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"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.
by 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 agoAnd then we'd have to redo/relearn the last millenium of why we do the things the way we do them.
- inetknght 9y agoIs that such a bad idea?
- graphitezepp 9y agoSeems 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 agoIt is if you think not every moment in the last millenium was pleasant for everyone.
- jrimbault 9y agoNot 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 agoThe 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 agoBecause History started when the US began and there was no financial system before and nobody ever learned anything before.
- ameister14 9y agoFirst 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?
- jrimbault 9y agoI'm talking about learning not "income tax"... The first "bank" was also founded much earlier than 1000 years ago (and wasn't a bank), but we did know a bit about financial systems even before then.
- ameister14 9y agoYou replied in a discussion of income tax to a person talking about the history of income tax. Your objection appeared to be that the person you replied to was talking about US income tax history and your millennia of progressive income tax talk covered other countries.
- wavefunction 9y agoThere aren't many sovereign nations that have been in existence since 1017 AD, so that sort of makes your question moot. The Code of Hammurabi describes Babylonian taxes and the manners of levy. The Egyptians and Romans levied income taxes. There is of course the gafol/Danegeld/heregald of the Anglo-Saxons. You've got taxes/tolls paid by merchants on the Silk Road and certainly I've read of taxation in Ashoka's era and other sub-continental sovereignties. You have the taxation/feudal levy system that existed even in archaic Greece where boats, rowers and soldiers were expected to be provided by patricians in times of war. China (especially) and Japan have long histories of taxation. The idea that recorded human history has been mostly without tax seems to be ahistoric.
- shortstuffsushi 9y agoWhat 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 agoDon'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 agoThe 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 agoThe 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 agoIn 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 agoExactly, a flat tax society would end up being a cash-under-the-table society.
- cbcoutinho 9y agoHow 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 agoA 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 agoI 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 agoThe 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 agoOh 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 agoThere 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 agoA 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 agoHow 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 agoThat 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 agoThat 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 agoIt 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 agoWhile 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 agoA flat tax rate would put a significant, unfair burden on poorer people.
- djrogers 9y agoEvery 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 agoA 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 agoNo 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.