Skip to comments.RAHN: The end of the progressive income tax
Posted on 07/10/2014 5:40:08 AM PDT by 1rudeboy
July 1 might go down in history as the beginning of the end of the comprehensive, progressive income tax. A progressive income tax, in which the government attempts to tax all labor income and capital income, such as interest, dividends and capital gains more than once, cannot help becoming so complex that it eventually dies of its own weight. This is particularly true when the government attempts to tax the worldwide income of its tax persons rather than the income located in its own territory. The complexity is caused by the never-ending attempt to define what income is and what should be exempt (loopholes).
Press reports now state that the U.S. tax code is more than 77,000 pages and growing at a rapid rate.  When laws are too complex and increasingly subjective in their interpretation, it inevitably leads to corruption. All but the willfully blind now understand that the IRS has both become corrupt and incompetent.
On July 1, the IRS extended its reach to perhaps 100,000 foreign financial institutions and millions of other non-Americans who receive or make payments to Americans. This global power grab was the logical extension of the effort to tax the worldwide income of all Americans, which requires the IRS to know about all payments to and from the United States and which financial institutions are involved in the transmittal and holding of accounts. The paperwork is unending and incomprehensible. (If you think I am overstating the case, download the new W-8BREN-E tax form from IRS.gov, which certain foreign recipients of U.S. payments are required to complete. Even tax lawyers tell me that it is nearly impossible to fill out the form without perjuring oneself, owing to the forms endless ambiguity and lack of clarity.)
(Excerpt) Read more at washingtontimes.com ...
We’ll never fund the Empire with a flat tax. And one that leaves out capital gains, interest, and dividends? Good luck with that.
if i were an irish citizen that received some money for doing some work across the internet for an American, why in the world would i care about some forms the US wants me to fill out??
seriously. citizens of other countries do not live under US law. it’s beyond ludicrous to think anyone outside our country is bound by our laws.
if it were the case, then saudis could start issuing warrants/kill orders for US citizens violating their laws while having never set foot in saudi
the level of acid you’d have to do to think these laws make any sense is just staggering
We can’t fund the empire no matter how many taxes are imposed given Congress’ propensity for out of control spending. We hit the wall a long time ago.
Somebody should tell the Pentagon.
I hate satire pieces.
Better yet, get rid of the IRS and go with the Fair Tax.
Because if you DON'T fill them out, the IRS will dock your payments by 30%.
How do you like them apples?
Representative apportionment is the better solution. Congress decides how much money to raise via taxes. That amount is divided in two. One half is the Senator’s amount, the other half is the Representatives amount. Divide each of these down by the number of Senators and Representatives to determine the per Senator and per Representative amounts.
Each state is then billed for their two Senators and the number of representatives times the representative amount. The States then can determine how to collect taxes that best suits their state. Some states may want to tax property, others income, others sales, or a mix.
A corrupt Federal prosecutor will extradite him and put him in an American prison. And the idiot Europeans will allow it.
I'd agree, except for the concept of a "Prebate", which is supposed to be a minimum income available to low-income people. The value of the prebate is determined by Congress, and once you do that, you're right back where you started from. Either remove the prebate or can the Fair Tax.
I'll go with Milton Friedman's 17% flat tax on all sources of income. If you have wage, interest, dividend, or capital gain income, the distributing institution withholds 17% and sends it to the new Tax Collections department, since the IRS is now defunct. Your new Federal Tax form now fits on a postcard and the Tax Code is one sentence long: You owe us 17% of all income. Done.
“....The States then can determine how to collect taxes that best suits their state. .....”
ding ding ding we have a winner!!
It is and never was the federal gov’t intended purpose to have any contact with an individual. the federal gov’t deals with the states......
In such a case the prosecutor is not acting within the purview of his job and becomes fair game for retaliation.
“Oh, look at what the IT folks found on his computer. And she can’t be more than 10 years old!”
No, I’m not saying that. I’m saying a flat tax will not fund the military we demand.
That's a good thing. A flat tax would mean everyone has a stake in the game. People would want to see some connection between what they put in and what the gov delivers. Starving the beast, global gov and war mongering, might be the only way of getting govs to do what they're supposed to do. That would be to benefit the lives of their citizens.
Not to mention redundancy... ;-P
I do not believe that the current IRS will allow the progressive income tax to fall - just as our political 'masters' will not allow it to fade away. There is far too much power in stealing from others based on their perceived (by you) ability to pay.
It would, IF we cut our spending!
Our military costs should be cut to a level that would allow us to defend the US from attacks but with enough room to allow purchase of developments for future needs.
It does not need to include every possible, conceivable piece of military hardware that a used-car salesman slips into a Congressman’s pocket.
More importantly, you want real, American economic growth? Stop funding all the research for every single possible, conceivable piece of military hardware that the military doesn’t want nor ask for - as we do today.
Some engineer makes a suggestion, some arms-dealer calls a Congressman and VIOLA - the US Government opens a spigot of cash to start developing something that we might, maybe, could possibly sale to the military, some billions of dollars later.
Let’s do it the old fashion way, see the Thompson Submachine gun - developed and sold completely in private!
No argument from me, but still won’t happen.
good luck docking payments made outside the US
and thank you for the tax free apples
Yeah, well, good luck with that.
The reality is that any number of thousands of Federal bureaucrats can destroy you on a whim. And, unless you are very wealthy, there is little you can do.
That is very unfair to small states and will never pass.
[ Better yet, get rid of the IRS and go with the Fair Tax.
I’d agree, except for the concept of a “Prebate”, which is supposed to be a minimum income available to low-income people. The value of the prebate is determined by Congress, and once you do that, you’re right back where you started from. Either remove the prebate or can the Fair Tax.
I’ll go with Milton Friedman’s 17% flat tax on all sources of income. If you have wage, interest, dividend, or capital gain income, the distributing institution withholds 17% and sends it to the new Tax Collections department, since the IRS is now defunct. Your new Federal Tax form now fits on a postcard and the Tax Code is one sentence long: You owe us 17% of all income. Done. ]
I rather like a 10% Flat Tariff on all imported goods.
I think this law applies only to transfers of funds into or out of the US.
I know that’s how it applies to me.
I also know that’s why many banks are considering withdrawing from the US market entirely, and are dropping US citizen clients abroad.
Our government has lost its mind.
Why? Do you mean adding this tax on top of the flat tax, or this tax instead of the flat tax?
[ I rather like a 10% Flat Tariff on all imported goods.
Why? Do you mean adding this tax on top of the flat tax, or this tax instead of the flat tax? ]
No as the ONLY federal “Tax” replacing all others and capped at 10%.
In 2013, total imports were $2.756586 trillion dollars. 10% of that is $275 billion. Our Congress would spin through that in a couple of months. US military spending alone in 2009 was $283.3. Seems to me you either need to make MASSIVE cuts in federal spending, or figure out a new revenue source.
Seems to me you either need to make MASSIVE cuts in federal spending,
I call BS on the idea that this will simplify anything. The big question is always how do you define 'income'. For the average employed person, the 1040EZ is already pretty simple. For somebody with money, the question of what is income, what is deductible, will always be there. And for business, there will always be the need for accountants to keep track of deductible and non-deductible expense.
All the work of the income tax is deciding what is income. Working out the final tax from the tax tables or tax brackets is a couple of minutes.
Milton Friedman was blowing smoke. Any form of income tax is evil, as it gives the government control over your life.
I like that.
But I like taxing consumption better than taxing productivity...
If you don’t have taxes of some sort, you do not have a government.
Or rather, you don’t till someone invades and forces one on you.
What I want to do away with are all of the programs where gov't competes with private industry (e.g., SBA, Student Loans, ObozoCare, etc.) or funds agencies that can pass laws that have economic consequences without the consent of Congress (e.g., EPA, HHS, NLRB, etc.) I would also say that any law Congress does pass applies equally to them...no more of this I'm-more-important-than-you-so-this-law-doesn't-apply-to-me. Screw that...it's a goose-gander thing to me.
You don't get it. The 1040EZ form has little to do with the accounting of income. It is simple because there are no complex deductions. Likewise, businesses wouldn't need a staff of tax accountants and lawyers because there would be no deductions. You pay 17% of income...there are no deductions. Personally, I'd make the tax rate on business 15% of income. Any tax on a domestic business ultimately ends up as a tax on the individual anyway.
There's no problem figuring out income. Any payment to you from someone else would be income. You're confusing the concept of income with the current concept of net income.
Unless you have some kind of social system that has no form of gov't yet remains viable, you need some way to fund gov't. Friedman's idea is workable. The only tax that is truly evil is a tax on wealth, not income.
Even if the bottom line is less than 17% of income? That would destroy most every business.
Increase the sales tax and a very low flat income tax rate 12%. And watch the economy go crazy upward.
We need to dump the IRS and the income tax.
But that’s never going to happen.
All the government’s real power is in the IRS.
No more progressive tax, just 100% on everything
“I’d agree, except for the concept of a “Prebate”, which is supposed to be a minimum income available to low-income people.”
Nope, the prebate is a refund for the taxes paid at a borderline poverty level of spending. That makes the Fair Tax less regressive (penalizing to lower income folk) than any type of flat tax. It’s a means of not having to categorize various things as “not taxable” like food. Is candy food or not? Is soda? Etc. Everyone who cares to, regardless of income level, can receive the prebate.
I don’t particularly love it either, but no purely regressive tax is going to fly.
“Our military costs should be cut to a level that would allow us to defend the US from attacks but with enough room to allow purchase of developments for future needs.”
The military budget is a fairly small percentage of Federal spending. Entitlements are the big problem, and it’s a tough sell to cut them.
Ths article assumes that more efficient governance and better economic conditions for the masses are a desired end result for the kakistocrats.
That is very unfair to small states and will never pass.I read something similar where the Fed taxes the states, instead of individuals and it was based on a percentage of the state's GDP, instead of apportioned according to congressmen.
The state's would individually decide how to collect the revenue to pay their fed tax bill. It would render a market driven taxing environment. The states with the better tax scheme would see an influx of residents and business, whereas the states with an atrocious tax scheme would drive taxpayers away. The result would be that the states seeing an influx of taxpayers & business would realize a growth in GDP and the Fed's percentage would generate more revenue as well.
I don't know if that would generate enough revenue to fund the Fed - perhaps the Fed could learn to live within it's means (That's a joke, folks!). But I do like the idea of a market-driven approach to taxes. Let the states compete against each other --AND-- any taxing disagreements would be between the state and the Fed, which are far more equal terms than the Fed against joe citizen all by his lonesome.
“It is and never was...”
I see this kind of phrase quite often now, in my view it is a contradiction. Do you actually mean, “It is NOT and never HAS BEEN”?
Absolutely false. A regressive tax is one where the average tax rate falls as income rises. If you plot taxes on the vertical axis and income on the horizontal axis, a regressive tax must have a positive intercept on the vertical axis. (The slope of a line from the origin to a point on the tax function measures the average tax rate.) A progressive tax rate must have an intercept on the horizontal axis. A true flat tax like I want to see, with no prebate, has the linear tax function that passes through the origin with a slope of .17 using Friedman's number, which means it has a constant average tax rate and, hence, cannot be regressive or progressive.
My problem with the prebate is that Congress would get to decide how it is determined and I don't trust them with such a decision. It will become political, just like it is now. Obozo bitches that the rich fat cats take advantage of tax loop holes. Really? Who the hell does he think wrote the tax code? Congress put those holes there with full knowledge of the political gains to be made for themselves by their existence. No, set a flat tax, teach the misinformed it's not regressive, and mail your tax form in on a postcard.
What a minute. How many companies have bottom line return over 17%? Maybe Goldman Sachs, but not your local grocery store.
Suppose a grocery store sells $10M of stuff. They have expenses of $9M. What's their income? $10M or $1M? If $10M, they have to pay $1.7M in tax, which is greater than their expected income as calculated today.
If a business cannot deduct expenses, this becomes just a sales tax, and not an income tax at all as far as business is concerned.
I do get it. The 1040EZ is simple because wage income is simple. Business 'income' is never simple, unless you define income = gross receipts, which nobody does when talking about income tax.
“My problem with the prebate is that Congress would get to decide how it is determined and I don’t trust them with such a decision. It will become political, just like it is now.”
Congress could mess with anything, including a flat tax. “17% is not sufficiently funding the entitlement programs, we are raising it to 25%...no, make that 30%.”
“Obozo bitches that the rich fat cats take advantage of tax loop holes. Really? Who the hell does he think wrote the tax code? Congress put those holes there with full knowledge of the political gains to be made for themselves by their existence.”
It’s the Golden Rule - “Those who have the gold make the rules.” It’s pretty much the way things have always worked, and it’s highly unlikely to change.
“No, set a flat tax, teach the misinformed it’s not regressive, and mail your tax form in on a postcard.”
It is more regressive, in that poor people spend a much higher percentage of their income on necessities. They can much less afford sending a full 17% of their income to the government. What you’re proposing would instantly send millions of people into poverty, and will never fly. Sorry about that.
You’d better learn to love the Fair Tax, which has the added advantage of eliminating IRS snooping into anyone’s life. Your proposal doesn’t do that.
Sounds fine to me — I’m moving to FL.
Actually, Milton Friedman favored a negative income tax so his preferred tax function was linear with a negative vertical intercept. This, of course, makes the tax system “progressive” (the average tax rate rises with income) but much simpler than “progressive” tax system with nonlinear tax functions.
Most flat (income) tax systems I have read about over the years eliminate the corporate income tax altogether. In those schemes, income taxes are levied on individuals only, and that includes “business” income distributed in the form of salaries, capital gains, profits, bonuses, or dividends - all taxed at the same (flat) rate. Retained business income is not taxed until it is distributed to an individual.