Taxes for individuals and corporations

[mfs378]

Would it be possible to have a simple tax plan that is consistent for corporations and individuals? Its something I've been thinking about and haven't come up with an answer - just wondering whether someone thinks they have one.

I suppose the fair tax would be a suggestion. My understanding is that everyone - including individuals and corporations - would pay a certain percentage tax on purchases. I have just two questions about the fair tax:

1) A potential problem with the fair tax: suppose a distributor buys TVs from a wholesaler and resells them to consumers. When the distributor buys the TVs, they pay a tax (say 20%). This dictates a minimum markup when the TV is sold to the consumer. Essentially, each 'middleman' between the manufacturer and the consumer has a mandatory and substantial markup, which means that small players (such as local stores) would not be able to compete.

2) As far as I know, investments would not be taxed, even though they are purchases. How is this consistent?

Any thoughts?

 

[Brainonska511]

The problem with that scheme in the first place is that sales taxes are inherently regressive. The extremely wealthy people that came up with this scheme keep pushing it because they stand to save tons of money in taxes while shafting the rest of society.

 

[mfs378]

Originally posted by: Brainonska511
The problem with that scheme in the first place is that sales taxes are inherently regressive. The extremely wealthy people that came up with this scheme keep pushing it because they stand to save tons of money in taxes while shafting the rest of society.

I agree, but if purchases of investments were also taxed, this problem would be reduced. This is why I asked whether there is an argument for excluding them from taxation.

 

[Brainonska511]

Originally posted by: mfs378

Originally posted by: Brainonska511
The problem with that scheme in the first place is that sales taxes are inherently regressive. The extremely wealthy people that came up with this scheme keep pushing it because they stand to save tons of money in taxes while shafting the rest of society.

I agree, but if purchases of investments were also taxed, this problem would be reduced. This is why I asked whether there is an argument for excluding them from taxation.

I'd assume that it is because some people consider investments to be saving as many times, they'll appreciate in value.

 

[mfs378]

Originally posted by: Brainonska511
I'd assume that it is because some people consider investments to be saving as many times, they'll appreciate in value.

I don't follow your sentence. Clarify?

 

[Brainonska511]

Originally posted by: mfs378

Originally posted by: Brainonska511
I'd assume that it is because some people consider investments to be saving as many times, they'll appreciate in value.

I don't follow your sentence. Clarify?

When you buy food or buy a car, it depreciates in value immediately as they are consumable goods. Stocks/bonds/savings accounts are not consumable goods and when you "buy" them, you merely do so for the purpose of making more money in the long run. You don't buy a loaf of bread at $2.50 expecting to sell it at $4.50 two weeks later. You buy investments and save because you are allowing the money to make more money on itself for future use.

I have a thought going, but I don't necessarily know if those were the words that best explain it.

 

[mfs378]

Originally posted by: Brainonska511
When you buy food or buy a car, it depreciates in value immediately as they are consumable goods. Stocks/bonds/savings accounts are not consumable goods and when you "buy" them, you merely do so for the purpose of making more money in the long run. You don't buy a loaf of bread at $2.50 expecting to sell it at $4.50 two weeks later. You buy investments and save because you are allowing the money to make more money on itself for future use.

I have a thought going, but I don't necessarily know if those were the words that best explain it.

Yeah that explains what investments are, but I don't see a reason why they shouldn't be taxed if we are going to apply a flat sales tax to everything. Anyway I agree with your original point about the fair tax.

 

[bbdub333]

Wouldn't taxing investments just hurt the lower classes even more by discouraging savings? We already have an imminent disaster looming due to a low savings rate in our country... maybe if we encouraged more people to save and invest instead of giving it the stigma of being for only the rich, we would be better off.

 

[mfs378]

Originally posted by: bbdub333
Wouldn't taxing investments just hurt the lower classes even more by discouraging savings? We already have an imminent disaster looming due to a low savings rate in our country... maybe if we encouraged more people to save and invest instead of giving it the stigma of being for only the rich, we would be better off.

It would discourage investment, but if you are going to tax the person who buys a house to live in it, but not the person who buys the house as an investment, or the person who invests in a realty fund which then goes and buys the house, how is it fair or consistent?

Also, you could argue that if investments were taxed, investors would be far more careful and more demanding of accountability from the companies they invest in. This would be a natural mechanism to put a lid on executive salaries, potentially.

My pet idea is to tax all revenue - not just profits. I haven't thought it all the way through, however. Also, point #1 I gave about the fair tax would also apply to this idea.

 

[bamacre]

I'd be happy with the IRS being tossed into the garbage, replacing it with nothing.

 

[Craig234]

Originally posted by: bamacre
I'd be happy with the IRS being tossed into the garbage, replacing it with nothing.

Great, and then no one pays any taxes because there's no enforcement, and the country falls in 18 minutes.

 

[Craig234]

What we need are not wild new tax systems, but to fix what we have: spending under control and taxes fairly distributed.

 

[bamacre]

Originally posted by: Craig234

Originally posted by: bamacre
I'd be happy with the IRS being tossed into the garbage, replacing it with nothing.

Great, and then no one pays any taxes because there's no enforcement, and the country falls in 18 minutes.

Yup, no one pays individual income taxes. That's the point.

The country isn't going to fall apart. It would take us back to, roughly, year 1999 spending. The federal government doesn't get all its revenue from personal income taxes, in fact, the majority of the federal government's revenue comes from other sources.

And, of course, I would support cutting the size and spending of the federal government appropriately.

 

[Craig234]

Originally posted by: bamacre

Originally posted by: Craig234

Originally posted by: bamacre
I'd be happy with the IRS being tossed into the garbage, replacing it with nothing.

Great, and then no one pays any taxes because there's no enforcement, and the country falls in 18 minutes.

Yup, no one pays individual income taxes. That's the point.

The country isn't going to fall apart. It would take us back to, roughly, year 1999 spending. The federal government doesn't get all its revenue from personal income taxes, in fact, the majority of the federal government's revenue comes from other sources.

And, of course, I would support cutting the size and spending of the federal government appropriately.

Hm, Wiki says:

Receipts for fiscal year 2007 were $2,407 billion. FY2007 on-budget receipts were $1,798 billion. FY2007 off-budget receipts were $608 billion. Off-budget receipts include Social Security and Medicare payroll taxes, as well as the net profit or loss of the U.S. Postal Service.

* $1,163 billion - Individual income tax
* $869.6 billion - Social Security and other payroll taxes
* $370.2 billion - Corporate income tax
* $65.1 billion - Excise taxes
* $26.0 billion - Customs duties
* $26.0 billion - Estate and gift taxes
* $47.2 billion - Other

Take out Social Security, because that's not for general spending (even though the surplus is raided and given IOU's), and you have about $1.16T of $1.54T coming from income tax.

Of course other taxes like the Corporate Income Tax would go to zero without the IRS enforcing it as well, as well as any other taxes it collects. So, we'd be little above zero.

 

[BansheeX]

http://www.ronpaullibrary.org/document.php?id=199

Getting rid of it would be fairly easy, but it has to come with reductions in government. If we somehow stop the Iraqs and Vietnams and get back to a sound foreign policy, that alone would be enough. We could also abolish unnecessary federal departments like the DoEduction and end the "war on drugs." Keep in mind also that no income tax means more individual wealth for food, education, rent/housing, wages (labor is a product, too). In which case, revenue in other taxes like sales taxes may actually go up, because it would result in more sales and investment domestically. This is one of the things they pressed Obama on in the debate everyone hated, because he couldn't understand how lowering capital gains in the past actually caused total tax revenue to go up because high taxes scared out investors that otherwise would've stayed in.

 

[Atreus21]

Originally posted by: bbdub333
Wouldn't taxing investments just hurt the lower classes even more by discouraging savings? We already have an imminent disaster looming due to a low savings rate in our country... maybe if we encouraged more people to save and invest instead of giving it the stigma of being for only the rich, we would be better off.

I think I disagree. If anything, the economy has slowed down because people are scared to spend money. That's why the Fed has been reducing interest rates: To encourage people to take money out of lower and lower interest yielding savings.

 

[GTKeeper]

Originally posted by: Atreus21

Originally posted by: bbdub333
Wouldn't taxing investments just hurt the lower classes even more by discouraging savings? We already have an imminent disaster looming due to a low savings rate in our country... maybe if we encouraged more people to save and invest instead of giving it the stigma of being for only the rich, we would be better off.

I think I disagree. If anything, the economy has slowed down because people are scared to spend money. That's why the Fed has been reducing interest rates: To encourage people to take money out of lower and lower interest yielding savings.

Scared to spend? I think some people just don't have any money to spend. And when 50% of the spending is with borrowed money, it doesn't matter how scared or not scared you are.

The Fed reduces rates to make money cheaper to lend, not to lower savings rates in banks so people take out the money and spend it.

Also if that was true the stimulus checks would not be getting spent, but they are and Wal-mart even said that it had impact on their latest quarter.

 

[Craig234]

Originally posted by: BansheeX
http://www.ronpaullibrary.org/document.php?id=199

Getting rid of it would be fairly easy, but it has to come with reductions in government. If we somehow stop the Iraqs and Vietnams and get back to a sound foreign policy, that alone would be enough.

No, ending $150B or $200B a year for a bad war does not even balance the budget, much less make up for $1.5T in lost personal and corporate income tax.

We could also abolish unnecessary federal departments like the DoEduction and end the "war on drugs." Keep in mind also that no income tax means more individual wealth for food, education, rent/housing, wages (labor is a product, too). In which case, revenue in other taxes like sales taxes may actually go up, because it would result in more sales and investment domestically. This is one of the things they pressed Obama on in the debate everyone hated, because he couldn't understand how lowering capital gains in the past actually caused total tax revenue to go up because high taxes scared out investors that otherwise would've stayed in.

You appear not to know about the studies that modern tax cuts are shown to return about 21% in additional taxes. They don't return more than they cut.

You also appear not to have any idea about the budget, how much a drop in the bucket things like DoE are. You should go use one of those 'balance the budget' web tools.

 

[Craig234]

Originally posted by: GTKeeper

Originally posted by: Atreus21

Originally posted by: bbdub333
Wouldn't taxing investments just hurt the lower classes even more by discouraging savings? We already have an imminent disaster looming due to a low savings rate in our country... maybe if we encouraged more people to save and invest instead of giving it the stigma of being for only the rich, we would be better off.

I think I disagree. If anything, the economy has slowed down because people are scared to spend money. That's why the Fed has been reducing interest rates: To encourage people to take money out of lower and lower interest yielding savings.

Scared to spend? I think some people just don't have any money to spend. And when 50% of the spending is with borrowed money, it doesn't matter how scared or not scared you are.

The Fed reduces rates to make money cheaper to lend, not to lower savings rates in banks so people take out the money and spend it.

Also if that was true the stimulus checks would not be getting spent, but they are and Wal-mart even said that it had impact on their latest quarter.

Of curse the stimulus checks are being spent.

When the government wants to actually stimulate the economy, it gives the money to the bottom, as it did with those checks, and it's spent.

When it wants to rob the public to enrich the wealthy, it passed 'tax cuts' for the rich and tells lies about how everyone benefits from the rich getting more money.

 

[Xavier434]

Originally posted by: mfs378

Originally posted by: Brainonska511
When you buy food or buy a car, it depreciates in value immediately as they are consumable goods. Stocks/bonds/savings accounts are not consumable goods and when you "buy" them, you merely do so for the purpose of making more money in the long run. You don't buy a loaf of bread at $2.50 expecting to sell it at $4.50 two weeks later. You buy investments and save because you are allowing the money to make more money on itself for future use.

I have a thought going, but I don't necessarily know if those were the words that best explain it.

Yeah that explains what investments are, but I don't see a reason why they shouldn't be taxed if we are going to apply a flat sales tax to everything. Anyway I agree with your original point about the fair tax.

Also consider that investments help encourage growth which leads to more jobs. You do not want to discourage this sort of thing like that.

 

[Craig234]

Originally posted by: Xavier434
Also consider that investments help encourage growth which leads to more jobs. You do not want to discourage this sort of thing like that.

Newsflash: all taxes have a price and 'discourage something you don't want to discourage'.

Tax imports, it discourages people selling us goods that would otherwise be attractive for Americans to buy.

Tax wages, and you 'discourage wage earners' and 'discourage spending' because people can afford to spend less, in an economy two-thirds based on consumer spending.

Tax corporations, and you 'just add to the overhead passed on in the prices'.

Tax investing and you 'discourage investing', supposedly.

Anything you tax has a price, so simply pointing out one of those prices is not an argument against that tax, since the tax will go somewhere else - say, to the middle class. Great.

In fact, I'd say out of the above, that the least compelling one is the investment tax. Investors put their money where they can get the best expected return, and the tax rate has relatively little effect on that. If they decide that investment x, based on risk and expected return, is the best place for their money, then it's still the best place whether they are paying 0%, 15%, or 35% taxes on that return.

You also neglect to mention the benefits of taxing investments, when that money can either reduce our debt, or reduce other taxes.