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I wrote this a few years ago in response to a similar piece: The problem is that the rich have the ability to take their income in alot of different ways. Tax

I wrote this a few years ago in response to a similar piece: The problem is that the rich have the ability to take their income in alot of different ways. Tax income more, they'll take it as dividends. Tax dividends more, they'll take it as capital gains. Tax capital gains, they won't realize their capital gains until they can offset them with realized losses or they'll just get bank loans again't their stock holdings. Tax assets on death and they'll pass them o n in trusts. Some will move money off shore if they think they can get better returns that way. The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code. Who would have thought 25 years ago that companies would buy other companies in different countries, not to acquire their products or markets, but to acquire their headquarters address to lower the tax paid in the US. I don't think anything has changed.

theseatoms 9y ago
Because the wealthy have more resources to maneuver their assets and income streams, tax policy complexity is a regressive tax.
tici_88 9y ago
"The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code." I disagree. I simple flat tax rate where everything is taxed at a single rate would close every single one of the loopholes above, if only by making it moot. The fact that the rich can maneuver themselves into a much lower tax rate than the average person presents a significant, unfair advantage in my opinion. A flat tax rate would make things much more equitable. Plus it would asimplify the tax code tremendously.
- jrimbault 9y ago
  And then we'd have to redo/relearn the last millenium of why we do the things the way we do them.
  - inetknght 9y ago
    Is that such a bad idea?
    - graphitezepp 9y ago
      Seems like we should make another go at trying to structure this whole "society" thing for the good of everyone from where I am sitting.
    - namarie 9y ago
      It is if you think not every moment in the last millenium was pleasant for everyone.
    - jrimbault 9y ago
      Not necessarily. But in that case we wouldn't argue for a "simple" tax system. A tax system has to be complicated because humans and their activities are complicated things. edit: at that point, if we threw out the tax system, why not just get rid of states and corporations and start everything from scratch, said the junior dev
  - wyager 9y ago
    The modern progressive income tax system is not even remotely a millennium old. We didn't even have income taxes in the US until 1861, and they weren't generally applied until 1913.
    - jrimbault 9y ago
      Because History started when the US began and there was no financial system before and nobody ever learned anything before.
      - ameister14 9y ago
        First income tax in the UK was in 1842, first income tax in France was 1789 - could you find one that has been going since 1017 AD?
- shortstuffsushi 9y ago
  What would the flat tax actually tax though, income? Wouldn't they just dodge that then by not having income? Sure, for you and me it would make it easier -- my W2 says I made exactly 100k, here's exactly 50k of it, period. For people who have a flexible income, why report any amount that would make you pay in?
  - gambiting 9y ago
    Don't have income tax at all, tax every transaction 20%, like a flat rate VAT except that you can't claim it back on your business expenses. Simplify the entire tax system without having loads of brackets, exemptions and special cases - if you sell goods or services, 20% of that is paid as tax, end of story. I mean, I am not an economist, I have no idea if that would work or not(probably not)
    - MichaelBurge 9y ago
      The big problem there is that it encourages companies to grow as big as they possibly can, because "internal" transactions aren't taxed. So Amazon would own the entire supply chain: Manufacturing widgets, selling widgets, storing widgets, shipping widgets, handling returns, etc. They already sort of do this, but if you add a 20% tax at each hop they would eliminate the remaining hops as fast as they possibly can or buy the hops. And you could never start a small business, because everyone who'd want to buy from you would save a ton of money doing it themselves. By not taxing business transactions, it's zero additional cost to have someone else do something for you, so it makes it possible to grow a small business. In particular, grocery stores with a 2% margin would be hit hard.
  - tici_88 9y ago
    The idea is to have everything taxed at the same rate: income, dividends, capital gains, whatever. So every source of 'money coming in' gets treated and taxed the same way. By having a flat tax it doesn't make sense to shift 'money in' under different categories because all gets taxed the same rate. So for example, income, capital gains, dividends would all be taxed at 10% or 15% or whatever.
- maxxxxx 9y ago
  In what way would a flat tax rate close loopholes? I hear that all the time but it doesn't make sense. In the end the problem with taxes is determining what counts as taxable income. The flat tax doesn't change this. As of now it would just be another huge tax cut for high incomes which in my opinion it's designed for.
  - JSONwebtoken 9y ago
    Exactly, a flat tax society would end up being a cash-under-the-table society.
- cbcoutinho 9y ago
  How would a flat tax rate avoid the unfortunate reality of burdening the poor with relatively high taxes? Tax brackets, in theory, mitigate this by reducing or eliminating taxes for low income individuals and families. A flat tax rate would surely simplify things, but I'm not convinced it would be the best solution.
  - mrob 9y ago
    A flat tax (eg. land tax + sales taxes, which are harder to manipulate than income tax) can be used to fund a universal basic income, which automatically gives you a smooth progressive tax system with no weird breakpoints setting up inefficient incentives.
    - cbcoutinho 9y ago
      I was under the impression that by flat tax you meant flat income tax. Property taxes are, at least in California, a very local form of taxes that finance local school districts. Using property taxes for something else (ie, to provide UBI for anyone not living in the direct school district) would be a large change in how those funds are distributed.
      - mrob 9y ago
        The exact mechanism of taxation is an implementation detail. All that's need to qualify as "flat" is that the tax paid must be in fixed proportion to the property or activity being taxed. The only reason I suggested other taxes is because precisely defining "income" in such a way that taxpayers can't manipulate it to their advantage is difficult.
    - naravara 9y ago
      Oh so all we need to do is eliminate the principle of Federalism and govern the entire country as one large state then?
  - tici_88 9y ago
    There could be a basic minimum income level that is tax free. This would be very similar to what we have right now. For example, income under around 9,000 (or was it 10,000?) in Canada is not taxed federally.
- 4c2383f5c88e911 9y ago
  A flat tax rate is not a good idea whatsoever; if you tax e.g. 20% of earnings ,do you believe people who earn $30k a year are impacted the same way as people earning $200k or more? Sure, those who earn more pay more, but it hits them in "extra" earnings, while the poor are taxed on money they need to survive. A (very) progressive tax rate with a few ways of reducing the tax based on social (e.g. number of children, etc) criteria would probably work better here.
  - 0xcoffee 9y ago
    How about a flat tax rate, but have essential goods be tax free?
    - wolfgke 9y ago
      > but have essential goods be tax free? People/politicians are very creative in what is to be considered essential.
    - sp332 9y ago
      That seems like an income tax mixed with a sales tax credit? It sounds awkward because income tax comes out of your paycheck but the sales tax is applied at the point of sale. You'd have income tax withheld, buy food with the money you have left over, get credited for the essential goods you bought, then pay rent, then get a credit for that...
  - imglorp 9y ago
    That might be oversimplifying what flat means. Suppose it's not a linear function? Pick your function to begin kicking in above the poverty line and maybe get linear above 200k. But "no loophole tax" might be a better characterization of the flat idea, yes?
    - maxerickson 9y ago
      It certainly isn't an oversimplification in context. The comment up the thread that raised the idea of a flat tax defined it as "everything is taxed at a single rate". Maybe single means a complex function? I doubt it.
- wyager 9y ago
  While I agree that a flat tax is drastically superior to our current convoluted tax scale, it would still have many unfortunate depressant effects. When you introduce friction at every trade, you hurt the market's ability to reach an optimum. This could never happen in the US (or any country that follows the Geneva convention, since it forbids revocation of citizenship), but it would be extremely interesting to have a small nation where the only tax was a constant head tax, like $X thousand/person/year. All of a sudden, many incentives that don't currently line up would start to.
- namarie 9y ago
  A flat tax rate would put a significant, unfair burden on poorer people.
  - djrogers 9y ago
    Every flat tax proposal I’ve seen has either an income floor or a ‘prebate’ to counteract this. Generally they are set at an amount that actually improves the lot of the lowest income earners, largely due to knee-jerk reactions such as yours.
- baursak 9y ago
  > I disagree. I simple flat tax rate where everything is taxed at a single rate would close every single one of the loopholes above, if only by making it moot. Flat tax rate has nothing to do with the loopholes, those are completely orthogonal. You could as well say "a simple progressive tax rate ...". If you meant to say 1) close all loopholes, and 2) implement flat tax rate, then OK, but those are still two different things. In that case, what's wrong with 1) close all loopholes, and 2) leave the progressive tax rate?
- british_india 9y ago
  A flat tax disregards the way our society pools resources to give the OPPORTUNITY to all to build a business. A flat tax acts as if the business owner who runs trucks over roads paid for by all is not getting a huge advantage by living in a country (the USA) where all taxpayers pool money to make these OPPORTUNITIES available. The huge advantages that come to a member of this country are disregarding and ignored by proponents of a flat tax. The flat tax is a huge giveaway to the rich. Should not happen.
- logfromblammo 9y ago
  No matter how simple you make the calculation of tax owed, you cannot simplify the complexity of relying on individuals and businesses to report accurate information to feed into the formulas. You eventually have to define your terms, and those definitions will have the loopholes embedded in them. That's not to say that simplification is useless. It would still cut a lot of waste out of the costs of collection, enforcement, and compliance.
thriftwy 9y ago
> The problem is that no tax code can close all loop holes I don't see why it won't be catching up if it is updated to match what people are trying to do.
mrob 9y ago
The can't easily dodge sales tax, because the responsibility is on the sellers to collect it. Most of them won't have the resources to cheat and get away with it. They can't easily dodge land taxes either, because land can't be moved.
crdoconnor 9y ago
>The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code. You can, legislators just have a number of strong incentives to do the exact opposite. You can tell how delicate this state of affairs is for the wealthy by the fits that they pitch via the media whenever a legislator proposes closing one or more of these loopholes (e.g. carried interest). Moreover, many loopholes are often opinion based and require the tacit acceptance of the IRS to continue. Change the IRS leadership and boost its funding and the house of cards would start to collapse. The problems are that they tell us to be fatalistic about this and we believe them and corporate-friendly lobbyists have more cash than union friendly lobbyists.
FuriouslyAdrift 9y ago
You could tax holdings in the US or by US citizens instead of earnings, then. Make it expensive to hold capital. Capital in motion and at a high velocity is generally good for everyone. Capital at rest serves very few and is very harmful to everyone else.
- cbcoutinho 9y ago
  Because that causes capital to flow in only one direction: namely, out of the country.
- chimeracoder 9y ago
  > Capital in motion and at a high velocity is generally good for everyone. Capital at rest serves very few and is very harmful to everyone else. This is dangerously wrong. No economist would tell you that a high velocity of money is an inherent good, or even that increasing the velocity of money is an unfettered good. Public infrastructure, mortgages, venture capital, small business loans - all of these are investments, and making it more expensive to hold capital will dry up access to money for these sorts of projects.
  - JumpCrisscross 9y ago
    > No economist would tell you that a high velocity of money is an inherent good You may be confusing money and capital. Money velocity is almost always good. If someone buys infrastructure bonds and then those proceeds are spent on contractors to build infrastructure (who in turn pay suppliers and employees) you have lots of money moving with velocity.
    - chimeracoder 9y ago
      > You may be confusing money and capital. Money velocity is almost always good. I am not confusing anything. Increasing the velocity of money is not always good. In fact, under some schools of thought, long-term increases in the velocity of money are neutral-to-slightly-bad. > If someone buys infrastructure bonds Increasing the expense of saving capital means increasing the expense of bonds, which decreases the incentive to buy them in the first place. > you have lots of money moving with velocity. Uh, no, the tail end of that process does describe consumption behavior, but this situation actually has very little to do with the velocity of money, since we haven't addressed the propensity to spend that money a second time within any finite timespan.
jazzyk 9y ago
The solution is just not that complicated: 1. For individuals, simple tax code which does not distinguish where your income came from, but does keep income brackets (not flat tax). 2. For businesses, distinguish between: - "US-based" company which would pay 10% corporate tax. A US-based company would need to have at least 66% of employees based in the US and/or at least 50% of the products/services produced in the US. - "international" company would pay 35% corporate tax, if they want to do business in the US.
- crispyambulance 9y ago
  A simple tax code would be beautiful thing. Unfortunately, its never going to happen. It will be phone-book-sized for the foreseeable future. Even loopholes which, by common sense, should be closed are fought against with ferocity. For example, the corporate jet loophole-- effectively a "gift" for millionaires and their corporations... https://qz.com/196369/why-buying-a-corporate-jet-pays-for-itself/ https://qz.com/196369/why-buying-a-corporate-jet-pays-for-it...
  - jazzyk 9y ago
    Agree - we would need to introduce term limits in D.C. and a bunch of other changes. Not going to happen until the SHTF.
- icebraining 9y ago
  A corporate tax on what? Income, profit, dividends, expatriation?
  - jazzyk 9y ago
    Could be tax on profit or % of revenue, if there is no profit.
    - charlesdm 9y ago
      That clearly doesn't work since that ends up being negative for capital heavy businesses (airlines, manufacturing companies, car dealerships). Some businesses generate massive amounts of revenue, but have very low margins + not much profit. There's a reason why things are the way they are. Redrawing the playing field is complicated and can't be done easily without (business) casualties. The wealthy pay a decent amount for the resources of society they generally consume, which is fine.
Iv 9y ago
That's like saying it will always be possible to murder someone so there is no point in trying to curb chemical weapons sales to children. Every loop closed makes tax evasion harder and riskier. There will always be people who do it, like there will always be people killing other people, but it is worth making it hard and risky enough that most people will consider other solutions before resorting to murder/tax evasion.
- zip1234 9y ago
  Tax evasion is illegally not paying the taxes that are due. If you are taking advantages of legal loopholes, it is not tax evasion.
  - jazzyk 9y ago
    What if you make the rules so simple that there are NO loopholes and there is no/little possibility for tax avoidance?
    - aaronchall 9y ago
      This would be an ideal world: > What if you make the rules so simple that there are NO loopholes and there is no/little possibility for tax avoidance? Then we could lower tax "rates", reduce dead weight loss, and increase tax receipts. But no, we've decided, for example, that home ownership is important for everyone so we subsidize home ownership by letting people write off mortgage interest. This has the unintended effect of driving up prices for homes and encouraging people to buy more home than they need. When taxes are too high, it causes pathological behavior. Some people will, even if it nets them less after taxes, minimize taxes paid. "Tax shelters" in the 80's would be all but guaranteed to lose money, and yet people would still buy into them because they would reduce their taxes and pay huge fees based on the total taxes that would be reduced. These arrangements were legal (although the IRS was hawkish on them) but actually made no business sense for investors.
      - sokoloff 9y ago
piokoch 9y ago
Yes, and that explains why rich people are often leftists and support complicated tax system - for them it does not matter, they will not pay a penny, but if someone tries to build competing business from scratch and cannot afford "tax optimalization" then taxation is one more obstacle on the road.
baursak 9y ago
There's a simple solution to it, no? Abolish all taxes on income, dividends, or capital gains. Introduce a single tax on wealth. Every year tax a certain percentage of one's capital holdings, whether capital gain is realized or not.
- naveen99 9y ago
  What about a business that is worth 10 million dollars but has a bad year and makes no profit. So now the owner has to pay a tax on the 10 million dollar wealth and liquidate his business ?
  - baursak 9y ago
    Why would they liquidate their business? I'm not advocating for a 100% rate. If they continuously lose money year after year, then the wealth tax would just be an additional incentive for them to shutdown, yes.
- Flozzin 9y ago
  If you are wealthy and have a lot of holdings, create an offshore company and move all your wealth to it, then just get a company credit card. All your wealth and possessions is now owned by that company... Spit balling here, but I'm not sure a wealth tax will fix it.
  - baursak 9y ago
    If you're an owner of an asset, and your primary residence is in the country of wealth taxation, you pay a wealth tax on the value of that asset, no matter where that asset is located. Another problem though is valuation of that asset. There will be huge incentives to show lower valuations, but that's already a case for things like real-estate property taxes, and somehow the system still works.
- djrogers 9y ago
  Under your proposal, the roughly 50% of Americans with zero net wealth would pay nothing. That’s fine on paper, but it would actually incent people to stay in debt and dis-incent the accumulation of savings. Look at it this way, I can either buy a bigger house with more debt whenever I have some extra money laying around, or I can save that cash and have the government take some of it every year. You also incent people to spend money on non-material things like travel and entertainment, rather than spending cash on a reasonable car (because leasing the car and blowing the other $20k in Vegas sounds like more fun). There’s a simple maxim in taxes and economics - do not tax activities you want to encourage, and tax those which you want to curtail.
cpursley 9y ago
A progressive national sales tax. Because you can't avoid buying goods and services, and not everyone gets a W2 paycheck (Buffet, Gates, Trump).
- the_gastropod 9y ago
  A progressive sales would be very difficult to implement and maintain. Virtually every good / service would need to have a tax associated with it. How much do you tax a Honda Civic vs an Acura RSX? A BMW? Bentley? How much do you tax a 33ft yacht? A 60ft yacht? This thing would also need to be updated very often as new technology comes out. Think about Apple Watches, VR headsets, etc. You'd need a small army of tax lawyers to come up with and enforce this tax code.
  - djrogers 9y ago
    Why would you need to tax each of those at a different rate? You make a consumption tax progressive by providing an advance rebate (prebate) to everyone in an amount that covers the consumption tax for a defined standard of living. Any consumption above that level burdens the consumer, and when averaged out over a quarter or year will be progressive.
snarf21 9y ago
I generally agree with you. People often say we should "just do X" with taxes, et. al. and we'd have lots of money for Y. They fail to understand that if you change the rules, you will change the behavior. Extremely rich people get (and stay) that way by leveraging their resources to not pay taxes if they don't want to. The economy will always need jobs and housing and the tax code must incentivize for those necessities. If you make things too costly, companies will move to other countries that would be glad to tax you less. This already happens at the state level as local governments compete on deals to attract good jobs to help their economy. We spend way too much effort designing these systems as all "stick" and no "carrot". There are much easier ways to incentivize the rich (and companies) for the behavior you want.
pnutjam 9y ago
Good job torpedoing this discussion, I hope you get a bonus from your "think tank". None of your points should preclude us from doing something, you'd have us just throw up our hands and say "aw shucks, those rich fella's are just too smart."
- aaronchall 9y ago
  "torpedoing"? What was this discussion supposed to be about? Why do you assume this user is in a "think tank"? What's wrong with being financially successful, aside from the fact that you either aren't or are pandering to people who aren't?
  - pnutjam 9y ago
    The discussion is about the merits of raising taxes and this user derailed a large part, probably the only part most people will read, into a discussion on how we could or could not tax the wealthy.
vorotato 9y ago
Examples of how people evade taxes, conclusion that preventing such a thing is impossible without any evidence. This is not an honest argument.
flexie 9y ago
That is just tax defeatism :-) The rich do pay some tax so it's not impossible to get them to pay and rich people in different countries pay different percentages of their overall wealth. So it's by no means impossible to make them pay more, if that is what society desires.
sandworm101 9y ago
Much of this could be solved by switching from an income-based approach to one based on increase in.net worth. We shouldnt care whether income is realized or not in a given period. If someone is now worth more than yesturday, that difference is taxable income. Such an approach would eliminate the need for a great many rules. (With standard policy-based exemptions such as tbe rise in value one one's primary residence etc)
Tyrek 9y ago
This is fairly limited thinking - your perception of the problem is constrained by the current status quo. What if Dividends, Income and Cap Gains shared the same tax rate? What if Trusts were not tax protected? Off-shoring is already pretty much illegal under the current tax regime, all you need to improve is enforcement rates.
hackeraccount 9y ago
I've always thought that the central problem with a progressive tax code - though laudable - is that it takes the view that people don't deal with money in absolute terms. For example: If I go hunting under my couch cushions I might find $1.50 in change. By that logic of a progressive tax code if I do the same activity on Bill Gate's couch I should find 3 or 4 million dollars. Obviously that's insane. I would argue that it's insane because on some level everyone looks at a million dollars and thinks "That's a lot of money". On top of that anyone encountering the sticky end of a progressive tax code is always confronted with the calculation of the cost of avoidance vs. the cost of the tax. And there's always a price you can pay to avoid a tax. It's generally based on the price of lawyers and the price of politicians. Which isn't to say a progressive tax code isn't a good thing. Frankly I'm all for it. But to be equally frank how we raise the money for Government in this country is over thought. An unfair tax code that raises a reasonable amount of money is loads better then a fair one that raises an unreasonable amount of money.
openasocket 9y ago
This is the Nirvana fallacy. Because we can't fix everything, there's no point in trying to fix anything. For example: "what's the point in having seatbelts? People still die in car crashes." The reality is, just like a seatbelts reduce the number of fatalities in car crashes, each loop hole closed makes things a little more difficult for people to shelter their assets.
- splintercell 9y ago
  But at what point, OP's criticism is a qualitative criticism of the approach being advocated? For instance, if someone says that alternative medicine fails for n different reasons, would you say that the person is committing Nirvana fallacy or that there is something to say about the fundamental failures of alternative medicine? The qualitative fault I'm trying to point out is that trying to tax 'rich people' is a failed attempt because no matter how effective you can implement your tax measures, at the end of the day people can move to other countries and your own country starts to suffer more than it benefits from the increased taxes. It is a Nirvana fallacy if someone says "No matter how hard you try to curb murders, serial killers always keep finding new ways to commit crime", because at the end of the day, if all the serial killers move out of your country to a more serial killer friendly country, you don't actually suffer, you did your job. On the other hand, in terms of taxes, you don't want your tax paying population to move out or be rendered incapable of producing wealth. That kind of 'equality' is not worth it.
  - openasocket 9y ago
    His argument, as stated, is a use of the Nirvana fallacy. But it can certainly be re-phrased and re-worked into something substantial. The general sentiment isn't completely without merit; people will always exploit loop holes in the tax system. But to say there isn't any point in closing this loop hole or that loop hole because people will just use another is an assertion, not an argument. You need to provide evidence to support this claim. Maybe those other loop holes are more of a hassle, or require substantial initial investment to take advantage of (like re-structuring your company to incorporate in a different country), or don't shelter as many assets from taxes. The point is, you need evidence to back up the claim. > The qualitative fault I'm trying to point out is that trying to tax 'rich people' is a failed attempt because no matter how effective you can implement your tax measures, at the end of the day people can move to other countries and your own country starts to suffer more than it benefits from the increased taxes. That's more of an argument against taxes in general, isn't it? You tax people high enough and they'll leave. There's a certain "sweet spot" at which you tax people just enough to provide good services without making people leave. I wouldn't dispute that. But for that to be a valid argument in this case, you'd have to provide evidence to show that closing these loop holes puts the tax burden of people above that "sweet spot."
carradjm 9y ago
https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism I hope more people will research Georgism and start trying to spread the idea around. It's the only tax-system that comes anywhere close to closing up any of these loopholes.
mstade 9y ago
This. I recently started my own business, and having an accountant explain to me all the different legal ways of optimizing the tax foot print of myself and my business has definitely been an eye opener. It's also been humbling. When I was just an employee, I used to wonder why taxes couldn't just be a simple linear function of income. These days, I have a much greater appreciation for the complexities involved in designing taxes such that they maximize income for the state (local or otherwise) while still being a fair system by some measure, possibly determined by ballot boxes every four years or so.
TeMPOraL 9y ago
> The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code. Especially that they can use their wealth to hire teams of world-class specialists and pay them to figure out creative loopholes. It's something regular people can't do.
dhuramas 9y ago
I was trying to see if there is a way to fix this- "no tax code can close all loop holes", and my first thought was Formal methods- and lo and behold Google points me to http://snapl.org/2015/abstracts/hsu.pdf http://snapl.org/2015/abstracts/hsu.pdf It sure looks promising. But still wondering if it has been applied in practice.
ringaroundthetx 9y ago
Lets keep it going! Tax stocks steeper and someone wealthy enough will create the same investment exposure in the futures market, where every trade gets a mixed lower capital gains rate automatically! Make cash transaction reporting requirements over $10,000 for everything, and someone wealthy enough will get real estate totally exempt from it! Get an APA or a private ruling from the IRS where they agree on all the ways you aren't going to pay them! Tell everyone else this is a problem so you can write a law with a new tax change that really only benefits you and your friends, because all the constituents you pander to have a base of voters that only somewhat understands income tax! Squad goals!
Spooky23 9y ago
That's one way to think about it. The reality is that people will calculate risk/reward based on the situations that they face. Tax enforcement is a pretty simple concept. You don't invest $1 in enforcement to net $1 in compelled compliance, you use enforcement to net $100 in voluntary compliance. Tax authorities can and do calculate how much they can harvest from enforcement activity. Enforcement increases both the risk and impact when people do that risk calculation. If doing some shady bullshit to re-swizzle income has a X% risk of costing me $Y or Z months of bureaucratic torture, it's going to impact my decision process. US Federal tax enforcement is a joke today. Through de-funding and neglect, the ability of the tax authorities at the Federal level to perform even basic enforcement activity has been kneecapped. To give a anecdotal illustration of the current situation, a friend of mine is a now-retired tax enforcement person. His particular speciality was staffed with as many as 75-100 people nationwide in the early 90s... when he retired earlier this year there were two other people in that function and most prosecutions in his speciality were being abandoned as no Federal people exist to testify at trial!
pmoriarty 9y ago
For a very long time, Swiss banks were bastions of impenetrable secrecy. The wealthy from all over the world used to stash their wealth there because they knew it was safe from prying eyes and even from the nearly all-powerful IRS. But then a couple of decades ago, the US government successfully made Swiss banks much more transparent -- to the effect that they are not nearly as reliable a safe haven for tax evaders as they were. This doesn't mean that the wealthy have no more places to hide their money, but it does make it much more difficult for them, and is a sign of progress.
tmaly 9y ago
I would like to see a simplification of the tax laws for those on the lower and middle incomes. It would also be nice to see something for independent contractors and smaller businesses. Should we really be taxing a mom and pop shop at the same top marginal rate as a large corporation?
tim333 9y ago
Well tax 'em all and close some loopholes. Most countries globally manage.
codingmyway 9y ago
A better approach might be to just stop them acquiring the things that ordinary folks need in a bid becoming rentier parasites, namely homes. In a world where food is abundant (for now) that's what keeps everyone else poor. Limit their ability to become greedy landlords and they'll be forced to invest in real businesses and take risks. This can be started on a local level and enforced easily by only allowing people who live in the homes or community trusts or government to own them. If some billionaire owns 10 ferraris, has millions in offshore accounts and a super yacht why should anyone else care? It's not taking away from anyone and creates demand for luxuries that wouldn't otherwise exist and create jobs.
devdas 9y ago
Have only wealth tax. Require everything to be marked to market for tax reasons.

theseatoms 9y ago

Because the wealthy have more resources to maneuver their assets and income streams, tax policy complexity is a regressive tax.

tici_88 9y ago

"The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code." I disagree. I simple flat tax rate where everything is taxed at a single rate would close every single one of the loopholes above, if only by making it moot. The fact that the rich can maneuver themselves into a much lower tax rate than the average person presents a significant, unfair advantage in my opinion. A flat tax rate would make things much more equitable. Plus it would asimplify the tax code tremendously.

jrimbault 9y ago
And then we'd have to redo/relearn the last millenium of why we do the things the way we do them.
- inetknght 9y ago
  Is that such a bad idea?
  - graphitezepp 9y ago
    Seems like we should make another go at trying to structure this whole "society" thing for the good of everyone from where I am sitting.
  - namarie 9y ago
    It is if you think not every moment in the last millenium was pleasant for everyone.
  - jrimbault 9y ago
    Not necessarily. But in that case we wouldn't argue for a "simple" tax system. A tax system has to be complicated because humans and their activities are complicated things. edit: at that point, if we threw out the tax system, why not just get rid of states and corporations and start everything from scratch, said the junior dev
- wyager 9y ago
  The modern progressive income tax system is not even remotely a millennium old. We didn't even have income taxes in the US until 1861, and they weren't generally applied until 1913.
  - jrimbault 9y ago
    Because History started when the US began and there was no financial system before and nobody ever learned anything before.
    - ameister14 9y ago
      First income tax in the UK was in 1842, first income tax in France was 1789 - could you find one that has been going since 1017 AD?
shortstuffsushi 9y ago
What would the flat tax actually tax though, income? Wouldn't they just dodge that then by not having income? Sure, for you and me it would make it easier -- my W2 says I made exactly 100k, here's exactly 50k of it, period. For people who have a flexible income, why report any amount that would make you pay in?
- gambiting 9y ago
  Don't have income tax at all, tax every transaction 20%, like a flat rate VAT except that you can't claim it back on your business expenses. Simplify the entire tax system without having loads of brackets, exemptions and special cases - if you sell goods or services, 20% of that is paid as tax, end of story. I mean, I am not an economist, I have no idea if that would work or not(probably not)
  - MichaelBurge 9y ago
    The big problem there is that it encourages companies to grow as big as they possibly can, because "internal" transactions aren't taxed. So Amazon would own the entire supply chain: Manufacturing widgets, selling widgets, storing widgets, shipping widgets, handling returns, etc. They already sort of do this, but if you add a 20% tax at each hop they would eliminate the remaining hops as fast as they possibly can or buy the hops. And you could never start a small business, because everyone who'd want to buy from you would save a ton of money doing it themselves. By not taxing business transactions, it's zero additional cost to have someone else do something for you, so it makes it possible to grow a small business. In particular, grocery stores with a 2% margin would be hit hard.
- tici_88 9y ago
  The idea is to have everything taxed at the same rate: income, dividends, capital gains, whatever. So every source of 'money coming in' gets treated and taxed the same way. By having a flat tax it doesn't make sense to shift 'money in' under different categories because all gets taxed the same rate. So for example, income, capital gains, dividends would all be taxed at 10% or 15% or whatever.
maxxxxx 9y ago
In what way would a flat tax rate close loopholes? I hear that all the time but it doesn't make sense. In the end the problem with taxes is determining what counts as taxable income. The flat tax doesn't change this. As of now it would just be another huge tax cut for high incomes which in my opinion it's designed for.
- JSONwebtoken 9y ago
  Exactly, a flat tax society would end up being a cash-under-the-table society.
cbcoutinho 9y ago
How would a flat tax rate avoid the unfortunate reality of burdening the poor with relatively high taxes? Tax brackets, in theory, mitigate this by reducing or eliminating taxes for low income individuals and families. A flat tax rate would surely simplify things, but I'm not convinced it would be the best solution.
- mrob 9y ago
  A flat tax (eg. land tax + sales taxes, which are harder to manipulate than income tax) can be used to fund a universal basic income, which automatically gives you a smooth progressive tax system with no weird breakpoints setting up inefficient incentives.
  - cbcoutinho 9y ago
    I was under the impression that by flat tax you meant flat income tax. Property taxes are, at least in California, a very local form of taxes that finance local school districts. Using property taxes for something else (ie, to provide UBI for anyone not living in the direct school district) would be a large change in how those funds are distributed.
    - mrob 9y ago
      The exact mechanism of taxation is an implementation detail. All that's need to qualify as "flat" is that the tax paid must be in fixed proportion to the property or activity being taxed. The only reason I suggested other taxes is because precisely defining "income" in such a way that taxpayers can't manipulate it to their advantage is difficult.
  - naravara 9y ago
    Oh so all we need to do is eliminate the principle of Federalism and govern the entire country as one large state then?
- tici_88 9y ago
  There could be a basic minimum income level that is tax free. This would be very similar to what we have right now. For example, income under around 9,000 (or was it 10,000?) in Canada is not taxed federally.
4c2383f5c88e911 9y ago
A flat tax rate is not a good idea whatsoever; if you tax e.g. 20% of earnings ,do you believe people who earn $30k a year are impacted the same way as people earning $200k or more? Sure, those who earn more pay more, but it hits them in "extra" earnings, while the poor are taxed on money they need to survive. A (very) progressive tax rate with a few ways of reducing the tax based on social (e.g. number of children, etc) criteria would probably work better here.
- 0xcoffee 9y ago
  How about a flat tax rate, but have essential goods be tax free?
  - wolfgke 9y ago
    > but have essential goods be tax free? People/politicians are very creative in what is to be considered essential.
  - sp332 9y ago
    That seems like an income tax mixed with a sales tax credit? It sounds awkward because income tax comes out of your paycheck but the sales tax is applied at the point of sale. You'd have income tax withheld, buy food with the money you have left over, get credited for the essential goods you bought, then pay rent, then get a credit for that...
- imglorp 9y ago
  That might be oversimplifying what flat means. Suppose it's not a linear function? Pick your function to begin kicking in above the poverty line and maybe get linear above 200k. But "no loophole tax" might be a better characterization of the flat idea, yes?
  - maxerickson 9y ago
    It certainly isn't an oversimplification in context. The comment up the thread that raised the idea of a flat tax defined it as "everything is taxed at a single rate". Maybe single means a complex function? I doubt it.
wyager 9y ago
While I agree that a flat tax is drastically superior to our current convoluted tax scale, it would still have many unfortunate depressant effects. When you introduce friction at every trade, you hurt the market's ability to reach an optimum. This could never happen in the US (or any country that follows the Geneva convention, since it forbids revocation of citizenship), but it would be extremely interesting to have a small nation where the only tax was a constant head tax, like $X thousand/person/year. All of a sudden, many incentives that don't currently line up would start to.
namarie 9y ago
A flat tax rate would put a significant, unfair burden on poorer people.
- djrogers 9y ago
  Every flat tax proposal I’ve seen has either an income floor or a ‘prebate’ to counteract this. Generally they are set at an amount that actually improves the lot of the lowest income earners, largely due to knee-jerk reactions such as yours.
baursak 9y ago
> I disagree. I simple flat tax rate where everything is taxed at a single rate would close every single one of the loopholes above, if only by making it moot. Flat tax rate has nothing to do with the loopholes, those are completely orthogonal. You could as well say "a simple progressive tax rate ...". If you meant to say 1) close all loopholes, and 2) implement flat tax rate, then OK, but those are still two different things. In that case, what's wrong with 1) close all loopholes, and 2) leave the progressive tax rate?
british_india 9y ago
A flat tax disregards the way our society pools resources to give the OPPORTUNITY to all to build a business. A flat tax acts as if the business owner who runs trucks over roads paid for by all is not getting a huge advantage by living in a country (the USA) where all taxpayers pool money to make these OPPORTUNITIES available. The huge advantages that come to a member of this country are disregarding and ignored by proponents of a flat tax. The flat tax is a huge giveaway to the rich. Should not happen.
logfromblammo 9y ago
No matter how simple you make the calculation of tax owed, you cannot simplify the complexity of relying on individuals and businesses to report accurate information to feed into the formulas. You eventually have to define your terms, and those definitions will have the loopholes embedded in them. That's not to say that simplification is useless. It would still cut a lot of waste out of the costs of collection, enforcement, and compliance.

thriftwy 9y ago

> The problem is that no tax code can close all loop holes I don't see why it won't be catching up if it is updated to match what people are trying to do.

mrob 9y ago

The can't easily dodge sales tax, because the responsibility is on the sellers to collect it. Most of them won't have the resources to cheat and get away with it. They can't easily dodge land taxes either, because land can't be moved.

crdoconnor 9y ago

>The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code. You can, legislators just have a number of strong incentives to do the exact opposite. You can tell how delicate this state of affairs is for the wealthy by the fits that they pitch via the media whenever a legislator proposes closing one or more of these loopholes (e.g. carried interest). Moreover, many loopholes are often opinion based and require the tacit acceptance of the IRS to continue. Change the IRS leadership and boost its funding and the house of cards would start to collapse. The problems are that they tell us to be fatalistic about this and we believe them and corporate-friendly lobbyists have more cash than union friendly lobbyists.

FuriouslyAdrift 9y ago

You could tax holdings in the US or by US citizens instead of earnings, then. Make it expensive to hold capital. Capital in motion and at a high velocity is generally good for everyone. Capital at rest serves very few and is very harmful to everyone else.

cbcoutinho 9y ago
Because that causes capital to flow in only one direction: namely, out of the country.
chimeracoder 9y ago
> Capital in motion and at a high velocity is generally good for everyone. Capital at rest serves very few and is very harmful to everyone else. This is dangerously wrong. No economist would tell you that a high velocity of money is an inherent good, or even that increasing the velocity of money is an unfettered good. Public infrastructure, mortgages, venture capital, small business loans - all of these are investments, and making it more expensive to hold capital will dry up access to money for these sorts of projects.
- JumpCrisscross 9y ago
  > No economist would tell you that a high velocity of money is an inherent good You may be confusing money and capital. Money velocity is almost always good. If someone buys infrastructure bonds and then those proceeds are spent on contractors to build infrastructure (who in turn pay suppliers and employees) you have lots of money moving with velocity.
  - chimeracoder 9y ago
    > You may be confusing money and capital. Money velocity is almost always good. I am not confusing anything. Increasing the velocity of money is not always good. In fact, under some schools of thought, long-term increases in the velocity of money are neutral-to-slightly-bad. > If someone buys infrastructure bonds Increasing the expense of saving capital means increasing the expense of bonds, which decreases the incentive to buy them in the first place. > you have lots of money moving with velocity. Uh, no, the tail end of that process does describe consumption behavior, but this situation actually has very little to do with the velocity of money, since we haven't addressed the propensity to spend that money a second time within any finite timespan.

jazzyk 9y ago

The solution is just not that complicated: 1. For individuals, simple tax code which does not distinguish where your income came from, but does keep income brackets (not flat tax). 2. For businesses, distinguish between: - "US-based" company which would pay 10% corporate tax. A US-based company would need to have at least 66% of employees based in the US and/or at least 50% of the products/services produced in the US. - "international" company would pay 35% corporate tax, if they want to do business in the US.

crispyambulance 9y ago
A simple tax code would be beautiful thing. Unfortunately, its never going to happen. It will be phone-book-sized for the foreseeable future. Even loopholes which, by common sense, should be closed are fought against with ferocity. For example, the corporate jet loophole-- effectively a "gift" for millionaires and their corporations... https://qz.com/196369/why-buying-a-corporate-jet-pays-for-itself/ https://qz.com/196369/why-buying-a-corporate-jet-pays-for-it...
- jazzyk 9y ago
  Agree - we would need to introduce term limits in D.C. and a bunch of other changes. Not going to happen until the SHTF.
icebraining 9y ago
A corporate tax on what? Income, profit, dividends, expatriation?
- jazzyk 9y ago
  Could be tax on profit or % of revenue, if there is no profit.
  - charlesdm 9y ago
    That clearly doesn't work since that ends up being negative for capital heavy businesses (airlines, manufacturing companies, car dealerships). Some businesses generate massive amounts of revenue, but have very low margins + not much profit. There's a reason why things are the way they are. Redrawing the playing field is complicated and can't be done easily without (business) casualties. The wealthy pay a decent amount for the resources of society they generally consume, which is fine.

Iv 9y ago

That's like saying it will always be possible to murder someone so there is no point in trying to curb chemical weapons sales to children. Every loop closed makes tax evasion harder and riskier. There will always be people who do it, like there will always be people killing other people, but it is worth making it hard and risky enough that most people will consider other solutions before resorting to murder/tax evasion.

zip1234 9y ago
Tax evasion is illegally not paying the taxes that are due. If you are taking advantages of legal loopholes, it is not tax evasion.
- jazzyk 9y ago
  What if you make the rules so simple that there are NO loopholes and there is no/little possibility for tax avoidance?
  - aaronchall 9y ago
    This would be an ideal world: > What if you make the rules so simple that there are NO loopholes and there is no/little possibility for tax avoidance? Then we could lower tax "rates", reduce dead weight loss, and increase tax receipts. But no, we've decided, for example, that home ownership is important for everyone so we subsidize home ownership by letting people write off mortgage interest. This has the unintended effect of driving up prices for homes and encouraging people to buy more home than they need. When taxes are too high, it causes pathological behavior. Some people will, even if it nets them less after taxes, minimize taxes paid. "Tax shelters" in the 80's would be all but guaranteed to lose money, and yet people would still buy into them because they would reduce their taxes and pay huge fees based on the total taxes that would be reduced. These arrangements were legal (although the IRS was hawkish on them) but actually made no business sense for investors.
    - sokoloff 9y ago

piokoch 9y ago

Yes, and that explains why rich people are often leftists and support complicated tax system - for them it does not matter, they will not pay a penny, but if someone tries to build competing business from scratch and cannot afford "tax optimalization" then taxation is one more obstacle on the road.

baursak 9y ago

There's a simple solution to it, no? Abolish all taxes on income, dividends, or capital gains. Introduce a single tax on wealth. Every year tax a certain percentage of one's capital holdings, whether capital gain is realized or not.

naveen99 9y ago
What about a business that is worth 10 million dollars but has a bad year and makes no profit. So now the owner has to pay a tax on the 10 million dollar wealth and liquidate his business ?
- baursak 9y ago
  Why would they liquidate their business? I'm not advocating for a 100% rate. If they continuously lose money year after year, then the wealth tax would just be an additional incentive for them to shutdown, yes.
Flozzin 9y ago
If you are wealthy and have a lot of holdings, create an offshore company and move all your wealth to it, then just get a company credit card. All your wealth and possessions is now owned by that company... Spit balling here, but I'm not sure a wealth tax will fix it.
- baursak 9y ago
  If you're an owner of an asset, and your primary residence is in the country of wealth taxation, you pay a wealth tax on the value of that asset, no matter where that asset is located. Another problem though is valuation of that asset. There will be huge incentives to show lower valuations, but that's already a case for things like real-estate property taxes, and somehow the system still works.
djrogers 9y ago
Under your proposal, the roughly 50% of Americans with zero net wealth would pay nothing. That’s fine on paper, but it would actually incent people to stay in debt and dis-incent the accumulation of savings. Look at it this way, I can either buy a bigger house with more debt whenever I have some extra money laying around, or I can save that cash and have the government take some of it every year. You also incent people to spend money on non-material things like travel and entertainment, rather than spending cash on a reasonable car (because leasing the car and blowing the other $20k in Vegas sounds like more fun). There’s a simple maxim in taxes and economics - do not tax activities you want to encourage, and tax those which you want to curtail.

cpursley 9y ago

A progressive national sales tax. Because you can't avoid buying goods and services, and not everyone gets a W2 paycheck (Buffet, Gates, Trump).

the_gastropod 9y ago
A progressive sales would be very difficult to implement and maintain. Virtually every good / service would need to have a tax associated with it. How much do you tax a Honda Civic vs an Acura RSX? A BMW? Bentley? How much do you tax a 33ft yacht? A 60ft yacht? This thing would also need to be updated very often as new technology comes out. Think about Apple Watches, VR headsets, etc. You'd need a small army of tax lawyers to come up with and enforce this tax code.
- djrogers 9y ago
  Why would you need to tax each of those at a different rate? You make a consumption tax progressive by providing an advance rebate (prebate) to everyone in an amount that covers the consumption tax for a defined standard of living. Any consumption above that level burdens the consumer, and when averaged out over a quarter or year will be progressive.

snarf21 9y ago

I generally agree with you. People often say we should "just do X" with taxes, et. al. and we'd have lots of money for Y. They fail to understand that if you change the rules, you will change the behavior. Extremely rich people get (and stay) that way by leveraging their resources to not pay taxes if they don't want to. The economy will always need jobs and housing and the tax code must incentivize for those necessities. If you make things too costly, companies will move to other countries that would be glad to tax you less. This already happens at the state level as local governments compete on deals to attract good jobs to help their economy. We spend way too much effort designing these systems as all "stick" and no "carrot". There are much easier ways to incentivize the rich (and companies) for the behavior you want.

pnutjam 9y ago

Good job torpedoing this discussion, I hope you get a bonus from your "think tank". None of your points should preclude us from doing something, you'd have us just throw up our hands and say "aw shucks, those rich fella's are just too smart."

aaronchall 9y ago
"torpedoing"? What was this discussion supposed to be about? Why do you assume this user is in a "think tank"? What's wrong with being financially successful, aside from the fact that you either aren't or are pandering to people who aren't?
- pnutjam 9y ago
  The discussion is about the merits of raising taxes and this user derailed a large part, probably the only part most people will read, into a discussion on how we could or could not tax the wealthy.

vorotato 9y ago

Examples of how people evade taxes, conclusion that preventing such a thing is impossible without any evidence. This is not an honest argument.

flexie 9y ago

That is just tax defeatism :-) The rich do pay some tax so it's not impossible to get them to pay and rich people in different countries pay different percentages of their overall wealth. So it's by no means impossible to make them pay more, if that is what society desires.

sandworm101 9y ago

Much of this could be solved by switching from an income-based approach to one based on increase in.net worth. We shouldnt care whether income is realized or not in a given period. If someone is now worth more than yesturday, that difference is taxable income. Such an approach would eliminate the need for a great many rules. (With standard policy-based exemptions such as tbe rise in value one one's primary residence etc)

Tyrek 9y ago

This is fairly limited thinking - your perception of the problem is constrained by the current status quo. What if Dividends, Income and Cap Gains shared the same tax rate? What if Trusts were not tax protected? Off-shoring is already pretty much illegal under the current tax regime, all you need to improve is enforcement rates.

hackeraccount 9y ago

I've always thought that the central problem with a progressive tax code - though laudable - is that it takes the view that people don't deal with money in absolute terms. For example: If I go hunting under my couch cushions I might find $1.50 in change. By that logic of a progressive tax code if I do the same activity on Bill Gate's couch I should find 3 or 4 million dollars. Obviously that's insane. I would argue that it's insane because on some level everyone looks at a million dollars and thinks "That's a lot of money". On top of that anyone encountering the sticky end of a progressive tax code is always confronted with the calculation of the cost of avoidance vs. the cost of the tax. And there's always a price you can pay to avoid a tax. It's generally based on the price of lawyers and the price of politicians. Which isn't to say a progressive tax code isn't a good thing. Frankly I'm all for it. But to be equally frank how we raise the money for Government in this country is over thought. An unfair tax code that raises a reasonable amount of money is loads better then a fair one that raises an unreasonable amount of money.

openasocket 9y ago

This is the Nirvana fallacy. Because we can't fix everything, there's no point in trying to fix anything. For example: "what's the point in having seatbelts? People still die in car crashes." The reality is, just like a seatbelts reduce the number of fatalities in car crashes, each loop hole closed makes things a little more difficult for people to shelter their assets.

splintercell 9y ago
But at what point, OP's criticism is a qualitative criticism of the approach being advocated? For instance, if someone says that alternative medicine fails for n different reasons, would you say that the person is committing Nirvana fallacy or that there is something to say about the fundamental failures of alternative medicine? The qualitative fault I'm trying to point out is that trying to tax 'rich people' is a failed attempt because no matter how effective you can implement your tax measures, at the end of the day people can move to other countries and your own country starts to suffer more than it benefits from the increased taxes. It is a Nirvana fallacy if someone says "No matter how hard you try to curb murders, serial killers always keep finding new ways to commit crime", because at the end of the day, if all the serial killers move out of your country to a more serial killer friendly country, you don't actually suffer, you did your job. On the other hand, in terms of taxes, you don't want your tax paying population to move out or be rendered incapable of producing wealth. That kind of 'equality' is not worth it.
- openasocket 9y ago
  His argument, as stated, is a use of the Nirvana fallacy. But it can certainly be re-phrased and re-worked into something substantial. The general sentiment isn't completely without merit; people will always exploit loop holes in the tax system. But to say there isn't any point in closing this loop hole or that loop hole because people will just use another is an assertion, not an argument. You need to provide evidence to support this claim. Maybe those other loop holes are more of a hassle, or require substantial initial investment to take advantage of (like re-structuring your company to incorporate in a different country), or don't shelter as many assets from taxes. The point is, you need evidence to back up the claim. > The qualitative fault I'm trying to point out is that trying to tax 'rich people' is a failed attempt because no matter how effective you can implement your tax measures, at the end of the day people can move to other countries and your own country starts to suffer more than it benefits from the increased taxes. That's more of an argument against taxes in general, isn't it? You tax people high enough and they'll leave. There's a certain "sweet spot" at which you tax people just enough to provide good services without making people leave. I wouldn't dispute that. But for that to be a valid argument in this case, you'd have to provide evidence to show that closing these loop holes puts the tax burden of people above that "sweet spot."

carradjm 9y ago

https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism I hope more people will research Georgism and start trying to spread the idea around. It's the only tax-system that comes anywhere close to closing up any of these loopholes.

mstade 9y ago

This. I recently started my own business, and having an accountant explain to me all the different legal ways of optimizing the tax foot print of myself and my business has definitely been an eye opener. It's also been humbling. When I was just an employee, I used to wonder why taxes couldn't just be a simple linear function of income. These days, I have a much greater appreciation for the complexities involved in designing taxes such that they maximize income for the state (local or otherwise) while still being a fair system by some measure, possibly determined by ballot boxes every four years or so.

TeMPOraL 9y ago

> The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code. Especially that they can use their wealth to hire teams of world-class specialists and pay them to figure out creative loopholes. It's something regular people can't do.

dhuramas 9y ago

I was trying to see if there is a way to fix this- "no tax code can close all loop holes", and my first thought was Formal methods- and lo and behold Google points me to http://snapl.org/2015/abstracts/hsu.pdf http://snapl.org/2015/abstracts/hsu.pdf It sure looks promising. But still wondering if it has been applied in practice.

ringaroundthetx 9y ago

Lets keep it going! Tax stocks steeper and someone wealthy enough will create the same investment exposure in the futures market, where every trade gets a mixed lower capital gains rate automatically! Make cash transaction reporting requirements over $10,000 for everything, and someone wealthy enough will get real estate totally exempt from it! Get an APA or a private ruling from the IRS where they agree on all the ways you aren't going to pay them! Tell everyone else this is a problem so you can write a law with a new tax change that really only benefits you and your friends, because all the constituents you pander to have a base of voters that only somewhat understands income tax! Squad goals!

Spooky23 9y ago

That's one way to think about it. The reality is that people will calculate risk/reward based on the situations that they face. Tax enforcement is a pretty simple concept. You don't invest $1 in enforcement to net $1 in compelled compliance, you use enforcement to net $100 in voluntary compliance. Tax authorities can and do calculate how much they can harvest from enforcement activity. Enforcement increases both the risk and impact when people do that risk calculation. If doing some shady bullshit to re-swizzle income has a X% risk of costing me $Y or Z months of bureaucratic torture, it's going to impact my decision process. US Federal tax enforcement is a joke today. Through de-funding and neglect, the ability of the tax authorities at the Federal level to perform even basic enforcement activity has been kneecapped. To give a anecdotal illustration of the current situation, a friend of mine is a now-retired tax enforcement person. His particular speciality was staffed with as many as 75-100 people nationwide in the early 90s... when he retired earlier this year there were two other people in that function and most prosecutions in his speciality were being abandoned as no Federal people exist to testify at trial!

pmoriarty 9y ago

For a very long time, Swiss banks were bastions of impenetrable secrecy. The wealthy from all over the world used to stash their wealth there because they knew it was safe from prying eyes and even from the nearly all-powerful IRS. But then a couple of decades ago, the US government successfully made Swiss banks much more transparent -- to the effect that they are not nearly as reliable a safe haven for tax evaders as they were. This doesn't mean that the wealthy have no more places to hide their money, but it does make it much more difficult for them, and is a sign of progress.

tmaly 9y ago

I would like to see a simplification of the tax laws for those on the lower and middle incomes. It would also be nice to see something for independent contractors and smaller businesses. Should we really be taxing a mom and pop shop at the same top marginal rate as a large corporation?

tim333 9y ago

Well tax 'em all and close some loopholes. Most countries globally manage.

codingmyway 9y ago

A better approach might be to just stop them acquiring the things that ordinary folks need in a bid becoming rentier parasites, namely homes. In a world where food is abundant (for now) that's what keeps everyone else poor. Limit their ability to become greedy landlords and they'll be forced to invest in real businesses and take risks. This can be started on a local level and enforced easily by only allowing people who live in the homes or community trusts or government to own them. If some billionaire owns 10 ferraris, has millions in offshore accounts and a super yacht why should anyone else care? It's not taking away from anyone and creates demand for luxuries that wouldn't otherwise exist and create jobs.

devdas 9y ago

Have only wealth tax. Require everything to be marked to market for tax reasons.