Taxation
Introduction
On this section i will touch on some of the types of taxation and the issues involved.
What is Fair, What Isn't
So of course, there is going to be some debate over what is "fair" in the taxation field - with some of the people saying if you make more you should be taxed at a higher percentage (the "progressive" taxers) and those saying that everyone should pay the same percentage (flat tax proponents).
To be perfectly clear, i am in the flat tax camp. i do not believe someone making more money should be punished for making more money, nor am assuming an obligation by those people to pay a higher percentage of their incomes because they have more disposable income (ability to pay principal).
What you are seeing in today's world is the lower class getting off completely free (if not negative), yet getting benefits, and the middle class not playing their fair share - thanks to the tax code. Taking income tax apart from all other taxes (like FICA, state taxes, etc - which are irrelevant to this discussion).
There are things that should not be taxed. Dividends, capital gains, non-cashflow "income" and investment income are among them. There should be as little double taxation as possible (preferably none). A good example of double taxation is the dividend tax. The dividends come out of the corporate profits/earnings that are taxed, then the recipient of the dividend has to pay tax when they receive it.
Keeping this in mind, taxes like the estate/inheritance and gift taxes are morally reprehensible. You should be able to transfer your resources (or receive resources, providing the transaction is mutually agreed upon with no coercion) yourself without the government taking a cut for itself.
It is not fair or equitable to use the tax code as the government's Robin Hood - stealing from the rich and giving to the poor (or special interest groups). Actually, it seems more of a mix of Robin Hood and Robin Brain (stealing from the rich and giving to yourself).
The tax code should never be about redistribution of wealth (something the government should never be a part of). If a person earns the money, they are not indebted to their fellow man.
Methods of Taxation
The two main forms of taxation i mentioned are the "progressive" tax and the flat tax. Of course, there are going to be subdivisions. To help drive the point home, i will give some pointless examples. i guess i should mention some other things.
There is usage taxation, like a gas tax, those who use goods/service pay for it with an associated tax. There is also a nefarious taxation called ability to pay - this is based off the theory that as income goes up a person has more disposable income (and the government being an insatiable spending beast it is wants as much as possible). This particular principal of taxation is more than a little socialist.
Progressive tax: my least favorite method, based off of the ability to pay principal (if you have the money government thinks you should give it to them). As income level increases, so does tax bracket (of course up to a point) - the percentage of your income the government claims as its own. The usual example of this in the US is the income tax. Really, the only reason you do this is to shift the burden of funding of government to the people less likely to use its "services".
Flat tax: called "regressive" by some because, apparently, they think it taxes the poorer groups more. This is fairer, everyone paying the same percentage of their income (regardless of income level). i do not care about "income inequality", neither should the tax code. "Income inequality" is a necessary part of Capitalism designed to reward those who invest, innovate, and take risks. At least it doesn't have the punitive success penalty like progressive taxes do.
Examples of this are sales tax, VAT/GST taxes, and some usage taxes.
The Role of Taxation
The role of taxation is to fund the government (at least the basics). Funding anything beyond that is a de facto tax. Unfortunately, restraint is not something congress actively uses when it comes to spending.
The government has lost sight of many things. For one they use vote buying schemes (usually social programs). The biggest thing they lost sight of is that it is not their money they are spending. Therefore, they have to keep looking for ways to fund their spending habit.
Taxation is appropriation at best, theft at worst.
The role of taxation should not be punitive or redistributive (taxes used to promote "income equality"). The point is not to look for "free cash" (in this case disposable income available) and tax to get everything the government can. Taxes should not be used for social engineering (child, mortage credits, encouraging debt, etc).
The people are not supposed to be working for the government (outside those actively employed by them), the government is supposed to be working for the good of the people. Many times, the best solution is to do absolutely nothing.
Sharing the Burden
Every citizen (at least working ones) have the responsibility to help fund the government. Unfortunately, government does not live up to its part by showing restraint (government wastes money and the budget is probably 4X what it should be). If everyone has the duty to fund the government, wouldn't the most equitable way be for everyone to pay the same amount (percentage). i would say yes.
It is not like the wealthier citizens get more services from the government (but they certainly have to pay for them), it is the opposite with poorer people seeing benefits with little or no cost to themselves. The top 1% of taxpayers paid over 40% of the whole income tax bill (at least in 2007 - The Tax Foundation), supposedly it was more than the bottom 95% combined. Some people say the US has the most progressive taxes of any nation (a OECD study somewhere).
Tax Reform i Would Like to See
Since eliminating the 16th Amendment seems highly unlikely... (i'd go VAT, probably)
So, what would i like to see done with the tax code and taxation at the federal level in the US. i want a flat tax where everybody pays the same percentage of their income without any deductions or tax credits (estate taxes eliminated, gift taxes eliminated. Also, no tax on capital gains, dividends, or interest.) i also want to see income tax withholding discontinued and people paying their taxes on a quarterly or annual basis.
No, tax refunds should not be a thing. Though if you want to overpay the government, you can.
The current tax codes are needlessly complicated. You should never have to outsource your tax preparation because you don't know how to do it. In other words, the average citizen should not have to use H&R Block or Turbo Tax to file their returns.
Ideally, your taxes should be able to be filled out on a postcard. Usually, i would lean into the concept of using cashflows, but in this case, i'm not a fan (especially if there is some kind of capital gains component, without it and maybe double taxation).
The numbers i played around with in Excel showed that the average tax rate (per household for 1970-2007) was 13.4%, the median rate was 16.89%. My plan (on a blog post if i can find it) was for a 15% flat tax. i also had a 20% flat tax with no deductions, exemptions, non-cashflow expenditure write-offs for business).
Disillusioned: Taxation Revisited: Previous Blog Posts (dft-disillusioned.blogspot.com)
Honestly, i'm not sure i can still do some of the data stuff i used to do back then (and i'm sure i don't have the original Excel files).
No comments:
Post a Comment