Cutting taxes on the rich

[CaptLouAlbano]

Has the notion of a consumption tax ever been bounced around here? I have given it some thought, and it seems to be a decent idea conceptually, but there would have to be some major restrictions on it. I don't want to see goods and services taxed all the way down the line. I am thinking back to my second business here which was a pizza shop. I wouldn't want to see all the ingredients to make a pizza taxed and then the final product taxed as well. I tend to think that only the consumable product should be taxed. So in that sense, I am thinking that businesses would only be taxed on products they buy as the end user, and not product that would go into the production of their product or service. Too complex?

[qh4dotcom]

I think Congress should have double the tax rates they impose on everyone else. That would go further to keep the rates low than most anything else I can think of.

You want Ron Paul, Rand Paul and Justin Amash to pay twice what they do now in taxes?

[CaptUSA]

Has the notion of a consumption tax ever been bounced around here? I have given it some thought, and it seems to be a decent idea conceptually, but there would have to be some major restrictions on it. I don't want to see goods and services taxed all the way down the line. I am thinking back to my second business here which was a pizza shop. I wouldn't want to see all the ingredients to make a pizza taxed and then the final product taxed as well. I tend to think that only the consumable product should be taxed. So in that sense, I am thinking that businesses would only be taxed on products they buy as the end user, and not product that would go into the production of their product or service. Too complex?

Lots of problems with a consumption tax. You're just highlighting one of them.
Another is that people who have already been taxed on their earnings would now also be taxed on their consumption. It's double taxation.

The idea sounds better than what we have now, but I think the ultimate goal should be to reduce the income tax to 0. We don't need new schemes to keep feeding the monster.

[CaptLouAlbano]

Lots of problems with a consumption tax. You're just highlighting one of them.
Another is that people who have already been taxed on their earnings would now also be taxed on their consumption. It's double taxation.

The idea sounds better than what we have now, but I think the ultimate goal should be to reduce the income tax to 0. We don't need new schemes to keep feeding the monster.

Right the ultimate goal is zero, but we have to have a means to get there. We cannot unravel 100 years of taxation overnight - that's libertarian fantasy land and not reality. By the way, in my consumption tax, we would eliminate the income tax, so you only get taxed on what you spend. But there are some problems with it - obviously enforcement since there is so much cash business taking place. And the issues of who or when the item is taxed is a huge problem, since there would have to be a book thicker than the current tax code to figure out what and when is taxed.

So scrap that the more I think on it.

I don't like taxing income either, since you run into the same issues there with double taxation, determining what is income and what is not, etc. Nonetheless, I think a flat tax of some sort is probably our best transition away from what we have now.

Ultimately, once we get spending under control a head tax wouldn't be a bad idea - that's what we did in the townships for years. A small amount of money per adult to pay for the small amount of gov't services provided (roads, defense, etc). But we are a long way from that, and I doubt we will see in in my lifetime or in the lifetime of many here.

[CaptUSA]

By the way, in my consumption tax, we would eliminate the income tax, so you only get taxed on what you spend.

That's for people that are still earning an income. If you're retired and living off your savings, you've saved your whole life and got taxed the whole time. With a consumption tax, you will be taxed again.

So scrap that the more I think on it.

Yeah, the more you dig into it, the more complicated it has to get. I liked it at first, too, until I saw all the problems.

Nonetheless, I think a flat tax of some sort is probably our best transition away from what we have now.

Probably marginally better, but I still think the problem is spending. The taxation scheme doesn't really compare to the real problem. Once we have spending under control, I think we can look at the tax system, but it's kinda putting the cart in front of the horse.

[ILUVRP]

http://www.decisionsonevidence.com/w...employment.png

this a chart of tax rates vs employment .

as a note the 90% rate was on income over $200,000 in the 50's-60's which would be about $2.5 million a year now.

[CaptUSA]

ILUVRP, there are a lot more variables that go into those numbers. Don't hang your hat on them.

[ILUVRP]

i agree , there is variables in all data .

[Zippyjuan]

Has the notion of a consumption tax ever been bounced around here? I have given it some thought, and it seems to be a decent idea conceptually, but there would have to be some major restrictions on it. I don't want to see goods and services taxed all the way down the line. I am thinking back to my second business here which was a pizza shop. I wouldn't want to see all the ingredients to make a pizza taxed and then the final product taxed as well. I tend to think that only the consumable product should be taxed. So in that sense, I am thinking that businesses would only be taxed on products they buy as the end user, and not product that would go into the production of their product or service. Too complex?

Let's say we wanted to try this. And to keep it from hurting lower incomes too badly we exclude food and food service industry from the National Sales Tax.

According to Federal Reserve figures, retail sales were $368 billon dollars for the month of September. http://research.stlouisfed.org/fred2/series/RSXFS Let's assume that this figure is the same every month for a year. That is $4.42 trillion a year. Let's also assume that we keep spending frozen where it is right now and want to balance the budget only using this sales tax for government revenue.

The 2012 US budget shows expenditures to be $3.8 trillion. That would require a national sales tax of 86% on everything aside from foods and food service industries. Naturally if you instituted that huge of a tax on everything demand would plumet and you would need an even higher tax rate to collect the same revenues so easily over 100% would be necessary.

In the past, some have suggested tariffs instead. Using the same limitations (only tax source and a balanced budget) that would require a 200% tariff or a tripling of the cost of every imported item (including oil).

[Tpoints]

Rich people do not keep their money in their mattresses. They have it invested in the economy. In other businesses. In their own businesses.
If you rob their wealth to feed the government, that's more money taken out of the economy. Fewer jobs.

People invest where they think they can get the most return. It sends proper signals to the market. Government screws up the signals and wealth is misallocated.

I've been trying to break this down in the simplest form possible.

OK, I grant you they don't keep ALL THEIR money in mattresses. But the opposite is true too, they don't invest ALL their money in job creation. If it were the case that the rich always or mostly always invests in job creation and economy stimulation, than trickle down theory would be true, and bailing out the rich would always be the right thing to do.

Some do, some don't, it's got a lot to do with opportunities available, and their personal goals, little to do with how much money they have. Rich people may have lots of ABILITY to invest and help the economy, but not always the DESIRE TO. People don't want to tax the rich because they like stealing, they only do so because they believe the rich are not spending it the right way. If the rich (any rich) were either throwing money around to charity or creating more jobs than we need, they'd be loved, not hated, and encouraged, not asked to be taxed.