oxlongm wrote:Chet: there's nothing inherent to a flat tax that gets rid of deductions. If we overhauled the tax code completely (whether it was for a flat or a progressive system) we could get rid of all the existing loopholes once... but nothing stops interest groups and lobbyists from adding them back in as soon as Congress reconvenes the following year. I do agree, though, that a simple flat tax would probably result in fewer loopholes (there'd be less political pressure to re-add them).

Also, rich people currently cannot deduct their taxes down to 0%. No matter how many normal deductions they have, the Alternative Minimum Tax (which has a lower rate, but lacks most deductions) hits them on wage income. The main tax dodge used by wealthy people is shifting compensation into stock options, so it's taxed at the lower capital gains rate instead. But getting down to 0%, or anything close to it, would have to involve actual fraud/shady offshore stuff.

Corporations are another story -- they can reduce tax in all sorts of ways, since profit is a much looser concept than income. But I think (and I'd welcome a correction if I'm wrong here) that publicly traded companies can only distribute dividends out of their declared profits, so they can't really weasel out of every dime of profit without pissing off their shareholders.

Good point - I was referring mainly to corporations, but youre right about the Alternative Minimum tax. I also agree with all the lobbyists pushing for more loopholes (exactly the kind of people Paul hates).

You've also hit the nail on the head with stock options. Exactly why Steve Jobs doesnt take a salary and gets paid in perks, so he only has to pay capital gains tax rate.

I would just like to add though that not all stocks are bought just for the dividend payment (think of high growth tech companies).

The taxation on dividends is tricky -

http://en.wikipedia.org/wiki/Dividend_tax

Also our friend George Bush tried to get rid of the "double tax" -

In 2003, President George W. Bush proposed to eliminate the U.S. dividend tax saying that "double taxation is bad for our economy and falls especially hard on retired people". He also argued that while "it's fair to tax a company's profits, it's not fair to double-tax by taxing the shareholder on the same profits."

Soon after, Congress passed the Jobs and Growth Tax Relief Reconciliation Act of 2003, which included some of the cuts Bush requested and which he signed into law on May 28, 2003. Under the new law, dividends are taxed at a 15 percent rate for most individual taxpayers. Dividends received by low income individuals are taxed at a five percent rate until December 31, 2007 and become fully untaxed in 2008. These provisions are set to expire on January 1, 2011.

Skronk wrote:So, is the problem for you more economic, or social? I mean the need for bigger government. If we can have a flat tax, like Chet has suggested, but get rid of our medieval drug laws and decriminalize narcotics, let the states become more autonomous, put an end to illegal wire tapping, end the war, and reduce the budget of the military, wouldn't smaller government be a benefit in regards to individual rights?

I ask because the social factor doesn't seem to be covered very much in this discussion.

All of those things that you advocate can occur while keeping the income tax. And, yes, they can even occur when you *raise* the income tax. Like I said, there's no reason why a flat-tax government wouldn't also be able to do those things.

If you're against certain social policies such as the drug laws, you can make that a priority while not supporting a lunatic libertarian.

But no other candidate is willing to put these priorities on the table like Paul is, especially in regards to the Federal Reserve. I highly doubt he'll get far in this election, but it's always worth a shot. I'm not a libertarian, and I differ with them somewhat on economics, but their social policy is what appeals to me.

Ultimately, Paul might just get ridden off like the libertarian's Badnarik, but it's still far off.

o_d_m wrote:
A national flat tax on goods means that the poor and middle class will dodge it through the black market. It also means the rich will sink their money into investments that wouldn't be taxed and that they could just buy overseas to avoid the taxes.

We already have the dodging-through-black-market problem with income tax. I don't picture any significant number of Americans spending cash in an unregulated market where you won't be able to sue if something goes wrong. A black market also wouldn't be able to have normal supplier/distributor relationships with the branded merchandise Americans prefer. Mafias actually aren't very good at competing with legal businesses, because secrecy is inefficient.

Some types of mostly-legal businesses (cash-only restaurants, bars) would find it easy to dodge the sales tax. But these are the same kinds of businesses that can easily dodge income taxes already.

I think a sales tax is the best idea, but it has nothing to do with flattening the tax burden (i.e., shifting the tax burden onto poorer people). With a big enough prebate/rebate, any sales tax could be kept progressive. To be specific, I'd say the first $X of purchases each year (ten grand per person, maybe fifteen?) would be tax-free. Some types of goods (groceries, for example) are usually exempt from state sales tax, and there's no reason similar considerations couldn't be made at a federal level.

The real difference is simplicity. Our current tax code is a jobs program for well-paid accountants and tax attorneys, and their work benefits those who can afford to pay them the most. Every April, the typical person puts a huge amount of time and/or money into complying. I think it's a very strange way for our society to allocate its resources. A national sales tax would mean that only retailers (who already need to do business accounting anyway) need to have a taxpaying relationship with the federal government.

I'm not all that disturbed by the behavioral changes a national sales tax would encourage. If a lawyer making $200,000 a year wants to be a miser, living in his parents' basement and investing all of his money (in other words, letting others use it and not enjoying it himself) I don't mind. If he ever wants to enjoy the money in the future, he'll pay tax on it when he does. Or his children will (actually, if he doesn't get out of that basement, he'll have to leave it to a nephew or something). Conversely, a douchebag who makes a fraction as much, but buys Hummers, Coach bags and expensive clothes, is actually using more resources. I'm fine with him paying more tax.

The issue of richer people spending more money overseas to avoid tax is a genuine concern, and would certainly cut into sales tax receipts. (This already happens when our currency is strong, making foreign items cheaper, although right now that's the least of our worries). But we already have a system in place to levy duties on people who bring goods home from other countries. I bet if we took a tenth of the IRS employees we'd no longer need, and reassigned them to customs, we'd be able to enforce that pretty well.

I'm taking the non existant vote of crap on this dude. As someone who works for social services, his stance on "welfare" as he calls it (more specifically broken down into Foodstamps, Medicaid, TANF and also falling under that category of funding goes adoption assistance, child protective services and community service boards -physical and mental issues- ).

I haven't been working in this field a long time, but I've seen enough to recognize the EXTENSIVE anti-fraud measures they take.

The argument that the small minority of "welfare" recipients make it worth scrapping the whole program over is inherently heartless to the people it genuinely helps.

He's against the war? That's great, but I do not want a leader of the free world who makes himself out to be a champion of the poor who wants to scrap the single most effective means of assistance they have.

Chris

Rick Reuben wrote:Why would Ron Paul be against a banking system that the US doesn't have, you shitbrain?? Paul is against the banking sytem we do have, and you obviously have no fucking clue what that banking system is.

I don't know. You manage to be against Rothschild funding of the Soviet Union, suppression of free energy technology, the controlled demolition of the WTC, the New World Order and a bunch of other wacky shit that doesn't exist and never will.

I guess that the common denominator between you are Ron Paul is that you're idiotic misanthropic douchebags. This must be how you to manage to believe such fantasies when the internet ejaculates them into your faces like Clinton at a cigar factory.

Absolute bullshit.

I'm unconvinced either way about the flat tax system, but I'd like to point out that the system can be tailored to benefit low earners. To my knowledge, the flax tax usually proposed has two variables: the flat tax rate, which is what most people focus on; and the tax free income limit, which is often ignored.

The second variable, the lower boundary of the tax band, enables people and corporations to earn up to that limit tax-free. This already exists in many national tax systems (including the UK). So, for example, were one to set this limit at £20k, someone earning £20k would not pay any tax, whereas someone earning £30k would pay tax on the £10k above the boundary.

Proponents therefore argue that such a system could be truly progressive,
in that the lower limit could ensure that no-one is taxed into povertity, whilst the unblinking simplicity of the single rate would greatly reduce tax dodging by rich individuals and corporations.

I'm sceptical due to the transnational nature of a lot of the intended targets (there is a black art to shifting income and expenditure between different business units under different tax regimes), but I think that it's worth investigating.

Until a few months ago I worked in one of the Big 4 accountancy firms, and I know firsthand how much of a cash cow the tax department is. The chargeout rates of a a tax manager are significantly higher than those of an audit manager, for example. Given the large fees paid by clients for corporate tax services, a lot of potential public revenue is lost through loopholes and inventive deductions. We can sell you this great product. Which is to say, we can help you hold onto more cash. I'm unconvinced that this is fair.

Rick Reuben wrote: Ron Paul is for strong state's rights, just as the Founders intended.

Yep all those Federalists that wrote the constitution didn't really write it I guess.

Mind you, there were states righters there, but to paint them all as states righter is silly. Jefferson, sure. Hamilton, eh not so much. Are you saying one of them is a founder and one isn't?

Maybe the authors of the Articles of Confederation meant to have strong states rights, but we all see how well that turned out.

Whenever people start talking about "original intent" I always have to make them clarify, "Whose original intent are you talking about?" Because again, people like Hamilton are a totally different stripe than people like Thomas Jefferson. And one of those people wasn't even at the Constitutional Convention, I'll let you figure out who it was.

Thanks Rick. I see these things that I know are incorrect - that the founders didn't want a weak federal government (10th amendment is pretty unequivocal and just look at Article 1, section , that we don't spend a lot on public education - but I don't have the time/am too lazy to write back. Thanks for sticking up for Paul.