[quote]
BostonBarrister wrote:
I don’t think it necessarily would. Of course, then you would need to cut government expenditures, particularly for “entitlements,” but I think that’s a positive effect.
hspder wrote:
Just read the numbers I presented. Again. And again. And again. Until you “get it”: we’re talking way too much money here. If you reduce taxes on the rich – by even a small amount, you’d have to compensate that by either heavily increasing taxation on the middle class or by cutting the budget by such a large amount the only way to balance it would be by either cutting DoD spending completely or by killing either Social Security or Medicare completely, leaving millions of people to die.
So, you either sacrifice the middle class, the DoD, the elderly or the poor. But one of them must “go” in order to have a flat tax.
The real numbers I presented clearly show this.
Get it this time? [/quote]
Actually, I looked over the numbers, but I might have missed something. Please tell me how eliminating the deductions and taking a flat tax rate of 17% from people and businesses across the board wouldn’t amount to 17% of GDP?
I realize that some proposals would say, exempt all people with incomes below $30K. So lets say a flat-rate of 20% across the board, with no deductions. That’s got to get close.
A few assumptions are needed: higher compliance rate, easier enforceability, etc. But I think those are generally fair assumptions to make.
Now political feasability for eliminating all deductions? That’s another matter entirely.
Much more likely that we could inch our way toward a much flatter tax with 5 steps: abolishing the estate tax, the capital-gains tax, and the Alternative Minimum Tax; enacting universal IRAs to shelter most saving from double taxation; and allowing businesses to deduct the full cost of their investments as soon as they make them.
Or, here’s another plan I also like, which would be even more politically feasible because it could be enacted incrementally:
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Start with the current tax code, rather than trying to design a new one from scratch.
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Triple the standard deduction. The current tax code gives you a personal exemption ($3,200 per person). It also lets you take either the standard deduction ($5,000 per adult) or various itemized deductions (for health-care spending, state and local taxes, and other costs).
Fold the personal exemption and most of the itemized deductions into a much larger standard deduction of $15,000 per adult. The basic cost of living would not be taxed.
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Phase out the mortgage deduction by placing a dollar amount on it, but don’t index for inflation.
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Get rid of the alternative minimum tax for individuals. The AMT was originally designed to keep rich people from taking so many tax breaks that they paid almost nothing in taxes. But it has turned into a second tax system for an increasing number of middle-class families.
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Cut taxes on capital. Tax dividends once, either at the corporate or at the individual level. Treat capital gains as regular income–but exclude 50 percent of net long-term capital gains. Tax estates at the same rate as long-term capital gains.
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Cut corporate taxes. Bring the top tax rate down to 32 percent. Where the tax code allows companies to take a full deduction on an investment in plant and equipment the year it is made, let them continue to do so. Other corporate investments should follow a new rule: Eighty-five percent of the cost should be deductible in the year it is incurred.
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Replace the six individual income-tax rates with two, set at 16 and 32 percent. The border between them should be set so as to raise the same amount of revenue as the current tax code. Wherever that threshold is set for individuals, it should be set at twice that level for joint filers.
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Stop real-income bracket creep. As people grow wealthier, they move into higher tax brackets. As a result, the government consumes a larger and larger share of the national economy. There’s no reason to put government growth on autopilot. The income level required to trigger the 32 percent tax rate should rise with wages. So should the size of the standard deduction and the child credit. The charitable deduction, on the other hand, just needs to keep up with inflation. And the mortgage deduction shouldn’t be indexed at all. Let its value slowly fall.
[quote]
BostonBarrister wrote:
That embeds the assumption that we should be engaging in that sort of thing to begin with. It’s essentially the government enforcing moral values via economic suasion - that and trying to guide the market, which it is inept at doing.
hspder wrote:
There is no other choice.
I can understand that this is fundamentally against your beliefs but the fact remains that any period in History punctuated by lack of government intervention eventually created dramatic social unrest and bred a revolution.[/quote]
So have periods with massive governmental intervention, such as communism.
[quote]hspder wrote:
Capitalism without heavy Government intervention is as big of an Utopia as Communism. The solution is, as always, in the middle – Capitalism + Social Democracy. Not an ideal solution, but the only sustainable one.[/quote]
It’s probably the case that we won’t ever reach a pure system, of any kind – but there’s no reason we can’t move the bar closer to the capitalism side of the continuum. There’s a lot of room to argue about the scope of the services government should provide to everyone, and the size.
