Tax increase

[helene_t]

It's frightening so American you have become, Han. I would expect you as a good Dutchman just to promise to restore norms and values, and leave everything else to the Eurocrats.

[Al_U_Card]

Do you think that the United States of Americorp ~~

don't you mean the u.s. of north america?

Americanexico?

[Winstonm]

Do you think that the United States of Americorp ~~

don't you mean the u.s. of north america?

Americanexico?

I think we need to vote on it:

 

1) CanAmerexico

2) AmeriMexiCan

3) MexiCanAmer

4) North American Union

[Al_U_Card]

Donde es el bano?

 

El numero uno, por favor.

[helene_t]

I vote for Nachos with tomato ketchup and maple syrup.

[Winstonm]

I vote for hockey, massive debt, and chile rellenos.

[Mbodell]

First $10,000 is tax exempt

 

Next $90.000 is taxed at the rate required to balance the budgetary expenditures.

 

Anything above $100,000 is taxed at the rate to pay off the deficit at a rate to reduce the deficit to $0 by 2064

 

You pay your taxes such that at the end of the year, you write down your income, your tax owed, your tax already paid and how much you owe or are owed.

First off I'll say that I'd prefer to tax wealth to income since a wealthy person with out income can still afford taxes and a person who is usually poor but has a windfall year doesn't deserve to get hit with the top rates necessarily. But if we imagine no wealth tax and instead continue to focus on income then I'll say a rough sketch of a better tax policy would be as follows (most people pay far less than in today's situation - some people [those who can most afford it] pay far more):

 

I'd say the first inflection point is an income*1 say triple the poverty line*2. I'd say anyone with income less than triple the poverty line should get 1/3 of the way between their income and triple the poverty line in negative taxes (therefore if you have no income you get a refund for the poverty line). I'd say the next inflection point should be, say, five times the median*3 (not mean) household (not family) income. For income between inflection point 1 and inflection point 2 say 50% of it should be taxed. The final rate I'd have would be, say 2/3 of income above inflection point 2. I'd want all of these points to continue to move as the underlying basis moves [and exact percentages could be adjusted as we balance budget or to make the numbers work].

 

I'll also say that my tax rates here assume no other (at least federal) taxes are needed (I.e., no payroll taxes, no sales taxes, no estate taxes [although if you could add a wealth tax, which the estate tax is, I'd gladly take it and lower the rates above a corresponding amount]) and also assumes you can lower the numbers some because no other Federal programs (I.e., welfare, foodstamps) are needed (although realistically you'd want those other programs and just count them either as 3X income for folks (3X to balance the 1/3X they get back) or as just an advance on their refund).

 

income*1 - I'd want to count as income anything that increases (- for decreases) wealth plus any consumption but I'd floor income at 0. Obviously this includes salary but also tips, gifts, capital gains, stock options, etc. Also, obviously, this is where most complexity comes in tracking what is income and/or tracking consumption plus tracking changes in net worth (depending on how you calculate what should be the same number).

 

poverty line*2 - I'd want a moving poverty line (I.e., adjusted each year) and I'd also want it adjusted for status of the filer and location of the filer. I.e., a single person in rural Alabama has a different poverty line than a family of 4 living in San Francisco. I'd also want a poverty line that accurately measured the costs of living inputs and that didn't overly rely on underreported CPI to adjust or assume that those in poverty have access to costco like prices.

 

In the US currently the poverty line for a family of 4 is $20,650. This poverty line would mean a family of 4 would get cash back from the gov't if they made less than $61,950. So if one family (the Albert's) of 4 make $0, another family (the Baker's) make $15,000, another family (the Cook's) make $20,650, another family (the Davis's) make $60,000, and the last family (the Elliott's) make $75,000 then the gov't would give: the Albert's $20,650 which would make their total income $20,650; the Baker's $15,650 for $30,650 total; the Cook's $13,766.66 for $34,416.66 total; the Davis's $625 for $60,625 total; the Elliott's would get nothing from the gov't (they'd actually owe).

 

median income *3 - Here I'd want to use the most basic household information as correcting to the reported family information or to the mean distorts things upwards too much. The median household income in the US is $48,201. Five times that is $241,005. So for a family of 4 all income between $61,950 and $241,005 would be taxed at 50%. So the Elliott's from above would owe $6,525 in taxes. If you pull down $100K you'd owe $19,025 in taxes. Pull down $200K and you'd owe $69,025 in taxes. Pull down $241,005 and you'd owe $89,527.50.

 

Once you go over that last threshold things go up more. So pull down $500K and you'd owe $262,190 in taxes. Have an income of $5M and you'd owe $3,262,190.83 in taxes (but you'd still have more than $1.7 M in after tax income, a much better situation to be in than any of the other families).

[mike777]

So people pay taxes on what is called:

1) earned and unearned income

2) realized and unrealized gains????/

 

"income*1 - I'd want to count as income anything that increases (- for decreases) wealth plus any consumption but I'd floor income at 0. Obviously this includes salary but also tips, gifts, capital gains, stock options, etc. Also, obviously, this is where most complexity comes in tracking what is income and/or tracking consumption plus tracking changes in net worth (depending on how you calculate what should be the same number)."

 

 

What to call income is such a tricky complicated question. You seem to call every gain, in any form, taxable income? If so, then the next question is how do you define a gain, very tricky....

 

I got 20 buddies who work for the IRS and even under today's rules..these questions are very complicated.

 

Lets take a simple example:

 

I am building a building, how to a value it? Each floor equals what value in building it? More than less than one floor? Keep in mind the building is not finished but is a two floor unfinished building worth more than the one floor finished last year? Did my wealth increase? How do you measure it? Who decides? Who do I appeal to? Where do I get the money to pay taxes..since I have a negative cash flow but a positive wealth increase?

 

If my stock goes up.......10% in 2007..so increase in value....but no sale.....now tax time 2008 and my stock is worthless. I still owe taxes on 10% increase in 2007 even though no sale?

 

It will be cute if stock goes up 100 million in 2007 but no sale and now in 2008 stock is down 50% ...I got to come up with money to pay 2007 taxes.....and i got no cash....or my house..or my stamp collection..etc etc etc....

[Gerben42]

I'd say the first inflection point is an income*1 say triple the poverty line*2. I'd say anyone with income less than triple the poverty line should get 1/3 of the way between their income and triple the poverty line in negative taxes (therefore if you have no income you get a refund for the poverty line). I'd say the next inflection point should be, say, five times the median*3 (not mean) household (not family) income. For income between inflection point 1 and inflection point 2 say 50% of it should be taxed. The final rate I'd have would be, say 2/3 of income above inflection point 2. I'd want all of these points to continue to move as the underlying basis moves [and exact percentages could be adjusted as we balance budget or to make the numbers work].

 

Sounds nice for the poor in theory, but in practice it just means you'd have to raise taxes on everyone else so much that no one can spend any money anymore. In addition, those who can afford it will then move to a country where they don't have to pay so many taxes.

[helene_t]

I vote for Mbodell's proposal. Or something like that, the precise parameters I'm not sure of.

[Codo]

I dislike mbodells b-modells.

 

1. As Gerben mentioned, the very rich will leave the country or at least they will take their money away. We saw this in Sweden and Germany f.e.

 

2. There is simply no majority for a simple and effectiv tax system. Obviously a lot of deciders what it complicate. During our latest federal election on party tried to put such a system into the focus. (Kirchhoff-modell)

Unluckily they had to stop this because most people had not voted them.

 

3. If you want a "wealth" tax instead of an income tax, you take the taxes for the same earnings multiple times. I doubt that this is fair.

[Al_U_Card]

Here's a thought.....your tax payable would be a function of your income AND your tax paid in previous years.....the more you have paid in the past, the less you have to pay now. (Future value anyone? :P )

[kenberg]

There are issues with this refund that need to be thought through. I have a relative (doesn't everyone) who really does not believe in working. She and her boyfriend live cheaply, they think my wife and I are a bit nuts to devote so much of our lives to making money. Their way works for them. I can guarantee you that if you were to give them each the poverty line amount for a single person (whatever it is) conditioned on them making $0, they would say thank you very much and would absolutely never work again. Maybe a little "below the radar" stuff now and then as a supplement. They live more or less at the poverty line now, working when they absolutely must. It's their way of life and they are happy with it. If they could live at the poverty line w/o working at all, they would be very happy.

 

I can tell you, personally, I don't plan to give them any money. Am I OK with setting up a tax/refund program that would give them the money I won't? Not really.

 

As with so many social issues, I am a bit stumped. This country is much richer now than when I was young and still we have so many people in bad circumstances. I am reluctant to just say "Forget about trying to do something useful that you would be paid for, just turn on the TV and we will send you a check." Seems like a bad idea. Do I have a better one? Not really.

[helene_t]

2. There is simply no majority for a simple and effectiv tax system. Obviously a lot of deciders what it complicate. During our latest federal election on party tried to put such a system into the focus. (Kirchhoff-modell)

Unluckily they had to stop this because most people had not voted them.

The Kirchhoff model looked very good to me. Not sure why people didn't like it. Maybe they are just against changes in general?