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Tax Plan Punts on a Loophole for the Wealthy
- jobu 9y agoIt's too bad a Wealth Tax isn't even discussed in politics anymore. Seems like it could solve a significant amount of these tax loopholes. https://en.wikipedia.org/wiki/Wealth_tax https://en.wikipedia.org/wiki/Wealth_tax
- solaxun 9y agoI've been asking this question for years - I think they are great in theory but probably hard to actually enforce.
- coltonv 9y agoThey would also never be supported by the powers the lobby billions to congress. Nothing that negatively affects the assets of the people who give congresspeople billions will be enacted in the forseeable future. Even if both houses switch heavily Blue/Red/Something else, lobbying touches all.
- WalterBright 9y agoHow does that explain Obama's huge tax increase?
- kmonsen 9y agoNorway has (had?) one, the problem is that the wealthy claims it brings advantages to foreign capital so it will never happen in the US. This easiest is to tax things that cannot move away, like real estate instead of giving giant deductions.
- ThrustVectoring 9y agoTaxing the unimproved value of land has the additional advantage that people cannot decide to create less of it in response to the tax disincentive. I really wish we went full Georgism back in the day.
- lr4444lr 9y agoChurches and their congregants would never go for it. I don't know how big a share we'd lose without their revenue, but it's hard to imagine it would NOT be a serious issue.
- ThrustVectoring 9y agoChurches are already exempt from paying real-estate taxes on their religious buildings. And they're exempt from paying taxes on any income they get from investment, too. It's a net wash - as long as churches have exempt investment assets of some sort that fund their religious and charitable activity (and not unrelated businesses), we're not getting tax income from them either way.
- lr4444lr 9y agoI'm not sure if you understood me or if I understand you. If churches do not have to pay capital gains or property taxes now, how do they not lose ground under a Georgist system?
- ThrustVectoring 9y agoI think I just kind of assumed that churches and other qualified charities would not be required to pay taxes on the unimproved value of land, much like they aren't required to pay property taxes or capital gains taxes today.
- munk-a 9y agoYea, thankfully the current plan proposes removing the estate tax to make sure we don't have any sorts of progressive taxes left...
- basseq 9y agoThis easiest is to tax things that cannot move away, like real estate instead of giving giant deductions. States and localities absolutely do. "The federal government is generally prohibited from imposing direct taxes unless such taxes are then given to the states in proportion to population."
- gamad 9y agoA frugal, thrifty person who saves money so he can retire shouldn't be punished by having his nest-egg eaten away. The only fair way is to tax people upon death.
- X86BSD 9y agoWhat would solve all "loopholes" is just going to a damn flat national sales tax. Period. End of story. Thank you drive through. Stop trying to mangle this demonic beast of a tax code we have now, it won't work and never has. And simply toss it. One paragraph as the replacement. 38% or whatever agreed upon percent as a national flat sales tax. And for the bleeding hearts that will scream this hurts the poor, Sentence two: The first 5,000/year in clothing tax free, and the First 10,000/year in food tax free. IRS? Dissolved. H&R block? Dissolved. No more audits. No more income tax. You keep your entire paycheck! No more asset seizure by the IRS. No more tax fraud. No more tax evasion.
- ph0rque 9y ago> The first 5,000/year in clothing tax free Per person? In that case, we can lower it to $1k/year.
- padobson 9y agoSentence two: The first 5,000/year in clothing tax free, and the First 10,000/year in food tax free. I like plans that take care of this with a prebate - $200-$500/mo checks for everyone. It could also be a precursor to UBI.
- openasocket 9y ago325M people getting $500/mo is $1.95 trillion / year. That would be the largest entitlement program in American history, and about 10.5% of GDP.
- ddebernardy 9y agoIn the context of 25-50% of people losing their job to AI in the next decade or three, such an entitlement or a much bigger one might come to being.
- snarf21 9y agoWouldn't you have a better chance of passing 0 federal taxes for anyone under 2x poverty level with a similar benefit?
- snarf21 9y agoIt just seems like the really wealthy would just keep it overseas or find other ways to hide it. Wealth is not always objective. Also, what do you do for someone who bought a house 40 years ago near SV for $80K and it is now worth $1.5M. Are you going to tax them (in addition to property tax) and force them to move? Are they your target? Personally, I think we need to keep the inheritance tax and remove other loop holes when people are making money. For instance, there is no reason we can't get rid of like kind exchange. People are always more readily accepting to pay a tax out of part of their profits.
- mdemare 9y agoThe Netherlands has a wealth tax of about 1.2% per annum; property you live in is not taxed (via the wealth tax)
- WalterBright 9y agoWe do have wealth taxes. Two of the largest are inflation and property taxes.
- howard941 9y agoIf we had inflation wages would rise and it'd be a lot easier to pay down debt than it actually is.
- WalterBright 9y agoWhen I was young minimum wage was $2.35, now it's $15 (in Seattle). Seems like it's rising.
- pgwhalen 9y agoIt's worth pointing out that property taxes can't really be avoided in practice, cause we all need somewhere to live, and those taxes are filtering down in some form.
- WalterBright 9y agoNeither can inflation.
- pgwhalen 9y agoRight, I figured the sibling commenter covered that.
- rojoca 9y agoOne (unsuccessful) party in the recent NZ election proposed a tax on productive assets, including land and housing but excluding financial assets which would already be taxed. It would only be levied if those assets did not produce some minimum return. This was in response to the wild property speculation that has made housing increasingly unaffordable for many people as well as stagnating productivity.
- test6554 9y agoKeep reading that wikipedia article especially the "Disadvantages" section: * Capital flight (people invest in other countries with more sane tax policies) * recessionary effects, including job loss. * huge burden on small business owners that are barely making a profit * Incorrect, unequal or subjective valuation of wealth * Disproportionate effect on seniors * Wealth taxes had high management cost and relatively low returns.
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- 0x27081990 9y agoTax cuts always have a higher impact on the wealthy because, well, they pay more taxes. This isn’t a bad thing. That money won’t dissapear. It’ll get spent or invested (either directly or indirectly by a bank if saved). Tax cuts are good. Stop saying they’re bad. The wealthy always find loopholes because they can afford lawyers and accountats to deduct taxes or skip taxes through offshore companies, so it’s the not-so-wealthy who have a yet bigger impact but not so directly visible.
- tacomonstrous 9y ago>Tax cuts are good. Stop saying they’re bad. Taken to the logical limit that would imply that we shouldn't have taxes at all. You're assuming also that taxes are being cut across the board, but it is very unclear if the middle class will experience any positive change, while there is ample evidence that the President and most of his cabinet will make out quite well personally.
- lucio 9y agoIf somehow you can have a government w/o having taxes (maybe financed by seigniorage), yes. We shouldn't have taxes at all. Taxes are a necessary evil.
- burkaman 9y agoIt's obviously possible to, for example, lower the lowest bracket and leave the highest the same. This would be a tax cut with no impact on the wealthy.
- gamad 9y agoAll due respect, but there's a reason you can't cut taxes on the non-wealthy: They don't pay taxes.
- nemo44x 9y agoIf you're truly wealthy there's a good chance your "personal income" isn't coming from a paycheck you worked for. Your income is in the form of qualified dividends, proceeds from long term capital gains and other investment income. Of which you're likely paying very little (long term capital gain) to no (qualified dividend) tax on. Any tax reform that does not address the fact that investment income is taxed more or less flat compared to labor which is taxed progressively is missing a huge opportunity to tackle income inequality and making the wealthy "pay their fair share". - Lower the corporate tax rate significantly. This creates more value in companies and possibly a larger labor pool. - Install a progressive tax system on capital gains similar (larger standard deduction than labor) to how labor is currently taxed. Investors are making more on companies that pay lower taxes now. If investment is your sole source of income you'll actually be paying your "fair share" now. - Lower taxes on working people who spend most of their income. This creates more consumption and investment which leads to better markets.
- snarf21 9y agoDo you think inheritance tax eventually captures a lot of this passive income?
- HockeyPlayer 9y agoGary Cohn (Trump's chief economic advisor) recently said, "Only ‘Morons’ Pay the Estate Tax" : http://nymag.com/daily/intelligencer/2017/08/gary-cohn-only-morons-pay-the-estate-tax.html" http://nymag.com/daily/intelligencer/2017/08/gary-cohn-only-...
- nemo44x 9y agoFederal inheritance tax is levied on 0.2% of the US population. It doesn't apply until you leave behind about $5.45 million dollars. If I was a politician I would leave it alone and let states deal with it. I think most people that are against the "death tax" know it won't affect them but it's the idea that income that was taxed is now being taxed again. The emotional appeal of leaving a better life for those you love, etc. So, I'd get rid of it. It's insignificant. It accounts for about .5% of total Federal revenue. Easy sacrifice.
- millstone 9y agoThat tax is worst which distorts most. Differential taxation of income and capital gains has resulted in many financial products for transforming ordinary income into capital gains - obviously non-productive "work." Differential taxation of ordinary income and pass-through income will do the same thing. This is just bad tax policy design.
- munk-a 9y agoI am rather disappointed that the mortgage rebates will remain in effect in this cut, providing an additional advantage to those who purchase and build up assets rather than rent is unnecessary. It also looks like this cut would make it even more advantageous to use an S-corp for funneling income from contract work. Piggy-backing onto methods used to reduce top-earner's tax burden always has it's advantages for those who can exploit it, I guess.
- djrogers 9y agoYou realize that the tax deduction for mortgages lowers the cost of rent by reducing the expenses involved in maintaining a large capital investment like a rental house?
- munk-a 9y agoIt does, but not at an even amount. The tax deductions lower the cost of operating a unit for renting, but that doesn't mean all the money saved gets translated directly to benefiting the renters.
- dragonwriter 9y ago> You realize that the tax deduction for mortgages lowers the cost of rent by reducing the expenses involved in maintaining a large capital investment like a rental house In a sense the does, but that's somewhat illusory. As with other businesses, any reasonable and necessary expenses of maintaining and managing the property being rented are deductible as business expenses for landlords; mortgage interest is, AFAIK, currently excluded from that only because, with the mortgage interest deduction, it would be double counted. Virtually no one who supports removing the mortgage interest deduction opposes the general notion of deduction of reasonable and necessary business expenses.
- s73ver_ 9y agoIf you got rid of mortgage interest, then almost no one could afford to buy a home.
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- ringaroundthetx 9y agoNice, just yesterday I asked on here how that pass-through entity tax rate is not the primary discussion, glad to see someone else noticed. https://news.ycombinator.com/item?id=15354110 https://news.ycombinator.com/item?id=15354110 My only gripe is that this isn't just a loophole for the wealthy. Any schmuck can make a pass through entity for $100 and do all their business through that. They might opt to be corp-to-corp contractors for every employment contract they sign. This would be a godsend that spans all socioeconomic classes.
- djrogers 9y ago>My only gripe is that this isn't just a loophole for the wealthy. The article addresses this - the tax rate for a married couple making ~150k or so is already 25%, so it's only people who make more than that who would be impacted by this.
- ringaroundthetx 9y agoah nice, to not see that I must be part of the bourgeoisie oblivious to the socioeconomic woes of the underclass finally.
- s73ver_ 9y agoWell, for one, that requires you to have $100 to spare to register. Two, it requires your employer to be willing to hire you like that.
- Joking_Phantom 9y agoThe 9 page Republican tax plan draft is pretty awful. Not just awful in the sense that Trump promised that it didn't benefit rich people, which it does ("It's not good for me, believe me"). The elimination of the estate tax on the top 0.2% of estates in America is the most egregious example. The immediate write off of depreciable assets, elimination of AMT and reduction of corporate taxes largely do not apply to small businesses. In particular, the immediate expensing of depreciable assets may further serve to exacerbate irrational purchases of equipment by small businesses, potentially locking them into unprofitable business practices, while benefitting large corporations that make these specialized products (see the corn glut). No comment on whether this is moral or not, in the end it brings profits to big business at the direct expense of small business. But its also awful in the sense that its not even close to complete or reasonable. Half of the 9 page document is just empty words and opinions that have no business being on a document meant to form the basis of our new tax code. Republican analysts have yet to make up for the optimistic 1.5 trillion dollar projected shortfall introduced by this tax reform, and the various "tricks" being discussed to bridge that gap are unpalatable at best. Clever accounting reminiscent of the practices that brought Enron to its downfall, punting the problem of shortfalls 10 years down when the debt becomes to big to ignore. Taxing of retirement plan contributions and proceeds which will be borne by middle class workers. If this is all the Republicans have to show after 2 years of bluster, I can't see any significant reform going through. Moreover, the duplicitous wording of the document gives less reason to view the Republicans in a charitable light. The whole section on the "zero tax bracket" and dependent deduction elimination represents little to the lower class Americans it purports to help. Replacing the deduction for non child dependents with a 500 dollar tax credit is a tax increase in most cases. The unspecified increase in the child tax credit is also balanced by the loss in the $4000 deduction - there is no reason to expect an actual effective tax break of significant magnitude when the Republicans can't even give us a flat answer. The elimination of most itemized deductions perturbs me as well - give people even less of a reason to spend their money in incentivized manners, punish the middle class further? We'll see what exactly they eliminate, if its comparable to the nearly doubled standard deduction. "Finally, the committees will work on additional measures to meaningfully reduce the tax burden on the middle-class." It's amazing how long it took them to produce a mere 9 page document, much of which contains words that impart no meaning. I've written essays in high school longer than this.
- calvinbhai 9y agoAny tax plan that promises to increase taxes for the rich, often tends to be something that ends up increasing the taxes for the rest, while the rich will have enough loopholes to pay less taxes, legally.
- Necromant2005 9y agoThat's AWESOME news! The more you earn the less you must pay in taxes. There's a simple explanation for this the low income people getting more services from society, than wealthy one. So it's fair share for society depends on amount of service society provides for you.
- Necromant2005 9y agoIdeal taxation system must follow normal distribution: http://www.itl.nist.gov/div898/handbook/pmc/section5/gifs/normal.gif http://www.itl.nist.gov/div898/handbook/pmc/section5/gifs/no... where: x - income f(x) - taxes For example: $5k annual income = 0% taxes $10k - 10% taxes $75k - 150k - 35% taxes $150k - $250k - 30% $250k - $1kk - 25% $100kk - 1%