Required reading: How doeth wealth flow?

If you do nothing else this week, set aside five minutes to read this excellent column on wealth redistribution by NC Policy Watch's Rob Schofield.





Comments

Even a flat income tax

might be better?

Fix the rate, phase out mortgage and all other deductions (shift to credits for stimulating specific sectors) and treat all income equally (salary, interest, capital gains, whatever).

Wouldn't that be better than this? Of course it would put a dent in the multi-billion dollar tax advice and preparation business.

Here's the deal, James

The "flat tax" as designed by Forbes would pretty much eliminate the IRS as it is today. What is the employment numbers with regard to the IRS? Also, what is the political manuevering that is being done with regard to the IRS and the tax structure today? No, that's not dem or repub. It is in both parties. To enact a "flat tax" or even the "fair tax" as presented by Linder and Boortz, it would be nearly impossible to get done just because of the power that the current tax structure holds today for our legislative leaders.

Also, you have hit on another disadvantage in that it would put a bunch of CPA's and the likes of H & R Block and such out of business which, of course, would cost jobs. It is not about common sense, it's about what it would do to the economy and jobs and, most importantly, governmental power. NOT going to happen.

Should it? You bet. Will it? No way.

Protecting jobs

What is the employment numbers with regard to the IRS?

Also, you have hit on another disadvantage in that it would put a bunch of CPA's and the likes of H & R Block and such out of business which, of course, would cost jobs.

Interesting point, and normally I would say that protecting jobs should be a top priority, but in this case, I am not so sure.

Should we allow companies to keep their union busting tactics because it protects jobs? Think about all the people in government who are employed by the NRLB (not enough, but some). Think about the lawyers and consultants paid by the companies. Think of those same jobs employed by the unions.

Maybe that one is easier to take sides on.

Should we allow locally owned businesses to be overrun by large corporations? The large corporations are a more efficient model and while that might reduce jobs, won't we be better served by allowing the superior method to triumph regardless of employment impact?

Now I am on both sides of the issue.

I really don't know where I stand on this. Yes, we should do what is right and what is best, particularly when it comes to something as big as the tax code. But at the same time, if we cut out every inefficiency, what will that do to our jobs market? It reminds me of Brave New World, where they talk about how they could have machines do all of the work of the Deltas and Epsilon semi-morons, but then what would those people do? And without those people, those above them wouldn't have a purpose in society either.

Ugh, do we actually get a net benefit from the codified idiocy that is the IRS?

It is a dichotomy, Apex Rich

Your post here tells it all, my friend. Something good done through common sense and good fiscal decisions sometimes might very well do more harm than improvements if I'm understanding what you are saying. It is a dichotomy. So, what then do we do? What is the best course of action for our country. Eliminate the IRS as it exists today and simplify the tax code and in doing so eliminate a bazillion government jobs as a result?

Like the saying goes: "hindsight is 20/20". Wouldn't it have been nice if the creation of the IRS would never have happened and a far more simplistic tax collection avenue would have been formulated?

Could a new, more efficient tax collection method be implemented in the U.S.? Yes, of course. But, as we're talking about here, at what cost?

I lived in Singapore

a while back. Given that they are a relatively young country, and fairly small, they have embarked on some sophisticated governance/economic/social experiments. Most of you have probably heard of caning, chewing gum and other less savory aspects to life there but relevant to this discussion is their approach to taxes.

- Income tax rates top out at around 11% for highest wage earners (this may be different now-not sure)

- Income tax is fairly flat with tax form 2-3 pages only as I recall.

- No withholding tax; pay it all at year's end.

- Tax revenues from income are relatively small compared to tax revenues from purchases or lifestyle. Because mass transit is cheap, cars are considered a luxury and are heavily taxed (also a quota system limits the number of cars permitted). Mass transit is cheap because the tax on cars gets put back into mass transit. Employing foreign workers is heavily taxed. and so on.

Singapore chose this kind of tax scheme because they saw no value in building a "tax industry" which creates no real wealth.

-b

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There cannot fail to be more kinds of things, as nature grows further disclosed. - Sir Francis Bacon

Is my math correct?

Following the data in the NC Policy watch article, it looks like the top 1% percentile is paying, AT A MINIMUM, 16.7 times the amount of state and local taxes that THE MAXIMUM lowest percentile is paying. In fact, if you compare the top 20th percentile to the lowest 20th percentile, the top group is paying, AT A MINIMUM, 28 times more than the top of the lowest 20th percentile. If the percentiles represent number of individuals regardless of income tax burden, then this example actually works against them.

"A point in every direction is the same as no point at all" - Pointless Man

Your math is right but...

I see no error in your calculations, but I believe that the numbers you generate are only of interest if you advocate a system wherein every taxpayer is responsible for the same $X in taxes, not a $% of what they earn.

EXACTAMUNDO

Soooooooo true.

Oh heavens no.....

I could never expect that everyone pays the same dollar amount in taxes. Those that earn a higher income will pay more in dollars even if they are just paying the percentage of their income. I do feel that taxes should be based more on consumption than earnings so we create preference for savings. Those people that do save more can maintain in later years a quality of economic consumption that benefits the society/economy as a whole.

"A point in every direction is the same as no point at all" - Pointless Man

I'm not a big advocate of the "consumption tax"

I have read the "Fair Tax" book by Neal Boortz and congressman Linder but I'm not convinced that a consumption tax is in our best interests. When put a certain way, it sounds great, but there are many unanswered questions on it.

Is that what you're referring to?

Flat Tax vs Fair Tax

The problem with the flat tax is definition of income for which the tax will be applied. This still gives congress to much power to manipulate the system. All you have to do is look back at the initial income tax law in the early 1900's to see that it was essentially a 2 tiered flat tax. It has been manipulated ever since.

I am in favor of a fair tax since this is based off of the retail sales. This means everyone one pays. The prebate lets the poor pay very little in tax since it basically covers the minimum tax to cover the basics in life.

The fair tax also rasies money from those not reporting income or visitors to the country.

Ideally this tax should be not just in US Code (law/tax code) but as a constitutional amendment so that congress can not mess with it.

A great book on the subject of power abuse, tax code etc is Prescription for Saving the United States.