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Very Hot Topic (More than 25 Replies) Fixing Federal Taxation (Read 9696 times)
Shiva_TD
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Re: Fixing Federal Taxation
Reply #60 - Dec 7th, 2013 at 7:10am
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keauxbi wrote on Dec 6th, 2013 at 11:15am:
More people die in America from the cold than die in Russia from the cold.  More people die in America from the heat than die in Africa.

This map puts into proportion the number of extreme temperature related deaths and you'll notice That the US is much larger in size than either Russia, Canada, South America, Australia, Greenland, Iceland or Africa.

Americans are stupid when it comes to weather, but not as dumb as Indians.
http://www.worldmapper.org/images/smallpng/253.png


Excellent illustration which supports the argument that "food" is not the only necessary expenditure of the person and that an "expemption" on a state comsumption (sale) tax should not exist but instead a general "prebate" that allows the person to offset taxation on whatever purchases they choose is highly preferrable.

The government should not be making the personal decisions of the individual when it comes to their expenditures which is what it's doing if it exempts some items from taxation while taxing other items.

  
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keauxbi
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Re: Fixing Federal Taxation
Reply #61 - Dec 7th, 2013 at 10:11am
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So here's the problem with history, there's a record of what happened.

If we got into the situation we are in because congress over spent the revenue coming in, what makes you think that congress will suddenly act responsibly?

The last time the debt was paid off using existing revenue was under Andrew Jackson in 1835.  By the end of Jackson's time as president, congress had again accrued about $3.8million in debt.  Congress could not act responsibly for 3 freakin' years!!! Why do you suddenly think that the current generation of congress is any more fiscally responsible.

So you keep dodging the question of how high the rate will be.  So let's play devil's advocate.  You want to exempt the first $50k for each tax payer.  For 140million tax payers that comes out to $7trillion from GDP that is untaxed.  $7trillion from about $16trillion in GDP leaves $9trillion.  To pay the entire budget of around $3.5trillion without any deficits would set a tax rate of say 39%.

Problem is that anyone making close to $50k will shave their productivity down to below the $50k threshold to avoid taxation.  It's human nature.  Some CEO's like Warren Buffet will simply defer compensation to avoid taxation in hopes of the rate coming down on a future date (WBuffet's yearly salary is $100k and most of his income is realized in capital gains which is absolutely deferable.)  Not everyone will have the luxury to defer their incomes so the reduction will be small but we can expect GDP to decline in the first year of your tax plan.  ANY decline in actual GDP from predicted GDP will create a deficit because congress has already spent the money!

Furthermore, here comes congress.  Without debt and deficits to worry about, you're sure as shit going to see them spending willy nilly in the first year after your proposal because of "emergencies" that crop up.  It could be a natural disaster or suddenly the children need more for education or our vets need more assistance, you name it and they'll spend it. 

So what happens in the second year when your tax rate needs to be adjusted?  Let's say Americans successfully deferred about $1trillion in income.  We're talking about the upper income levels that can afford to manipulate their income year to year so this is reasonable.  Now the taxable base is only $8trillion.  Let's assume congressional spending increased by 6% as is their yearly increase that is built into the budgeting process.  $3.5trillion becomes $3.71 and since congress spent irresponsibly let's just pad that to an even $3.8trillion.  To pay the yearly budget the tax rate becomes 47.5%!!  Such a jump will encourage more Americans to defer as much income as possible.

That is why the math matters.
  

Keauxbi
"Anarchism is not a romantic fable but the hardheaded realization..."--Edward Abbey
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Shiva_TD
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Re: Fixing Federal Taxation
Reply #62 - Dec 9th, 2013 at 8:14am
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Let me address this by issue as trying to do all at once becomes overly complex.

keauxbi wrote on Dec 7th, 2013 at 10:11am:
So here's the problem with history, there's a record of what happened.

If we got into the situation we are in because congress over spent the revenue coming in, what makes you think that congress will suddenly act responsibly?


Because the tax law has built-in fiscally responsibility. If Congress raises spending then the tax rate goes up. They can't avoid it by simply borrowing against our children's income (that they have no right to do). 
  
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Liberalterian
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Re: Fixing Federal Taxation
Reply #63 - Dec 9th, 2013 at 8:24am
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Hey keauxbi, I thought Eisenhower cut down on the debt?


Shiva_TD wrote on Dec 9th, 2013 at 8:14am:
Because the tax law has built-in fiscally responsibility. If Congress raises spending then the tax rate goes up. They can't avoid it by simply borrowing against our children's income (that they have no right to do). 

Why does a consumption tax have fiscal responsibility built in? Congress can just keep borrowing money by having a deficit. Why would a consumption tax effect this at all?
  
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Shiva_TD
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Re: Fixing Federal Taxation
Reply #64 - Dec 9th, 2013 at 8:35am
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keauxbi wrote on Dec 7th, 2013 at 10:11am:
So you keep dodging the question of how high the rate will be.  So let's play devil's advocate.  You want to exempt the first $50k for each tax payer.  For 140million tax payers that comes out to $7trillion from GDP that is untaxed.  $7trillion from about $16trillion in GDP leaves $9trillion.  To pay the entire budget of around $3.5trillion without any deficits would set a tax rate of say 39%.


Income taxes are a component of "general tax revenues" that only fund general expenditures authorized by Congress. Social Security/Medicare are not funded with general taxation so those expenditures must be excluded from the "Income Tax Rate" calculation.

We can do a rough calculation based upon a general assumption that about 30% of federal spending is on Social Security/Medicare currently and rerun the numbers.

$3.5 trillion in total expenditures would equal $2.45 in general expenditures to be paid for with "income taxes" (plus other misc federal fees and excise taxes). If $9 trillion was available to pay for these expenditures then the tax rate would be about 27% for all income above $50,000/yr. to balance the budget.

Social Security/Medicare taxation and spending was also addressed by my proposal for privatization to eliminate Medicare completely and all but eliminate Social Security (leaving just a small safety net) after the transition is completed and it's a different issue.

  
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Shiva_TD
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Re: Fixing Federal Taxation
Reply #65 - Dec 9th, 2013 at 9:01am
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keauxbi wrote on Dec 7th, 2013 at 10:11am:
Problem is that anyone making close to $50k will shave their productivity down to below the $50k threshold to avoid taxation.  It's human nature. 


This is based upon very ignorant propaganda that is completely false. Simple logic dictates that a person is better of with more disposable income as opposed to less. I person would rather earn $60,000 and pay $2,700 in income taxes than only earn $50,000 and pay no taxes. Let's run the actual numbers to get a better picture.

At $50,000 in gross income a "worker" would have zero income tax liability but would have $3,825 in FICA "taxes" deducted (along with a matching employer payroll tax contribution) invested in a privatized "Social Security" invesment portfolio and they would have $46,175 in net disposable income.

At $60,000 in gross income they would have $4,590 in FICA "taxes" deducted (plus employer payroll taxes) split between private investment and funding of Social Secuity/Medicare and $2,700 in income taxes for a net disposable income of $52,710.

"Human nature" would want that $6,535 in additional net disposable income for the year and only a real idiot would refuse that additional income.
  
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Shiva_TD
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Re: Fixing Federal Taxation
Reply #66 - Dec 9th, 2013 at 9:08am
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keauxbi wrote on Dec 7th, 2013 at 10:11am:
Some CEO's like Warren Buffet will simply defer compensation to avoid taxation in hopes of the rate coming down on a future date (WBuffet's yearly salary is $100k and most of his income is realized in capital gains which is absolutely deferable.) 


The capital gains tax is abolished by my tax proposal.

All income regardless of source is taxed as income.

If a person purchases "ABS" stock then they will pay the income tax (above their exemption level) on all dividends and/or if they sell the stock for a profit (or claim a loss if they sell it for a loss). Warren Buffet is not going to stop buying and selling stock. The "income" cannot be deferred if it is accured during the year.
  
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Shiva_TD
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Re: Fixing Federal Taxation
Reply #67 - Dec 9th, 2013 at 9:10am
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Liberalterian wrote on Dec 9th, 2013 at 8:24am:
Why does a consumption tax have fiscal responsibility built in? Congress can just keep borrowing money by having a deficit. Why would a consumption tax effect this at all?


I have not proposed a "consumption tax" in my federal tax proposal. It is an income tax with the annual rate established by the authorized expenditures. It always results in a "balanced" budget.
  
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Liberalterian
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Re: Fixing Federal Taxation
Reply #68 - Dec 9th, 2013 at 9:14am
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Shiva_TD wrote on Dec 9th, 2013 at 9:10am:
I have not proposed a "consumption tax" in my federal tax proposal. It is an income tax with the annual rate established by the authorized expenditures. It always results in a "balanced" budget.

Oh my fault, I forgot that this is what you support.

I guess that could work but realistically it's not going to ever pass. Congress is obsessed with borrowing and spending. Not to mention, every Keynesian and Neo-Keynesian's head will explode if we don't borrow money so that we can effectively "set interest rates" and do other BS. So basically, we would need to somehow change the prevailing economic thinking as well as kick out the current bozos for your plan to ever come close to reality.

And even then, I guarantee you that eventually they will simply borrow money again. Or find some sort of loophole. And even if they don't, they'll probably just raise taxes in order to spend on domestic and war matters. After all - you do care about seniors don't you? And if we don't bomb Iran then they will get a nuke!  Grin

The point is, Washington is too corrupt for any plan like that to become reality or to somehow remain a good thing. The current tax code hasn't change in decades, I doubt it's going to have a real change like you or I are proposing.
  
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Shiva_TD
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Re: Fixing Federal Taxation
Reply #69 - Dec 9th, 2013 at 9:18am
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keauxbi wrote on Dec 7th, 2013 at 10:11am:
ANY decline in actual GDP from predicted GDP will create a deficit because congress has already spent the money!


I already addressed that income cannot be deferred and would also note that the GDP is fundamentally unrelated to investment.

Investments have very little to do with the GDP except for the "commissions and fees" paid on transactions.

Elsewhere I also mentioned that we need to pay down the national debt so we can assume a "buffer" in the tax rate. For example above it calculate out to be about 27% but if we included paying down the national debt a 30% rate would be more appropriate. If Congress over-spends it would come out of the surplus being collected or, as noted, could also drive up the following years rate to payback the overspending. 

  
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