Posted on 09/29/2010 4:44:29 PM PDT by Sneakyuser
Snip...
Columbia University Professor Marc Lamont Hill tells me, "Those who have more should pay more."
But is there a point where they stop producing wealth or leave altogether?
"The rich have always cried wolf like that," Hill says.
But the wolf is here. Maryland created a special tax on rich people that was supposed to bring in $106 million. Instead, the state lost $257 million"
(Excerpt) Read more at wnd.com ...
“Eliminate all the corporate and capital gains taxes and you’d have an economic explosion the likes of which have never been seen or even dreamed of.”
While true in terms of economic explosion, keep in mind that Capital Gains (and Dividends) are a significant chunk of total Personal Income. Roughly $1.4T of income comes from those sources, so if it were untaxed then the 10% Flat Income Tax rate would need to be higher. It also begins the slippery slope of deciding some SOURCES of income should not be taxed.
Every source of income that gets excluded from taxation causes the rate needed to increase. Before you know it, income from Disability, Social Security, Pensions, Minimum Wage, etc. would be added to the list. Income spent on rents, mortgage interest, food, medicine, State and Local taxes, childcare, etc. would then be deemed non-taxable income. In short, we end up right where we are — with income excluded via exemptions, deductions, credits, etc. while politicians sell such tax favoritism in return for campaign cash. And we know how high the rates required get when we’ve slid to the bottom of that slope.
Better not to hold any sacred cows, and tax all income from whatever source at 10% when it is received by an individual.
I think we could wipe away capital gains taxes entirely, and less people keep 100% of what they make on their investments. I'm quite confident it would result in at least $1 trillion more in economic activity and income, thus more than offsetting the "cut" in capital gains taxes.
But that $117B was over 12% of the Individual Income Tax collected. It is a huge chunk. And if you add in the other “investment” income, ie dividends, tax collections would be another $50B lighter.
Plus, psychologically, you can’t sell people on taxing wage income but excluding investment income. A FLAT tax is easy to explain as everybody getting dinged the same percentage. Anything else opens the door to all the lobbying I mentioned above.
I agree with your general point Kellis - exceptions are the politicians candy (bought with our money).
That said, capital is critical to growth. Labor is dependent on it, thus jobs, etc.
It would be the one exception. What would it do to your equation? Maybe fixing it at 11%?
12% if only Capital Gains were excluded, and 12.5% if Dividends were also excluded.
Your fears are, unfortunately, correct. Having government choose who gets to be rewarded produces a situation like our current situation. However, the thought experiment I propose is to reverse the systemic incentives. That is, instead of penalizing greater accomplishment, what would happen if we rewarded greater accomplishment (not defined by people who are themselves rewarded by garnering votes)? Perhaps the only sustainable solution is to bar government from deciding who earns and keeps their earnings.
Exactly. Government should be blind to who you are and what you do for a living. Otherwise it will be tempted into rewarding based on behavior — “social engineering”.
If taxing income, then it should be the income itself that is taxed. A flat rate income tax does this because it doesn’t matter whether it was earned singly, jointly, or how many dependents the earner has.
To actually reward “success” you have to accept the level of income as the measure of “success”, but you also have to know how many people the income is attributable to. I say this because if large incomes are taxed at lower and lower rates, then you would end up favoring married people who file jointly. Their marginal tax rate would be lower than if their own contributions to the total income had been taxed separately.
The government therefore needs to know enough about the taxpayer to determine whether a part of their income is subject to the lower rate. It may not be worth the loss of privacy. A flat tax doesn’t “reward success” but seems like the only way to get government out of attempting “social engineering” via the tax system.
They now move to Switzerland.
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