7 ms·

I would really just like a flat tax. No loopholes or deductions. Very simple. It should not take a masters degree to understand the tax code. I recognize this

by mlac 5y ago

I would really just like a flat tax. No loopholes or deductions. Very simple. It should not take a masters degree to understand the tax code. I recognize this is one of the main ways Policy is implemented (incentives can drive certain behavior), but we’ve got hundreds of years of complexity going on and I wouldn’t mind simplifying this. I don’t know where to start though.

lucideer 5y ago
> I don’t know where to start though. I would start with "cui bono" and look into learning about the various institutions in place who's main purpose is to maintain the complexity, that would stand to make significant losses (or disappear) if it were simplified. (just in case this sounds like pessimism or apathy, I don't necessarily think it is. But if one genuinely wants change, one does need to be aware of where hurdles lie)
an_opabinia 5y ago
Economically, you sort of live in a flat tax. (https://www.nytimes.com/interactive/2019/10/06/opinion/income-tax-rate-wealthy.html https://www.nytimes.com/interactive/2019/10/06/opinion/incom...) I know that's not what you mean. But if you simply filed a 1040EZ, then paid a 20% penalty when the IRS sends you a letter saying pay the rest of what you owe, expect to pay... 28 percentage points effective instead of 26. This is to say that tax complexity is a red herring. You can already live in an almost zero-complexity tax obligation personally, as a wage earner, above and beyond what is officially prescribed. It's not really what it's about. It's probably not about saving money either.
- hellisothers 5y ago
  Looks like the 1040-EZ is no longer used, could you elaborate on this “hack” you’re suggesting is a flat tax solution?
madaxe_again 5y ago
I don’t know that flat tax is necessary - progressive taxation is a sane policy, as the marginal utility of money goes down the more of it you have, and therefore a larger tax burden is more easily borne - however addressing the gap between how asset and employment income are taxed is critical to combatting gross wealth asymmetry. I write this as a member of the asset-owning class. I wasn’t always - I worked in the U.K., with my income automatically taxed via PAYE (Pay As You Earn), and paid between 20 and 45% effective tax rates on my earnings. Now, my income is rentals and investments, and my effective tax rate is nearer 5%, on a much larger income than I ever had from employment. I’ve not done anything special or weird, I’ve just paid capital gains and written down the allowable expenses. It would not be hard to pay no tax, just by restructuring my finances a little, but it doesn’t sit well with me as it is. Honestly, it’s nonsensical. At the very least asset income should be taxed at the same rates as labour income - but it should probably be taxed at a higher rate, as penalising productive labour and rewarding rent-seeking is ultimately contrary to the interests of everyone.
- short_sells_poo 5y ago
  One could always tax land ownership. It cannot be hidden or escaped from. It's also the ultimate scarce resource and yet there are landlords who do nothing just draw rent from those who actually utilize the land. An addendum re the UK: it's funny how the UK tax scheme is so punitive on the middle class. Earn 100k pounds gross and take home 50k. But the moment you become an asset owner, you can basically optimize all of it away. The two income brackets "supported" by the UK tax regime are the poorest and the richest.
user3939382 5y ago
Unfortunately Intuit (Turbotax) and the CPA trade groups lobby against any tax simplification whenever it comes up. Regulatory capture of our political process has corrupted it at every turn.
naasking 5y ago
Flat tax is too regressive. What seems justified is a basic S-curve indexed by income, and where the left hand side dips below zero so those below a certain line effectively get a negative income tax to maintain a certain standard of living.
- dataviz1000 5y ago
  Agreed. Flat tax and sales tax are both regressive and both hurt the population the economy needs most to spend on consumption to be viable with circulation.
- mantas 5y ago
  Flat tax + minimum non-taxable incomes is where it's at. Just set high enough threshold.
- pmoriarty 5y ago
  Many of the ultra-wealthy have little or no income. What needs to be taxed is wealth, not income.
  - naasking 5y ago
    I don't entirely disagree, but current political and economic structures aren't designed well enough for a wealth tax.
  - silicon2401 5y ago
    I disagree, at least not with so simple an implementation. I don't want to live in a world where we're unable to escape working by constant taxes. There should be at least a minimum threshold where wealth is completely untaxed so that people can live freely and not have to work until they die. Enough for a house, some property and land, and a retirement fund. I'd consider it more justifiable to tax someone like Bill Gates with billions of dollars and millions of acres of land, but it's just unnecessary for taxes to be absolutely inescapable.
    - mstipetic 5y ago
dvh 5y ago
How about removing income tax (hard to measure, easy to avoid by rich) and increasing vat by the same amount. Vat could be even added to stocks (buying $5000 of Tesla stocks? Pay 20% vat. This could probably end all short term speculations as well). Definitely to yacht and houses, vacations, butlers and gardeners, gold doorknobs, Ferraris, swimming pools, 200" LCDs, hotel stays, massages, anything that is consumption really)
- breakfastduck 5y ago
  Because this would absolutely shaft everyone other than the well off? Because there would be no way at all of scaling the tax based on income / wealth? So someone earning almost nothing with no wealth would be expected to pay the same tax as a billionaire?
  - BarkMore 5y ago
    See the Fair Tax proposal for one way to address this problem. https://en.wikipedia.org/wiki/FairTax https://en.wikipedia.org/wiki/FairTax
    - ianbicking 5y ago
      A large UBI would address this OK, but FairTax seems to really work to keep the tax as regressive as possible without being quite so bad as a flat VAT. A "welfare payment" for "low-income earners" means you have to be in the system ("earner"), that income still has to be calculated, and that the payment is stigmatized ("welfare") instead of presented as an entitlement. This also seems bad: "The proposed Fair Tax Act would apply a tax, once, at the point of purchase on all new goods and services for personal consumption" - "personal consumption" is arbitrary. A VAT tax applied everywhere for all goods would be fair and harder to avoid. Though even that seems like it would encourage financialization to hide material production.
      - Ericson2314 5y ago
        Yes thanks. That thing sounds like a Trojan horse; VAT and UBI is much better.
ianbicking 5y ago
A flat tax simplifies one little bit of math, and doesn't really address loopholes and deductions. If you have an income tax you have to calculate "income". If I have a little store and buy gum for $1.00 and sell it for $1.10, it will not work well if that's counted as $1.10 of income. That $1.00 is a deduction. We can't eliminate them. It's a "loophole" when we think the deduction is not in the spirit of calculating income, but that's not an objective criteria. A flat tax removes the benefit of shifting income to different entities to pursue lower marginal taxes, but I don't think that's the kind of abuse we're looking at here, nor is that abuse particularly scalable.
alok-g 5y ago
I would like to have discussions even for "constant" tax. Wrote more in the comments below: https://news.ycombinator.com/item?id=27434369 https://news.ycombinator.com/item?id=27434369 https://news.ycombinator.com/item?id=27434819 https://news.ycombinator.com/item?id=27434819
Ericson2314 5y ago
That misses the point. The problem isn't income. The problem is there is no "simple" way to assess wealth. Actually, simplest thing to do mathematically is to skip the dollar-denominated accounting entirely, and just pay the government in kind i.e. asset forfeiture / putting the means of production in partial state control. e.g. the gov owns stock in a company based on the distribution of private ownership (is it equal like ESOP or unequal like Facebook and Google?), and without regard to the market price of the stock. I challenge the mathematically literate in America to really think through this.
LatteLazy 5y ago
A flat tax removes the simliest fairest part of the tax code and leaves all the bullshit and loopholes behind. Don't make the mistake of thinking you're (and my) experience of the tax code is anything like the actual code. We only see 0.001%. It's easy to consider only the things we see after all.

by mlac 5y ago

lucideer 5y ago

> I don’t know where to start though. I would start with "cui bono" and look into learning about the various institutions in place who's main purpose is to maintain the complexity, that would stand to make significant losses (or disappear) if it were simplified. (just in case this sounds like pessimism or apathy, I don't necessarily think it is. But if one genuinely wants change, one does need to be aware of where hurdles lie)

an_opabinia 5y ago

Economically, you sort of live in a flat tax. (https://www.nytimes.com/interactive/2019/10/06/opinion/income-tax-rate-wealthy.html https://www.nytimes.com/interactive/2019/10/06/opinion/incom...) I know that's not what you mean. But if you simply filed a 1040EZ, then paid a 20% penalty when the IRS sends you a letter saying pay the rest of what you owe, expect to pay... 28 percentage points effective instead of 26. This is to say that tax complexity is a red herring. You can already live in an almost zero-complexity tax obligation personally, as a wage earner, above and beyond what is officially prescribed. It's not really what it's about. It's probably not about saving money either.

hellisothers 5y ago
Looks like the 1040-EZ is no longer used, could you elaborate on this “hack” you’re suggesting is a flat tax solution?

madaxe_again 5y ago

I don’t know that flat tax is necessary - progressive taxation is a sane policy, as the marginal utility of money goes down the more of it you have, and therefore a larger tax burden is more easily borne - however addressing the gap between how asset and employment income are taxed is critical to combatting gross wealth asymmetry. I write this as a member of the asset-owning class. I wasn’t always - I worked in the U.K., with my income automatically taxed via PAYE (Pay As You Earn), and paid between 20 and 45% effective tax rates on my earnings. Now, my income is rentals and investments, and my effective tax rate is nearer 5%, on a much larger income than I ever had from employment. I’ve not done anything special or weird, I’ve just paid capital gains and written down the allowable expenses. It would not be hard to pay no tax, just by restructuring my finances a little, but it doesn’t sit well with me as it is. Honestly, it’s nonsensical. At the very least asset income should be taxed at the same rates as labour income - but it should probably be taxed at a higher rate, as penalising productive labour and rewarding rent-seeking is ultimately contrary to the interests of everyone.

short_sells_poo 5y ago
One could always tax land ownership. It cannot be hidden or escaped from. It's also the ultimate scarce resource and yet there are landlords who do nothing just draw rent from those who actually utilize the land. An addendum re the UK: it's funny how the UK tax scheme is so punitive on the middle class. Earn 100k pounds gross and take home 50k. But the moment you become an asset owner, you can basically optimize all of it away. The two income brackets "supported" by the UK tax regime are the poorest and the richest.

user3939382 5y ago

Unfortunately Intuit (Turbotax) and the CPA trade groups lobby against any tax simplification whenever it comes up. Regulatory capture of our political process has corrupted it at every turn.

naasking 5y ago

Flat tax is too regressive. What seems justified is a basic S-curve indexed by income, and where the left hand side dips below zero so those below a certain line effectively get a negative income tax to maintain a certain standard of living.

dataviz1000 5y ago
Agreed. Flat tax and sales tax are both regressive and both hurt the population the economy needs most to spend on consumption to be viable with circulation.
mantas 5y ago
Flat tax + minimum non-taxable incomes is where it's at. Just set high enough threshold.
pmoriarty 5y ago
Many of the ultra-wealthy have little or no income. What needs to be taxed is wealth, not income.
- naasking 5y ago
  I don't entirely disagree, but current political and economic structures aren't designed well enough for a wealth tax.
- silicon2401 5y ago
  I disagree, at least not with so simple an implementation. I don't want to live in a world where we're unable to escape working by constant taxes. There should be at least a minimum threshold where wealth is completely untaxed so that people can live freely and not have to work until they die. Enough for a house, some property and land, and a retirement fund. I'd consider it more justifiable to tax someone like Bill Gates with billions of dollars and millions of acres of land, but it's just unnecessary for taxes to be absolutely inescapable.
  - mstipetic 5y ago

dvh 5y ago

How about removing income tax (hard to measure, easy to avoid by rich) and increasing vat by the same amount. Vat could be even added to stocks (buying $5000 of Tesla stocks? Pay 20% vat. This could probably end all short term speculations as well). Definitely to yacht and houses, vacations, butlers and gardeners, gold doorknobs, Ferraris, swimming pools, 200" LCDs, hotel stays, massages, anything that is consumption really)

breakfastduck 5y ago
Because this would absolutely shaft everyone other than the well off? Because there would be no way at all of scaling the tax based on income / wealth? So someone earning almost nothing with no wealth would be expected to pay the same tax as a billionaire?
- BarkMore 5y ago
  See the Fair Tax proposal for one way to address this problem. https://en.wikipedia.org/wiki/FairTax https://en.wikipedia.org/wiki/FairTax
  - ianbicking 5y ago
    A large UBI would address this OK, but FairTax seems to really work to keep the tax as regressive as possible without being quite so bad as a flat VAT. A "welfare payment" for "low-income earners" means you have to be in the system ("earner"), that income still has to be calculated, and that the payment is stigmatized ("welfare") instead of presented as an entitlement. This also seems bad: "The proposed Fair Tax Act would apply a tax, once, at the point of purchase on all new goods and services for personal consumption" - "personal consumption" is arbitrary. A VAT tax applied everywhere for all goods would be fair and harder to avoid. Though even that seems like it would encourage financialization to hide material production.
    - Ericson2314 5y ago
      Yes thanks. That thing sounds like a Trojan horse; VAT and UBI is much better.

ianbicking 5y ago

A flat tax simplifies one little bit of math, and doesn't really address loopholes and deductions. If you have an income tax you have to calculate "income". If I have a little store and buy gum for $1.00 and sell it for $1.10, it will not work well if that's counted as $1.10 of income. That $1.00 is a deduction. We can't eliminate them. It's a "loophole" when we think the deduction is not in the spirit of calculating income, but that's not an objective criteria. A flat tax removes the benefit of shifting income to different entities to pursue lower marginal taxes, but I don't think that's the kind of abuse we're looking at here, nor is that abuse particularly scalable.

alok-g 5y ago

I would like to have discussions even for "constant" tax. Wrote more in the comments below: https://news.ycombinator.com/item?id=27434369 https://news.ycombinator.com/item?id=27434369 https://news.ycombinator.com/item?id=27434819 https://news.ycombinator.com/item?id=27434819

Ericson2314 5y ago

That misses the point. The problem isn't income. The problem is there is no "simple" way to assess wealth. Actually, simplest thing to do mathematically is to skip the dollar-denominated accounting entirely, and just pay the government in kind i.e. asset forfeiture / putting the means of production in partial state control. e.g. the gov owns stock in a company based on the distribution of private ownership (is it equal like ESOP or unequal like Facebook and Google?), and without regard to the market price of the stock. I challenge the mathematically literate in America to really think through this.

LatteLazy 5y ago

A flat tax removes the simliest fairest part of the tax code and leaves all the bullshit and loopholes behind. Don't make the mistake of thinking you're (and my) experience of the tax code is anything like the actual code. We only see 0.001%. It's easy to consider only the things we see after all.