Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 10-26-2011, 01:56 PM   #41
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,714
Send a message via Skype™ to kcowan
Any tax system will inevitably tweaked by special interest groups dealing with politicians. Over time, this creates a mishmash of exceptions and loopholes. Politicians are poor at anticipating loopholes and side effects. And they love special interest groups.

The best that can be achieved is a one time simpification before the process starts again.
__________________

__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-26-2011, 02:34 PM   #42
Moderator Emeritus
 
Join Date: Oct 2007
Posts: 4,929
I like the latest flat tax proposal, as an outstanding example of simplification, American Politics style. My tax preparation would reduce to:

1) prepare my standard old tax code style return, including all the assorted deductions, income sources, and credits. 1040, Sched A, D, Foreign Taxes, etc.
2) prepare my alternative minimum tax return, including fewer deductions, more income sources, adjusted credits. More of the usual forms.
3) note the larger of the amounts due from steps 1 and 2
4). Prepare a tax return under the new rules, including the new proposed exemptions, taxable income sources, and new credits. All new forms to complete!
5) choose the smaller amount from steps 3 and 4, and file the appropriate return.

Easy. Simple. And even better, it creates thousand of new jobs for tax preparers! What's not to like?
__________________

__________________
M Paquette is offline   Reply With Quote
Old 10-26-2011, 02:43 PM   #43
Thinks s/he gets paid by the post
 
Join Date: Apr 2011
Posts: 1,557
Quote:
Originally Posted by retire@40 View Post
I'm really surprised nobody has ever talked about scrapping the entire tax code as it relates to individuals and implementing a national real estate tax.

I can't think of any negatives in having a national real estate tax, but here are some positive points:

  • Everyone pays some tax, except for the homeless. Even renters would have this tax built into the rent they pay to the landlord.
  • The tax can be made progressive in $100K assessed value increments. For example, a 0.10% tax on the first $100K value ($100), 0.20% on the next $100K value, 0.40% on the next $100K value, etc. I just made these numbers up for example purposes, but with everyone paying something, we would all pay less.
  • The assessed property values and associated taxes would be transparent since they would be in the public domain. Hence, very little or no cheating.
  • No tax forms to complete.
  • No April 15 deadlines.
  • No audits.
  • No need to keep receipts to justify income/expenses under an audit.
  • All wages and other income are tax-free, so make as much money as you want without worrying about being taxed at a higher bracket.
  • Efficient collection if the IRS uses the same method as each town already uses. Maybe the IRS could even have the towns collect the tax and keep a small amount for admin purposes.
  • There could be a "special assessment" in areas prone to natural disasters where it may cost the government (aka other taxpayers) money to keep saving people from themselves when they build in these areas.
  • There could be tax-free zones where the government wants to stimulate population growth, or needs workers for a specific military need.
Bottom line, this is the easiest tax plan to understand, implement, and collect.
I like the idea. Thanks for bringing it up.

Why wouldn't cash, gold, art, stocks, etc., be "property"? I.e., why not a wealth tax that includes all tangible assets? 0.5% of Gates' or Buffett's ~$50B wealth tax/yr would $250M. Somebody with $5M assets tax would be $25K. Somebody that's in net debt would be $0.
__________________
gerntz is offline   Reply With Quote
Old 10-26-2011, 03:09 PM   #44
Dryer sheet aficionado
 
Join Date: Jul 2007
Posts: 47
The way it's typically proposed, a flat tax is orders of magnitude more simple than the current tax code.

This does not mean your own personal taxes will be a lot more simple, although that will likely be the case. Believe it or not, the rules surrounding what you currently file for yourself, do not make up the entirety of the U.S. Federal tax code! Although having fewer deductions and such, would still simplify that.

This is much more about taking all the thousands of provisions in our tax code and doing away with them, while simultaneously making it so that government can't behind the scenes, be granting constant streams of special tax breaks for their donors, for political reasons, etc.

Additionally, if congress asks for a tax hike, the idea is that most of the population is then affected, so you won't get pandering based on wealth in terms of who gets taxed and who doesn't. A democrat in office might run on lowering taxes for the middle class and below, a Republican might run on cap gains reduction, for example. That would go away by in large, you'd have to propose to the U.S. population, a tax increase. Might go a long way to promote less government spending right?
__________________
Mach is offline   Reply With Quote
Old 10-26-2011, 03:56 PM   #45
Moderator Emeritus
 
Join Date: Oct 2007
Posts: 4,929
Quote:
Originally Posted by gerntz
I like the idea. Thanks for bringing it up.

Why wouldn't cash, gold, art, stocks, etc., be "property"? I.e., why not a wealth tax that includes all tangible assets? 0.5% of Gates' or Buffett's ~$50B wealth tax/yr would $250M. Somebody with $5M assets tax would be $25K. Somebody that's in net debt would be $0.
Oh, don't stop there. Tax the intangible assets, too.
__________________
M Paquette is offline   Reply With Quote
Old 10-26-2011, 03:59 PM   #46
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,037
Quote:
Originally Posted by gerntz View Post
I like the idea. Thanks for bringing it up.

Why wouldn't cash, gold, art, stocks, etc., be "property"? I.e., why not a wealth tax that includes all tangible assets? 0.5% of Gates' or Buffett's ~$50B wealth tax/yr would $250M. Somebody with $5M assets tax would be $25K. Somebody that's in net debt would be $0.
A number of countries have experimented with the wealth tax and it has never been a success. There are more efficient ways to collect taxes.
__________________
FIREd is offline   Reply With Quote
Old 10-26-2011, 04:22 PM   #47
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 6,323
I have looked at all the flat-tax proposals. Every one of them means I will pay MORE taxes, unless there are huge reductions in Federal expenditures. This is just a way of increasing the tax burden on the middle class.
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 10-26-2011, 04:25 PM   #48
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 6,323
if the goal is lower taxes, then do what the rich do - get more income from capital gains and dividends taxed at a maximum rate of 15%. Own your own business so you can write off all sorts of expenses. Be happy that we have the best government money can buy!
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 10-26-2011, 07:28 PM   #49
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,815
Quote:
Originally Posted by samclem View Post
It depends what the goal is. If we want "simple," then taxing all income (wages, Cap gains, dividends, etc) at the same rate is very simple, and that is appealing. It also strikes most people as "fair"--no matter how you earned it, once you get it you pay the same tax rate on it. There are at least a couple of problems in implementation:
Cap Gains: If you bought an asset 20 years ago and sell it today for 10% more dollars than you paid, you really didn't earn 10% in income. Due to inflation and the decreased values of today's dollars, you really had a tremendous loss --of approximately 36%. So, to truly tax the value of the income, any Cap Gain tax should be indexed to inflation. That increases complexity (I can see the voter's eyes glazing over). In addition, a significant portion of the cap gains of most stocks is due to retained earnings--the stock went up in price because the company held back some earnings to invest in the company. Those earnings were already taxed when the company earned them, to tax them again when the stock is sold violates the principle of fairness for which we are striving.

Equitable treatment of capital: Is there any inherent reason that income produced by putting your money at risk should be taxed at the same rate as income produced by your labor? After all, you are taking a risk. Will the government treat the results of your risk equitably--treating losses just as they treat gains? So, if you put $1000 at risk and earn $100, they take $10, but if you lose $100 ("earn a negative $100") they pay you $10? I don't think so.

Practical impact on the economy: The US has had the same tax rate on wages as it had on investment income (capital gains, interest, dividends, etc) several times in our history. For example, the 1986 Tax Reform Act made the cap gains rate the same as the rate for earned income (up to the 28% rate). The impact of this policy is (frequently) that business slows down as capital availability dries up. In 1997 President Clinton signed another piece of tax reform legislation lowering the top cap gains rate to 20%, and this had a positive impact on the economy.

So, in some cases, the appearance of fairness really isn't, and in some cases simplicity brings neither equity nor prosperity.

But I still think the tax code can be very simple, fair, and promote prosperity (largely by turning the tremendous energies now devoted to "gaming the system" of our bizarre tax code to producing things instead)
I'd agree that cap gains should be adjusted for inflation. But, if I'm already keeping track of the cost basis, doing the inflation adjustment is just another line of code. If we made dividends deductible on C-corp tax returns as part of a deal to raise the dividend rate to the labor income rate, then companies would probably pay out profits, and cap gains would have very little after tax accumulated profit.

I don't see any reason why "putting your money at risk" should be taxed at lower rates than "going out and earning money by working for it". In my life, I've earned investment returns for doing what I was going to do anyway - save for retirement. But, I wouldn't advise higher rates on investment income, just keep it simple and have the same rates. Then we don't have hedge fund managers claiming their $100 million bonus is really "capital gains".

I believe that if you do a full history of cap gains rates since WWII, you won't find the correlation you're claiming. There's good evidence that people will adjust the timing of events to reflect tax changes (defer income to January or advance it into December if you know rates are changing). There's some evidence that they will re-label income (people formed S-corps when the relationship of corp and individual taxes changed in the 80's). But there is little evidence that they simply stop or start saving/investing when tax rates change (just like you can't find much evidence that people work more or less when tax rates change). The market rewards people for working and for saving/investing. I don't think the gov't should use the tax code to try to "correct" the market incentives.
__________________
Independent is offline   Reply With Quote
Old 10-27-2011, 06:55 AM   #50
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Quote:
Originally Posted by ERD50 View Post
There will be a tidal wave of complaints over what is a 'fair' assessment, and there will be fraud.

Why should the govt promote population growth in any specific area?

If they need workers - pay 'em.

People in high cost housing areas will complain. SS payments are not changed for geography, but this tax would be sensitive to it. That would hurt them.

-ERD50
There will always be complaints in any tax system. The nice thing about a real estate tax is that it is transparent, so fraud will be less than any other tax system. Of course an assessment falls within a range since the only time a property is more precisely assessed is when a willing buyer and a willing seller agree on a price.

I just threw out the idea that the government may have the option to have tax-free zones in certain areas. For example, if they wanted more doctors or teachers in Alaska, they could implement that tool.

Of course people in high cost real estate areas would complain. Self-employed people in the 35% tax bracket who also pay 15% in self-employment tax plus state income tax of 5.3% (in MA) complain to me all the time that they are paying over 50% of their net income in taxes. The good thing about the national real estate tax (NRET) is that they only pay a high tax if they choose to live in a high value property. Otherwise, they can make millions and live in a modest home and pay less tax. The well-to-do will keep their mansions and pay the real estate tax for that benefit.

Someone who only lives on social security will not be living in a million dollar home. Not under the current system, not under the NRET tax system. That is why the NRET system would be a progressive tax. So under the examples I gave in my original post, the person on a fixed income living in a $100K to $200K home would only pay a annual NRET of $100 to $200. Enough to make them proud taxpaying Americans, but not enough to break the bank. If even that amount would be a problem, then the rate could be reduced or maybe the first $100K of value would be exempt from taxes.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Old 10-27-2011, 07:20 AM   #51
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Quote:
Originally Posted by Hamlet View Post
I didn't have to think very long to come up with some big negatives.

The distortion of the real estate market by this system would be extreme. If people are taxed on the value of their house and other real estate exclusively, they will go to some pretty extreme lengths to reduce their property ownership. I can see people in places with no shortage of space living in those little pods that the Japanese use for travelling.

I suspect that you would see an awful lot of real estate become government owned as people try to ditch their tax liability.

Businesses would contract their property use to reduce their tax liability. A sit-down restaurant would become a luxury only the very wealthy would indulge in. Most fast food places would become kiosks.

Millionaires would stop building fancy houses. The ultra-high end RV, plane, and yacht markets might explode depending on whether they were categorized as "real estate" for tax purposes.
People may want to reduce their property ownership to pay less tax, but what is wrong with that? People do that now anyway. Why don't you live in a $50 million home right now under the current tax system? What's that? Because the cost of maintaining it is so high? People will always tend to purchase as much as they can afford. It happens with motor vehicles. It happens with homes. You want to live in a pod. Be my guest. Most people will not. Many millionaires will still want to live in luxury.

The government will not want to keep any real estate foreclosed upon due to unpaid real estate taxes. It will be sold at auction to recover at least those unpaid taxes plus interest and penalties so no tax revenues are lost.

By the way, since people have to live somewhere, you won't see many people "ditching" their home due to non-payment of taxes since they will still need to pay the tax in the next home they live in.

Businesses will always seek the most tax-efficient method to operate. Why wouldn't they look for ways to reduce their tax liability? They do it now with loopholes and creative accounting. The NRET would make any property ownership by a business cleaner and more transparent to tax.

Yes, any home including any RV, yacht, etc with a kitchen and bath that one may live in would be included in the NRET. Most of these type vehicles are very expensive, so the value would approximate a land-based home. The reason people would live in an RV or yacht is because they want to, not because they would do it strictly to save on taxes.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Old 10-27-2011, 07:25 AM   #52
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Quote:
Originally Posted by HFWR View Post
In Texas, if you fence your property, and keep a couple of goats horses, you pay the "agricultural" property tax rate.
I don't see that as a negative. If an area is conducive to agriculture and it's justified, more power to them. I can't see this happening in parts of Manhattan.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Old 10-27-2011, 07:33 AM   #53
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Quote:
Originally Posted by TromboneAl View Post
Goodbye McMansions!

Any change will be so bitterly opposed by those who pay more, so I'm sure change is impossible.
I'm no economist, but with everyone paying something into the system and with much less possible tax evasion than we have today under our current tax system, my gut feeling is that even those in the top tax brackets would be pleased to see their overall tax decrease under a national real estate tax.

It would be very interesting to have a real economist crunch the numbers under this plan.

Change is ALWAYS possible
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Old 10-27-2011, 07:46 AM   #54
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Quote:
Originally Posted by gerntz View Post
I like the idea. Thanks for bringing it up.

Why wouldn't cash, gold, art, stocks, etc., be "property"? I.e., why not a wealth tax that includes all tangible assets? 0.5% of Gates' or Buffett's ~$50B wealth tax/yr would $250M. Somebody with $5M assets tax would be $25K. Somebody that's in net debt would be $0.
Thanks. I like the idea too.

The goal under the national real estate tax is simplicity, efficiency, and transparency.

You don't want to worry about taxing items other than real estate because those other items you mentioned (cash, gold, art) are too easy to hide, less static (meaning you may have $100K in cash today but spend it tomorrow), and in some cases more difficult to value (such as art). Also, where would you stop? After taxing cash, gold, art, and stocks, do you then move to your furniture, tools, paper clips in your drawer? It would not be practical to go beyond taxing real estate.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Old 10-27-2011, 07:49 AM   #55
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Quote:
Originally Posted by M Paquette View Post
Oh, don't stop there. Tax the intangible assets, too.
Like I said, this is what would happen if you went beyond my original proposal to tax only real estate.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Old 10-27-2011, 08:13 AM   #56
Recycles dryer sheets
BOBOT's Avatar
 
Join Date: Aug 2006
Posts: 415
Why tax income at all? Simpler by far to tax consumption. There are economic implications, of course, but I think the positive could outweigh the negative.

Anybody familiar with the so-called Fair Tax plan ? I'm not advocating, just think it's an interesting idea. Not sure about the "pre-bate" thing, though.
__________________
I still don't get it...
BOBOT is offline   Reply With Quote
Old 10-27-2011, 08:42 AM   #57
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,815
Quote:
Originally Posted by BOBOT View Post
Why tax income at all? Simpler by far to tax consumption. There are economic implications, of course, but I think the positive could outweigh the negative.

Anybody familiar with the so-called Fair Tax plan ? I'm not advocating, just think it's an interesting idea. Not sure about the "pre-bate" thing, though.
I've got a couple observations.

1) A simple income tax with an unlimited traditional IRA has the same economic incidence as a national sales tax (e.g. "Fair Tax").

2) Countries that have tried broad-based sales taxes with rates over 10% have found so many compliance problems that they switched to VAT. The economics are the same, but they find the VAT more enforceable.
__________________
Independent is offline   Reply With Quote
Old 10-27-2011, 08:53 AM   #58
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,085
Quote:
Originally Posted by BOBOT View Post
Why tax income at all? Simpler by far to tax consumption. There are economic implications, of course, but I think the positive could outweigh the negative.

Anybody familiar with the so-called Fair Tax plan ? I'm not advocating, just think it's an interesting idea. Not sure about the "pre-bate" thing, though.
If you search this site you'll find plenty of discussions on this proposal.

As to a national real estate tax, I'm sure it would quickly get very complex and plenty of folks would find innovative ways of reducing their taxes, keeping the current army of tax accountants in full employment.

This year I visited a lot of old historic towns in the UK and plenty of those old houses had some of their windows bricked up - this was in response to the "Window Tax" of the 18th and 19th centuries.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is online now   Reply With Quote
Old 10-27-2011, 10:09 AM   #59
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,263
In response to the national RE tax....

First, (and this is from memory of 30 years ago... so who knows)... I think it is unconstitutional...


And if it is not, it will never pass... the highest cost property are more 'blue state' than red... (NY, New England, Washington DC, Cali...) The coasts would have to pay a lot higher tax then the midwest or south... politically, it is a non-starter...

Also, would you have an ag rate If not, then you are going to kill off a lot of ranchers and farmers... heck, ranchers today are selling cattle for less than it costs to feed them here in Texas...
__________________
Texas Proud is offline   Reply With Quote
Old 10-27-2011, 11:14 AM   #60
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Quote:
Originally Posted by retire@40 View Post
I'm really surprised nobody has ever talked about scrapping the entire tax code as it relates to individuals and implementing a national real estate tax.
This would be the best rationale for building one of those groovy earth-sheltered homes. Live in your 2000 sq feet of underground comfort, only a two-room tin shack at ground level for the appraiser to see.

"Yep, it ain't much, but we get by. Sorry to ask you to leave, but we have to dump out the chamberpot now."
__________________

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Is There a Way to Minimize my Federal and State Income Tax Liability? nico08 FIRE and Money 13 10-25-2011 09:13 PM
9-9-9 tax plan: Good for ER types? samclem FIRE Related Public Policy 73 10-07-2011 03:28 PM
jobs news July 8--losing government jobs palomalou FIRE Related Public Policy 72 07-12-2011 07:31 PM

 

 
All times are GMT -6. The time now is 03:39 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.