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Sunday, April 17, 2011

Hope And Change, But Not Quite As Expected

The previous post is content-rich and is new.

This one's for thinking material. This is a post at DU this morning. I intend to watch the comments closely:
Corporate taxes, sales taxes, property taxes, and fees should be eliminated from all government.

1. Corporate Taxes: The issue here is not that the government should lose tax revenue, but it's that the government is placing tax burden in a haphazard way. The shareholders of a corporation maybe be billionaires or they could be mom and pop. When you tax a corporation, it is not with any regard to the people who may take money from it in the form of a dividend or an increase the price of their stock due a perceived increase in the company's value.

That is my problem with it.

Another is that a corporation that's larger has enough resources at its disposal that it can weasel its way out of paying taxes, something that benefits poorer shareholders, but also the richer ones. Again, the benefit is haphazard and can go to those who do not need it (the richer shareholders.)

When money comes out of the company in income for its workers and dividends, it should be taxed then, in a progressive manner. And any other gains are not linked to actual real income, and should be taxed again under a unified tax code.

2. Sales taxes have to be one of the dumbest ideas humanity ever came up with. Everyone has to pay a sales tax on taxable items, it is not means tested in most cases. So, in other words, someone who is rich pays the same tax as someone who is poor. What bullshit is that?

And we have the morons with the flat tax who want to just tax freaking sales, but the poorer ones don't see how badly they would get fucked under such a system.

3. Property taxes are not fair, and that's it. You can see how you'd like to dick over someone with a lot of land, but the problem is that these taxes often result in tax auctions, because even when a middle class home is paid for, you must still pay property taxes on it. You do not truly own it. In any other area of life, if I told you I was going to levy a tax just for owning it, you'd freak the fuck out. If I went further and said I could simply take it and sell it away to pay off the bill, for no higher price than the bill, you'd hang my ass.

But this is precisely what goes on with property taxes ALL THE TIME.

Elderly individuals in our society who worked their asses off in most case for a house are forced to sell it earlier. This is a method by which wealth is stolen away from people, not just the wealthy (the one's with the resources to pay for the tax bills), but mainly the poor/middle class. It makes a poor family even poorer.

One should eliminate taxes on property, and replace the tax with one on income equal to the amount of money needed to sustain the function formerly dependent upon the property taxes.

4. Fees are taxes. You can call it what you want, but you are taxing someone. In a lot of cases, not all, but a lot, there is no method in place to progressively increase a fee depending upon the income of the person. This again is wrong.

5. The last area is fines. Fines are not really taxes or "fees" in the traditional sense of the word, but they are unfair as currently structured. Why should someone pay the same amount of money for the exact same crime, if it will punish them less severely based upon their wealth and income? A $100 fine really hurts someone living paycheck to paycheck, but not at all for someone who is a millionaire.

They should be adjusted based upon the income and wealth of the individual in question, so that it will have the same negative consequences for all participants.
What is being advanced here correlates well with the basic economic strategy adopted by the northern European "socialist" states so beloved of progressives. They have mostly chosen to sharply cut corporate tax rates in favor of creating new jobs.

Here is one response to the OP:
7. What tax method is a fair tax method?

Is it possible that good ideas are often discarded because of their source ?

I was once against the fair tax plan... but actually took the time to sit down learn more about it. (Well, was 'forced' to sit down.) I realized I did not fully understand it.

Surprisingly, I walked away with a much different viewpoint.

If you truly are concerned about the middle class and the lower income segments of this society (and that would include 'me')... this has to be an option. Before you condemn it, research it yourself. 90% of the negative rhetoric I had heard was in fact false.

If you can imagine this, a tax that you pay on the 'extra' items you voluntarily purchase with your discretionary income. That is what it amounts to.

Perhaps someone can tell me why this particular plan is not a good one. If the democratic party could/would embrace the Fair Tax... perhaps modify some areas, they would be the true champions of the people.
The reality is that local and state tax burdens (sales, property, income, fees) are hurting lower income people very strongly.

It's interesting that the first response on the thread argues that corporate taxes are good because they give the government the ability to control the corporation. This is theorized to be a public good, but if you actually look at what has happened, the housing bubble was clearly helped along by such schemes. The intent was good; the results were pure disaster.

Comments:
Many "Fair Tax" advocates would exclude basic necessities from the fair or flat tax. If groceries and the first increment of utilities, and the like are exempted from the tax, the scheme becomes significantly less troubling.
 
The first point in the DU underground, that "corporate" taxes are passed through to people of very different means, is a VERY good one and argues against any income tax on corporations. His dislike of sales taxes is another matter. Replacing the income tax with a national sales tax would reduce the incentive to drive jobs overseas because buying foreign production from foreign companies would lose the tax advantage it now enjoys.

As to putting "basic necessities" outside the reach of the Fair Tax: that way lies gaming of the rules that many municipalities have now. Buy sliced meat and bread, no tax. (Buy sliced meat ON bread, tax.) I prefer the prebate, though I have misgivings about it.
 
The corporate tax code has been used to funnel
payments at a lower rate to hedge funds. Asset
stripping is the term I believe. Amazingly, few
want tariffs, which would bring new money into
the revenue stream for the privilege of selling and
competing with US based companies. All I see is discussions on how to divide the tax burden not
how to increase the total tax revenue with the least
amount of pain for the average American. Let's cheapen the dollar to export more goods which
profit multinational corporations but not labor.
Oh yeah, good luck with inflation.
Sporkfed
 
Gregg - I've read about various versions of the "Fair Tax" before. Most include some form of rebate to lower income people.

The problem is that it must be paid in advance if they are going to be charged the extra at the point of sale. That's what NJCommuter is referring to.

I found it interesting that this idea was posted on DU. I'm thinking that the general stress is making us all reevaluate, and that politicians have underestimated the public's perception of reality and the willingness to accept real change.

Spork - the corporate tax is much misused. It's misused by everyone, and I agree that it is sometimes used to make very wealthy interests even wealthier.

I'd be more than willing to kiss the corporate tax off if I could be sure that we had a workable alternative. Overall I think it would help politics - right now what our economy creates the best are jobs for well-paid lobbyists.
 
"the first response on the thread argues that corporate taxes are good because they give the government the ability to control the corporation. This is theorized to be a public good"

Well, they are certainly a good for "public servants" who are able to get lucrative second careers as lobbyists...
 
I agree that the voters are ahead of the politicians on this, at least in some parts of the country. Christie's relative success to date is evidence of that I think.

The DU poster's arguments are valid if you want something that is highly progressive and taxes something at the point of eventual benefit as opposed to one of the intermediaries that economic activity channels through. However, it would lead to enormous volatility in tax revenues over the course of the cycle - which governments are extremely poor at managing. Look at places like NY and CA that are highly dependent on income tax revenue streams from high end earners. They view all that "fat cat" income tax revenue as recurring and sustainable and spend against all of it when time are flush and then open up huge deficits when the economy cycles down. I've got zero confidence that the politicians would manage that well.
 
MOM,

"This is theorized to be a public good, but if you actually look at what has happened, the housing bubble was clearly helped along by such schemes. The intent was good; the results were pure disaster."

Speaking of taxes, schemes, good intents, and pure disasters...

TIP Virtually Guaranteed to Lose Purchasing Power

"Once taxes are factored in, this investment should lose purchasing power."

Keep in mind it is a popular bond fund and the average maturity of the bonds within it is a whopping 9 years!

The only logical conclusion is that when a safe fund like this is poised to lose purchasing power over the long-term, then the only other real choice savers have is to hoard.

For what it is worth, toilet paper is still cheap and keeps a long, long time. Sigh.
 
The Fair Tax prebate wouldn't HAVE to be paid in advance. It could be paid monthly and after-the-fact. With electronic funds transfer, it could be made to work, especially if it were in the form of a "grocery" card--an electronic food stamp card, in effect. (Yes, that is open to social engineering, but it might be managable.) Moreover, it could be applied to every US resident with a SSN, providing a way to assist the cost of providing for children. That would also reduce the dollar amount of the prebate and the incentive to ride free on the system.
 
I totally agree with the comments in that post on property taxes. The boyfriend has two paid off pieces of property. He's trying to come up with a way to keep them out of foreclosure because he's behind in the taxes. That's ridiculous. It's bad enough that they've both lost value due to the housing market bubble. We're still trying to get through paying those higher taxes from the start of the bubble.

Meanwhile, we are fighting with the local politicians who want to put in a brand new bridge over the Columbia, complete with tolls and light rail. Never mind that the voters have turned down both and the new mayor was elected on a no tolls campaign. (Need I mention that his company is an engineering firm that stands to gain if a new bridge goes through?)
 
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