New at Reason
As Americans shuffle off to the post office with their IRS-addressed envelopes, Katherine Mangu-Ward surveys the panoply of tax reform proposals in the punditocracy.
Comments to "New at Reason":
Francisco Torres | April 16, 2007, 3:48pm | #
End withholding, pleads freelancer Laura Vanderkam In USA Today. After all, misery loves company[...]Ending withholding at the current tax levels will certainly make people think twice about financing the State at its current size. Of course, the endless fight between the "goodists" that want people to dole out (almost all Dem-agogues and most Republi-cons) and productive people will only intensify.
Lots of proposals, yet nothing about a consumption tax. It really has no chance, does it?
NAL | April 16, 2007, 4:03pm | #
I love the idea of ending paycheck withholding. That'sa sure way to shrink gov't spending. Make everyone write a check!
I also like the income-tax cap. (As a side note, I still can't believe the SS tax still has a cap. I love when, near the end of every year, I get that "raise", but I can't believe the politicians didn't eliminate that common sense many years ago.)
The one I really like that's not mentioned here is the
Fair Tax (i.e. national sales tax, combined with repealing the income-tax amendment). Even though I would be one of the ones most hurt by the transition because I'm a saver (which, with a national sales tax, all my savings up to this point would suddenly have a lot less buying power), it just makes sense to me that you should pay a tax when you use resources rather than when you earn money.
Francisco Torres | April 16, 2007, 4:03pm | #
Consumption taxes would not eliminate the IRS. The government would still not believe the suppliers are withholding the "correct" levels, so an auditing agency would still be placed.Indeed, all proposals ail of the same thing: They consider Taxation as something that is needed, without taking into consideration the government's expenditure. In fact, the income tax can be repealed if Congress took into account that the current income levels from taxation that does not come from Income Tax could pay for a 1993 FedGov budget. See:
http://www.mises.org/story/2552
ron | April 16, 2007, 4:04pm | #
my awesome plan this year was to put a bunch of exemptions on my w4 so that they dont withhold anything, and then not file.we'll see how it works out!
For Fuck's Sake | April 16, 2007, 4:08pm | #
Tim Harford's suggestion is literally retarded.You could give me a several severe concussions, a lobotomy, and a particularly thorough anal probe and I could still come up with better ideas for tax reform.
I swear, ever since the advent of Freakonomics people think being weird is the same as being clever.
biologist | April 16, 2007, 4:09pm | #
You don't need a flat tax to end wasteful spending on professional tax preparators. Simply end all the ridiculous loopholes. You could still have a relatively simple tax code graduated by income if you ended the loopholes.Also, as a confirmed bachelor w/o children, I like the idea of everyone filing as individuals, w/o marriage penalty or bonus, nor EIC.
Francisco Torres | April 16, 2007, 4:15pm | #
it just makes sense to me that you should pay a tax when you use resources rather than when you earn money.A national sales tax (a tax on being alive, basically) would still generate problems, some even more serious than the income tax. In the first place, it would lead to poor people paying more taxes to the proportion of theior income, since most of their revenue goes into expenditures, whereas richer people save more of their income.
In the second place, it is perverse to tax people for the mere fact that they exist on this earth.
Most national sales tax proposals define poverty at a certain level, and offer a rebate on the taxes paid on those purchases. The "poor" wouldn't pay a dime.
Francisco Torres | April 16, 2007, 4:26pm | #
Most national sales tax proposals define poverty at a certain level, and offer a rebate on the taxes paid on those purchases...Which would defeat the purpose of the sales tax, which is to "simplify" the tax code. Now you would have people REPORTING to a government agency their income (just like they do know) so as to get this "rebate". Of course, the government would not simply assume EVERYONE that asks for this rebate is telling the truth, and so...
The "poor" wouldn't pay a dime.
Of course they would. They would still have to pay for the tax at the moment of the expenditure (because the seller would be the tax withholder), until the poor can prove their poorness to the FedGov - just how long do YOU think that would take???
Cab | April 16, 2007, 4:31pm | #
Actually, under the most widespread plan, everyone would receive the rebate, thus eliminating the need to report income. The theory being the $400 check to a poor person would mean something, but the $400 check to Bill Gates is relatively worthless.This rebate (actually they call it a "pre-bate" in an attempt at clever marketing) would come monthly to all individuals.
Now I have to stop - I’m sounding too much like Neal Boortz.
Francisco Torres | April 16, 2007, 4:34pm | #
my awesome plan this year was to put a bunch of exemptions on my w4 so that they dont withhold anything, and then not file.we'll see how it works out!
You have a 4% chance of being audited, on average. But the IRS will send you letters demanding compliance (or else!).
NAL | April 16, 2007, 4:40pm | #
A national sales tax (a tax on being alive, basically) would still generate problems, some even more serious than the income tax. In the first place, it would lead to poor people paying more taxes to the proportion of theior income, since most of their revenue goes into expenditures, whereas richer people save more of their income.As "Cab" wrote, the Fair Tax gives every household "prebates" to pay for food, etc. The prebate is exactly analogous to (and exactly the amounts, I believe, of) the current standard deductions and exemptions.
In the second place, it is perverse to tax people for the mere fact that they exist on this earth.
To me, the consumption tax is actually less of a tax for "exist[ing] on this earth" than the current system. You could keep all you earn and, if you want to, you could move to a rural location, plant a garden, keep some livestock, distill your own fuel, ride a bicycle, etc. and "exist" while paying a whole lot less in taxes than with the current system even if you continue working. By it's nature, it's a system that discourages waste, and encourages freedom.
With the current system, you'd first have to pay taxes on all the money you earn to put a downpayment on the rural home, then you have to keep paying taxes to earn enough to make the payments. It doesn't matter how simply you live, you still have to pay taxes if you want to stay in your home.
Cab | April 16, 2007, 4:41pm | #
I should point out that the theory is nobody should have to pay taxes on essentials (regardless of income), therefore everyone gets the 'prebate' check.It is actually a decent plan, you should look into it further.
I just read NAL's post. I agree. If "living off the grid" is your deal, it would propably be easier with "The Fair Tax" than any other.
Francisco Torres | April 16, 2007, 4:46pm | #
Actually, under the most widespread plan, everyone would receive the rebate, thus eliminating the need to report income.Ohhh, that would lead to a nifty fraud scheme, where you can send for the creation of several Individual Tax Identification Numbers or Social Security numbers and receive several monthly checks...
AGAIN, the government is not simply going to believe that a person is who he or she says it is. The Fed will demand verification, and that means: income report, a National ID (i.e. Nazi) card, the works...
That rebate idea sounds more like a wealth distribution scheme.
Well, I like it. Seems like you're convinced otherwise. That's cool.
Francisco Torres | April 16, 2007, 4:51pm | #
You could keep all you earn and, if you want to, you could move to a rural location, plant a garden, keep some livestock, distill your own fuel, ride a bicycle, etc. and "exist" while paying a whole lot less in taxes than with the current system even if you continue working. By it's (sic) nature, it's a system that discourages waste, and encourages freedom.Difficult to consider "freedom" as being imposed the choices of living like a recluse or living on the grid but paying.
I do not know about discouraging "waste", but it will, however, encourage black market transactions, as it happens in many countries that currently have a national tax (like Mexico, for instance).
Once again we hear the nonsense that the flat tax would simplify the system. But anyone who's proficient in math at an elemenary level can figure out percentages. What makes the tax system complicated is what counts as income and what doesn't, along with what deductions are allowable.
edna | April 16, 2007, 5:08pm | #
In the second place, it is perverse to tax people for the mere fact that they exist on this earth.they're taxed because they're living on this particular piece of earth, defended from external enemies, able to use courts to enforce contracts, have the use of police, fire, and other emergency services, and all the other stuff which i'd agree is perverse.
I don't think it should really matter how the government decides to collect taxes considering, if you ask me, they shouldn't be collecting enough in taxes for it to impact anyone's livelihood in the first place. It should be so minimal (if at all) that nobody would even bother complaining about it. Everything else would be made up in user-fees (Oh, you know, actually only paying for the goods/services you consume), which would do a much better job of limiting waste than a consumption tax, which nobody would support if only because of its name. Who wants to tax consumption? That just begs for cries of "YOU'RE GOING TO SLOW DOWN THE ECONOMY!"
Brian Moore | April 16, 2007, 5:12pm | #
Tabarrok, not Tarrabok. :) Both sound cool though!biologist | April 16, 2007, 5:13pm | #
Bill Pope:so we agree?
Reinmoose (VM? iz dat yoo?):
strangely, even though taxes are used to support the fire department, if your house is on fire, and the fire department puts it out, expect to receive a bill for services. this happened to a friend of mine in Tampa.
pdog | April 16, 2007, 5:15pm | #
Francisco Torres:Its by no means an ideal system, and of course the prebate is somewhat of a wealth redistribution system...but so is what we have now. I think its appeal is in the fact that it makes life easier for regular joes like me. A kind of lesser of two evils.
It also makes me feel better when I read about the rich blowing obscene amounts of money on the most sensless and stupid shit. ($1000 pizza!?)
Francisco Torres | April 16, 2007, 5:18pm | #
Reinmoose,It should be so minimal (if at all) that nobody would even bother complaining about it.
The Constitution actually provided for that, in the way of excise taxes, poll taxes or tariffs. A government that limited itself to safguarding the borders and provide justice could perfectly exist by levying tariffs only. The current Leviathan, instead, must do with our very blood and sweat...
Francisco Torres | April 16, 2007, 5:21pm | #
they're taxed because they're living on this particular piece of earth[...]The government does not own the land so as to levy rent from it. That is what can be gathered from this comment, if taken logically.
defended from external enemies, able to use courts to enforce contracts, have the use of police, fire, and other emergency services,
Great. Since the goons-with-guns do not allow for competition, saying that people are taxed because of those services STILL sound perverse. It is not like people have a choice.
Rhywun | April 16, 2007, 5:22pm | #
Most of these ideas remind me of that cynical ploy to bring back the draft. Which I guess is why none of them go anywhere.As was explained on a previous thread, NO, I am not VM, it just happens that "moose" is a very popular surname :)
biologist | April 16, 2007, 5:27pm | #
sorry, Reinmoose, I don't read all the threads.they're taxed because they're living on this particular piece of earth[...]
The government does not own the land so as to levy rent from it. That is what can be gathered from this comment, if taken logically.
no, that's what you took from that comment self-servingly
Reinmoose | April 16, 2007, 5:29pm | #
have the use of police, fire, and other emergency servicesThat's funny, I thought that's why there were things like insurance... Feasibly, edna, couldn't you pay monthly premiums to a private fire-response company to ensure that your house would be protected? Or what about your health? Couldn't you pay premiums to a health insurance company so that when you needed emergency health care.... oh wait
Aresen | April 16, 2007, 5:33pm | #
For those of you advocating a National Sales Tax, I'd suggest you check out Canada's Goods & Services Tax [GST] before you go any further.It sounds simple - 7%* on everything except food and a few other essentials - but it is a bureaucratic nightmare for the businessess that have to collect it. I've seen estimates that place the cost as high as C$10 billion/year in accounting and bookkeeping costs. Multiply that by 12 for the US economy.
The only virtue it has is that it is visible on every purchase, which is why it is the most hated tax in Canadian history.
*The Harper government cut it to 6% last year. In the long run, I expect it will go up and up.
edna | April 16, 2007, 5:37pm | #
reinmoose, re: fire, yes, feasibly. but it is more efficient to have it done by the community; federalizing it would be silly, but privatizing it would be inefficient in the way you don't want it to be. i can give lots and lots of hypotheticals, if you like.mr. torres, your logic escapes me. a government by definition is a means of a monopoly on the initiation of force.
R C Dean | April 16, 2007, 5:55pm | #
In the second place, it is perverse to tax people for the mere fact that they exist on this earth.And the current system, which penalizes people for being productive through "progressive" tax rates, isn't perverse at all.
Schutz | April 16, 2007, 6:10pm | #
The general trend of this article and discussion is that ANY idea would be better than our current system... Have we reached rock bottom yet?pdog | April 16, 2007, 6:25pm | #
yes we haveJim Henshaw | April 16, 2007, 6:35pm | #
One simple way to put pressure on politicians to cut spending is to move the tax submission deadline from April 15th to October 15th, so the pain is still fresh when voters cast their ballots -- in conjunction with the end of withholding, so the check they just wrote is really big.Francisco Torres | April 16, 2007, 7:41pm | #
Dicsussion,they're taxed because they're living on this particular piece of earth[...]
My comment:
The government does not own the land so as to levy rent from it. That is what can be gathered from this comment, if taken logically.
Biologist said:
no, that's what you took from that comment self-servingly.
Did I, biologist? The "BECAUSE" in that statement implies a reason, and the reason is that the tex payers are living on a perticular place, which implies occupancy, from the part of the people, and ownership, from the part of the collector.
Francisco Torres | April 16, 2007, 7:43pm | #
Reinmoose:That's funny, I thought that's why there were things like insurance... Feasibly, edna, couldn't you pay monthly premiums to a private fire-response company to ensure that your house would be protected?
Of course, and if I was able to pay them AND NOT ONE ELSE, then I would have a choice. But I am being taxed nonetheless, so I do NOT have a choice.
Or what about your health? Couldn't you pay premiums to a health insurance company so that when you needed emergency health care.... oh wait
Wait, what?
Francisco Torres | April 16, 2007, 7:44pm | #
mr. torres, your logic escapes me. a government by definition is a means of a monopoly on the initiation of force.
Indeed. That is the point. Or what did you think I was saying, that all is fine and dandy, being taxed by the thugs with guns?
edna | April 16, 2007, 9:53pm | #
if they're elected thugs who can be un-elected, sure. i'm unhappy that the electorate keeps putting in thugs who go beyond what the constitution allows them, but that's a matter of convincing my fellow citizens; the thugs are just following the incentives we give them.Karl Marx | April 16, 2007, 10:02pm | #
Can any of you econ college boys explain why it is better to collect taxes broadly(income sales excise property etc rather than narrowly-say capital markets? The cost gets spread around indirectly to everyone anyways. Taxing everthing directly seems inefficent.Genghis Kahn | April 16, 2007, 11:06pm | #
i'm unhappy that the electorate keeps putting in thugs who go beyond what the constitution allows them, but that's a matter of convincing my fellow citizens; the thugs are just following the incentives we give them.edna, you must have been a boy scout too. An eagle scout, I'll bet.
If you think it's as easy as "convincing your fellow voters", I've got a bridge or two you should look at buying.
The system is out of control, and nobody's vote is going to fix it at this point in the game.
Francisco Torres | April 16, 2007, 11:45pm | #
"The system is out of control, and nobody's vote is going to fix it at this point in the game."Genghis, you hit the nail in the head.
Democracy, the god that failed.
Genghis Kahn | April 17, 2007, 12:34am | #
Aye, what a pleasant fiction it's all become. What every democracy becomes.I just haven't seen anything yet that look any better.
jw | April 17, 2007, 5:55am | #
Actually the US Constitution created a republic rather than a democracy. You won't find the words democracy or democratic anywhere in that document; you will, however, find the words republic and republican. (No, there is not really any connection to the GOP.) The Founding Fathers abhorred political democracy. They associated the word with "classical" democracy -or rule by straight or direct majority vote. They were men of wealth and property and they were not about to let just anyone vote on laws regarding wealth and property nor did they care to let just anyone elect those who did vote on such laws; that is why suffrage was not universal. Indeed, in the beginning most states let only property owners vote - male property owners, that is. As a result the government had very little power regarding wealth and property. Taxes were few and moderately low, as was government spending.However, as certain political parties succeeded in extending the vote to those individuals who previously did not enjoy the franchise (in order to increase the strength of those parties) the government became a political democracy. As a result more and more laws were enacted regulating and redistributing wealth and property and increasing government spending. They were enacted by politicians elected by voters, many of whom had very little or no wealth at all.
Let's face it - a tax is just another name for wealth redistribution. Money is taken from the taxee by the taxor and either used for the purposes of the taxor or given to the non-taxee - or both. No one (or almost no one) would even vote for or otherwise support a tax unless he or she expected to get more benefit from it than what it cost them. People are just viscious, back-biting, thieving monkeys - that's all there is to it. (well, some are two-legged cockroaches, but that's a different thread.)
Genghis Kahn | April 17, 2007, 7:33am | #
Actually the US Constitution created a republic rather than a democracy.Yes, I forget that little detail once in a while.
Not that it does us any good, but it wasn't a pure democracy and still isn't, strictly speaking.
Reinmoose | April 17, 2007, 9:21am | #
Francisco Torres:I put "Oh wait" at the end of my Or what about your health? Couldn't you pay premiums to a health insurance company so that when you needed emergency health care...
as a humorous way to signify that I know that what I'm talking about already exists, and that the thought-experiment follows itself to a logical conclusion. The entire comment was to show, by example, that emergency services (such as fire services) were not necessarily only able to be served by the government.
And edna, I can think of a whole bunch of hypothetical problems with it as well. I, however, am also aware of the fallacy that government is incapable of screwing up something like fire services. Ultimately though, I think someone smarter than both you and I could figure out a payer system that would work very well.
Suffering Taxpayer | April 17, 2007, 11:33am | #
Maybe we should put economists in charge of spending, rather than writing the tax code. They might at least do away with useless programs like paying people to grow nothing, which would reduce the need to collect so many taxes in the first place.Francisco Torres | April 17, 2007, 1:36pm | #
Maybe we should put economists in charge of spending, rather than writing the tax code.As long as you do not hire neoclassical (i.e. Marxist/Keynesian) economists for the job. Austrians, on the other hand, would probably cut spending to a trifle...
Francisco Torres | April 17, 2007, 1:37pm | #
I put "Oh wait" at the end of my Or what about your health? Couldn't you pay premiums to a health insurance company so that when you needed emergency health care...My mistake. You were clearly talking to edna.
Dave Thomas | April 18, 2007, 12:14am | #
A national sales tax is what is needed pure and simple.Dave Thomas | April 18, 2007, 12:21am | #
I'm turning down work this year because I've been so successful that the alternative minimum tax gave me only 45% of everything I made over $200,000. The harder I work the more freeloading losers I am supporting. I grew up in poverty and in my 40's I'm finally making up for lost time and a bunch of losers have their hands in my pocket. I live in Los Angeles so making $200,000 out here is like making $100,000 where I grew up in the rural south.It is utterly ridiculous to me that our tax system gives me incentive to turn down work because I don't want to do work where all the freeloaders piled up on my back get 55% of my check and I get 45%.
FDR started this mess and LBJ led us right down the road to ruin. If you read any of the founding fathers writings you find intuitive insights like "the threat of starvation keeps the people industrious." There are way too many people on the government dole, like corporations, doctors, agribusiness and people who have absolutely no business getting tax money.
Abolish the IRS, institute a national sales tax, and end this idiotic wealth redistribution.
Matt | April 18, 2007, 7:53am | #
I'm surprised nobody takes the flat tax seriously, since we've had it for years here in Pennsylvania. It's actually unconstitutional in PA to use graduated taxes, so the state is at a single fixed bracket, this year of 3.07 percent.Included income is easy - everything. Every single dime you make is elligable. Deductions are likewise easy - none. Not a single thing can be deducted. My PA State tax return (and everyone else's) is a one page affair, slightly bigger than Steve Forbes' postcard, but not by much.
I'd argue that this is the fairest implementation of an income tax anywhere in the US.