The Least Harmful Tax?

[Billy T]

I believe only citizens should be taxed...as only citizens vote. Taxing corporations is only an 'indirect' way of taxing citizens.

But can you give an example of how your 'ten year' waiting period would work?

That 10 years also may need to be modified by a study commission, but if it is 10 years and first year of plan in effect is 2018, then each corporation gets out it annual reports for 2008 and makes sure their dividends paid in 2018 are greater than the profits were in 2008. Or something like that. Again the precise details will need careful study.

The 10 year phase is ideas I illustrated here:

... I.e. my idea in my tax plan is this generation gives real net benefits to the future generation, not un-payable debts.Of course new tax plan is phased in. Some what arbitrarily, I suggested 10 years and a linear phase in (but perhaps a non-linear phase in is better?) A commission would be needed to chose the best phase in plan. I chose 10, linear as it is easiest to illustrate:

I.e in first year you compute your tax as you do now and find you owe M and also compute with the new plan and find under it you owe N. Then what you pay is P = 0.9M + 0.1N and second year it is: P = 0.8M + 0.2N etc.

A phase in of only 10 years would make the home mortgage deduction worth only about 90% of its value in the first year, and yes that would be some economic stress, but there are many benefits to Joe Homeowner, when the wealthy are not getting the tax breaks the lawyers discover in the 30,000 volumes of tax code.

Recall that in my tax plan, the Office of Budget adjusts the tax computation formula each year to cover the expenditures of Congress and the "Fund as you go" legislation requirement operates 100% in year one. Also, the threshold for zero wealth tax, again set by commission study, is probably in the range of 50 million dollars net worth.

Also note, that on average most stocks are owned by the well off. Corporations pass their profits mostly to them, and they tend to have higher marginal tax rates than the corporations were paying (This is the third of several more reasons I have just listed why LESS WILL BE COLLECTED from the typical home owner. (Others, not him are losing their tax loop holes; Congress is more reluctant to spend as they know the CBO will set the tax formula factor (for pay as you go) higher, and anger voters; income originating in corporations pays on average a higher tax rate (= equal marginal rate of the wealthy)

Yes typical Joe Homeowner will get say 10% less interest deduction in the first years but still pay significantly LESS tax as the wealthy pay more and government builds no more bridges to no where. Also note that this Sacred Cow benefits on small part of the population - Nothing for renters, and many, like the baby boomers paid off their mortgages. ...

SUMMARY: I am not wise enough to set the details, but want to establish some principles:
(1) All income is treated the same.
(2) Except in war time, Government runs on a "pay as you go" system. I. e. Each new expediture bill in Congress passes thru the CBO to get at least its current year cost impact evaluated and the CBO then announces that the "tax adjustment factor," in the tax calculation equation will for example, will be bumped up from 1.235 to 1.245 by it if that bill becomes law.
(3) There are no special tax breaks. Everyone pays from the same progressive rate schedule
(4) Accumulated wealth (when large say > 50 million dollars) is tax by progressive schedule too, but giving wealth to IRS qualified groups can reduce income by half the gift total (and obviously reduces "accumulated wealth" by 100% of the gift.) This encourages the wealthy to support IRS approve organizations.
(5) US corporations are not taxed but must distribute 100% of their profits after some (10?) years delay to tax payers, who typically will pay a higher marginal rate than the corporations did.

[quadraphonics]

Yes. I will admit that things like QE1 &2 (and soon 3 but with some other name) do make short term stimulation but also make long term economic disasters of un-payable debt accumulation.

This seems to be the basic issue.

I don't want to get into a long-winded analysis of that idea right now, so let me just point out that if you legislate that the only way for politicians to enact deficit-financed economic stimulus is via declaring a war, then the result will simply be a lot more declarations of war, rather than a lot less deficit-financed stimulus.

When youner I though Keynesian ideas were correct (and they probably are IN PRINCIPLE). In practice, several decades under both parties have show that when times are good, the government ignores the Keynesian concept of running surpluses that off set the stimulus deficits used when times were bad.

Sure, everyone recognizes that moral hazard. There are simpler, more effective ways to address it than radical overhaul of the entire tax and spending systems. You can just mandate that the national debt must be decreased by some amount each year that GDP growth is above some target (or unemployment is below some target, or whatever).

Moreover, I can only think of one period in the last several decades in which a Democrat was in charge during a boom time in the economy. It was the 1990's, and the result was that the national debt got reduced substantially. A larger analysis of the behavior of the debt under different parties' control likewise refutes your equivocation. So, I reject the premise that there is a problem that requires a systemic solution here - all we really need to do is vote for Republicans less often, until they get the message and start following through on their rhetoric about balanced budgets.

These benefits includes investments in infrastructure and schools etc. BUT ONLY TO THE EXTENT THE CURRENT GENERATION PAYS FOR THIS. People want their children to have a better life than they had and will support infrastructure and education to achieve that.

But, you hamstring their ability to buy such by preventing them from financing any of it. They can only build what they can pay for at the time, each year. This type of scheme would rule out maintaining the interstate highway and rail systems, for one thing. If applied at the state level, it would cripple education and other services. All infrastructure would have to be private, since only private entities would be allowed to finance anything big.

Current system of issuing bonds often for not needed infrastructure, but for local make-work job creation does not benefit future generations (or even the current one sometimes). Can you say "bridge to no-where"?

That's a seprate - minor - problem, and hardly one worth doing away with infrastructure creation entirely in order to fix. You're throwing out the baby with the bathwater.

Ask any intelignet college student if he thinks he will be better off than his parents were, or if he will ever see a dime´s worth of benefit from the 10s of thousands of dollars he will pay into Social Security

I've never met a college student who had a particularly informed view of how Social Security works, what its finances look like, etc.

In point of fact, Social Security will require only a minor haircut in benefits (or minor boost in taxes) to render it solvent indefinitely. You're probably thinking of Medicare.

(which is helping fund current government expenses, not invested for him).

A T-bill doesn't count as an investment any more?

In point of fact, though, Social Security only barely runs a surplus these days and so almost all of the money paid in just gets paid out to current retirees. In a few more years, there will be no money invested in T-Bills.

They know the current generation of their parents has screwed them badly.

That's a canard, frankly, and generational warfare rhetoric is useful idiocy for the 1%.

A phase in of only 10 years would make the home mortgage deduction worth only about 90% of its value in the first year, and yes that would be some economic stress, but there are many benefits to Joe Homeowner, when the wealthy are not getting the tax breaks the lawyers discover in the 30,000 volumes of tax code.

So the political viability of your plan depends directly on its details working out such that it hoses the rich. Sounds like a recipe for failure - the rich will still find ways to game the system, and you'll have a hell of a time trying to explain how people will benefit overall.

Also, even if your average homeowner does end up with the same final income, getting rid of the mortgage interest deduction will still distort the housing market in a systemic, long-term way that will crunch an entire generation of voters. This is because you are getting rid of an incentive to buy, instead of rent - and so, even if everyone still has the same amount of money, they will not want to buy as many houses with it as they did under the subsidy, and so the value of homes will decline. So even if everyone can still afford their mortgages, your still devaluing the single biggest asset that most voters will ever own.

Also, the threshold for zero wealth tax, again set by commission study, is probably in the range of 50 million dollars net worth or more.

Why? I don't see anything in your plan that says what the balance of wealth and income tax should be, nor how progressive each one would be structured. Moreover, I don't see how it would fit on an index card if you actually specified that stuff - nor how you propose to maintain the political support for keeping these crucial details where you need them to be for the plan to work.

Note that the flaws you claim to be addressing in the current system are themselves matters of political will, and not statutory details. There is no tax code you can come up with that can prevent a democratic populace from voting itself the ability to borrow money.

Also note that this Sacred Cow benefits only a small part of the population - Nothing for renters and many, like the baby boomers, have paid off their mortgages.

Dude, something like 60% of all US households have a mortgage. This deduction didn't become a Sacred Cow by benefitting only some narrow minority.

And if you think anything close to all fo the Boomers have paid off their mortgages, you've missed a lot of economic trends in the USA in recent years. 63% of Americans in the 55-65 age range still have mortgages, and the amount owed by said group has exploded in recent decades.

Because "Income is Income" -does not come in 30 or 40 different forms (like short term vs long term capital gains etc.) AND everyone pays on the same progressive schedule. There are "tax tables" like now for those who can not evaluate the two simple formula that are printed on the "3 by 5 index card".

One is T(i) = ..... the tax on your income. & other is T(w) = ..... the tax on you accumulated net worth. Note for at least 85% of the population, T(w) = 0.

I didn't ask why you think your plan will fit on an index card. I asked why you think that the question of taxation and spending policy in a large, developed modern nation can be simplified to that extreme. There's a certain level of complexity inherent in the economy and society in question to begin with, and so an over-simple tax code will fail to reflect that and so produce bad effects. What confidence can we have that the US economy and society are simple enough to be efficiently addressed with a tax code that would fit on an index card?

[quadraphonics]

(1) All income is treated the same.

No progressive tax system treats all income "the same." That's the whole point - larger incomes get treated differently from smaller incomes.

You are being intentionally obtuse (or just not understand what was clearly said, and even illustrated by mentioning among the dozens of different TYPES of income long vs. short term capital gains.)

Yes those with larger TOTAL income will pay higher percentage on any "progressive rate schedule." But their tax on the 100th dollar they earned is at the SAME rate as everybody else´s 100th dollar earned. Likewise all who earn their 100,000th dollar pay the same rate on it.

[Carcano]

Of course.

You don't?

I dont...government should raise money only through the leasing of land....which is the primary asset it actually owns.

Not selling...leasing. Far more money can be made over a long time period by leasing than selling.

Sadly, most governments have given away or sold off most of the valuable land they could have used as a revenue resource for centuries to come.