Greenspan wants tax code simplified

[southsider2k5]

http://money.cnn.com/2005/03/03/news/econo...dex.htm?cnn=yes

[Soxy]

And I want twenty dollars.

 

Neither seems very likely to happen.

[Texsox]

Since most of our elected leaders have law backgrounds, it could happen in hell

[Texsox]

And I want twenty dollars.

 

Neither seems very likely to happen.

 

So many thoughts, so many thoughts :headshake

 

[NUKE_CLEVELAND]

The Bush Administrations panel on tax reform is set to deliver its recommendations for simplifing the tax code on July 31st. I guess we'll see what they say and where it goes from there. I do, however, think that the tax code, as it is now, is archaic and has far too many loopholes for not paying taxes.

[mreye]

Greenspan's been saying that for years.

[southsider2k5]

The Bush Administrations panel on tax reform is set to deliver its recommendations for simplifing the tax code on July 31st.  I guess we'll see what they say and where it goes from there.  I do, however, think that the tax code, as it is now, is archaic and has far too many loopholes for not paying taxes.

 

No doubt about it. Every tax change since 1986 has been about making the system more porous and more complex. I almost wish someone would push a flattax so that maybe we could meet in the middle with a real progressive tax code that is simplified and spackled to prevent leaks.

[Texsox]

I'd like to see a single percentage system, computed on earnings over a minimum amount, all based on the individual system. No difference between married or single.

 

Using $20,000 as the start and 20%

 

Single Woman 25, earning $32,000 pays $2,400

CEO earning $200,000 pays $$36,000

Someone making $19,500 pays zero.

 

Thinking as I type this, I'm certain there would be some flaws, and I'm equally certain y'all will find them. Bottom line, come up with a min number, poverty level, or whatnot. I know that would give a person in Manhatten, IL an advantage over someone living in Manhatten, NY.

[NUKE_CLEVELAND]

No doubt about it.  Every tax change since 1986 has been about making the system more porous and more complex.  I almost wish someone would push a flattax so that maybe we could meet in the middle with a real progressive tax code that is simplified and spackled to prevent leaks.

 

 

I think I prefer a consumption tax as opposed to a flat tax as its more fair ( more you spend more you pay ) and would also encourage people to save more money.

[Soxy]

I think I prefer a consumption tax as opposed to a flat tax as its more fair ( more you spend more you pay ) and would also encourage people to save more money.

I don't know if that's true. Making 12,000 a year a far larger percentage of my money would then go to taxes than someone earning ten times my income with a very high sales tax.

 

For this flat tax--are you exempting life necessities (clothes, food, etc)--that might be more fair, but a general flat consumption tax would honestly bury someone in my income bracket.

Edited March 3, 2005 by ChiSoxyGirl

[Texsox]

I think I prefer a consumption tax as opposed to a flat tax as its more fair ( more you spend more you pay ) and would also encourage people to save more money.

 

Also a better idea than what we have.

 

The problem with that is I believe if we all are getting together to do stuff like protect the country, fund some eduction, help the needy, launch rockets, etc. we all should kick in. The focus should be on the governement's consumption, not our own. Plus, the system has to get easier for the people who are actually collecting the taxes. It's a pain in the ass to be tracking tax collections for many small businesses. I am in the process of reviewing all the locations we do service and finding out there are 4 or 5 different tax codes based on city, county, and state, taxes. Spending time on that doesn't help me to grow my business.

[southsider2k5]

I think I prefer a consumption tax as opposed to a flat tax as its more fair ( more you spend more you pay ) and would also encourage people to save more money.

 

Not at all actually. It is extremely regressive against the poor, as they have to spend all of their money to survive. They end up actually paying a higher marginal tax rate. It would be disaster for poor families who now have actually a negative tax rate.

[southsider2k5]

I don't know if that's true. Making 12,000 a year a far larger percentage of my money would then go to taxes than someone earning ten times my income with a very high sales tax.

 

For this flat tax--are you exempting life necessities (clothes, food, etc)--that might be more fair, but a general flat consumption tax would honestly bury someone in my income bracket.

 

The only exemptions in most flat tax plans are mortgage interest. And actually the only reason I even said flat tax was because it is the simplist of all systems. Your taxes could be done on a postcard. My theory is through negotiations if you start with something extreme like that, maybe we can compromise to a solid progressive multi-rate tax plan, without any loopholes.

[Texsox]

Not at all actually.  It is extremely regressive against the poor, as they have to spend all of their money to survive.  They end up actually paying a higher marginal tax rate.  It would be disaster for poor families who now have actually a negative tax rate.

 

I think you would immediatly create exemptions for food, clothing, shelter, type items to shield those first dollars out the pocket every month. Same as in my system of basically giving everyone their first $20,000 tax free for those same items.

[southsider2k5]

Also for the comsumption taxers, here is an example of why this is bad for the poor. Take someone earning 10,000 100,000 and 1 million a year with a 20% consumption tax.

 

A person making 10k spends all of their money to survive and ends up paying 2k in taxes at 20% for a marginal rate of 20%

 

Someone making 100k, if they save 10%, spends only 90k which would be all they get taxed on. They pay 18K in taxes, for a marginal rate of only 18%.

 

And finally someone making a million dollars a year and is able to save 50% of their money, would only spend 500k, meaning they only get taxed on 500k for a tax bill of 100k. Their marginal tax rate is only 10%, meaning they would pay half of the tax rate of the people who have to spend all of their money.

 

The system is regressive and would bankrupt the poor.

[Texsox]

Putting on the rose colored glasses for a moment . . .

 

Could it be that our tax code is so complex because we are trying so hard to be fair? We always seem to get into this vortex

 

Wealthy pay more than poor

 

Oops, that is unfair and hurts the poor, because the wealthy need capital to expand businesses, give raises, etc etc

 

We better tax the poor more and the rich less

 

Meanwhile the burden on the "middle class" which we can never agree on who is and isn't "middle class" stays the same or increases.

[southsider2k5]

Under the current system, the poorest quintile of tax payers have a negative tax rate. The poor actually net recieve money from paying taxes because of child credits and EIC and the like.

[jackie hayes]

No matter the exemptions, a consumption tax will be regressive (b/c the rich save SO much).

 

Other than that, it's all in the details. There's noone in their right mind who would prefer complicated to simple. Until the idea is fleshed out more, this is hot air. And btw, I still don't understand why Greenspan's word has any weight in this. He's the monetary policy guy, not 'economics czar'.

[Texsox]

Under the current system, the poorest quintile of tax payers have a negative tax rate.  The poor actually net recieve money from paying taxes because of child credits and EIC and the like.

 

Not only that, many qualify for assitance on some level. What would be interesting, but almost impossible to compute, is what "benefits" we are receiving. What's my cost for guys like Nuke patrolling and keeping America safe? What's my cost for these roads, the communications infrastructure, the research that has improved my way of life, the schools my children attend, etc. etc. Even if we do not sign the back of a government aid check, we all benefit.

[TheBigHurt35]

I think I prefer a consumption tax as opposed to a flat tax as its more fair ( more you spend more you pay ) and would also encourage people to save more money.

 

Encouraging people to save would benefit the economy in the long run, but a consumption-based tax system would probably lead to an economic disaster. Our economy is heavily reliant on consumer spending.

 

IMO, the best way to encourage people to save money would be to do away with Social Security. That would literally force people to act responsibly with their income and would also fix a broken system that's dommed to failure because it wasn't intended to support people for 15-20 years after retirement.

[Texsox]

Let's take a simple system.

 

We passed a budget, it will cost $500 to run the country.

Here's everyone's bill for their share.

Money goes in, we're done.

 

Let's keep the focus on paying our bills. As soon as the politicians mesmerized us with speeches telling us we could get all these benefits and keep our money, we were screwed.

 

If the government spends $100 this year. We have to pay the $100 eventually. The longer we wait to pay the $100 the more it will cost us in interest.

 

So if we borrow the money to pay the $100, for all of us to pay less, we need more taxpayers, who will divide up that $100 more ways, and they have to contribute all the interest plus their share.

 

As far as sparking the economy, every dollar the government gets, it spends. Unfortunately, too much of our national debt is now owned by the foreign governments and their banks who we love to hate. So those dollars are going overseas. But to say a dollar spent at Boeing by Uncle Sam spends differently than a dollar spend at Boeing by United doesn't make sense.

[NUKE_CLEVELAND]

Encouraging people to save would benefit the economy in the long run, but a consumption-based tax system would probably lead to an economic disaster.  Our economy is heavily reliant on consumer spending.

 

IMO, the best way to encourage people to save money would be to do away with Social Security.  That would literally force people to act responsibly with their income and would also fix a broken system that's dommed to failure because it wasn't intended to support people for 15-20 years after retirement.

 

 

I disagree with you on both points. A consumption tax, in place of income tax, would be better because it would have a net effect of zero on the indivisual taxpayer but would result in more revenues for the treasury due to a vast expansion of the tax base.

 

As for SS I dont think eliminating it outright is the solution. The private accounts are a far better alternative for the following reasons.

 

-If the payroll deduction is eliminated people would not save that money, they would spend it, especially at the low end of the income spectrum. Then the paranoid fears of SS reform critics would be realized with a bunch of people with no retirement saftey net whatsoever.

 

-Private accounts do a far better job of what you're trying to accomplish, increase the savings rate, because people with steady jobs who opt for the private accounts would be able to pile up their half of their contribution making a far better rate than the current system and would create a new class of wealthy people in the country.

Edited March 3, 2005 by NUKE_CLEVELAND

[Cerbaho-WG]

I think I prefer a consumption tax as opposed to a flat tax as its more fair ( more you spend more you pay ) and would also encourage people to save more money.

 

This would absolutely ruin the economy. Consumption and taxes would fall significantly killing GDP, while investment would be neglected due to savings and the economy would fall flat on its face.

[TheBigHurt35]

I disagree with you on both points.  A consumption tax, in place of income tax, would be better because it would have a net effect of zero on the indivisual taxpayer but would result in more revenues for the treasury due to a vast expansion of the tax base.

 

That may be true, but you still need to consider the negative effect that a consumption-only tax will have on consumer spending. Taxing people ONLY when they spend money will give them incentive to spend much much less. People will spend less on their homes, vehicles, entertainment items, etc. That might be good for the poor, but the economic impact might be disasterous. As demand for consumer products decreases, millions of jobs will likely be lost.

 

Then again, Greenspan and other economists argue otherwise, and they know a lot more about this than I do. I just don't see how only taxing money spent couldn't hurt the economy.

 

Perhaps a modest rise in sales tax and a lowering of income tax would be the best solution?

 

-If the payroll deduction is eliminated people would not save that money, they would spend it, especially at the low end of the income spectrum.  Then the paranoid fears of SS reform critics would be realized with a bunch of people with no retirement saftey net whatsoever.

 

True, but that's their fault. They shouldn't be living above their means and it's not like Social Security is going to support them after retirement. Frankly, I'm sick of my hard-earned income going to support people who make idiotic decisions.

 

-Private accounts do a far better job of what you're trying to accomplish, increase the savings rate, because people with steady jobs who opt for the private accounts would be able to pile up their half of their contribution making a far better rate than the current system and would create a new class of wealthy people in the country.

 

Agreed, but then why not just not have a social security system in the first place? I don't see a big difference between these private accounts and IRAs. Then again, I'm not exactly an expert in economics, so you'll have to forgive me if I'm missing something obvious.

[Texsox]

I'm not convinced a consumption tax would decrease spending that much. For example, do people in the city of Chicago buy less because of a higher tax rate than someone in rural Kankakee County?

 

I believe you may see much more pressure on manufacturers to lower prices. Perhaps it would drive more manufacturing overseas where they can produce good for less.