tax, death tax, and all the rest.
I would prefer a progressive sales tax that taxes higher % for luxury goods. I suppose the reason might be then people will try to import goods from foreign countries. For example, UK has 17% VAT, so some people there import stuff from here.
Please read The Fair Tax Book by Neil Boortz and John Linder (no relation). If (when?) we have major tax reform in this country, that's how it needs to happen. (Although it won't, because taxation is also a form of governmental control, and the Fair Tax gives that up.)
I think the monthly rebate idea is too costly. Nowadays, with Internet and computers, we can record every transaction at the computer. Then at the end of a tax year, people just refer to how much they spent last year to calculate the tax they owe. By doing this, they can apply the monthly rebate as yearly tax exemption.
I prefer a flat tax of %10-15 sales tax of %X %0 capital gains tax and of course $0 spending on income redistribution
a flat income tax sytem is the most efficient one, by far. in a flat tax system, there is no incentive to cheat. The role of the IRS would be dramatically reduced.
Are Corporations being taxed in a FairTax system? Do they need to pay consumption tax when they pay for the service of their employees?
Probably flat tax with simple exemption such that we can guarantee poor people to have a decent living standard is even better.
you're wrong abou this one. a consumption tax encourages black market transaction. a consumption tax places disproportionate tax burden on young families w children. conversely, it favors empy-nesters.
http://en.wikipedia.org/wiki/Fair_tax Wikipedia's response to black market --------------- Underground economy Opponents of FairTax argue that imposing a national retail sales tax would drive transactions underground and create a vast underground economy.[2][72] Under a retail sales tax system, the purchase of intermediate goods would not always be taxed, since those goods would produce a retail good that will be taxed. Individuals and businesses may be able to manipulate the tax system by claiming that purchases are for intermediate goods, when in fact they are final purchases that should be taxed. Proponents point out that a business is required to have a registered seller's certificate on file, and must keep complete records of all transactions for 6 years. Businesses must also record all taxable goods bought for 7 years. They are required to report these sales every month (see Personal vs. business purchases).[8][73] While the superiority of consumption taxes is evident to many economists and tax experts, problems could arise with using a retail sales tax rather than a value added tax (VAT).[2] A VAT imposes a tax at every intermediate step of production, so the goods reach the final consumer with much of the tax already in the price, along with some extra overhead. The retail seller has little incentive to conceal retail sales, since he has already paid much of the good's tax. Retailers are unlikely to subsidize the consumer's tax evasion by concealing sales. In contrast, a retailer has paid no tax on goods under a sales tax system. This provides an incentive for retailers to conceal sales and engage in "tax arbitrage" by sharing some of the illicit tax savings with the final consumer.[74] In the United States, a general sales tax is imposed in 45 states plus the District of Columbia (accounting for over 97 percent of both population and economic output). Most states also collect a variety of local sales taxes including county, city, and transit taxes.[75] The United States has a large infrastructure for taxing sales that many countries do not have. Proponents respond to the underground economy argument by pointing out that, whereas tax evasion under the current income tax system requires only one person (the payer) to lie on their tax forms, tax evasion under the FairTax requires collusion of both the payer (the retail purchaser) and the payee (the retail seller). Furthermore, the number of individuals required to file taxes drops from approximately 145 million to 25 million, a drop in excess of 80%. This drop in the number of collection points will allow the tax administration to view tax fraud with greater scrutiny.[68] Proponents of the FairTax see a substantial amount of additional tax revenue from those engaging in the black market, as a sales tax would require all who consume to be taxed ------------------------------- Sorta make sense to me
I'm not exactly sure what all this means (flat tax, etc), i'm not a economics buff. Anyone care to explain? Is a tax reform likely? This might be un-related, but whats the deal with social security running out and what not? Why is that going to happen?
wikipedia is NOT a creditable source. it is only common sense that a consumption tax would increase black market activities. that verbiage in wikipedia doesn't make any sense. it is like the AMA's logic that having more MD would drive up medical cost.
Another problem of Fair Tax is that it won't be able to tax personal services like private tutoring, nanny, etc.
I think it is saying since every step from producer to wholesaler to retailer need to report to the government, to avoid Fair Tax, you need to have the whole chain going underground. It is not easy to change your business that way unless your business is that way already, e.g. drug dealing.
Flat tax is very simple. Income tax rate will be the same for all income level. Fair tax is more complicated. But the basic idea is to do sales tax only. A tax reform is possible because the tax code right now is too complicated in the US. Tax code simplification can spur economic growth. Social Security will run out because we have less young people and more retirees. Therefore SS is doomed and young people who are far from retirement age will be royally screwed when they retire.
Regarding flat rate income tax, I totally oppose it. Currently we have a progressive system such that Marginal Tax Rate (Tax bracket) 10% ($0 — $7,550) 15% ($7,550 — $30,650) 25% ($30,650 — $74,200) 28% ($74,200 — $154,800) 33% ($154,800 — $366,550) 35% (Over $366,550) To me, this makes more sense and is much more fairer than, say, 20% (all levels of income). The point of brackets is to say that as you earn more and more income, you can tax it more since a person's ability to pay grows disproportionately. The last $1 of a family on near poverty wages is much more needed and valuable to that family than the last $1 of a millionaire and shouldn't be taxed at the same marginal rate. A simplified progressive tax is not any more complex than a simplified flat tax while being fairer. As for doing away with income tax and substituting it purely with consumption tax, that would simply punish poor families who don't make much but now have to pay high taxes on all their expenditures.
you say it's fairer, how is it fairer to tax somebody a higher percentage just because they earn more? fair is equality. and it's not punishment to poor people, this point is invalid. my opinion is cold hearted, but it is fair for all. i'm just curious on this, perhaps there is something that i'm missing.
