Post your tax structure plan

[NorthSideSox72]

How would you structure taxes? Make some specific tweaks, or start new? Lots of deductions/credits, few, or none? What rates for income? What about corp taxes? Div/Cap gains?

 

With all the dissection of the tax plans from various GOP candidates for President, I would love to hear what each of you would do...

 

[Middle Buffalo]

How would you structure taxes? Make some specific tweaks, or start new? Lots of deductions/credits, few, or none? What rates for income? What about corp taxes? Div/Cap gains?

 

With all the dissection of the tax plans from various GOP candidates for President, I would love to hear what each of you would do...

I'd like to pay 15% like Romney.

[NorthSideSox72]

By the way, here are the current income tax brackets and rates, for reference...

 

SINGLE

 

std Deduction: $5800

$0-$8500 @ 10%

$8500-$34500 @ 15%

$34500-$83600 @ 25%

$83600-$174400 @ 28%

$174400-$379150 @ 33%

Over $379150 @ 35%

 

MARRIED JOINT FILING

 

std Deduction: $11600

$0-$17000 @ 10%

$17000-$69000 @ 15%

$69000-$139500 @ 25%

$139500-$212300 @ 28%

$212300-$379150 @ 33%

Over $379150 @ 35%

 

 

[StrangeSox]

I'd be more inclined to tax wealth instead of labor.

 

But, keeping the current taxation system largely in place, make the brackets substantially more progressive (1990's or higher) and bring capital gains and dividends taxes in line with everything else.

[NorthSideSox72]

Long Term Cap Gains are ZERO if you are in the 15% or lower income bracket, 15% if above.

 

Short Term follow the income rates.

 

Estate tax has a $5M exemption, and above that has a sliding scale up to 35%.

 

Corp Taxes are highly convoluted by credits and deductions, and I won't even list all the credits and deductions for them or individuals.

 

[StrangeSox]

One interesting unintended consequence in the current tax code: when banks have foreclosed on a house and have it listed for sale, it counts as an inventory item. That means they can't take deductions for various expenses incurred on the property for upkeep, cleaning, repair, etc. until the property is actually sold.

[Jenksismyhero]

Long Term Cap Gains are ZERO if you are in the 15% or lower income bracket, 15% if above.

 

Short Term follow the income rates.

 

Estate tax has a $5M exemption, and above that has a sliding scale up to 35%.

 

Corp Taxes are highly convoluted by credits and deductions, and I won't even list all the credits and deductions for them or individuals.

 

I'd make cap gains zero unless you fall into the top 2 tax brackets. Even at the 25-28%, that's squarely in the "middle class." Why punish those people for being smart enough to invest their left over dollars to earn some more money? It's not like they're making a fortune off that. Increase the top brackets if need be, but leave the middle class alone.

 

On a similar note, i'd drop the 15-28% to 12-23% (or more) and increase the top two brackets.

 

I'd change the credit/deduction system for any domestic corp. dodging taxes here (GE, for example). Heavy tax incentives for domestic companies and especially small domestic companies.

Edited January 24, 2012 by Jenksismybitch

[Balta1701]

Why punish those people for being smart enough to invest their left over dollars to earn some more money?

This begs a question..."Is this the most effective way to encourage this class of wage earners to invest in retirement funds". If it is not, then even if it disadvantages that type of investment, it's not punishment, because it'd be better for the country if people went elsewhere. A good comparison would be 401k/IRA style retirement accounts, which are currently given huge tax advantages.

[farmteam]

I'd make cap gains zero unless you fall into the top 2 tax brackets. Even at the 25-28%, that's squarely in the "middle class."

 

Interesting point. I'm assuming there's a chart somewhere that correlates these percentages and income, that would make it easier to evaluate NorthSide's question

[Soxbadger]

Without doing hardcore numbers I think the answer is something like, raising income taxes on the highest levels, raise inheritance tax, lowering capital gains etc. Capital gains is somewhat of a double tax which is kind of unfair (taxed when you made the money and then taxed as the money gains value), inheritance isnt so much a double tax because the person who is inheriting the money didnt earn it (if it was earned it would be taxed as wages/income).

[NorthSideSox72]

Here is the NSS tax plan...

 

First, reduce the number of income tax brackets to four, and lower all the rates except the top bracket (you will see why later)...

 

On singles...

0-36k: 5%

36k-90k: 15%

90k-200k: 25%

200k+: 35%

 

Married similar relatively.

 

Throw out the ENTIRE current book for personal deductions and credits, and replace it with a 5-item rule. Congress can have enacted, at any given time, only 5 deductions or credits. If they want to add one, they need to remove one. This not only greatly simplifies the tax code, it also allows the overall rates to drop, while maintaining the SAME LEVEL OF OVERALL PERSONAL INCOME TAX REVENUE (my numbers above are guesstimates, but they should be tuned to that goal).

 

Furthermore, by using this 5-item rule, it prevents the tax code from going right back to where it is now - a convoluted mess. But still allows Congress to make a few tweaks based on current needs. The five I might pick currently, for example, could be:

 

--Deduction for any education or day-care related spending, with no cap

--Deduction for mortgage interest on one home only

--Deduction for all charitable contributions, no cap, but only at the equivalent effective rate of that bracket of income to the individual

--Child credit per child, similar to how it is now

--All property, state and local taxes deductible, much as it is now

 

Short term capital gains should follow the income tax brackets, much as they do now.

 

Long term capital gains should be 10% on the first 100k of distributions or realized P&L in a given year, and 20% on all above that level.

 

Business taxes, like personal taxes, scrap ALL current deductions and credits, and again allow for a 5-item rule. Use the total amount of current tax revenue from businesses as your target for total, adjust for the 5 items, and make a flat corporate income tax rate lower as a result. This should decrease the tax burden for most corporations on their income, while preventing a situation like the one GE has. My current 5 items might look like this:

 

--A deduction for each new employee hired and retained in the US for the full year (using a full head count invoice)

--Deduction for all charitable contributions

--Deduction for any spending directly on facilities or services related to family treatment in the workplace beyond legal requirements: child care, maternity/paternity leave granted, etc. (the etc would need to be clarified of course)

--Special credits for employing energy-use-reducing facilities or items, where the credit is a % rate of total spent on the items (alt energy, building retrofitting, HVAC equipment above ratings levels, etc.)

--Something else

 

A slight expansion on the definition of income is also needed - things like carried interest and other short term tricks that look like long term gains but aren't, need to be captured under short term gains.

 

Finally, keep the currently lowered soc security tax rate, but remove the cap entirely, with all funds going to shore up Soc Sec fund.

 

 

This plan keeps the tax revenues neutral, except for shoring of Soc Sec, increased revenue from a stablized top bracket rate coupled with removing some deductions and credits, and the extra income from income definition recapture, which can be used to further reduce the deficit.

 

The spending side then needs to be further addressed to balance the budget, but that is another matter.

 

[Balta1701]

Without doing hardcore numbers I think the answer is something like, raising income taxes on the highest levels, raise inheritance tax, lowering capital gains etc. Capital gains is somewhat of a double tax which is kind of unfair (taxed when you made the money and then taxed as the money gains value), inheritance isnt so much a double tax because the person who is inheriting the money didnt earn it (if it was earned it would be taxed as wages/income).

Double-taxation happens all the time. I pay income taxes and then sales taxes and then property taxes and so on.

 

The question to ask is whether low capital gains taxes produces a strong positive economic effect compared to other possible mechanisms of taxation. We've done a spectacular experiment on this in the last 10 years, cutting capital gains taxes to recent historic lows, and the net result has been a disastrous increase in financial risk with no obvious benefit to society except for a lot of vacant housing in the Imperial Valley.

[Jenksismyhero]

This begs a question..."Is this the most effective way to encourage this class of wage earners to invest in retirement funds". If it is not, then even if it disadvantages that type of investment, it's not punishment, because it'd be better for the country if people went elsewhere. A good comparison would be 401k/IRA style retirement accounts, which are currently given huge tax advantages.

 

But you don't want to limit middle class investments solely to retirement.

 

I just think it's unfair that if i earn 3k on my investments this year i gotta pay 450 bucks. That's essentially a penalty for being smart with my money.

 

 

[Balta1701]

But you don't want to limit middle class investments solely to retirement.

 

I just think it's unfair that if i earn 3k on my investments this year i gotta pay 450 bucks. That's essentially a penalty for being smart with my money.

Having the tax rate be the same on investments as on labor doesn't "Limit middle class investments solely to retirement"...it just treats that income like any other income.

[Jenksismyhero]

Having the tax rate be the same on investments as on labor doesn't "Limit middle class investments solely to retirement"...it just treats that income like any other income.

 

Well, that begs the question of whether there should be any "income" tax. It's all a penalty.

[Soxbadger]

Balta,

 

Sales tax, property tax etc are for different services, items. Personally I think they are different, especially because sales/property tax are generally not federal taxes and this is a discussion on federal tax.

[Balta1701]

Well, that begs the question of whether there should be any "income" tax. It's all a penalty.

Any tax is a drag on some portion of society...but clearly, I'm of the philosophy that there is substantial societal gains that can be produced by things like an army and quality health care. So the question we're effectively asking is what things do we want to advantage relative to others.

 

If you raise income taxes relative to investment, you are giving a big boon to people who invest a lot relative to people who don't have funds to invest. This can be a good thing if it encourages effective investment, or a bad thing if it destroys every part of the economy that isn't related to investment. And I think you know which of those I'll say we're closer to.

[Jenksismyhero]

Here is the NSS tax plan...

 

First, reduce the number of income tax brackets to four, and lower all the rates except the top bracket (you will see why later)...

 

On singles...

0-36k: 5%

36k-90k: 15%

90k-200k: 25%

200k+: 35%

 

Married similar relatively.

 

Throw out the ENTIRE current book for personal deductions and credits, and replace it with a 5-item rule. Congress can have enacted, at any given time, only 5 deductions or credits. If they want to add one, they need to remove one. This not only greatly simplifies the tax code, it also allows the overall rates to drop, while maintaining the SAME LEVEL OF OVERALL PERSONAL INCOME TAX REVENUE (my numbers above are guesstimates, but they should be tuned to that goal).

 

Furthermore, by using this 5-item rule, it prevents the tax code from going right back to where it is now - a convoluted mess. But still allows Congress to make a few tweaks based on current needs. The five I might pick currently, for example, could be:

 

--Deduction for any education or day-care related spending, with no cap

--Deduction for mortgage interest on one home only

--Deduction for all charitable contributions, no cap, but only at the equivalent effective rate of that bracket of income to the individual

--Child credit per child, similar to how it is now

--All property, state and local taxes deductible, much as it is now

 

Short term capital gains should follow the income tax brackets, much as they do now.

 

Long term capital gains should be 10% on the first 100k of distributions or realized P&L in a given year, and 20% on all above that level.

 

Business taxes, like personal taxes, scrap ALL current deductions and credits, and again allow for a 5-item rule. Use the total amount of current tax revenue from businesses as your target for total, adjust for the 5 items, and make a flat corporate income tax rate lower as a result. This should decrease the tax burden for most corporations on their income, while preventing a situation like the one GE has. My current 5 items might look like this:

 

--A deduction for each new employee hired and retained in the US for the full year (using a full head count invoice)

--Deduction for all charitable contributions

--Deduction for any spending directly on facilities or services related to family treatment in the workplace beyond legal requirements: child care, maternity/paternity leave granted, etc. (the etc would need to be clarified of course)

--Special credits for employing energy-use-reducing facilities or items, where the credit is a % rate of total spent on the items (alt energy, building retrofitting, HVAC equipment above ratings levels, etc.)

--Something else

 

A slight expansion on the definition of income is also needed - things like carried interest and other short term tricks that look like long term gains but aren't, need to be captured under short term gains.

 

Finally, keep the currently lowered soc security tax rate, but remove the cap entirely, with all funds going to shore up Soc Sec fund.

 

 

This plan keeps the tax revenues neutral, except for shoring of Soc Sec, increased revenue from a stablized top bracket rate coupled with removing some deductions and credits, and the extra income from income definition recapture, which can be used to further reduce the deficit.

 

The spending side then needs to be further addressed to balance the budget, but that is another matter.

 

I'd support the vast majority of this. Though I'm not sure why something like deducting interest on college loans is taken out. That's a good thing. That's providing an incentive for people just like deductions for businesses who hire new employees. And I'd remove the cap. $2500 bucks isn't enough.

 

You reminded me of the day care expense, which i'll be utilizing next year. Only 20% is deductible? Ludicrous. Up that to 50% or more.

Edited January 24, 2012 by Jenksismybitch

[Jenksismyhero]

Any tax is a drag on some portion of society...but clearly, I'm of the philosophy that there is substantial societal gains that can be produced by things like an army and quality health care. So the question we're effectively asking is what things do we want to advantage relative to others.

 

If you raise income taxes relative to investment, you are giving a big boon to people who invest a lot relative to people who don't have funds to invest. This can be a good thing if it encourages effective investment, or a bad thing if it destroys every part of the economy that isn't related to investment. And I think you know which of those I'll say we're closer to.

 

There's also a detriment to subsidizing a large portion of our society, including the poor and the old. Maybe if people weren't taxed/fee'd to death they'd be able to provide for themselves a little more.

[Balta1701]

I'd support the vast majority of this. Though I'm not sure why something like deducting interest on college loans is taken out. That's a good thing. That's providing an incentive for people just like deductions for businesses who hire new employees. And I'd remove the cap. $2500 bucks isn't enough.

 

You reminded me of the day care expense, which i'll be utilizing next year. Only 20% is deductible? Ludicrous. Up that to 50% or more.

See, now you've hit on the big issue in NSS's setup. He's tried to make Congress limit itself to 5 deductions. The immediate response is that getting rid of one of the current deductions is "Ludirous", and you've put in 2 big deductions already.

 

If we're allowing deductions in the first place, and we've got a system where people are regularly buying Congresspeople (as we currently have), then the current deduction mess is pretty much the logical result. even if Congress tried to limit deductions, the next Congress can just discard those limits.

[Balta1701]

There's also a detriment to subsidizing a large portion of our society, including the poor and the old. Maybe if people weren't taxed/fee'd to death they'd be able to provide for themselves a little more.

I'm hoping you can write my response for me by now .

[StrangeSox]

But you don't want to limit middle class investments solely to retirement.

 

I just think it's unfair that if i earn 3k on my investments this year i gotta pay 450 bucks. That's essentially a penalty for being smart with my money.

 

It's a tax on earned money. You can phrase "selling your labor" as "being smart with your time" and get the same results. But that $3000 was never taxed before.

 

I think this is a good opportunity to post this again: http://www.levyinstitute.org/pubs/wp_589.pdf

 

The bottom 90% of Americans hold a whopping 10.6% of stock value in this country (pg 51). The bottom 90% owns 18.8% of direct/indirect stock e.g. 401k's, but those are already given preferential tax treatment.

 

Both yours and NSS's plans explicitly exclude the top brackets from further cuts, so I don't have a huge problem there. It wouldn't amount to much of a hit against revenues, but again it's a cut that wouldn't much at all for 60% of the country (pg 58 for breakdown of stock ownership by wealth category).

[Jenksismyhero]

See, now you've hit on the big issue in NSS's setup. He's tried to make Congress limit itself to 5 deductions. The immediate response is that getting rid of one of the current deductions is "Ludirous", and you've put in 2 big deductions already.

 

If we're allowing deductions in the first place, and we've got a system where people are regularly buying Congresspeople (as we currently have), then the current deduction mess is pretty much the logical result. even if Congress tried to limit deductions, the next Congress can just discard those limits.

 

I guess I don't have much problem with all the deductions. They're given as little "thanks for contributing positively on society" gifts. What's wrong with that? Turbo Tax does the work for me, I don't find it all that confusing. "Did you do X? Great! You get to do Y now." Pretty simple.

[southsider2k5]

Double-taxation happens all the time. I pay income taxes and then sales taxes and then property taxes and so on.

 

The question to ask is whether low capital gains taxes produces a strong positive economic effect compared to other possible mechanisms of taxation. We've done a spectacular experiment on this in the last 10 years, cutting capital gains taxes to recent historic lows, and the net result has been a disastrous increase in financial risk with no obvious benefit to society except for a lot of vacant housing in the Imperial Valley.

 

Then why don't we ask the question what the return on investment looks like for every other tax under the sun? How valuable are the liquor taxes we pay? Property taxes? Tolls? Sales Taxes? Fees? Why aren't we looking at how strong their returns are?

[StrangeSox]

Jenks, do you see how everything you're proposing is blatantly self-serving?

 

edit: That doesn't mean it's wrong, necessarily, it's just that every deduction you can take should be kept, your rates should be lowered, and others's rates should be increased.

Edited January 24, 2012 by StrangeSox