Consumerism Commentary - Latest Comments in Question for Tax Day: How Would YOU Reform the Tax Code?

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

F. D. Bryant II — Fri, 18 Apr 2008 10:46:19 -0000

I'd remove all federal tax laws and implement the FairTax (http://www.fairtax.org).

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

James — Thu, 17 Apr 2008 11:31:48 -0000

@David & Joshua

I agree with most of what you guys are saying. It'd be a refreshing step in the right direction. Law enforcement would be a local issue as are fire departments. Many fire departments and firefighters don't collect any money from the federal and state governments.

I think we can agree that the government is too large. I think we're nitpicking at relatively small government expenditures like highways and law enforcement.

I don't like the government monopoly on education.

National security, law enforcement, and settling disputes should be all the government does.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Joshua — Thu, 17 Apr 2008 10:26:34 -0000

David:

You were right, our government was a LOT smaller back then, and that's exactly what the framers of our constitution wanted. Somehow we went wrong somewhere since then that has caused our government to be the number 1 employer in the world. What's that about!?

I understand that we cannot just cut our government down overnight but I would expect that over an eight year period we could do a lot of drastic things.

Here is a breakdown of what I believe the governments should consist of:

Federal government should be the smallest branch of government we have. It's only responsibilities should the overall stability of our money system (central bank oversight), relationship management between the states [i.e. aiding in designing the national highway systems] and possibly an overall military strategy with a NON-STANDING army.

The state governments should have all the power. Each state should have it's own militia (like the Iowa National Guard) that can be called up but still is not a standing military and only on a voluntary basis. Taxes should be very minimal and should not tax us on our earning power. I don't mind paying a consumer tax when I purchase something but it should VERY low.. something like 1-2%. If we need a fire department then we can have volunteers like many towns do. If our city or state needs to raise money for something, such as a road, fire truck, ambulance, etc.. it should be done with municipal or state bonds. Those can be paid back using the 1-2% tax.

Anyway, I could go on and on about this. The truth of the matter is that government should hardly EVER be involved in anything except police work, justice, and overall needs such as national highways.

If that's all they did, and truly that is all we need, then they wouldn't need so much money or employees. Oh, one more quick thing.. welfare makes people lazy.. I grew up on it and it's the worst. My Mother never worked because she didn't have to and grew accustomed to the lifestyle that welfare provides. If we didn't have welfare, people would work harder to make it, and if we didn't have so much damned tax on us.. well people would be richer in the first place.

I better stop now before I get too carried away. ;)

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Brian — Thu, 17 Apr 2008 09:47:16 -0000

First, I would abolish the IRS and hold an official tax code burning ceremony. Political approval ratings would be through the roof. LOL. Then I would install a national sales tax. Personally, I would favor either this fair tax, or the flat tax above our current system. However, the flat tax lends itself to the same abuses of the current system. That's how we end up with a tax code larger than "War and Peace."

Fair Tax all the way!
Check out www.fairtax.org

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

David B — Thu, 17 Apr 2008 09:35:49 -0000

@James

My apologies if I misunderstood. You said "we don't need taxes" but it sounds like you meant to say we don't need income taxes. A tariff is just a tax levied on imports.

I've heard people bring up the argument that we used to run solely off of tariffs. The problem is that the government was MUCH smaller then, and good luck ending all of our entitlement programs that take up a majority of the federal budget. Not to mention the devastating effect that instituting tariffs would have on our economy. Smoot-Hawley Tariff Act anyone? That led to a little thing called the Great Depression.

I wouldn't be totally opposed to pay as you go roads. It would certainly limit traffic congestion. Do you believe government should fund education? How about law enforcement and fire departments? If not, how would individuals pay for the last two?

Thanks for the discussion.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Kelli Myers — Thu, 17 Apr 2008 02:14:52 -0000

I agree with Kyle. I'll go for either the consumption tax or a flat tax.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

FrugalDoug — Wed, 16 Apr 2008 20:55:36 -0000

It's not just the idea of taxes, it's the incredible waste that happens after they are collected. My kids go to a Catholic grade school. I pay about $3,000 each for them to get an education that hands-down beats the local public schools (and they are rated highly for public schools). The budget per child at the public schools in this area is $8,500. They are spending almost three times as much, yet they are underperforming by 40%. Yes, they have to take care of special ed kids, but they make up about 4% of the student body.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

James — Wed, 16 Apr 2008 17:54:42 -0000

@David

I didn't say the government shouldn't have money. There were tariffs before the 16th amendment. The government operated for over a hundred years without taxes on everyone.

I'd be OK with pay-as-you-go roads as long as I wasn't paying taxes up front for their construction. It'll certainly be more inconvenient, I'll grant you that. I'm sure technology today would make it very easy to pay for driving on a road. After all, if it's convenient to pay and use, you'll use the road more and the owners will make more money.

You'd think with $3,000,000,000,000.00 you could make a lot of people happy. What's congressional approval at now? Is it above 20% yet? It doesn't matter the size of the federal budget, so few people shouldn't be allowed to spend that much of other peoples money without their consent.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

huditz — Wed, 16 Apr 2008 17:54:28 -0000

Anyone who makes more than I do should have to pay it all in tax. That would be the threshold. I mean I work long hours. Besides they probably use more public services than I do with their SUVs that destroy roads and their 5 shower head showers running so much water through the pipes. That way it would be fair, if we all got to have the same amount of money.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Becca — Wed, 16 Apr 2008 17:27:18 -0000

I absolutely LOATHE the social security and medicare taxes. I wish I could check a box on my w-4 and say "no thanks, I'll save my own retirement fund" and then, as long as I truly do save the same or more as the govt takes, I wouldn't have to pay it back. I don't trust social security to be around when I am ready to retire (I am not even 25 yet) but I hate just having to write that off. I don't expect it to take care of me, so why should I have to pay for it now?
I do think that the govt needs money to operate. But I hate the waste. $600 for a hammer? Better be a dang good hammer. I think that public schools need to be improved dramatically. I like having smooth roads to drive on. Welfare is a necessary evil, but should be much stricter as to definitions of not being able to work. Lazy is not an excuse.
I don't mind paying taxes on my income or on my goods, but I hate that they take it from both. I don't really care either way, so long as it is fair. We made $50k last year, but because we worked 5 jobs between the two of us. Taxes either need to be simplified, or take more things into consideration- like debt ratio or mortgage payment compared to income. We didn't but a super huge house, it's all we can afford. ($130k if you are interested, 1200 square feet) and my husband is in school. That to me should mean less taxes being paid, because we need more to survive. Either take less of my money in taxes so that I can pay for school myself, or give us grants to make up for the taxes being taken.
I don't know that there is one single simple way to make it work. Those with the access to good tax people will continue to find more loop holes than those who don't have access to them. That's the way it is regardless of income.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

David B — Wed, 16 Apr 2008 16:35:50 -0000

@James

I agree with some of what you say in principle, but disagree in some ways as well.

I believe that the amount of tax revenue collected by the government should be drastically reduced, but I also recognize that the government needs money to operate. Even though I oppose the single largest expenditure of our federal budget (which is social security, by far), I do not oppose the collection of my taxes altogether. I think that most people agree with many of the services it provides such as roads, law enforcement, fire departments. Are you in favor of pay-as-you-go roads? I'm not being antagonistic, I'm genuinely curious, some people are. But to say that we don't need taxes at all is a bit extreme to me. At the very minimum, we need a basic framework to enforce property rights and settle disputes.

I do agree that individuals can spend their own money more effectively than the government, and believe that there should be fewer government programs for this reason. As you say, the government will never spend money the way everyone wants it to be spent. Since you can't please everyone, it would be better to let them choose more things for themselves (choice and competition in education is one example that I believe in).

Also, in regards to your "greater good" comment, I study constitutional law, and believe that the "promote the general welfare" clause of the constitution is grossly misunderstood. However that is another topic.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

James — Wed, 16 Apr 2008 16:14:47 -0000

Fan of fair tax or flat tax? It's still a tax! We don't NEED taxes and people shouldn't be forced to pay them. If you want to give money to the government, fine. But it doesn't seem "fair" at all to threaten people and take their money without consent.

I just can't believe people enjoy paying taxes. How many people really agree with everything the government does with your money?

Does everyone here like continuing to pay for the war on iraq/drugs/poverty? Think of what you could do with a 30-60% boost in your income.

The "greater good" is a lie.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

John Newman — Wed, 16 Apr 2008 16:08:01 -0000

There's a lot of class envy coming through this thread and I'm offended when I read "luxurious lifestyles" or "ordinary Joes."

I believe that we all feel the same about our living standard regardless of what we earn. We want to at least maintain it or notch it up a little. The angst that I feel about keeping what I've worked for is similar to yours and is similar to Warren Buffet's.

Policy should proceed from that fundamental understanding and we should not attempt to shift the tax burden onto the other guy.

Furthermore, I think elected officials should have tools to encourage economic behavior that will foster the greater good. If we determine that saving is to be encouraged then there should be some leverage available like tax sheltered savings accounts. Or, if spending is key to a vital economy, then the tax code can be used to encourage that.

I know I'm begging the question about what changes to make but we should talk about what we're aiming for before we go about establishing policy.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Jon — Wed, 16 Apr 2008 14:12:21 -0000

Gotta say I'm a fan of a flat tax. As Trent said you should be able to fill out your tax return on a postcard. I think we need to have more education as part of high school to explain how the tax code works. So many people haven't a clue. Instead the system is now: for the first part of your life you don't owe any tax, then your parents take care of your tax return, then you move out and H&R block takes care of your tax return. No where in there do you ever learn about taxes.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Kyle — Wed, 16 Apr 2008 14:00:04 -0000

I like either a flat tax with no deductions or a consumption tax, although I don't like the fair tax. The whole prebate thing ruins its simplicity.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Trent Hamm — Wed, 16 Apr 2008 13:35:49 -0000

Flat tax. I'd make all income taxable at the same rate with a larger standard deduction and a very tiny handful of additional deductions for specific situations. You should be able to fill out your tax return on a postcard.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Aryn — Wed, 16 Apr 2008 12:55:10 -0000

I have four suggestions for improvements to the tax code:

1. Abolish the AMT. Now it only serves to penalize middle-class workers in high-income/high-cost states.

2. Fix the marriage penalty. My husband and I pay slightly more in taxes because we're married and don't have children.

3. Remove the cap on student loan interest deductions. If we were single, we could both deduct our student loan interest, but the cap means that only one of us can. Also, we live in a high-cost state. We both have higher degrees, but his came at a steep cost. Because of these degrees, we have good incomes, but pay more in taxes and more in student loan payments to earn that pay. Basically, we'd probably be better off working low-salary jobs and not having student loans, but then we wouldn't really be helping the economy grow. We're caught in a catch-22, and the student loan interest cap only makes it worse.

4. Simplify the childcare deduction. Let parents deduct the whole amount, not a fraction of a fraction of the cost up to a max.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Kevin — Wed, 16 Apr 2008 12:53:21 -0000

@David B: Keep in mind that one of my "wishes" was that everyone would file individually, so a two income household would still be in the middle bracket up to $150k. I pulled that out of my head while I was writing the post. Maybe $100k or $150k would be more appropriate. I just made something up to make it concrete.

Question for the fair tax advocates: the new/used distinction seems like a huge loophole. Seems like I could incorporate a corporation, and any time I need something, have the corporation buy it tax free, then sell it to me "used", and I would avoid all taxes. Or similarly, someone like Amazon.com could "use" everything in their inventory to avoid charging the tax. Is there a mechanism to prevent this?

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

B_W — Wed, 16 Apr 2008 12:49:00 -0000

My choice would be to do away with the income tax and enact a national sales tax of X% on all goods and services. Add a value added tax for certain high value goods such as they do in many European countries. States/counties/cities can add what is necessary for their necessary revenue.
There would be two major advantages this type of taxation. First, everyone would pay equally regardless of income. Second, everyone would pay tax. Visitors/tourists, illegal immigrants, foreigners working in the U.S would all still pay the same amounts as citizens. The extra revenue from goods purchased by the 11 million plus illegal immigrants alone would be significant.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Tom — Wed, 16 Apr 2008 11:30:29 -0000

http://www.fairtaxcalculato...

Check that out.

I agree with the fair tax though. The more you spend, the more you pay.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Saving Freak — Wed, 16 Apr 2008 11:03:46 -0000

@Michael

This is what makes the fair tax so great. There would be no more payroll taxes of any kind. People would get to take home what they make. On top of that you would receive a check every month that would compensate for your spending up to the poverty line. This means poor people would pay no taxes. Just as you pointed out this would be an automatic 7.65% increase to employees and a 7.65% to employers. The self employed would see an immediate 15% increase in pay. I recommend everyone read the fair tax book. Even if you do not agree it is an interesting read.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

KC — Wed, 16 Apr 2008 10:57:26 -0000

I read Fair Tax and it was a good starting point. I would love a pure consumption tax code. Buy new and you pay a tax, buy used and you don't. The market would even out prices. A 1 year old car wouldn't be a whole lot less than a new one w/ tax - market prices. Ditto on houses.

I also hate how the income tax is structured to penalize earners. Mu husband makes a very good salary. I don't mind paying taxes on it. However I quit my low-paying job in my low-paying profession cause after taxes I was bringing home very little. Basically I am being penalized because my husband makes a large salary. So I'm encouraged to not work and have my 2 master's degrees sit at home. In a consumption based tax folks are encouraged to work and prosper because their work is not taxed - their desires are taxed.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

Micahel B. Rubin — Wed, 16 Apr 2008 09:54:57 -0000

Where to begin? Having done hundreds of tax returns (from the destitute filing solely to claim the Earned Income Tax Credit to the zillionaire disgusted at the check he'll have to write), I am consistently and utterly amazed at one fact, thus far not raised (best I could see) in this discussion:

Payroll taxes (Social Security and Medicare).

When the government tells you that half of Americans aren't paying any income taxes, they are talking about income taxes. But one of the reasons pay doesn't go as far as it could is due to the fact that you're losing 7.65% (a flat tax, to be sure) off the top. That's not counting the other 7.65% your employer is chipping in. If the payroll tax wasn't around, you'd get a 15% raise without any additional cost to your employer.

Is it a separate taxing system? Yes - but only for collection purposes. As we all learned a few years ago, there is no lock-box. For years, the excess money collected over benefits paid out has been spent on other governmental expenses.

In order to really help people with their tax burden and have a truly productive national discussion, we must talk about all the taxes that are taken from their pay checks; not simply those we choose to call "income taxes."

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

David B — Wed, 16 Apr 2008 09:49:47 -0000

@Mike L

Don't you know? "Rich" people are evil! Anybody who is rich must have done something immoral to achieve their wealth. That's the only possibility. It isn't possible that they have a unique skill set that is in high demand, or developed a product that benefits millions of people. Nope, wealth comes only from pure evil. The people who are incapable of taking advantage of the enormous educational opportunities in this country, and have not improved themselves to the point where they are able to contribute to society and be compensated accordingly are the ones to be revered. The people who pay for all of those people's services definitely should be punished.

BTW, the same is true of big, successful companies as well. If a company has done well, it does not mean that it has been pleasing its customers so much that they continue to return and buy/use their products/services. It means they are behaving unfairly. We should punish them too.

@Kevin

75,000 should be the top tax bracket that qualifies as a "luxurious" lifestyle, with no exemptions or deductions!? I'm not sure where you live, but for most people that is definitely middle class. Many public school teachers make more than that. Too me that isn't quite high enough to warrant being punished yet. It's not quite to the evil level. I wonder where you got the number 75,000 from? Did you come up with that on your own, or did you borrow that from a well known presidential candidate that made the same statement? For the record, I'm slightly below that line as well.

I hate people with the mentality that the government is somehow doing you a favor by letting you keep more of the money that you earned.

Re: Question for Tax Day: How Would YOU Reform the Tax Code?

ryan — Wed, 16 Apr 2008 08:48:01 -0000

consumption tax, all the way. charge people who spend, stop milking us who try to be responsible.

and as long as we are changing things, stop handing money out to bums and stop the wars (iraq/afghan/drugs)

maybe we will be in a better place before this all collapses. can we get some economists or something else in charge and not all rich lawyers?