Flat Tax or Consumption Tax

Off Topic Politics and World Issues
1

It’s been a little while since we had a great knock-down drag-out tax debate . . . and possibly there’s nothing new to hit, but kicking dead horses is fun (and the socialists keep letting us kick them . . .) sooooo

How about it - to replace our current evil progressive tax system, which would you prefer Flat tax system or Consumption tax system, what limits/rules would you like to have and why that particular system.

I’ll lead off with Consumption tax: I would have it installed with a set percentage of 15%, with 5 for federal, 5 for state and 5 for county/city. There would be no mechanism for increasing or decreasing the percentage. It is fair to all and promotes the most economic activity - no taxes on profits, no taxes on inhertances, etc . . . earn all you want and only pay taxes on what you spend. The wealthy pay proportional to their wealth as do the poor, and it is completley equitable . . .

2

oh - and total permanent repeal of all other taxes . . .

3

I could go with consumption tax and heavy on the luxury and non necessity . with the exemption on food

Example a Hundai is taxed a a lower rate than a BMW

4

If you say all other taxes would that mean property taxes, cigarrett taxes, and all the other sin taxes?

I like the idea of consumption tax, because it would cause people to start saving if it was a small amount instead of spending it all. Sales Tax here is 8.25%. 6.25% goes to the state and 2% goes to the city. I dont know about the 15% number, but maybe 20% would be better, but it might put undue harm on the poor. 8% federal, 7% state, and 5% local.

5

[quote]IrishSteel wrote:
It’s been a little while since we had a great knock-down drag-out tax debate . . . and possibly there’s nothing new to hit, but kicking dead horses is fun (and the socialists keep letting us kick them . . .) sooooo

How about it - to replace our current evil progressive tax system, which would you prefer Flat tax system or Consumption tax system, what limits/rules would you like to have and why that particular system.

I’ll lead off with Consumption tax: I would have it installed with a set percentage of 15%, with 5 for federal, 5 for state and 5 for county/city. There would be no mechanism for increasing or decreasing the percentage. It is fair to all and promotes the most economic activity - no taxes on profits, no taxes on inhertances, etc . . . earn all you want and only pay taxes on what you spend. The wealthy pay proportional to their wealth as do the poor, and it is completley equitable . . .[/quote]

Here’s an idea. We vote on what our tax dollars go toward. Not the backwards, far-removed way we do now, but a brand-new way.

It’ll take several years at least to implement but we start slowly. Let’s say we vote on some pre-determined percentage of our income (15% sounds like a nice number) or perhaps something like 12% for those who are “low-income” earners, 14% for the middle class and 16% for upper-class earners.

Now the first year, the week of April 15th (the whole week, not just one day) everyone must go to the ballot box and determine where, say 1% of our taxes go. If I want to dump 1% my income into defense spending, so be it. If I want to divide it between healthcare, defense and some other stuff, fine.

Each year we add a few %points to the total we vote on, along with giving us more options to choose from each year, until we’re acclimated to this process and are dividing our 12-16% between all sorts of different choices. Maybe we’ll take anywhere from 8-12% of our income for federal taxes and the rest for state taxes. The point is that we choose for ourselves where our tax dollars go. We get the govt we deserve, as the saying goes.

Obviously there would be some problems to this method, but a huge added benefit would be that we’d be forced to pay a little more attention to what the hell happens in our state, local and federal govt. You can bet your ass that if I wanted to put all of my taxes into education spending, I’m going to have a pretty good idea of what the education czar is all about. If most of the country feels that we should have a huge defense budget and no social services, that’s what we’ll get. And it’ll keep all these bureaucrats much more accountable because there budget will be determined on a year-to-year basis that is highly dependent on their success or failure each year. Fuck up this year, next year you might not get shit.

6

As for consumption taxes, the taxes should be on a hierarchical scale depending on the damage to society that those products do. Cigarettes should be taxed at a higher rate in relation to their cost than squats and milk. A 4,500 lb car does more damage to the higheay system than a 3500lb car and should be taxed higher accordingly. Tax breaks for gym memberships, tax hikes for people who spend a ton of money on fast food.

7

[quote]DBCooper wrote:

[quote]IrishSteel wrote:
It’s been a little while since we had a great knock-down drag-out tax debate . . . and possibly there’s nothing new to hit, but kicking dead horses is fun (and the socialists keep letting us kick them . . .) sooooo

How about it - to replace our current evil progressive tax system, which would you prefer Flat tax system or Consumption tax system, what limits/rules would you like to have and why that particular system.

I’ll lead off with Consumption tax: I would have it installed with a set percentage of 15%, with 5 for federal, 5 for state and 5 for county/city. There would be no mechanism for increasing or decreasing the percentage. It is fair to all and promotes the most economic activity - no taxes on profits, no taxes on inhertances, etc . . . earn all you want and only pay taxes on what you spend. The wealthy pay proportional to their wealth as do the poor, and it is completley equitable . . .[/quote]

Here’s an idea. We vote on what our tax dollars go toward. Not the backwards, far-removed way we do now, but a brand-new way.

It’ll take several years at least to implement but we start slowly. Let’s say we vote on some pre-determined percentage of our income (15% sounds like a nice number) or perhaps something like 12% for those who are “low-income” earners, 14% for the middle class and 16% for upper-class earners.

Now the first year, the week of April 15th (the whole week, not just one day) everyone must go to the ballot box and determine where, say 1% of our taxes go. If I want to dump 1% my income into defense spending, so be it. If I want to divide it between healthcare, defense and some other stuff, fine.

Each year we add a few %points to the total we vote on, along with giving us more options to choose from each year, until we’re acclimated to this process and are dividing our 12-16% between all sorts of different choices. Maybe we’ll take anywhere from 8-12% of our income for federal taxes and the rest for state taxes. The point is that we choose for ourselves where our tax dollars go. We get the govt we deserve, as the saying goes.

Obviously there would be some problems to this method, but a huge added benefit would be that we’d be forced to pay a little more attention to what the hell happens in our state, local and federal govt. You can bet your ass that if I wanted to put all of my taxes into education spending, I’m going to have a pretty good idea of what the education czar is all about. If most of the country feels that we should have a huge defense budget and no social services, that’s what we’ll get. And it’ll keep all these bureaucrats much more accountable because there budget will be determined on a year-to-year basis that is highly dependent on their success or failure each year. Fuck up this year, next year you might not get shit.[/quote]

So only the people that pay taxes would be allowed to vote on this?

8

Since Mankiw mentions a flat tax in comparison to the the VAT.

[i]There has been a lot of talk lately about the possibility of a value-added tax, or VAT. See, for example, this article by Henry Aaron and Isabel Sawhill in yesterday’s Washington Post. So I thought readers of this blog might be interested in my views of this policy proposal.

From a strictly economic standpoint, a VAT is great. It is essentially a flat consumption tax, like the so-called FairTax, but implemented in a way to reduce compliance problems. Because it is collected in stages along the chain of production, rather than all at the retail level, tax evasion is more difficult.

If you look at the economic effects, a VAT is similar to the Hall-Rabushka Flat Tax, which many economists love. Essentially, the main difference between a VAT and the flat tax as developed by Hall and Rabushka is that firms get to deduct wages as a cost under a flat tax, but then those wages are taxed at the household level. Other than this minor change of shifting the responsibility for the tax on wage income from the firm to the household, the Hall-Rabushka flat tax and VAT have identical economic effects. (There is also an exclusion for the first X thousands of dollars of wage income under Hall-Rabushka, making it progressive in average tax rates, but the same result can be accomplished with a VAT as well by rebating some of the revenue via a demogrant.)

My bottom line: If I could [u]replace[/u] our current tax system (including the personal income tax, corporate income tax, payroll tax, and estate tax) with a VAT, I would gladly do it.

Why do some conservatives hate the VAT? For political reasons. They fear it would be a new tax, hidden from many voters, used to expand government. They fear that rather than replacing our existing tax system, a VAT would add to it. Indeed, that is precisely what Aaron and Sawhill are proposing.

Which brings us to Europe. Many European countries have both a VAT and a large government. But here is the hard question: which is cause and which is effect? Did the VAT cause government to become large, as VAT-opponents fear? Or did Europeans adopt large governments and then, needing to finance it, look for a relatively efficient way to raise a lot of revenue? I am inclined toward the latter hypothesis, but I will be the first to admit that it is not entirely clear which way causation runs here.[/i]

http://gregmankiw.blogspot.com/search?q=progressive+tax

9

[quote]dmaddox wrote:

[quote]DBCooper wrote:

[quote]IrishSteel wrote:
It’s been a little while since we had a great knock-down drag-out tax debate . . . and possibly there’s nothing new to hit, but kicking dead horses is fun (and the socialists keep letting us kick them . . .) sooooo

How about it - to replace our current evil progressive tax system, which would you prefer Flat tax system or Consumption tax system, what limits/rules would you like to have and why that particular system.

I’ll lead off with Consumption tax: I would have it installed with a set percentage of 15%, with 5 for federal, 5 for state and 5 for county/city. There would be no mechanism for increasing or decreasing the percentage. It is fair to all and promotes the most economic activity - no taxes on profits, no taxes on inhertances, etc . . . earn all you want and only pay taxes on what you spend. The wealthy pay proportional to their wealth as do the poor, and it is completley equitable . . .[/quote]

Here’s an idea. We vote on what our tax dollars go toward. Not the backwards, far-removed way we do now, but a brand-new way.

It’ll take several years at least to implement but we start slowly. Let’s say we vote on some pre-determined percentage of our income (15% sounds like a nice number) or perhaps something like 12% for those who are “low-income” earners, 14% for the middle class and 16% for upper-class earners.

Now the first year, the week of April 15th (the whole week, not just one day) everyone must go to the ballot box and determine where, say 1% of our taxes go. If I want to dump 1% my income into defense spending, so be it. If I want to divide it between healthcare, defense and some other stuff, fine.

Each year we add a few %points to the total we vote on, along with giving us more options to choose from each year, until we’re acclimated to this process and are dividing our 12-16% between all sorts of different choices. Maybe we’ll take anywhere from 8-12% of our income for federal taxes and the rest for state taxes. The point is that we choose for ourselves where our tax dollars go. We get the govt we deserve, as the saying goes.

Obviously there would be some problems to this method, but a huge added benefit would be that we’d be forced to pay a little more attention to what the hell happens in our state, local and federal govt. You can bet your ass that if I wanted to put all of my taxes into education spending, I’m going to have a pretty good idea of what the education czar is all about. If most of the country feels that we should have a huge defense budget and no social services, that’s what we’ll get. And it’ll keep all these bureaucrats much more accountable because there budget will be determined on a year-to-year basis that is highly dependent on their success or failure each year. Fuck up this year, next year you might not get shit.[/quote]

So only the people that pay taxes would be allowed to vote on this?[/quote]

In short, yes. An account would be created, kind of like SS, that ALL workers would automatically have 12-16% of their income put into each month. If you ain’t workin’ you ain’t determining the course of this country. Simple as that.

If you’re unemployed for the same reasons that currently make you eligible to collect unemployment benefits, you would get a one-year exemption from having to pay taxes the week of April 15th, but you could have the option to voluntarily choose to divide your income amongst various programs and so forth in the same manner you would if you were employed.

10

[quote]DBCooper wrote:

[quote]IrishSteel wrote:
It’s been a little while since we had a great knock-down drag-out tax debate . . . and possibly there’s nothing new to hit, but kicking dead horses is fun (and the socialists keep letting us kick them . . .) sooooo

How about it - to replace our current evil progressive tax system, which would you prefer Flat tax system or Consumption tax system, what limits/rules would you like to have and why that particular system.

I’ll lead off with Consumption tax: I would have it installed with a set percentage of 15%, with 5 for federal, 5 for state and 5 for county/city. There would be no mechanism for increasing or decreasing the percentage. It is fair to all and promotes the most economic activity - no taxes on profits, no taxes on inhertances, etc . . . earn all you want and only pay taxes on what you spend. The wealthy pay proportional to their wealth as do the poor, and it is completley equitable . . .[/quote]

Here’s an idea. We vote on what our tax dollars go toward. Not the backwards, far-removed way we do now, but a brand-new way.

It’ll take several years at least to implement but we start slowly. Let’s say we vote on some pre-determined percentage of our income (15% sounds like a nice number) or perhaps something like 12% for those who are “low-income” earners, 14% for the middle class and 16% for upper-class earners.

Now the first year, the week of April 15th (the whole week, not just one day) everyone must go to the ballot box and determine where, say 1% of our taxes go. If I want to dump 1% my income into defense spending, so be it. If I want to divide it between healthcare, defense and some other stuff, fine.

Each year we add a few %points to the total we vote on, along with giving us more options to choose from each year, until we’re acclimated to this process and are dividing our 12-16% between all sorts of different choices. Maybe we’ll take anywhere from 8-12% of our income for federal taxes and the rest for state taxes. The point is that we choose for ourselves where our tax dollars go. We get the govt we deserve, as the saying goes.

Obviously there would be some problems to this method, but a huge added benefit would be that we’d be forced to pay a little more attention to what the hell happens in our state, local and federal govt. You can bet your ass that if I wanted to put all of my taxes into education spending, I’m going to have a pretty good idea of what the education czar is all about. If most of the country feels that we should have a huge defense budget and no social services, that’s what we’ll get. And it’ll keep all these bureaucrats much more accountable because there budget will be determined on a year-to-year basis that is highly dependent on their success or failure each year. Fuck up this year, next year you might not get shit.[/quote]

You know what DBC? - we’ve disagreed on a few things - but this idea just might be freaking genius level intelligence! I like where you’re going here . . .

11

i think americans have it good, see in the uk we have soooo many taxes and in fact we are paying roughly $1.80 for a liter and i think that works out as $8.1 per gallon. most of it is tax or we would be paying a similar price to you guys. we have road tax (for cars to use the road), value added tax (taxes on all goods and services now being put up to 20%), stamp duty (1~3% on houses above £180K and most are especially in the south of england which is really the best bit of the counrty for jobs etc),

if you make above £50k half of everything above that is taxed by the government, council tax (local government depends on the size of your property costs £1200 a year for a two bed flat in the city of bath), inheritance tax (the goverment taxes you twice, once your perants and then you, this tax makes people loose the houses they grew up in because everything over £300K is taxed at 40%)
as for the whole sin tax thing (extending it to fast food and fatties) you guys dont have a universal healthcare system so you cant really say they are a burden because if you screw yourself over then you pay the costs of healthcare.

you cant really vote on taxes because the country has bills to pay and they have to paid, you should find out what has to be paid for the upcomming finincial year and then say how much do we need to pay and then come up with it after cutting out/back wastage I dont what your bills are but I can imagine defence and health and social security and a quick look through wikipedia says interest

12

[quote]lickyourelbow wrote:
i think americans have it good, see in the uk we have soooo many taxes and in fact we are paying roughly $1.80 for a liter and i think that works out as $8.1 per gallon. most of it is tax or we would be paying a similar price to you guys. we have road tax (for cars to use the road), value added tax (taxes on all goods and services now being put up to 20%), stamp duty (1~3% on houses above �£180K and most are especially in the south of england which is really the best bit of the counrty for jobs etc),

if you make above �£50k half of everything above that is taxed by the government, council tax (local government depends on the size of your property costs �£1200 a year for a two bed flat in the city of bath), inheritance tax (the goverment taxes you twice, once your perants and then you, this tax makes people loose the houses they grew up in because everything over �£300K is taxed at 40%)
as for the whole sin tax thing (extending it to fast food and fatties) you guys dont have a universal healthcare system so you cant really say they are a burden because if you screw yourself over then you pay the costs of healthcare.

you cant really vote on taxes because the country has bills to pay and they have to paid, you should find out what has to be paid for the upcomming finincial year and then say how much do we need to pay and then come up with it after cutting out/back wastage I dont what your bills are but I can imagine defence and health and social security and a quick look through wikipedia says interest[/quote]

tell you what, ya’ll straighten out your economy your way (more taxes + more spending) until your government runs out of “other people’s money” to quote Lady Thatcher and we’ll handle things our way . . . mmmkay?

13

we dont want to pay more taxes we want to pay less taxes like americans and at the moment were rasing taxes and cutting spending to avoid the situation which americans are in, having to divert funds to pay off interest. my point was were being taxed out the ass and your voting method would work better in reverse find out what you need money and then raise the minimum amount

14

The biggest problem with our tax system is that is so fucking complicated it’s almost impossible to understand. This allows people to do some pretty shady tax evasion type stuff and also makes it very difficult to address most of the problems in the system. A consumption tax would have the benefit of being much easier to operate, but if we addressed the complexity issue of our current system it could probably work too.

I’m paraphrasing from my man Noam Chomsky but I remember him saying something along the lines of, “It’s ironic that everyone despises April 15th. In theory, everyone should be happy and join together saying here is the money to pay for the things that we collectively decided would make our country better. In reality what we have today is people feeling like their money is being stolen from them to pay for shit they don’t want it to go toward.”

for those that like documentaries:

15

[quote]lickyourelbow wrote:
i think americans have it good, see in the uk we have soooo many taxes and in fact we are paying roughly $1.80 for a liter and i think that works out as $8.1 per gallon. most of it is tax or we would be paying a similar price to you guys. we have road tax (for cars to use the road), value added tax (taxes on all goods and services now being put up to 20%), stamp duty (1~3% on houses above �£180K and most are especially in the south of england which is really the best bit of the counrty for jobs etc),

if you make above �£50k half of everything above that is taxed by the government, council tax (local government depends on the size of your property costs �£1200 a year for a two bed flat in the city of bath), inheritance tax (the goverment taxes you twice, once your perants and then you, this tax makes people loose the houses they grew up in because everything over �£300K is taxed at 40%)
as for the whole sin tax thing (extending it to fast food and fatties) you guys dont have a universal healthcare system so you cant really say they are a burden because if you screw yourself over then you pay the costs of healthcare.

you cant really vote on taxes because the country has bills to pay and they have to paid, you should find out what has to be paid for the upcomming finincial year and then say how much do we need to pay and then come up with it after cutting out/back wastage I dont what your bills are but I can imagine defence and health and social security and a quick look through wikipedia says interest[/quote]

regarding your last paragraph: that’s why my “genius level” tax plan (thanks IrishSteel) calls for a slow implementation. Given our huge debt and the interest that MUST be paid on it, perhaps a second tax of 1-3% of our income (depending on our income levels) would be set aside specifically to pay off our debt. But once it’s paid off, that 1-3% additional tax is permanently exterminated.

If we slip back into debt, given that it will be OUR fault because we will be the ones deciding where our expenditures/investments and so on go, perhaps a law should be put into place that reinstates that 1-3% additional tax, but only if our national debt grows until it represents a pre-determined percentage of our GDP or something like that.

Fuck it. Politicians are so fucking corrupt across all party/ideological lines that this tax plan would certainly remove a lot of that corruption. “Oh, I’m sorry pal but I can’t promise to pump tens of millions into your bullshit program/company/etc if I’m elected because I can only use the tax money in the way the taxpayers want me to.”

One thing that would have to happen in order for this plan to work is to rein in the pundits/sensationalists/media moguls like Beck, Limbaugh, Olbermann, Stewart and that fucking piece of shit, Rick Sanchez. These fuckers are the ones who will become corrupt because big business and other such lobbyists will use them as a way to spread false info in order to lure us into spending all of our tax dollars on their pet projects. Perhaps a stringent set of regulations mandating ardent fact-checking of all claims made thru media or something along those lines.

16

yeah that plan makes great sense.
in the uk we have two main parties and one minor one that controls enough seats to be a player but not enough to win the game if you get what i mean. at the moment this smaller party has put the bigger one into power by forming a coallition govt but now they are compromising their values and screwing over everyone who voted for them. long story short they sold out in order to get into government.

just get rid of the media. they suck they need to get real jobs. and learn to squat :stuck_out_tongue:

17

I like a flat income tax, but start with an exemption of the first, let’s say 30,000.
Add a consumption tax, with no exceptions except food and utilities.
Federal law banning deficit spending. If you don’t have it, ye ol’ dumb ass, life long living on the gov’t tit congressmen, you can’t spend it, period. Limit congress pensions to a max of time served.
I was also thinking corporate tax breaks for those that are a certain percentage employee owned. 75%?

consumption tax allocation is set to a certain percentage off the top applied to gov’t debt.

18

[quote]jp_dubya wrote:
I like a flat income tax, but start with an exemption of the first, let’s say 30,000.
Add a consumption tax, with no exceptions except food and utilities.
Federal law banning deficit spending. If you don’t have it, ye ol’ dumb ass, life long living on the gov’t tit congressmen, you can’t spend it, period. Limit congress pensions to a max of time served.
I was also thinking corporate tax breaks for those that are a certain percentage employee owned. 75%?

consumption tax allocation is set to a certain percentage off the top applied to gov’t debt.[/quote]

I like the anti deficit spending

19

[quote]IrishSteel wrote:
It’s been a little while since we had a great knock-down drag-out tax debate . . . and possibly there’s nothing new to hit, but kicking dead horses is fun (and the socialists keep letting us kick them . . .) sooooo

How about it - to replace our current evil progressive tax system, which would you prefer Flat tax system or Consumption tax system, what limits/rules would you like to have and why that particular system.

I’ll lead off with Consumption tax: I would have it installed with a set percentage of 15%, with 5 for federal, 5 for state and 5 for county/city. There would be no mechanism for increasing or decreasing the percentage. It is fair to all and promotes the most economic activity - no taxes on profits, no taxes on inhertances, etc . . . earn all you want and only pay taxes on what you spend. The wealthy pay proportional to their wealth as do the poor, and it is completley equitable . . .[/quote]

And then make it cast in concrete – this it it. Government gets x dollars to spend and NO MORE. If the budget is short, no matter how ‘noble’ the cause, no borrowing, no inflating.

This idea of robbing one group to help another, no matter how worthwhile the cause, is killing us.

20

A VAT is a stupid idea. People care about the real wage rate not the money wage rate.