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[JuntaJoe]

Supposedly the only two guaranteed facts of life.

Well, dealing with death problem is for super scientists and clergy, something none of us are.


But taxes? If a politician can do it then it's mere childsplay for us. :P

I can't believe that with all the talk about taxes that creep into the debate threads here that we don't have a true thread on the topic.

Now we do. Let us extoll the virtues of our own personal taxation ideas and criticize the competition.


Just to start us off, I've got a great article to get you thinking:



Panel Recommends Major Tax Law Overhaul

November 01, 2005 12:37 PM EST
WASHINGTON - Chosen to find a simpler way to tax the nation, a presidential panel on Tuesday recommended two designs that would rewrite virtually every tax law for individuals and businesses.

Treasury Secretary John Snow called the proposals "bold recommendations" but he did not indicate what ideas the administration would embrace.

"Now it's up to us," Snow said. The Treasury Department will "take the report, review it carefully, understand the implications and use the report as a starting point for recommendations that we will make to the president," he said.

Under the panel's plan, most deductions, credits and other tax breaks would be eliminated along with much of the paperwork and equations that baffle taxpayers under a drastically simplified income tax.

Many, including the nine members of the presidential commission, have said key recommendations will be unpopular.

"The effort to reform the tax code is noble in its purpose, but it requires political willpower," the group said Tuesday in a letter to Snow. "Many stand waiting to defend their breaks, deductions and loopholes, and to defeat our efforts."

Members of the panel urged taxpayers and lawmakers to look at the whole plan, not just individual components.

Asked whether the administration could build support for a tax plan that contained some controversial ideas, Snow said, "I happen to believe - it may be naive, but I don't think so - that good ideas ultimately prevail."

The President's Advisory Panel on Federal Tax Reform spent most of the year studying tax designs, including consumption taxes like a national retail sales tax. President Bush tasked the group with finding simpler and more economically productive ideas for taxation.

The commission wrapped up its work last month, and its ideas immediately attracted criticism - some from those who wanted to see more change and some from those who felt the changes went too far.

Drawing particular criticism, the panel determined that tax breaks for homeownership be changed to spread their benefits to more middle-income families.

The panel would convert the home mortgage interest deduction into a credit equal to 15 percent of mortgage interest paid. The $1 million limit on mortgages eligible for the tax break would shrink to the average regional price of housing, ranging from $227,000 to $412,000.

Senate Finance Committee Chairman Charles Grassley, R-Iowa, said that idea is bound to be politically unpopular. "But it's important to have a comprehensive starting point that will get everyone talking and thinking," he said.

In another major change, taxpayers could purchase health insurance using untaxed money up to the amount of the average premium, about $5,000 for an individual and $11,500 for a family, a change that caps currently unlimited breaks but would create a new tax break for those who do not get health insurance through work.

Both plans would tax rates on individuals and businesses.

Under one plan, individuals would pay no tax on dividends paid by U.S. companies and exclude 75 percent of their capital gains from taxation. Under the second plan, all investment income would be taxed at 15 percent.

Both proposals would abolish the alternative minimum tax, a levy originally drafted to prevent wealthy individuals from escaping taxation but increasingly reaching into the middle class. They also would eliminate federal deductions and credits for mortgage interest, state and local taxes and education, among others.

The advisory commission would replace those withdrawn tax breaks with simpler benefits, including three savings plans that supplant more than a dozen provisions currently available for retirement, medical expenses and education.

Bush set certain limits on the panel, requiring that the new plans collect roughly as much tax money as the government collects now.

The proposals also had to retain the progressive system that taxes wealthier taxpayers at higher rates than poorer individuals and families. They were also required to recognize "the importance of homeownership and charity in American society."

The panel rejected frequently touted ideas to impose taxes on consumption, like a retail sales tax.

Instead, the group chose to use one recommendation to push for major simplification of the current income tax system. Its second recommendation makes changes for businesses that shift the nation's tax system toward indirect tax on consumption.

The changes allow every taxpayer to use a simpler tax form, less then half the length of the current Form 1040. Snow said that would also cutting in half the number of taxpayers who need to hire a professional tax preparer.

The tax-writing House Ways and Means and Senate Finance committees pledged to take a close look at the recommendations.

---

On the Net:
President's Advisory Panel on Federal Tax Reform: http://www.taxreformpanel.gov

Copyright 2005 Associated Press.

[s_stabeler]

hmmmmmmm, well it looks like abolishing the AMT is going to happen, but that would have to mean the main tax system gets more money coming in ( it isn't actually that hard, as deductions are worth less under the AMT due to the smaller tax rates, so reforming the deductions and reducing some may well mean that the hit taken by the loss of the AMT is removed) also of note that it would halve the length of the return. I hope the extra items do not simply go onto more schedules though, as that would drive taxpayers round the bend. note- I do not live in the USA, therefore I do not pay US income taxes or any other form of US tax. I currently have to pay no taxes under the UK system, for the reason that i do not have a job ( I am nearly 16) therefore my income is below the minimum tax threshold

[Baron]

My physics teacher and I were talking about tax simplification. We realized that if a national flat tax were introduces, hundreds of thousands of IRS bureaucrats, private tax accountants, consultants, and lawyers would have to find another line of work. There would be two major results of this:

(1) The cost of hiring accountants, consultants, and lawyers would decrease slightly, as competition increases among the labor force for a smaller supply of such service jobs;

(2) and the United States would gain in trade, as tax professionals would begin hiring themeselves out to foreign firms, who still have to deal with other country's complicated tax codes.

[JuntaJoe]

Stabler, your totally different system could shed some light here for new ideas. The idea of a consumption tax, a national sales tax, has been pushed around a lot in discussion here and throughout the country. Your country uses a Value Added Tax (VAT) system as part of their taxation plan. While not actually a sales tax like we discuss, you could point out your positive and negative observations on the Brit consumption tax plan. And can you also discuss what other main taxing methods your country employs?

Baron, you forgot one HUGE occupation sector that would be gutted by a sales or flat tax system. The lobbying industry. So tell me what they think of the idea and what they will try to do about it? If thousands of well paid and well connected lobbyists are facing imminent obsolesence then just imagine their next reaction and action. It could be a nasty class war as they try to pit everyone against each other to kill it. It will take strong resolve by the voters, Congress, and the Prez, to hold firm in the face of a massive propaganda campaign intended to split us.

[Brf]

JuntaJoe wrote: Both plans would tax rates on individuals and businesses.

Tax "rates"? How do you tax a rate?

[JuntaJoe]

For a moment there, I thought you were poking fun at my verbage and had to go hunting for the line.

And then I find out it comes from the article. Hell, I just copy/paste that stuff, bugs and all. I figure if a mega newswire can employ thousands of staffers that I can skip being their editor staff. :P


My guess is that they are missing the words "increase" or "lower" after the word "would".

Naturally, that's a pretty nasty little mistake as it kills their dramatic statement and leaves us wondering the outcome.

Oh well, that article isn't the prime focus of this thread. Just something to get us rolling.

Since I've carped on my tax desires frequently over the past few years, I'm holding off for now until we get some more viewpoints to chew on.

[Brf]

Yup. I knew it was a copy-paste... It is probably missing the word "lower".


You know... I was going to comment on s_stabler's comments on the AMT....

Quote: deductions are worth less under the AMT due to the smaller tax rates

...saying there were no deductions under the AMT. It being a flat 17% tax on all income over 45K.

But it appears the AMT has been complicated over the last few years, and now has as many deductions as the regular tax and a higher tax rate.... That kind of defeats its purpose.

[JuntaJoe]

Yeah, the AMT has become a quagmire. It was a feel-good sop to the lefties saying we would tax the rich a lot more than the poor.

So rich people simply incorporated themselves and went to business deductions instead, while the middle class inched up into the bracket and got nailed.



While not particularly enamored by the Brit VAT system, I'm interested in hearing what they like and dislike about it in order to give me ideas on how to design a workable national sales tax model.

[s_stabeler]

well, as that is the only type of tax i actually pay, as most things you can buy in the shops are subject to it, the gist of it is that 17.5% of the cost of most items is the VAT and is paid to the government, with exceptions on i think food, childrens clothes, probably drinks, but i do not know of others, but there probably are others. that is the basics. interesting thing is that VAT is one of the easier taxes to pay, as the people actually sending the cheque to the government are the people in the store, tyhe VAT is incorporated into the price you see, so you don't even notice that you are paying it unless you actually like reading every minor detail on every reciept you get, overall a very painless tax to pay, as it's so easy to pay while not realising it. of course you then could talk about when certain people have VAT refunded by their employer, and when certain people that need to charge VAT can charge their customers the full rate but actually pay it at a lower rate, if you want a list of advantages and disadvantages, just say in this topic.

[DrJoshuaFalken]

What's the deal with Death taxes? I mean, these people work hard all their lives and get taxed to hell, then the family cant get half because Uncle Sam wants to put their bucket in everyone's well so to speak.

[JuntaJoe]

Inheritance taxes are pretty contentious these days. It's effectively double taxation. It also makes a hash of a parent's plan to help their children. But it's an easy target for tax and spend types who want more money rolling into government coffers. The dead can't object in court and the survivors were not the one's to actually earn the money.





s_stabeler wrote: ............if you want a list of advantages and disadvantages, just say in this topic.

I'll take anything you can offer up here. Changing the US tax code will be a nasty war. Only excellent ideas with few negatives will survive after special interest groups go after them. So learning anything I can on popular opinion of the world's various taxation plans will help.

Personally, I'm not fond of the VAT which taxes a product several times in its path to a consumer. The consumer only sees the last surcharge at the retail register. What they don't see is the taxes built in from earlier VAT charges as the product moves from raw material sales, manufacturer, distributor, and retailer.

It's the same reason I think taxing business is a total waste of time. No company ever accepts the tax hit. They simply add it to the sales price and send it forward to the consumer.

One of the founding pillars of our revolution was "No taxation without representation". We don't like being taxed without our permission. I see hiding taxes in the sales price to be hidden taxation without our permission. We should see every penny of tax paid on an object when we buy it. This way we can choose our legistlators properly to represent our taxation acceptance.

But a consumption tax like a national sales tax may be the way to implement that goal. So seeing the Brit opinions on their consumption tax might help refine my ideas.

I'm also interested in other forms of major taxation in the UK. You can skip small user fees in the discussion. Every nation has them and are widely accepted as a good way to tax.

[s_stabeler]

ok, list of advantages and disadvantages, and those that could be either:

advantages
no forms to fill in by the consumer
is likely the only tax around that is a flat rate but in reality is pretty progressive
the extremely poor, that can only afford food are automatically exempt due to food being exempt
the wealthy are hit the most, as their purchases are more usally high-value that incur large VAT bills

disadvantages
always passed on to the consumer, it is neverabsorbed by the business
certain professions can actually profit on the VAT charge, as they have to charge the full rate, but pay a smaller rate


either
hidden in the cost of the product (although you can get what is known as a VAT reciept, which includes the amount of VAT)
no deductions (you may think this is a disadvantage, but cutting the VAT bill for the poor is achieved by the altogether fairer method of exempting the goods they are likely to buy from VAT, rather than deductions, which mostly benifit the richer people, as they can catch each and every one of them with a tax planner, while people on the minimum wage would be more likely to miss them, and they are the ones that need them most)

if you need clarification on any of the points made, just post in this thread.

edit- just noticed you asked for an opinion on other major forms of taxation over here in the UK. well, the only other major tax, council tax, is basically the same as your real estate tax, just w/o the reassessments, and w/o yhe chance to appeal an assessment, and also some people can get releif. oh, and with massive rises each year :evil: due to the government favouring it's strongholds in the grant allocations. as for national insurance contributions, look at your social security, and you are spot on. and it's in only slightly better shape, as we don't have a trust fund, it goes into the general taxation pot, w/o government debt to a fund being accrued. and as for the various other taxes, stamp duty, well, if a tax on home sales is proposed along the lines of it, oppose it with a passion. IHT, inheritance tax- same as in america, just ith a guarantee if you own your house, you will have to pay it :evil: .
and i think that about covers it, all other taxes are similar to those in america, except we have slightly higher rates of income tax.

[JuntaJoe]

So other than the little fee based taxes, you have three major forms of taxation, right?

Real estate tax, income tax, and VAT tax?


I must say that is pretty repressive. Sure, we have those three as well, but our consumption tax is merely a retail sales tax. But I still consider our taxation system repressive as well.

I'm sure your real estate tax is like ours. It's a regional rather than national tax for funding local projects. While I'm pretty irritated with them too, they really don't fall into this discussion as local taxation is a battle for local politics and not a national discussion. Our current sales taxes are regional as well.

So our national tax is really just the income tax, whereas you have both a consumption tax AND an income tax as well? Sounds like the death of a thousand cuts if you ask me.

[s_stabeler]

well, yes. thing is, i did exclude our national insurance, as you just need to look at social security. and we do have the advantage of only having to pay income taxes to the government of the whole nation, rather than having state and local and federal taxes as you have in the USA. added to that, the VAT is not really an issue, fuel duty (another thing ol' bush may want to look at, works similar to VAT, but is larger as a percentage) is more controversial at the moment. most people accept VAT, it's NI and Council Tax that people complain about.

edit- and you have our council tax wrong, i'm afraid. council tax is more like your state income taxes, it is the only direct tax from councils, if they do not pay something out of the grant from the government, they must pay out of council tax. that is why it increases so much. grants from the government are shrinking.

[JuntaJoe]

But that's what I said, council taxes are a regional tax, not a national one.

And while I would love to complain about regional taxes, it is a discussion better left to a regional discussion group. It is only the national taxation system that everyone can participate in.


As for state income tax, Texas doesn't have one. It uses a sales tax system and user fees. Sure, we also have real estate taxes, but they are for funding city government and education systems only. I'd like to see the entire US move to the Texas model. It has allowed us to remain competitive in encouraging business to move here and thrive. We have a much lower cost of living, therefore corporations can pay a lower salary base without affecting the standard of living of its employees. The sales tax/user fee system works well enough to fund state projects and isn't oppressive on the poor as we exclude raw food products. Only ready made foods get taxed.

Additionally, we run a sales tax holiday once a year just before school starts in the fall on things that kids need, like school supplies and clothing priced under $100. These tax holidays are extremely popular here and discount merchants cash in big on those few days. If a family makes a point to either use the sales tax holiday or purchase household items on sale then a poor family can easily reduce expenses and tax burdens. Same goes for shopping for healthy raw foods instead of easy-greasy fast meals. All it takes is good planning and discipline to resist temptation.

If a man gets a job with a health plan at a mere $30,000 a year, he can give his family a relatively secure, but modest, lifestyle. If you look at any other large metropolitan area around America, you will find that income level to be dangerous destitution.

America is losing jobs overseas to reduce company payroll costs. Pushing wages higher may help some families in the short term as will arbitrary laws restricting companies from using foriegn produced goods and services. But corporations will find a new path to lower payroll expenses somehow. Texas has learned that lowering the cost of living is the key. Cheaper pricing allows corporations to offer lower pay. Making goods in America has an added bonus of reduced fuel/transportation expenses, plus a highly educated workforce capable of high productivity. Therefore government must look to ways of reducing the cost of business at home in order to bring the payroll threshhold down to where the fuel/transportation savings become a major factor in staying here. The number one tool of government to lower corporate payroll issues is taxation. Having a tax system based on sales tax has shown to keep the state in funding while lowering the end cost of goods. Workers don't push for higher pay to offset state income taxes.

The strange thing is that our policy of no state income tax also provides the federal government with more income. State taxes are largely deductable from federal taxation. Since Texans don't pay state income tax, they don't deduct it from federal payments. An national plan to eliminate federal and state income taxes will actually increase federal funding. Moreover, with sane exemptions, a sales tax will lower the tax burden on low income families. This will lower income demands, cost of living expenses, and give extra money for taxable luxury/lifestyle buying. The latter will stimulate commerce and increase tax income to government coffers. All of this will keep corporations from transfering jobs overseas.


On a side note, I also excluded from the conversation the national insurance burden. While it is still a tax, it really is an entirely different discussion truthfully. That discussion has a more philosophical angle that simply cannot be described in mere economics. By keeping the focus on the standard government expenses of copy paper, road tar, and rifle bullets, we can achieve some savings for the middle class populace and actually fund the government properly to provide those roadways, soldiers, and government safety pamphlets.

[s_stabeler]

erm, juntajoe, what i meant was that it does not simply go to local projects, it goes to everything local, but maybe i am mising the point of what you were trying to say.

[JuntaJoe]

Semantics really. Your council tax is used to fund local road repair, local social programs, local education special projects, water treatment plants, etc. It may be purely local or in conjuction with regional or national projects.


Combined initiatives are fairly common here.

The federal government may decide to widen an interstate highway going through the city. The state then decides to augment the exit ramps from the refurbished interstate to a connecting state highway and beef up the feeder roads to hold more traffic. Then the local city may come in and add foliage beautification, stoplight signal controls, and sound wall barrier efforts to finish everything off.

If you get into waterway projects then the list of interested government parties gets even longer. All of them getting their funding from various schemes.

Your council tax may end up funding a portion of a national initiative simply because a portion of it affects you local area. Or then it might be simply used the town to fill the potholes in the street in front of your house.

Trying to create neat dividing lines for how you get taxed and how it gets spent is like trying to understand the rules for the English language. There may be rules in place, but the exceptions always seem to outnumber the rules. The general idea of a regional real estate tax is to fund regional projects, but the lines blur as differing government entities take a part in these projects.



On a side note, Texas get a very high number of Brit immigrants of the white variety. They seem to like the aggressive business spirit here. Must have the allure of the old colonial entrepenuer days when Brits left the island to find wealth in grand schemes. I'm always amazed at the number of Brits who move to my city. And you could not drag them back home unless you clapped the leg irons on them sent them back with armed escort. They really do love it here.

With all the Orientals and Indians coming in, Houston is begining to resemble London.......with much warmer weather. :P

[s_stabeler]

erm.........well, as far as i know, the council is pretty tight-fisted at the moment ( they considered closing down a very useful local resouce due to financial reasons, they said it was hardly used, but it is used a lot) so i think they would make the government pay for said changhes, not pay themselve. and as for potholes, well lets just say that i've seen quite a few myself, they aren't fixed quickly....... makes going home by bus an experiance that is best forgot.

[JuntaJoe]

No one said that the council tax will be used properly by responsible politicians. :lol:

That's what a voting booth is made for. :wink:

[s_stabeler]

true.........problem is, this is all parties doing this. bit of a catch-22. vote out ythe current government, and have more of the same or worse, or leave things as they are. most seem to think, better the devil you know than the devil you don't.