Some thoughts on the tax code

[samclem]

OTOH, I don't why we want to skew the tax system to discourage consumption.

I'd have to stew on that to build a case. The off-the-cuff answer is that increases in productivity are the only thing that increase societal wealth in the long term. Increases in consumption don't increase our wealth in the long run (so, they don't increase or standard of living). Nations that are productive succeed in this competitive world, they have the resources to protect their interests and to do important good things. Ultimately, increases in productivity enable increases in consumption, the reverse isn't true.

But, I don't see why we would believe that the market, which automatically provides incentives for saving/investing, is so far wrong that we need to design a tax system to "correct" some error.

Interesting point. I'm not sure that net good accrues from trying to use taxes to encourage various uses of capital. But the thickness of the tax code sure indicates someone thinks such engineering is a good idea.

 

[missionfinder]

now i am thinking you have not done your research

Yes I did.

here is a quote (bolding is mine) from one of the coauthors, Neal Boorzt, of the fair tax book where he more fully explains the 22% (on average) fed tax in all goods and services here in the US. (and here is the link September 15, 2005 on boortz.com)

And here's what I said above:

When they are talking about is the costs of compliance and the taxes the company pays, not the individual's payroll taxes which come out of his checks so salaries should not be impacted. By the time a company pays accountants, pays employees to help comply with tax code, (or in the case of a small business, spends time doing paperwork when he/she can otherwise be putting the time to product money making use), pays their own taxes, pays their portion of ss,

For the self employed, that portion is 15.3% (SS and medicare, but I rolled them into one in the above, I do that with all my budgets since I'm self-employed and consider them part of the same entitlement I have to pay into) and for employers its SS/medicare 7.65%. I'm not sure what the rules are for FUTE, I believe that depends on company size and industry.

your response to my discussion on this topic doesnt agree with the guy who thought up the FairTax, however my point is completely consistant with this. sooo i think my observation about what would happen if the fairtax was enacted stands as your rebuttal isnt based in fact.

Neal Boortz didn't think up the Fair Tax. He's a Libertarian talk show host simply wrote a book about it many years after the fact, and was not part of the research and formulation of the Fair Tax. He did a lot of study on it to write the book and wrote it with the Fair Tax bill's co-sponsor (John Linder), but neither wrote the Fair Tax.

and here is a quote from another document on FairTax website which shows there is tax due on interest paid http://www.fairtax.org/PDF/Tax Notes article on FT rate.pdf

You're quoting the other side of the equation. I thought you meant personal filings to pay tax on a personal level. Its entirely consistent: its the lender handling it, like any other retailer, since they are the retailer of the loan and you are purchasing money. How its calculated is determined differently than services and goods taxes, but its still handled by the retailer. No return by the person.

and boy that sounds complicated. you need to do more research​

Pot meet kettle.

and here are quotes from HR 25 itself which show tax will be due on that mowed lawn.​

Under current law that kid is supposed to pay taxes on it after a certain threshold. Generally, that's not done. He's just a kid earning a few bucks. Hardly a domestic servant, unless he's raking in more than $1700 annually doing it under current law. Its really stretching it equating a kid mowing some lawns to a full fledged business.

all the bolding is mine and it shows that tax is due on any wage paid to a domestic servant by a household. you were incorrect through your entire rebuttal of my post however in my research i have determined who is responsible for getting the tax to the US government in this last example and it is the taxable employer, not the kid mowing the lawn.​

You got it wrong when you said I didn't mention the taxes incurred by an employer on behalf of the employee. I did mentioned it, and then clarified the amounts in this post (they go down for 2011 temporarily). Equating some kid mowing a lawn to a full fledged business, another stretch unless he mows $1700 worth of grass for you! No one goes after kids raking leaves, selling lemonade and mowing grass... nor their customers - the government hasn't gotten that desperate (yet).​

 

[missionfinder]

Fair Tax, Flat Tax, Income Tax, Sales Tax, Value Added Tax, it makes no difference. Nothing is really going to change. The politicians will end up with a system to punish some and reward others. Nothing will be passed that does not increase current collections. There are not enough politicians that care more about the people that elected them rather than the people that can get the re-elected, and they won't change anything that is not in their favor. All this is going to do is generate more campaign contributions from all sides. It is one of they reasons the keep it alive, and never really do anything about it. When they can no longer milk the donors they will drop it or pass something.

Time for a Constitutional Convention! Or move out and renounce citizenship! lol

 

[jdw_fire]

Yes I did.



And here's what I said above:

When they are talking about is the costs of compliance and the taxes the company pays, not the individual's payroll taxes which come out of his checks so salaries should not be impacted. By the time a company pays accountants, pays employees to help comply with tax code, (or in the case of a small business, spends time doing paperwork when he/she can otherwise be putting the time to product money making use), pays their own taxes, pays their portion of ss,

For the self employed, that portion is 15.3% (SS and medicare, but I rolled them into one in the above, I do that with all my budgets since I'm self-employed and consider them part of the same entitlement I have to pay into) and for employers its SS/medicare 7.65%. I'm not sure what the rules are for FUTE, I believe that depends on company size and industry.



Neal Boortz didn't think up the Fair Tax. He's a Libertarian talk show host simply wrote a book about it many years after the fact, and was not part of the research and formulation of the Fair Tax. He did a lot of study on it to write the book and wrote it with the Fair Tax bill's co-sponsor (John Linder), but neither wrote the Fair Tax.



You're quoting the other side of the equation. You had posted about paying taxes on interest earned and having to file a return. But its not done that way. Its entirely consistent: its the lender handling it, like any other retailer, since they are the retailer of the loan. How its calculated is determined differently than services and goods taxes, but its still handled by the retailer.



Pot meet kettle.



Under current law that kid is supposed to pay taxes on it after a certain threshold. Generally, that's not done. He's just a kid earning a few bucks. Hardly a domestic servant, unless he's raking in more than $1700 annually doing it under current law. Its really stretching it equating a kid mowing some lawns to a full fledged business.



You got it wrong when you said I didn't mention the taxes incurred by an employer on behalf of the employee. I mentioned it, and then clarified the amounts in this post (they go down for 2011 temporarily). You got it wrong when you equate some kid mowing a lawn to a full fledged business. Technically its taxable under current law after a certain threshold, but no one goes after kids raking leaves, selling lemonade and mowing grass... the government hasn't gotten that desperate (yet). Maybe a little different if he's raking in big bucks (no pun intended), but that's an extreme exception. You got it wrong when about people filing complicated returns for interest - its not taxed at the personal level, the institution handles it like any other retailer, but with a different formula (btw, research shows interest rates will go down by about 1% under Fair Tax, so it negates a great deal of this).

it is obvious from your above post that you didnt really read mine.

1) all neal was talking about was taxes imbedded in each products cost and it included the taxes (FIT and FICA) paid by all employees involved the production of said product. he said nothing in that explanation about the cost of compliance. you should reread what i quoted in my last post.

2) now you agree that interest paid would be subject to this tax and you are correct that when paying a bank said interest the bank would take care of collecting the tax from you and sending it on to the US treasury but private mortgages (for example) are also subject to this tax and now you the payor are responsible for calculating, paying and getting it to the US treasury which i am sure will involve filling out some kind of form (tax return).

3) i never compared the kid mowing your lawn to some "full fledged business" you are the one who said that, i just pointed out that tax will be due and again it falls to you to calculate, pay and get it to the US treasury. it appears that if you pay your kids to do work around the house then tax is due and your responsibility. and since there is a provision for taxing barter in HR 25 maybe even if you dont pay them money, them doing work around the house may still be taxable.

HR 25 makes it clear that the payor of the tax is responsible for getting the tax to the US treasury unless the payor can get the payee to take that responsiblity and issue the payor a reciept that includes the tax and in 2) and 3) above, the payor could be charged with tax evasion if s/he doesnt get said tax to the US treasury.

 

[Independent]

Interesting point. I'm not sure that net good accrues from trying to use taxes to encourage various uses of capital. But the thickness of the tax code sure indicates someone thinks such engineering is a good idea.

I definitely agree with the last sentence. But that someone isn't me.

I've been looking for evidence that tax preferences change the actual amount of saving (as opposed to moving existing saving from one bucket to another). As close as I can tell so far, the correct answer is "Not enough for anyone to measure".