By flat, I mean there's not 10% on some transactions, 15% on others, 20% on the rest. And yeah, it's a VAT that would replace income tax. The theory behind it is that if the purpose of taxation is to redistribute wealth, then do it as directly as possible and without any strings attached.
That's like saying, if the purpose of a hospital stay is to distribute medical care, then give everyone the same medicine regardless of their diagnosis. Obviously, you can't redistribute anything without paying attention to who's getting how much of it. In your plan, a family of 4 spends 80,000 in one year, owes 20% of that = 16,000 tax, but gets 4 x 4000 = 16,000 credit, and pays nothing. x = income f = family members to owe any tax, .2x > 4000f rearranged equation is x/f > 20,000 Tax will be owed if income per family member > $20,000. Families under $20,000 will see a tax decrease. Families just over that will see a tax increase. Wealthy families way over that will supposedly see a tax decrease. But they currently really pay way under 20%, despite their supposed tax bracket, due to deductions, write-offs, credits, and exemptions. Republican campaign contributors would not allow those to be eliminated. Analysis would have to be done to see who pays more and who less.
Surely not. Take Paul Allen for instance. A tax on what he spends (and we know he likes to spend) would be a nano-fraction of a what a tax on his yearly income would be. It would redistribute more wealth to the wealthy, and pretty much crush what's left of the lingering middle-class.
How does he get his income? Every stock sale would be taxed, every dollar he borrows against his assets would be taxed. Buying the Blazers, he'd have paid 20% tax on that, too.
Currently a family of 10 with one wage earner making $106K pays 15% in FICA alone. The way I'm looking at it, the government spends $3.9T (Obama's latest budget proposal) for 310M people, or $12,580 per person. Refund $4K or even $6K of that $12,580, and there's still plenty for government to spend. Realistically, the government should be spending no more than $9K per person if it doesn't want to be borrowing $1.5T every year.
Well, that would certainly have some interesting outcomes. For example, the stock markets would take a huge hit. All the hedge funds would go belly up. No one would buy stocks except those planning to hold them for a very long time. And taxing loans at 20% would pretty much kill what's left of the housing market and most business expansion projects. Other than the economic consequences, I think your plan has a lot of merit. barfo
When buying a house, it's a matter of what you can afford as payments. The down payment is after tax income. The principal you pay off is after tax income, too. It's not going to hurt a thing. The stock market is little more than legalized gambling as it is set up. Buying and holding stocks for a very long time is what the stock market is supposed to be. Doesn't it bother you that Exxon makes $billions in earnings and pays $0 in taxes?
Ok, let's say I want to buy a house. Price of the house is $1 million. If I'm a typical homebuyer, I scrape together 20% for a downpayment and pay the rest over time. Now I have to scrape together 20% downpayment and 20% tax. Doubling the upfront cost isn't going to depress sales? I find that rather difficult to believe. Plus there is now a huge disincentive to move from house to house, as it costs 20% each time - and you don't get that back when you sell. Just as with the stock market, you have to wait until prices go up by 20% just so you can break even. Maybe your answer to that is the same - people should buy a house and stay there instead of moving around? I don't necessarily disagree with that sentiment, but "supposed to be" according to who? Sure. But there are lots of ways to address that. Some of them are better than others. I'd be inclined to start by removing whatever loopholes they are using to avoid paying tax. barfo
The purchase price would be $1.1M, you have to scrape together 20% of that. You pay 10% the seller pays 10%. Or only the buyer would pay the tax - either way works. People are already paying 6% cost each time they sell, in broker fees. It hasn't been such a huge disincentive to move. The point of the stock market is to own a small piece of US companies, period. When you've sold stock in the past, you've paid broker fees and capital gains tax - short term capital gains has been taxed at 39.6% (under Clinton tax rates) or 35% (Bush tax cuts) while long term capital gains tax rates are currently 15% and will be 20% in 2013. Where's this disincentive you keep talking about? Capital gains applies to sale of homes, too.
Sure, what's $100K between friends. I don't understand your math. Why is the purchase price $1.1 million? Pretty sure I said the purchase price was $1 million. Inflation? Are you ignoring the downpayment + tax issue? Don't both the downpayment and the tax need to be paid? Then, sure, let's quadruple it. If 6% is no barrier, then 26% can't possibly be a barrier, can it? Uhm. That's a tax on profits. If you sell at the same price you got in, you pay no tax. You are proposing a tax on the amount of the transaction. So you pay 20%, instead of 0%, if you sell at the same price you bought at. That's a pretty big difference. Sure, if you make more than half a million profit. Otherwise it's zero. barfo
You'd finance the tax, not have to come up with it like a down payment. The seller pays his half of the tax out of his proceeds. If you bought Ford stock at the time the government took over GM, you'd have 2x your investment by now. If you bought 100 shares at $1.50 and 100 shares at $3, you currently can sell 100 shares and claim you're selling the $3 shares at no profit, yet you are taking a profit on the $1.50 ones - it's something of a scam. The $500K exclusion you talk about for real estate is only on your primary residence.
That's a sales tax, paid by the purchaser. I thought this was a value-added tax, paid by the seller. Which is it? It can't be both, or the buyer pays 40%, after the seller increases his price to include his 20%. ...which brings up the 20% inflation on all prices that occurs the first year this goes into effect...
I wrote, "a 20% flat tax on every transaction." I didn't write "paid by the seller" or "paid by the buyer." Taxes paid along the way, from parts to manufacturing to retail are generally passed on to the buyer. However, the buyers will also see $0 taken from their paychecks as withholding, so they will have more to spend. Not to mention the rebate. And frankly, don't you think that people would lower their prices to reduce the tax paid?
Now I get it. It replaces social security tax. I thought it was either income tax, sales tax, or VAT. Can we make it medicare tax too? Does this also replace estate tax? How about state and local tax? Property tax? I think you're thinking that this replaces the whole schmeer, right? I don't think it will raise enough money.
Is the world ready to hear the correct answer to the deficit problem? (The problem that the Democrats solved in the late 90s, but then the Republicans took power in 2001.) I've announced the solution on this board before. I don't want to build the suspense again. But The solution isn't to cut conservative programs. Conservatives can continue to get their kicks starting wars, spying on Americans, and lengthening prison terms. The solution isn't to cut liberal programs. Liberals can continue to keep welfare queens fat and pregnant. In my plan to cut the deficit, NO PROGRAMS ARE CUT. Millions of government employees are not put out of work, which would just cost the government more for unemployment benefits. Wait for it... Just cut the pay and benefits of every government employee by a flat percentage. Figure out what percentage it will take to balance the budget and do it. The jobs will still have waiting lists of applicants, because of guaranteed job security and guaranteed pensions. Unlike companies, the government never goes out of business.
Yes, it replaces the whole schmeer, but only federal taxes. The states continue to do their taxes however they see fit. This does mean that in California, the sales tax on buying something might be 30%. As I mentioned earlier, the 20% rate might be too high. For other VAT proposals, the numbers I've seen that raise enough revenue for the government are 10% to 14% range. Consider that the government taxes about 25% of GDP (state and feds combined). At 20% per transaction, they're probably going to make more than 25% of GDP.
I looked at cutting 1/2 the government workforce (equivalent to a 50% flat percentage in your thinking). It saves maybe $200B. Though $200B here and $200B there and the budget will be balanced.
You claim that every dollar of the $4 trillion Federal budget is paid to nongovernment employees, except $400 billion. So 90% goes back to the taxpayers. Then what are you complaining about?
