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Subject: We have a flat tax rss

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Kelsey Rinella
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Romney advisor Greg Mankiw cites a CBO study saying our federal tax rates are pretty flat. He seems to take away from this that we ought to repeal all the nonsense and just make it an officially flat tax. I think most Americans have no objection to the nonsense part, but would prefer a progressive tax regime.
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Boaty McBoatface
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I seem to recall that even in flat rate tax regimes the rich still end up paying less tax by tax avoidance.
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Here's the report. Take a peak and see if you think he's drawing a valid conclusion from the contents of the document. Pages 22-23 are probably the "quickest hits" in terms of doing so.

In particular, take a look at the drop-off in marginal tax rates once you get above that 450% of the FPL where the taxes are supposedly "flat." Isn't it convenient to stop looking there (which is around $50,000 annual for an individual, $103K for a family of 4).

I don't know how he's reaching that conclusion based on this report.
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Guess he missed the memo about half of America not paying any federal income tax.
 
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Romney and his people are in the news so much right now, it's making me worry they might not have received the memo about how they lost the election.
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Bojan Ramadanovic
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You can always have flat marginal tax and achieve progressivity by greater exception at the bottom.
Best of both worlds.
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Ken
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bramadan wrote:
You can always have flat marginal tax and achieve progressivity by greater exception at the bottom.
Best of both worlds.


I think a VAT and no income tax at lower income levels is a much better way of achieving this.
 
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True Blue Jon
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perfalbion wrote:
Take a peak


Can I get Mt. Everest or is that already taken?
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perfalbion wrote:
bramadan wrote:
You can always have flat marginal tax and achieve progressivity by greater exception at the bottom.
Best of both worlds.


I think a VAT and no income tax at lower income levels is a much better way of achieving this.


that is regressive, VAT is better balanced by a capital tax.
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Boaty McBoatface
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muntmeister wrote:
perfalbion wrote:
bramadan wrote:
You can always have flat marginal tax and achieve progressivity by greater exception at the bottom.
Best of both worlds.


I think a VAT and no income tax at lower income levels is a much better way of achieving this.


that is regressive, VAT is better balanced by a capital tax.
Could it not be levelled based upon price. Truly luxury items (those that cost more then the mean for that item( could be taxed at a higher level, those that are will below the man would be tax free. And the tax would be on all items, including necessities.
 
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Bojan Ramadanovic
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perfalbion wrote:
bramadan wrote:
You can always have flat marginal tax and achieve progressivity by greater exception at the bottom.
Best of both worlds.


I think a VAT and no income tax at lower income levels is a much better way of achieving this.


No tax at lower income levels is exactly what I meant by exception at the bottom
You can push the threshold at which people start paying tax as high as you want to achieve progressivity.

Advantage of having flat marginal tax above that is that you get out of all sorts of dodges through attribution and simplifies your tax code considerably.

Personally I am a big fan of having flat marginal tax rate all the way and giving everyone refundable tax credit instead of welfare to both ensure progressivity and provide social safety net all at once - but that is not quite the topic

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Boaty McBoatface
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bramadan wrote:
perfalbion wrote:
bramadan wrote:
You can always have flat marginal tax and achieve progressivity by greater exception at the bottom.
Best of both worlds.


I think a VAT and no income tax at lower income levels is a much better way of achieving this.


No tax at lower income levels is exactly what I meant by exception at the bottom :)
You can push the threshold at which people start paying tax as high as you want to achieve progressivity.

Advantage of having flat marginal tax above that is that you get out of all sorts of dodges through attribution and simplifies your tax code considerably.

Personally I am a big fan of having flat marginal tax rate all the way and giving everyone refundable tax credit instead of welfare to both ensure progressivity and provide social safety net all at once - but that is not quite the topic :)

Then it's not a flat tax (it's not even Nominally or theoretically a flat tax). It's the tax system we have (the wealthy pay more then the poor) with a few name changes.
 
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Bojan Ramadanovic
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slatersteven wrote:
muntmeister wrote:
perfalbion wrote:
bramadan wrote:
You can always have flat marginal tax and achieve progressivity by greater exception at the bottom.
Best of both worlds.


I think a VAT and no income tax at lower income levels is a much better way of achieving this.


that is regressive, VAT is better balanced by a capital tax.
Could it not be levelled based upon price. Truly luxury items (those that cost more then the mean for that item( could be taxed at a higher level, those that are will below the man would be tax free. And the tax would be on all items, including necessities.


For that item ?

Unfortunately there is no platonic form of "an item".

If I buy a below mean diamond ring - am I off the hook for the luxury tax or is the item in question in-fact "personal adornment" and mean is dominated by the hippy-beads and sterling silver gewgaws.

Is duck pate below average foie gras or above average spam ?

Is where I live an upper-scale condo or a sub-average "house" ?

This idea is one of the most dumb variants on an already dumb notion of "luxury tax".
 
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Ken
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muntmeister wrote:
perfalbion wrote:
I think a VAT and no income tax at lower income levels is a much better way of achieving this.


that is regressive, VAT is better balanced by a capital tax.


Having a graduated income tax that kicks in above a certain income level is regressive? I don't see how you reach that conclusion.
 
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bramadan wrote:
Advantage of having flat marginal tax above that is that you get out of all sorts of dodges through attribution and simplifies your tax code considerably.


I think this is largely an argument designed by people who would pay the higher income tax rates. If you get rid of deductions altogether and don't define different forms of income, then the dodges aren't there in the first place.

I think our code desperately needs to be simplified and changed. I don't see a flat tax as a realistic way to do so in a revenue neutral and fair way.
 
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The tax code is in the business of influencing behavior as well as getting money out of people, which is why it's so complicated.
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Mac Mcleod
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bramadan wrote:
slatersteven wrote:
muntmeister wrote:
perfalbion wrote:
bramadan wrote:
You can always have flat marginal tax and achieve progressivity by greater exception at the bottom.
Best of both worlds.


I think a VAT and no income tax at lower income levels is a much better way of achieving this.


that is regressive, VAT is better balanced by a capital tax.
Could it not be levelled based upon price. Truly luxury items (those that cost more then the mean for that item( could be taxed at a higher level, those that are will below the man would be tax free. And the tax would be on all items, including necessities.


For that item ?

Unfortunately there is no platonic form of "an item".

If I buy a below mean diamond ring - am I off the hook for the luxury tax or is the item in question in-fact "personal adornment" and mean is dominated by the hippy-beads and sterling silver gewgaws.

Is duck pate below average foie gras or above average spam ?

Is where I live an upper-scale condo or a sub-average "house" ?

This idea is one of the most dumb variants on an already dumb notion of "luxury tax".



Hmmm

What about anything over $X (say $6) per ounce or anything over $500 per item.

Still would need to audit for abuses. Anything written down can be abused.
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Matthew Horton
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maxo-texas wrote:


Hmmm

What about anything over $X (say $6) per ounce or anything over $500 per item. Still would need to audit for abuses. Anything written down can be abused.


Buying a car would become a purchase of a number of pieces each costing less than $500 and an additional service fee to pre-assemble.

This sort of thing would mean nothing would cost between $500-$550. Check out the British housing market around discrete stamp duty step-ups.
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Xander Fulton
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maxo-texas wrote:
What about anything over $X (say $6) per ounce or anything over $500 per item.


...suddenly, every tablet PC anywhere, every computer, every phone, etc will be no more than $499.99, and have an extra $10, $20, $50 (whatever) added to the per-month 'service/maintenance fees'...

Nonono, arbitrary cut-offs won't work. WAY too easy to game, and would have a very bizarre effect on pricing of items.
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Mac Mcleod
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XanderF wrote:
maxo-texas wrote:
What about anything over $X (say $6) per ounce or anything over $500 per item.


...suddenly, every tablet PC anywhere, every computer, every phone, etc will be no more than $499.99, and have an extra $10, $20, $50 (whatever) added to the per-month 'service/maintenance fees'...

Nonono, arbitrary cut-offs won't work. WAY too easy to game, and would have a very bizarre effect on pricing of items.


And that is why we have a complicated tax system always.

At some point a human needs to get in the loop and say, "nope your assertion that you are leasing the pate is ludicrous. Your deduction is denied AND we are fining you for being so ridiculous."

Income taxes are simple for 80% of us. It's really the people who own businesses or rental property who can redefine things who create the complexities.

That being said, I agree and that's why you end up with a board of humans looking at every product and classifying it as a luxury item or not. Perhaps it would be simpler to define a base set of non-luxury items and then require new products to pay the tax unless they get a non-luxury item exception.
 
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Boaty McBoatface
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bramadan wrote:
slatersteven wrote:
muntmeister wrote:
perfalbion wrote:
[q="bramadan"]You can always have flat marginal tax and achieve progressivity by greater exception at the bottom.
Best of both worlds.


I think a VAT and no income tax at lower income levels is a much better way of achieving this.


that is regressive, VAT is better balanced by a capital tax.
Could it not be levelled based upon price. Truly luxury items (those that cost more then the mean for that item( could be taxed at a higher level, those that are will below the man would be tax free. And the tax would be on all items, including necessities.[/q]

For that item ?

Unfortunately there is no platonic form of "an item".

If I buy a below mean diamond ring - am I off the hook for the luxury tax or is the item in question in-fact "personal adornment" and mean is dominated by the hippy-beads and sterling silver gewgaws.

Is duck pate below average foie gras or above average spam ?

Is where I live an upper-scale condo or a sub-average "house" ?

This idea is one of the most dumb variants on an already dumb notion of "luxury tax".


As I said the tax would be on all items, with the amount determined by it's luxury status. A luxury item would be one that is either priced above the norm for that type of item (such as food, that is the key you use the same broad definitions you use now). It's based on price, not nature of the item (as I had said).

A diamond ring would start at a high rate of vat (it's not an necessity) and would go up in vat as they get more expensive.

If Duck Pate (a food and thus would be VATED at a nominal rate) it would have a lower rate of VAT then foie gras but higher then SPAM spam

Thus a house that cost twice the mean price of a house (for that area) would have twice the VAT.

Surely the way you determine luxury is not what the item is, but how much it costs.
 
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Bojan Ramadanovic
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maxo-texas wrote:
XanderF wrote:
maxo-texas wrote:
What about anything over $X (say $6) per ounce or anything over $500 per item.


...suddenly, every tablet PC anywhere, every computer, every phone, etc will be no more than $499.99, and have an extra $10, $20, $50 (whatever) added to the per-month 'service/maintenance fees'...

Nonono, arbitrary cut-offs won't work. WAY too easy to game, and would have a very bizarre effect on pricing of items.


And that is why we have a complicated tax system always.

At some point a human needs to get in the loop and say, "nope your assertion that you are leasing the pate is ludicrous. Your deduction is denied AND we are fining you for being so ridiculous."

Income taxes are simple for 80% of us. It's really the people who own businesses or rental property who can redefine things who create the complexities.

That being said, I agree and that's why you end up with a board of humans looking at every product and classifying it as a luxury item or not. Perhaps it would be simpler to define a base set of non-luxury items and then require new products to pay the tax unless they get a non-luxury item exception.


Which requires a whole new "luxury assesment" bureaucracy that has to process every new cheap laptop, every Costco cereal, every cheap-ass car to determine whether or not they are luxuries.

Alternatively we can asses roughly how much everyone needs for necessities of life and give them tax credit for that amount - which is what we do.

Luxury tax has that satisfactory "get the rich" crunch to it - but it really is one of the most inefficient and red-tape generating forms of taxation known to men.
 
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Bojan Ramadanovic
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slatersteven wrote:
bramadan wrote:
slatersteven wrote:
muntmeister wrote:
perfalbion wrote:
[q="bramadan"]You can always have flat marginal tax and achieve progressivity by greater exception at the bottom.
Best of both worlds.


I think a VAT and no income tax at lower income levels is a much better way of achieving this.


that is regressive, VAT is better balanced by a capital tax.
Could it not be levelled based upon price. Truly luxury items (those that cost more then the mean for that item( could be taxed at a higher level, those that are will below the man would be tax free. And the tax would be on all items, including necessities.[/q]

For that item ?

Unfortunately there is no platonic form of "an item".

If I buy a below mean diamond ring - am I off the hook for the luxury tax or is the item in question in-fact "personal adornment" and mean is dominated by the hippy-beads and sterling silver gewgaws.

Is duck pate below average foie gras or above average spam ?

Is where I live an upper-scale condo or a sub-average "house" ?

This idea is one of the most dumb variants on an already dumb notion of "luxury tax".


As I said the tax would be on all items, with the amount determined by it's luxury status. A luxury item would be one that is either priced above the norm for that type of item (such as food, that is the key you use the same broad definitions you use now). It's based on price, not nature of the item (as I had said).

A diamond ring would start at a high rate of vat (it's not an necessity) and would go up in vat as they get more expensive.

If Duck Pate (a food and thus would be VATED at a nominal rate) it would have a lower rate of VAT then foie gras but higher then SPAM spam

Thus a house that cost twice the mean price of a house (for that area) would have twice the VAT.

Surely the way you determine luxury is not what the item is, but how much it costs.


So what you are proposing is to categorize all products, then assign base tax rate to every category, based on perceived necessity of the category and then apply some non-linear scaling of tax according to price of item within the category ?

This makes even less sense then what I thought you are proposing.

Consider your food category:
Is wine food ? I mean it is certainly unnecessary but on the other hand it shares many characteristics of food.
What about chocolate ?

Then there is a question of quantities. Is buying a $10 macaron less of a luxury then buying $15 bag of flour.
Are we to asses price per gram or per nutritional content or per volume or what ?

Then you have to make same sort of decision in every single category.
Are "vehicles" assesed per passenger basis or per item or per volume (small businesses using pickup trucks could become quite luxurious under some of those rules as could having more then two kids.

Are concert/sports tickets in same category as movie tickets (or rentals) and therefore massively luxurious or are they sufficiently different ?

While we are at it - how is "average" of a category defined ? Do you list all items in a category and find a mean of that (which is already next to impossible task requiring a gigantic bureaucracy) or do you weight the average by how many of that item is actually sold.

Former method would be easily gamed by producers by simply designing bunch of very expensively priced items in a category which are not expected to actually sell in order to make most everything "below average".
Later method would require constant tracing of all traffic in everything and would probably cost a great deal more then your entire tax would bring...

Reason I am pointing out all of this is to illustrate how easy it is to create idiotically bad laws through the method of "original idea seemed good at the time - why don't people just play along with how I thought it will work".
 
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perfalbion wrote:
Having a graduated income tax that kicks in above a certain income level is regressive? I don't see how you reach that conclusion.

Replacing income tax with a sales tax that lets high income earners dodge tax by investing is regressive, even if you exempt the lowest earners.
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sbszine wrote:
perfalbion wrote:
Having a graduated income tax that kicks in above a certain income level is regressive? I don't see how you reach that conclusion.

Replacing income tax with a sales tax that lets high income earners dodge tax by investing is regressive, even if you exempt the lowest earners.


I don't rightly know how to respond. Why would investments not be classified as "income" when they generate income? I think that we treat capital gains pretty horribly, myself. I'd call it "income" and maybe allow a deduction for inflation. But I don't particularly believe in different categories of income.

I'm happy to be shown where I'm wrong. I'm just not sure that I actually am.
 
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