No taxing overtime? Comsumption? States only?
Thanks to all of you for the grist. :)
"I have an idea for someone, anyone, running for public office and would appreciate you thoughts on it. No taxing overtime. That would be hourly workers. Not taxing any time worked after forty hours a week. This would put money directly in the pockets of people in need to help pay thier bills and also help generate demand in the economy. IMHO."
-Dougman
What I like about this idea (in addition to the goals you wrote) is that it may engender productivity increases.
What I don't like about it is the practicality of it. On its face it seems problematic for logistical and accountability concerns. If I have two jobs, which is my untaxed job, what system brokers it, etc? How do we catch the evaders who work 80 hours every other week on paper? It is the sort of structure that may become possible with increased technological implementations in the future, but it looks like a non-starter for today until some advances in made. Some of the required advances may also have privacy related concern that could slow them. (Workplaces do not currently have to report to the IRS the hours worked on a per week basis, for example.)
If I were to advise your friend, I'd probably tell him to keep this one in the breast pocket for now unless it were part of a bigger vision of changes and fulfilled a necessary role in the whole package. Floating this idea as a candidate may show your friend as a visionary but unrealistic candidate that is not very appealing to most constituencies.
Some tax thought items from Glitch:
1. Why not tax ANY Work based income? Why not tax consumption? I know this scares the heck out of people but c'mon, what would be more fair than that?
Ok, here's other ideas:
2. Citizens pay NO FEDERAL TAXES. States are the entities that pay FEDERAL TAX.
3. States tax citizens (income tax/property tax/consumption tax, whatever...).
-Glitch
Personally I do like the notion of taxing labor less, and adding a consumption tax may be a realistic means to achieve that, but making all labor tax free invites evasion. The system you propose is very close to what is done in the European Union. EU is very fond of the Value Added Tax (VAT) that is essentially a consumption tax. There the Nations/States collect the taxes rather than the EU itself and are responsible to the EU for the tax collection on their citizens, so your proposal looks very much like what you could in the EU already, just a slightly more extreme version of it. The good news is that it could work for the US, but I would not be very eager to try it.
In general, I don't much care for drastic changes in the tax structure. It tends to cause financial upheaval and unpredictability in the market engendering losses in productivity due to increases in uncertainty. I don't see new taxes (such as VAT, or luxury tax) as likely under the current administration at all, but if it were added in order to reduce tax on labor we would most likely still trend toward the target of 17-19% of GDP as taxes collected as we always have as a nation. We may see some productivity gains as a result from that but it is against the desired goal of "simplification".
If you will indulge me as I take a look into my crystal ball... Instead I see our current administration as more likely to be using the tax of inflation to fill the gap. Yes, inflation is a tax, and it doesn't require any big changes to collect it. When inflation is encouraged by things like low marginal interest rates such as we have today and devaluation of the dollar, the effect is that the US can collect more in capital gains taxes. If the price on an item rises and it is resold, there is a capital gain. It doesn't matter whether that price rise is due to a change in value or due to inflation, the difference is taxed as a capital gain. Essentially, the inflation tax is the tax of last resort. If we continue to run a current account deficit and take no actions to correct this, we get this tax added by default. I personally don't see it as a horrible outcome as its effects work through our bond, equity and commodity markets, (though as I recall, other voters were not very forgiving of Carter when we were last in this situation). Other jackasses disagree with me on my assessment of non-crisis (jackass is a term of endearment when used as only a loving Democrat could). One only disagrees with Jim Willie CB the at their extreme peril as he is very often the one who is correct at the end of the day! The man in an unqualified genius, but on this we differ.
Bush #41 was tripped up on his "read my lips" promise of no new taxes. I don't see Bush #43 as likely to add a new tax such as VAT to the mix even though it could help to smooth out our tax roll and reduce the tax on productive workers. The inflation tax is not a new tax, and if used moderately, most voters usually ignore it. Some work to set this up as our tax backstop was performed under Clinton/Greenspan by changing the quality adjustment of price index. Since many federal benefits (such as social security) are keyed to this index, it was also a way to cut these tax backed benefits and entitlements without most folks noticing. Clinton was often very clever in these sorts of ways. Bush #43 tends to be clever in many of the same ways so we may see this sort of thing again if the "above the table" tax simplification work stalls too much.
"I have an idea for someone, anyone, running for public office and would appreciate you thoughts on it. No taxing overtime. That would be hourly workers. Not taxing any time worked after forty hours a week. This would put money directly in the pockets of people in need to help pay thier bills and also help generate demand in the economy. IMHO."
-Dougman
What I like about this idea (in addition to the goals you wrote) is that it may engender productivity increases.
What I don't like about it is the practicality of it. On its face it seems problematic for logistical and accountability concerns. If I have two jobs, which is my untaxed job, what system brokers it, etc? How do we catch the evaders who work 80 hours every other week on paper? It is the sort of structure that may become possible with increased technological implementations in the future, but it looks like a non-starter for today until some advances in made. Some of the required advances may also have privacy related concern that could slow them. (Workplaces do not currently have to report to the IRS the hours worked on a per week basis, for example.)
If I were to advise your friend, I'd probably tell him to keep this one in the breast pocket for now unless it were part of a bigger vision of changes and fulfilled a necessary role in the whole package. Floating this idea as a candidate may show your friend as a visionary but unrealistic candidate that is not very appealing to most constituencies.
Some tax thought items from Glitch:
1. Why not tax ANY Work based income? Why not tax consumption? I know this scares the heck out of people but c'mon, what would be more fair than that?
Ok, here's other ideas:
2. Citizens pay NO FEDERAL TAXES. States are the entities that pay FEDERAL TAX.
3. States tax citizens (income tax/property tax/consumption tax, whatever...).
-Glitch
Personally I do like the notion of taxing labor less, and adding a consumption tax may be a realistic means to achieve that, but making all labor tax free invites evasion. The system you propose is very close to what is done in the European Union. EU is very fond of the Value Added Tax (VAT) that is essentially a consumption tax. There the Nations/States collect the taxes rather than the EU itself and are responsible to the EU for the tax collection on their citizens, so your proposal looks very much like what you could in the EU already, just a slightly more extreme version of it. The good news is that it could work for the US, but I would not be very eager to try it.
In general, I don't much care for drastic changes in the tax structure. It tends to cause financial upheaval and unpredictability in the market engendering losses in productivity due to increases in uncertainty. I don't see new taxes (such as VAT, or luxury tax) as likely under the current administration at all, but if it were added in order to reduce tax on labor we would most likely still trend toward the target of 17-19% of GDP as taxes collected as we always have as a nation. We may see some productivity gains as a result from that but it is against the desired goal of "simplification".
If you will indulge me as I take a look into my crystal ball... Instead I see our current administration as more likely to be using the tax of inflation to fill the gap. Yes, inflation is a tax, and it doesn't require any big changes to collect it. When inflation is encouraged by things like low marginal interest rates such as we have today and devaluation of the dollar, the effect is that the US can collect more in capital gains taxes. If the price on an item rises and it is resold, there is a capital gain. It doesn't matter whether that price rise is due to a change in value or due to inflation, the difference is taxed as a capital gain. Essentially, the inflation tax is the tax of last resort. If we continue to run a current account deficit and take no actions to correct this, we get this tax added by default. I personally don't see it as a horrible outcome as its effects work through our bond, equity and commodity markets, (though as I recall, other voters were not very forgiving of Carter when we were last in this situation). Other jackasses disagree with me on my assessment of non-crisis (jackass is a term of endearment when used as only a loving Democrat could). One only disagrees with Jim Willie CB the at their extreme peril as he is very often the one who is correct at the end of the day! The man in an unqualified genius, but on this we differ.
Bush #41 was tripped up on his "read my lips" promise of no new taxes. I don't see Bush #43 as likely to add a new tax such as VAT to the mix even though it could help to smooth out our tax roll and reduce the tax on productive workers. The inflation tax is not a new tax, and if used moderately, most voters usually ignore it. Some work to set this up as our tax backstop was performed under Clinton/Greenspan by changing the quality adjustment of price index. Since many federal benefits (such as social security) are keyed to this index, it was also a way to cut these tax backed benefits and entitlements without most folks noticing. Clinton was often very clever in these sorts of ways. Bush #43 tends to be clever in many of the same ways so we may see this sort of thing again if the "above the table" tax simplification work stalls too much.
posted by joseph at 10:04:00 PM
6 Comments:
Why not just flat tax without deductions (and only above a certain income level based on family size)? Progressives howl at the thought of that, but they also howl at those who get out of paying 'their fair share' (fair share generally means your side pays more and my side gets deductions). The other advantage is that all economic decisions are made in the realm of free enterprise, since nothing done could change the amount one is taxed.
A consuption tax cannot be 'fair' from a progressive standpoint unless certain essentials are exempted to help the needy; there is no way to have any tie-in based on ability to pay. Then the battle is on to call what I like 'essential' (tax-free) and the things you like as non-essential.
Michael,
I don't have a basic objection to flattening income taxes more than they are when accompanied by reducing deductions. In practice, such modifications reduce the power of our government to use taxes to modify behaviors. Usually reducing that sort of government power is a good thing, but as regards taxes I see it as a mixed bag.
I'd advocate only very small flattening changes because most citizens have made decisions that were based on the tax consequences of those decisions for many years to come. Some of those decisions are not simple to change in response to a big change in the taxes that influenced the decision-making. (Homes, children, etc). Since it would be disruptive to reduce confidence in reliance on policy as it influences decision-making I'd move slowly and with as much advance notice as possible. Change should be gradual when not in a crippling crisis to avoid unnecessary upheaval. Bush has already taken us in this direction with measured steps. I expect more of the same, but nothing drastic please.
I like a flat tax around 10 to 15 %
I don't give a damn how poor you are, pay your share.
Don't think Im cold as I have shoveled snow to feed my family in past years.
TomC
Well, you have more comments in 2 weeks than gandho gets in 2 months....and he advertises.
More on the tax thingy in a bit. Busy day and I will have to find some references. Stay tuned.
What really caught my eye was the part of the discussion about watching peoples hours. When my kids were young I was a single mom trying to support two kids on money from a home based business making small porcelain dolls.
I kept thinking, if the government could tax me just a little different, I'd survive. I was working 80 - 90 hours a week to be taxed at the same rate of someone working 40 and making the same amount. Flat tax wouldn't answer that problem. (Not that I am expecting to ever reach a point of 100% perfection in taxation.) But the idea of keeping track of hours really stopped me in my tracks...no pun intended. I'd be interested to read more thoughts along those lines and opinions on how that avenue might be furthered.
Thank you for taking the time to reply.
I get a headache just thinking about money these days.
Who invented it anyway, and why? I would think buy now our collective societies would have improved on such an ancient experiment.
Anyway,...time for me to get a little sleep,so's i can wake up,to leave the ones i love & turn my time into money & money into food,heat,shelter,clothes...The Romans turned us into addicts!
Thanx for letting me rant a little ;-)
Dougman
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