8 ms·

Yea which is one benefit of simple tax systems. If the tax rate is 10% across the board, then there is a simple "spirit" there to appeal to.

jhbadger 7y ago
But that's not really a fair system because poor people need their income to live on while rich people paying more taxes just means they will have one less yacht or mansion.
- SolarNet 7y ago
  I never said it was fair, just that that was a benefit of it. Also, an alternative is a higher tax rate but use a UBI so poor people always have an effective negative tax rate. Constant offset, multiplicative tax rate. Ensures a floor of income such that people can always survive and that there are always consumers.
- Mattasher 7y ago
  How is it unfair for people making twice as much, to pay twice as much? If anything, "fairness" would favor a system where (absolute) taxes went up slower than income, as I doubt consumption of government services increases linearly with income (modulo rent seeking by the very rich and powerful).
  - zaksoup 7y ago
    Taxes are explicitly and intentionally not fair. It's not fair that I pay taxes to public schooling when I could just send my kids to a private school. It's not fair that I pay taxes to the roads when I drive significantly less than average. It's not fair that I pay taxes to subsidize the USPS when I don't ever mail things. Nothing about taxation is fair because it's not intended to be fair. We agree that society as a whole benefits from every child having access to a high quality education. We agree that society as a whole benefits from free and easy travel. I read an economic report a while back (still trying to find it) that posited that a significant contributor to the US's current economic success and high rate of entrepreneurial system was the USPS. The ability for everybody to mail anything anywhere on the cheap allowed for an untold number of companies to exist and be competitive. To pretend like taxes should be associated with the consumption of government services is a-historical, fallacious, and based on any number of lies that vilify the poor for being poor.
    - LyndsySimon 7y ago
      > Nothing about taxation is fair because it's not intended to be fair. I agree with this 100%, and thank you for stating it so clearly. > We agree that society as a whole benefits from [...] Well, not all of us agree, but certainly a large majority. > To pretend like taxes should be associated with the consumption of government services is a-historical, fallacious, and based on any number of lies that vilify the poor for being poor. It also sets up a hell of a strawman for the abolition of taxation in general - if the goal is for the individual to pay based on their consumption, then the most effective means of achieving that with the lowest possible overhead would be to allow a competitive marketplace to develop for those things. For the record, I do support the abolition of all taxation, but find this argument to be very poorly constructed. My justification is that taxation is instituted through the implicit threat of violence. That said, from a practical standpoint, if we're going to have a government funded through taxation, it's in our best interest to ensure the overhead for collecting it is as low as possible. That means the ruleset should be as simple as possible, and that using taxation powers to modify behavior should be done rarely if ever in order to maintain that simplicity.
      - zaksoup 7y ago
        To be clear, our government is not funded through taxation. If the government is the sole issuer of a currency then the government is also capable of paying for anything and everything priced in that currency, full stop. To put it another way... Question: those dollars you have in your pocket, where'd they come from? Answer: The government issued them and they eventually found their way to me Question: How'd the government have them to issue them? Answer: They taxed it from somebody else. Question: How'd that person get those dollars? Taxation is a method of controlling inflation and the implicit threat of violence isn't directly related or due to taxation, but rather it's connected to the government's monopoly on a fiat currency. Our government is funded through being the monopoly issuer of a currency that it requires all transactions be priced in while enforcing that monopoly with the implicit threat of violence. Our government (and all governments that are monopoly issuers of fiat currency) additionally use taxation as methods of economic control, but not funding. > it's in our best interest to ensure the overhead for collecting it is as low as possible I'm not sure I agree with this. If the government is going to tax as a method of inflation control it's in our best interest that that taxation does the "least harm" and as a democratic society we have the opportunity to vigorously debate based on evidence and research how we define "least harm". The simplest ruleset possible could easily be "everybody contributes $30k/year" (more or less what my annual tax burden is) but suddenly we're bankrupting a majority of Americans. Perhaps "as possible" includes an implicit "without bankrupting a majority of individuals subject to the tax" but at that point "as possible" is just a doorway to say "taxing should be simple [except when it can't be]" and to me that's the same as saying "taxing is complicated" which is, finally, to say that I think it's really a whole lot of nothing interesting to say "I think tax rules should be simple". Edit: And yes, I understand that State taxes (as opposed to federal taxes) do fund State services (Property Taxes -> Schools in CA, for ex), but the States are not monopoly issuers of a fiat currency... It's complicated and hairy but the reason I bring up the issue of funding via taxes vs. issuing dollars is because almost always in conversations about flat tax rates or "simplifying tax code" it's in reference to federal taxes and not state/local taxes.
  - jogjayr 7y ago
    Taxes aren't just about consumption of government services. If you earn more, you've clearly benefited from living in that society more than someone who does not. Or, as an economist would put it, it's price discrimination - charging more to the customer who gets more value out of the product.
    - nybble41 7y ago
      > If you earn more, you've clearly benefited from living in that society more than someone who does not. No, those who consume more have benefited more. Earning more is just the opposite: it shows that you've provided more benefit to society than someone who earns less. The ones who benefit most from society are the ones who manage to consume more than they earn.
      - jhbadger 7y ago
        There is little to no correlation of benefit to society provided and salary gained. Nobel prize winning scientists are generally not poverty-stricken, but they rarely make anything close to what a successful Wall Street stockbroker does, for example.
      - jogjayr 7y ago
        > No, those who consume more have benefited more. Usually you can consume more if you have earned more i.e. have more buying power. But I know that's not what you mean. > Earning more is just the opposite: it shows that you've provided more benefit to society than someone who earns less. They're not very strongly correlated. It's possible to provide value without seeing much in reward (janitors, nurses, schoolteachers), earn plenty without providing much or even negative value (telemarketers, those opioid manufacturers we're hearing about), or both provide value and earn $$$ (Google, StackOverflow). In any case the taxman doesn't care about "value" provided to society because it's such a nebulous concept. The IRS doesn't let you take deductions for adding value or add extra taxes because you're a telemarketer. Even if you provided a ton of value to society while getting rich, you still got rich. And your society's enforcement of laws and property rights, educated citizenry, and infrastructure were likely crucial to this. > The ones who benefit most from society are the ones who manage to consume more than they earn. This is true in the case of those who inherit large fortunes/trust funds and don't work. Tax laws favor them greatly at present (lower estate and capital gains taxes). It's not true at the other end of the scale though. If not having a job and being on food stamps/medicaid/unemployment was really all that great, you'd have far more people looking to get in on it. It's actually a miserable situation that most people work their hardest to never fall into.
aero142 7y ago
I disagree. The loopholes are not from the progressive part of the tax code, so making it a flat rate doesn't simplify anything. I assume you are talking about a flat tax, which is a personal income tax only, but event still that is difficult. The complexity is from defining "income". A big source of complexity is about companies operating in other countries. You still have to define rules about a company car vs a personal car; and a business expense and a personal expense; and income that is entirely in another country vs domestic income. These problems don't go away with a flat tax despite it's proponents unquestioned belief that it does.
andrewla 7y ago
This is not simple. If the tax rate were $10 per person across the board, that would be simple. 10% of what is what the question reduces to. What if I have an investment that increases in value? Does the gain count as income? What if I don't sell it? What if I receive non-monetary compensation? Is that income? How valued? What if I have a loan forgiven (as in the article)? Do I pay tax on the forgiven amount? What if I lose money or spend money? Does that affect income, or am I being taxed on my gross income? What if my company pays for my rent and other living expenses? Is that income? If you don't close these "loopholes" then the 10% just becomes a penalty for the people who don't have the time or the knowledge to circumvent the rule, but for those that do, they just don't have any "income" so there's no problem. The closure of the loopholes creates more loopholes, that push the problem upstream until only the very wealthiest individuals can afford to not pay taxes.
- LyndsySimon 7y ago
  You're assuming that the parent poster meant a 10% income tax. If it were a 10% sales tax, then it would be based on consumption and there would be no issues over and above the current complications with what is and what is not exempt from sales tax.
  - HeyLaughingBoy 7y ago
    In that case bartering would suddenly look very appealing.
jogjayr 7y ago
10% of what? Revenue? Profit? Assets? Companies already engage in all sorts of shenanigans to show lower profits when it suits them. [1] Taxing revenue goes against decades, maybe centuries, of established tax law and tradition, which roughly operates on the principle "The state makes money when you make money." If you start taxing assets, you're going to need very invasive government bureaucracy that knows everything you own, down to the last paperclip. Anyone who claims they can make taxes simpler is either lying or doesn't understand the subject. 1. https://en.wikipedia.org/wiki/Hollywood_accounting https://en.wikipedia.org/wiki/Hollywood_accounting
- reboog711 7y ago
  Where I live; in northeastern US my assets are taxed. Personal assets such as my home and car are taxed on a yearly basis. As are business assets, which includes everything from the desk I'm sitting at; the chair I'm sitting on; to the computer I'm using. Disposable supplies, such as paperclips, are not taxed but once a year I have to fill out paperwork--roughly a 10 page document--to pass onto my local government declaring said assets.
singron 7y ago
Graduated rates aren't the complicated part of the tax system. The complicated part is figuring out the amount the rate applies to. E.g. capital gains, deductions, credits. If you have never filed your own tax return before, go skim the instructions for form 1040[0] (117 pages). It includes a 10 page table for the graduated tax rate so most people don't need to do any arithmetic if they make <100,000. Besides a couple tables like that and some administrative pages, the rest is text and worksheets for figuring the amount to apply the rate to. And this is just the basic form that everyone files! There are additional forms someone might file for complex circumstances, let alone filings for all the kinds of trusts and corporations. 0: https://www.irs.gov/pub/irs-prior/i1040gi--2018.pdf https://www.irs.gov/pub/irs-prior/i1040gi--2018.pdf

jhbadger 7y ago

But that's not really a fair system because poor people need their income to live on while rich people paying more taxes just means they will have one less yacht or mansion.

SolarNet 7y ago
I never said it was fair, just that that was a benefit of it. Also, an alternative is a higher tax rate but use a UBI so poor people always have an effective negative tax rate. Constant offset, multiplicative tax rate. Ensures a floor of income such that people can always survive and that there are always consumers.
Mattasher 7y ago
How is it unfair for people making twice as much, to pay twice as much? If anything, "fairness" would favor a system where (absolute) taxes went up slower than income, as I doubt consumption of government services increases linearly with income (modulo rent seeking by the very rich and powerful).
- zaksoup 7y ago
  Taxes are explicitly and intentionally not fair. It's not fair that I pay taxes to public schooling when I could just send my kids to a private school. It's not fair that I pay taxes to the roads when I drive significantly less than average. It's not fair that I pay taxes to subsidize the USPS when I don't ever mail things. Nothing about taxation is fair because it's not intended to be fair. We agree that society as a whole benefits from every child having access to a high quality education. We agree that society as a whole benefits from free and easy travel. I read an economic report a while back (still trying to find it) that posited that a significant contributor to the US's current economic success and high rate of entrepreneurial system was the USPS. The ability for everybody to mail anything anywhere on the cheap allowed for an untold number of companies to exist and be competitive. To pretend like taxes should be associated with the consumption of government services is a-historical, fallacious, and based on any number of lies that vilify the poor for being poor.
  - LyndsySimon 7y ago
    > Nothing about taxation is fair because it's not intended to be fair. I agree with this 100%, and thank you for stating it so clearly. > We agree that society as a whole benefits from [...] Well, not all of us agree, but certainly a large majority. > To pretend like taxes should be associated with the consumption of government services is a-historical, fallacious, and based on any number of lies that vilify the poor for being poor. It also sets up a hell of a strawman for the abolition of taxation in general - if the goal is for the individual to pay based on their consumption, then the most effective means of achieving that with the lowest possible overhead would be to allow a competitive marketplace to develop for those things. For the record, I do support the abolition of all taxation, but find this argument to be very poorly constructed. My justification is that taxation is instituted through the implicit threat of violence. That said, from a practical standpoint, if we're going to have a government funded through taxation, it's in our best interest to ensure the overhead for collecting it is as low as possible. That means the ruleset should be as simple as possible, and that using taxation powers to modify behavior should be done rarely if ever in order to maintain that simplicity.
    - zaksoup 7y ago
      To be clear, our government is not funded through taxation. If the government is the sole issuer of a currency then the government is also capable of paying for anything and everything priced in that currency, full stop. To put it another way... Question: those dollars you have in your pocket, where'd they come from? Answer: The government issued them and they eventually found their way to me Question: How'd the government have them to issue them? Answer: They taxed it from somebody else. Question: How'd that person get those dollars? Taxation is a method of controlling inflation and the implicit threat of violence isn't directly related or due to taxation, but rather it's connected to the government's monopoly on a fiat currency. Our government is funded through being the monopoly issuer of a currency that it requires all transactions be priced in while enforcing that monopoly with the implicit threat of violence. Our government (and all governments that are monopoly issuers of fiat currency) additionally use taxation as methods of economic control, but not funding. > it's in our best interest to ensure the overhead for collecting it is as low as possible I'm not sure I agree with this. If the government is going to tax as a method of inflation control it's in our best interest that that taxation does the "least harm" and as a democratic society we have the opportunity to vigorously debate based on evidence and research how we define "least harm". The simplest ruleset possible could easily be "everybody contributes $30k/year" (more or less what my annual tax burden is) but suddenly we're bankrupting a majority of Americans. Perhaps "as possible" includes an implicit "without bankrupting a majority of individuals subject to the tax" but at that point "as possible" is just a doorway to say "taxing should be simple [except when it can't be]" and to me that's the same as saying "taxing is complicated" which is, finally, to say that I think it's really a whole lot of nothing interesting to say "I think tax rules should be simple". Edit: And yes, I understand that State taxes (as opposed to federal taxes) do fund State services (Property Taxes -> Schools in CA, for ex), but the States are not monopoly issuers of a fiat currency... It's complicated and hairy but the reason I bring up the issue of funding via taxes vs. issuing dollars is because almost always in conversations about flat tax rates or "simplifying tax code" it's in reference to federal taxes and not state/local taxes.
- jogjayr 7y ago
  Taxes aren't just about consumption of government services. If you earn more, you've clearly benefited from living in that society more than someone who does not. Or, as an economist would put it, it's price discrimination - charging more to the customer who gets more value out of the product.
  - nybble41 7y ago
    > If you earn more, you've clearly benefited from living in that society more than someone who does not. No, those who consume more have benefited more. Earning more is just the opposite: it shows that you've provided more benefit to society than someone who earns less. The ones who benefit most from society are the ones who manage to consume more than they earn.
    - jhbadger 7y ago
      There is little to no correlation of benefit to society provided and salary gained. Nobel prize winning scientists are generally not poverty-stricken, but they rarely make anything close to what a successful Wall Street stockbroker does, for example.
    - jogjayr 7y ago
      > No, those who consume more have benefited more. Usually you can consume more if you have earned more i.e. have more buying power. But I know that's not what you mean. > Earning more is just the opposite: it shows that you've provided more benefit to society than someone who earns less. They're not very strongly correlated. It's possible to provide value without seeing much in reward (janitors, nurses, schoolteachers), earn plenty without providing much or even negative value (telemarketers, those opioid manufacturers we're hearing about), or both provide value and earn $$$ (Google, StackOverflow). In any case the taxman doesn't care about "value" provided to society because it's such a nebulous concept. The IRS doesn't let you take deductions for adding value or add extra taxes because you're a telemarketer. Even if you provided a ton of value to society while getting rich, you still got rich. And your society's enforcement of laws and property rights, educated citizenry, and infrastructure were likely crucial to this. > The ones who benefit most from society are the ones who manage to consume more than they earn. This is true in the case of those who inherit large fortunes/trust funds and don't work. Tax laws favor them greatly at present (lower estate and capital gains taxes). It's not true at the other end of the scale though. If not having a job and being on food stamps/medicaid/unemployment was really all that great, you'd have far more people looking to get in on it. It's actually a miserable situation that most people work their hardest to never fall into.

aero142 7y ago

I disagree. The loopholes are not from the progressive part of the tax code, so making it a flat rate doesn't simplify anything. I assume you are talking about a flat tax, which is a personal income tax only, but event still that is difficult. The complexity is from defining "income". A big source of complexity is about companies operating in other countries. You still have to define rules about a company car vs a personal car; and a business expense and a personal expense; and income that is entirely in another country vs domestic income. These problems don't go away with a flat tax despite it's proponents unquestioned belief that it does.

andrewla 7y ago

This is not simple. If the tax rate were $10 per person across the board, that would be simple. 10% of what is what the question reduces to. What if I have an investment that increases in value? Does the gain count as income? What if I don't sell it? What if I receive non-monetary compensation? Is that income? How valued? What if I have a loan forgiven (as in the article)? Do I pay tax on the forgiven amount? What if I lose money or spend money? Does that affect income, or am I being taxed on my gross income? What if my company pays for my rent and other living expenses? Is that income? If you don't close these "loopholes" then the 10% just becomes a penalty for the people who don't have the time or the knowledge to circumvent the rule, but for those that do, they just don't have any "income" so there's no problem. The closure of the loopholes creates more loopholes, that push the problem upstream until only the very wealthiest individuals can afford to not pay taxes.

LyndsySimon 7y ago
You're assuming that the parent poster meant a 10% income tax. If it were a 10% sales tax, then it would be based on consumption and there would be no issues over and above the current complications with what is and what is not exempt from sales tax.
- HeyLaughingBoy 7y ago
  In that case bartering would suddenly look very appealing.

jogjayr 7y ago

10% of what? Revenue? Profit? Assets? Companies already engage in all sorts of shenanigans to show lower profits when it suits them. [1] Taxing revenue goes against decades, maybe centuries, of established tax law and tradition, which roughly operates on the principle "The state makes money when you make money." If you start taxing assets, you're going to need very invasive government bureaucracy that knows everything you own, down to the last paperclip. Anyone who claims they can make taxes simpler is either lying or doesn't understand the subject. 1. https://en.wikipedia.org/wiki/Hollywood_accounting https://en.wikipedia.org/wiki/Hollywood_accounting

reboog711 7y ago
Where I live; in northeastern US my assets are taxed. Personal assets such as my home and car are taxed on a yearly basis. As are business assets, which includes everything from the desk I'm sitting at; the chair I'm sitting on; to the computer I'm using. Disposable supplies, such as paperclips, are not taxed but once a year I have to fill out paperwork--roughly a 10 page document--to pass onto my local government declaring said assets.

singron 7y ago

Graduated rates aren't the complicated part of the tax system. The complicated part is figuring out the amount the rate applies to. E.g. capital gains, deductions, credits. If you have never filed your own tax return before, go skim the instructions for form 1040[0] (117 pages). It includes a 10 page table for the graduated tax rate so most people don't need to do any arithmetic if they make <100,000. Besides a couple tables like that and some administrative pages, the rest is text and worksheets for figuring the amount to apply the rate to. And this is just the basic form that everyone files! There are additional forms someone might file for complex circumstances, let alone filings for all the kinds of trusts and corporations. 0: https://www.irs.gov/pub/irs-prior/i1040gi--2018.pdf https://www.irs.gov/pub/irs-prior/i1040gi--2018.pdf