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[P]
A Fair Tax

By Baldrson in Op-Ed
Thu Nov 18, 2004 at 10:33:24 PM EST
Tags: Politics (all tags)
Politics

Some say a "fair tax" that removes the need to file tax returns from the vast majority of the citizenry is a national sales tax. This doesn't seem to be very fair to people trying to feed, house and clothe themselves and seems to subsidize large land holders (Bush's favorite constituency). There is a tax that lives up to the promises broken by Bush's proposal for a national sales tax.


Among the major political agendas before the Bush administration is a national sales tax, misnamed the "Fair Tax". While it provides, for consumers, the benefit of not having to file a tax return with the IRS, it places on consumers a greater tax burden and benefits rich rural land owners by forcing consumers to move out of the cities where cost of living is high. Bush's advisors have answered the objection that this hits poor and even middle class families hard to benefit rich people by offering each family of 4 a paltry $6,000 per year "national dividend" (more or less depending ont he size of the family) combined with greater social service subsidies through churches.

This whole thing seems like a scam of major proportions comparable to the New Deal's redefinition of "wealth tax" to mean a loop-hole-ridden tax on income -- while Norm Thomas and Huey Long -- both proponents of a genuine asset tax -- had their proposals neutralized.

Given the horrendous trade deficits due to deindustrialization of the US, and looming loss of the US dollar's status as the world's reserve currency to China or possibly the Euro, such political games benefitting the rich amount to little more than rearranging the deck chairs on the Titanic.

There is a tax proposal that achieves the promises of a fair tax while eliminating filing of tax returns for not only consumers, but small, non-corporate businesses and eliminating loopholes for everyone.

The following exerpts are from a 1992 white paper on a Net Asset Tax is summarized in the following excerpts:

The government should tax net assets, in excess of levels typically protected under personal bankruptcy, at a rate equal to the rate of interest on the national debt, thereby eliminating other forms of taxation. Creator-owned intellectual property should be exempt.

The levels typically protected by personal bankruptcy can be approximated by the median price of housing an individual added to the median capitalization of a job in the economy. Together, these exemptions add up to between $50,000 and $100,000. Additional but smaller exemptions may be added to represent the lower levels of bankruptcy protection typically extended to children within families.

The NAT is a self-adjusting system that seeks an equilibrium between government debt levels, current tax rates and private wealth distribution, without attempting to achieve an outright balanced budget or direct intervention in the economy.

Under current (1992) asset distribution and government debt the NAT would generate between $1 trillion and $1.5 trillion in revenue, thus totally displacing other forms of taxation.
...
only assets whose existence is legally recorded in titles, insurance documents, etc., or that are currently reported for capital gains and losses would be individually assessed. Since most households own few major assets changing little from year to year, the NAT would greatly simplify tax computation.

While Bush's "fair tax" reform proposes to ease the sadistic impact on consumers with religious organizations running local social services combined with a $6,000/year "national dividend" for each family of four this is hardly fair to people who aren't having children or who don't have an organized religion with which they affiliate.

Better is the proposed "market democracy" from the same white paper:

With the exception of basic functions of government and the pay down of debt, the government budget should be dispersed to citizens as cash, rather than being spent in government programs or even limited in the form of vouchers. This is "market democracy" in which the citizens and their markets, rather than central planning and politics, influence the selection of goods and services to be capitalized and provided.
This seems to be a proposal that the Democrats could use to totally wipe out the Republican political base in rural America and even middle class suburban America while achieving real simplification and fairness.

The Democrats are not in the driver's seat at the moment but a compromise proposal may work:

The NAT is used to make up for any short-fall in revenues due to the adoption of the national sales tax.

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Related Links
o national sales tax
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o looming loss of the US dollar's status as the world's reserve currency to China or possibly the Euro
o 1992 white paper
o Also by Baldrson


Display: Sort:
A Fair Tax | 319 comments (300 topical, 19 editorial, 0 hidden)
dear baldrson i need your advice (1.96 / 25) (#1)
by Tex Bigballs on Wed Nov 17, 2004 at 02:34:38 PM EST

should i keep playing half-life 2? the main character is named gordon freeman. i have a feeling i might be unwittingly promoting some sort of secret video game zionist agenda.

gordon freeman is forbidden (1.00 / 6) (#4)
by Black Belt Jones on Wed Nov 17, 2004 at 02:56:39 PM EST

ror!

[ Parent ]
ror (1.16 / 6) (#5)
by Tex Bigballs on Wed Nov 17, 2004 at 02:59:38 PM EST



[ Parent ]
the balls are big (1.80 / 10) (#6)
by circletimessquare on Wed Nov 17, 2004 at 03:12:59 PM EST

and the name is tex

I LOVE YOU MAN!

(start awkward heterosexual male to heterosexual male hug now)


The tigers of wrath are wiser than the horses of instruction.

[ Parent ]

*cops a feel* (2.31 / 22) (#7)
by Tex Bigballs on Wed Nov 17, 2004 at 03:15:05 PM EST

i

love

you

too

circle

times

square

and

find

your

posts

very

entertaining

as

well

as

educational

xoxoxo,

tex

[ Parent ]

3;vertical mockery (1.90 / 11) (#8)
by sllort on Wed Nov 17, 2004 at 03:21:14 PM EST


--
Warning: On Lawn is a documented liar.
[ Parent ]
Net Asset Tax and the economy (1.60 / 5) (#9)
by LilDebbie on Wed Nov 17, 2004 at 03:53:42 PM EST

Anyone who has studied macroeconomics can tell you that NAT is the best way for the government to derive revenue. I won't go into all the calculations, but, simply put, NAT is the only form of taxation that does not drag on economic equilibrium. I know a lot of you don't like Baldrson, but this does warrant discussion.

My name is LilDebbie and I have a garden.
- hugin -

NAT doesn't seem right (2.50 / 2) (#10)
by Nursie on Wed Nov 17, 2004 at 04:56:17 PM EST

Am I interpreting this correctly - under NAT, I pay taxes on the house I live in relative to its worth? Even if I've owned it forever? Or if I inherit a house from a parent and have little other money I may have to sell it as I can't pay the tax on the worth of the asset (regardless of current inheritance tax regs)?

It seems somehow more natural to pay on what you earn rather than on what you've got.

Meta Sigs suck.

[ Parent ]
Reread the exemption for bankruptcy assets (2.60 / 5) (#12)
by Baldrson on Wed Nov 17, 2004 at 05:02:22 PM EST

Read the exemption. Bankruptcy protects your home and tools of the trade. While Bill Gate's mansion would not be totally exempt, the idea of bankruptcy protection is to make it so that people can avoid undue hardship when they declar bankruptcy. The NAT, as stated in the article, does exempt the same level of assets as bankruptcy protection so you would not pay any taxes on a modest home, nor on the essential tools of your trade.

-------- Empty the Cities --------


[ Parent ]

Not so bad then. (none / 1) (#16)
by Nursie on Wed Nov 17, 2004 at 05:10:26 PM EST

I just didnt like the idea of being taxed out of your home. I'm still not sure I like it though. I prefer the idea of a tax on what you acquire rather than on what you already have. Perhaps it's that it's more obviously the government taking away your stuff rather than just the usual skimming of everything as it comes in and goes out.

Meta Sigs suck.

[ Parent ]
Effectively its a use fee... (2.50 / 6) (#18)
by Baldrson on Wed Nov 17, 2004 at 05:18:35 PM EST

When you have assets beyond those you, yourself, can effectively defend (such as your house and essential tools), the only reason you can claim them is the existence of the government to enforce your legal rights and protect them from foreign invasion. You want this service for free and to have people who are engaging in transactions to pay that fee for you. That's unfair of you.

-------- Empty the Cities --------


[ Parent ]

Well... (none / 0) (#21)
by Nursie on Wed Nov 17, 2004 at 05:33:01 PM EST

It's not unfair of me 'cos I don't currently own a house and so stand to benefit greatly under NAT. Someday though, I plan to own half of Wessex! Which is why people get stuck wioth systems that benefit the rich I suppose - they all think they'll be there one day.

Meta Sigs suck.

[ Parent ]
actually (none / 0) (#44)
by speek on Wed Nov 17, 2004 at 07:14:07 PM EST

A NAT would decrease your taxes if you owned a house as opposed to renting. As a renter, your landlord would pass his tax on to you, and a the exemption will make less of a dent in the tax on a rental complex than it would on a single residence owned by the person living there.

--
al queda is kicking themsleves for not knowing about the levees
[ Parent ]

Not true enough... (none / 1) (#51)
by Baldrson on Wed Nov 17, 2004 at 08:16:56 PM EST

The flip side is that anyone who rents would be well positioned to purchase a house/condo of their own by the NAT's subsistence exemption and freedom from any taxes. This is superior to the current system of income tax deductions for mortgage interest payments since their ability to build equity is greater due to the lack of income and/or capital gains taxation as well as the fact that they don't pay tax on the income that would normally go into actual paydown of the principle of the mortgage.

Home "ownership" at present is a farce anyway since the percentage of people who actually own their homes outright is miniscule.

-------- Empty the Cities --------


[ Parent ]

What you earn is wholly yours. (2.00 / 3) (#15)
by LilDebbie on Wed Nov 17, 2004 at 05:08:49 PM EST

You need no government to protect it. Your property, however, is a different story. You depend upon the government to make sure other people don't steal your shit. Thus, you pay what the mobsters call "protection money," which should be proportional to how valuable your stuff is. Imagine if your insurance rates weren't based on the value of what was insured, but instead your ability to pay.

Of course, all that is philosophy. The hard numbers prove it.

My name is LilDebbie and I have a garden.
- hugin -

[ Parent ]
See other post (2.50 / 2) (#17)
by Nursie on Wed Nov 17, 2004 at 05:14:50 PM EST

For some reason I find the idea worse, it makes it moreobvious that the government are actually taking a proportion of your stuff.

It's probably just because of what I'm used to.

Meta Sigs suck.

[ Parent ]
I don't need the gummint... (none / 0) (#257)
by ckaminski on Mon Nov 22, 2004 at 12:50:57 PM EST

Just my trusty .308, AR15, and shotgun.

When the zombies come, I've got swords and sharp objects galore.  I'm covered.

[ Parent ]

How is that different? (2.50 / 2) (#68)
by curien on Thu Nov 18, 2004 at 05:03:30 AM EST

Under current tax laws, if you inherit (or are given) a house and don't have the money to pay taxes on it, you have to sell it.

--
This sig is umop apisdn.
[ Parent ]
Why? (none / 0) (#229)
by skyknight on Sun Nov 21, 2004 at 12:29:14 AM EST

What you've got represents your stake in a political entity.

It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
[ Parent ]
Reservations (none / 0) (#60)
by nomoreh1b on Thu Nov 18, 2004 at 01:21:59 AM EST

I have my hesitancies about Nat. However, wealth in the US at this point is largely a function of monopoly power-and thus is a reasonable item to tax to at least some degree. I would prefer to see more effect land taxes. I suspect with appropriate rates and a restructuring of laws that prop up various monopolies, not much of a NAT would be necessary. However to go to a salestax without a NAT is sad. Even partial adoption of NAT as part of a fairtax proposal would casily mean that Food and Medical care could be exempt from tax-and in the present situation, the rich wouldn't loose _anything_ in terms of their present net worth(since other taxes would be reduced).

[ Parent ]
I knew there was something fishy........ (2.60 / 5) (#14)
by Nursie on Wed Nov 17, 2004 at 05:06:08 PM EST

about this tax when someone was singing its praises a few months ago. It taxes families with children more than individuals, because they have to buy more stuff.

Now I'm all for this, as I don't have or intend on having any rugrats, and I resent having to pay more taxes whilst people that have the little blighters get tax breaks. However this is not the way most people seem to think (gov'ts seem to try and encourage people to get married and procreate through tax).

Also it would seem to be a great way to slow the economy down. If all tax was through sales then people would have much more incentive to save. Good for them, but bad for the consumerist economy as a whole. "Fair Tax" sucks.


Meta Sigs suck.

Most people aren't savers (none / 0) (#19)
by NaCh0 on Wed Nov 17, 2004 at 05:24:06 PM EST

After an initial break-in period, people would be back at their old spending levels. Just like the sales tax of today has little influence on purchases.

--
K5: Your daily dose of socialism.
[ Parent ]
No. (none / 0) (#153)
by DavidTC on Thu Nov 18, 2004 at 09:25:27 PM EST

THis doesn't tax purchasing, it taxes ownership, unless I'm very confused.

A family with children may own a few more assets than a without, more beds, a minivan instead of a car, a few hundred dollars worth of toys, etc. It's not anywhere near noticable, though.

Now, eventually, of course, they'll have a larger house. I don't see anything wrong with taxing that more.

-David T. C.
Yes, my email address is real.
[ Parent ]

The problem with NAT (2.83 / 6) (#22)
by tetsuwan on Wed Nov 17, 2004 at 05:39:19 PM EST

assets have to be evaluated. That's a problem. In Sweden, we have an asset tax, but it has a couple of exceptions that makes it in-the-face unfair. If you own land or forest, that is excempted, and worse: if you privately own a big enough company, you don't have to pay.

Njal's Saga: Just like Romeo & Juliet without the romance

Previously solved problem... (2.50 / 2) (#24)
by Baldrson on Wed Nov 17, 2004 at 05:56:03 PM EST

Ultimately, property insurance has dealt with this problem in the form of controls on moral hazard in declared value of assets insured. In general all assets that are not covered by property insurance are easily valued. If an entity is large enough that it self-insures then all you reall need to do is demand that it insure itself with one of the regular underwriters who will then impose the normal auditing controls against moral hazard.

-------- Empty the Cities --------


[ Parent ]

Then: (2.66 / 3) (#28)
by tetsuwan on Wed Nov 17, 2004 at 06:09:58 PM EST

What about accounts in foreign countries eg Swiss? the problem with wealth tax in Sweden is that wealthy people move abroad.

Njal's Saga: Just like Romeo & Juliet without the romance
[ Parent ]

Mobile assets... (1.66 / 3) (#34)
by Baldrson on Wed Nov 17, 2004 at 06:33:19 PM EST

When people move their assets to avoid fair tax burdens they are creating unfair situations in the destination countries. For instance every able-bodied Swiss man must be enlisted in the national guard and keep military weapons at all times. Ask the US National Guardsmen who have been fighting in Iraq whether they think their level of compensation has been adequate, and you have some idea of what is in store for the Swiss. Conscription has historically been horribly abused. The subsistence exemption of the proposed NAT remedies this by providing something real and substantial up front to all families that may lose an able-bodied man to national emergencies.

Ultimately, the countries that rely on the self-sacrificial tribal instincts of their population to protect concentrated wealth are going to be conquered and those who had their assets stored there will be up shit creek.

-------- Empty the Cities --------


[ Parent ]

wars haven't been fought in Swiss (2.00 / 4) (#66)
by tetsuwan on Thu Nov 18, 2004 at 03:57:43 AM EST

for 700 years or so. Europe is not seeing another big conflict anytime soon and, Switzerland will certainly not send their sons to any Iraq-like situation. They do not have any imperialist ambitions. Of the European countries, only France and Britain have imperialist ambitions left.

It's entirely unfair to call any civilization larger than 1000-10 000 people tribal, since tribal structures don't work for large bodies of people.

When you here rants about "the Danish tribe" and similar BS, you should keep in mind that this is the result of successful nationalism, not tribalism. It's an entirely modern phenomenom.

Njal's Saga: Just like Romeo & Juliet without the romance
[ Parent ]

Switzerland (edit) (none / 0) (#70)
by tetsuwan on Thu Nov 18, 2004 at 05:58:57 AM EST


Njal's Saga: Just like Romeo & Juliet without the romance
[ Parent ]

Dealing with the presumption. (1.80 / 5) (#75)
by Baldrson on Thu Nov 18, 2004 at 07:25:44 AM EST

The presumption was that people would move their liquid assets to Swiss banks. Traditionally what this meant was that the Swiss would buy more gold to store away in their Alps fortress. The only other option Swiss banks have is Swiss real estate. Anything else simply locates the assets somewhere else. Without this, Swiss banks are fundamentally unable to compete with other banks -- especially banks backed by the de facto reserve currency of the world -- presently the US dollar. So the argument comes down to a simple one: How hard can it be to steal the gold (and/or real estate)? Has anything fundamentally changed recently that is unprecedented in 700 years and could render the Swiss banks more vulnerable?

For one thing, militant Muslims, among many other cultures never before present in europe in large numbers, are present in unprecedented numbers with a rate of onset that is culturally traumatic. For another thing, Europe's unification has created an unprecedent political situation surrounding and impacting on the Swiss. A move to grab the Swiss gold could occur from the EU itself if there is a fiscal crisis at some point. Either of these factors could erupt into armed conflict with the Swiss.

It's entirely unfair to call any civilization larger than 1000-10 000 people tribal, since tribal structures don't work for large bodies of people.

What I was referring to was the evolutionary psychology of tribalism, that still exists within people, that is manipulated by everyone from politicians to clergy to salesmen. While this instinct isn't going away soon, the ability to focus it on national identity -- particularly national identity that doesn't really reciprocate the sacrifices made in defense of that identity -- is going away soon.

-------- Empty the Cities --------


[ Parent ]

ASFAIK (none / 0) (#83)
by tetsuwan on Thu Nov 18, 2004 at 09:21:51 AM EST

The swiss banks have assets to the value of about $2 000 billion, but my guess is that they manage a lot more, maybe ten times that. Swiss banks, as almost all other banks, do not have assets to back up the amount they lend or manage. The rule that all accounts should be covered by assets is long gone, 75 years or so.

Njal's Saga: Just like Romeo & Juliet without the romance
[ Parent ]

Well then... (2.00 / 2) (#126)
by Baldrson on Thu Nov 18, 2004 at 02:14:05 PM EST

The question was predicated on massive flight of capital to Swiss banks which was itself predicated on the myth of Swiss banks being "good as gold". Of course to the extent the myth is untrue then the argument is moot. The point is that wherever the capital flees, it ends up in some nation where it is subject to protection. In that nation it will experience one of two things: 1) It will not be subject to any taxation and the government will have to get the locals to subsidize it, OR 2) Its profit stream will be subject to taxation, rendering that nation valuable only because it attracts less productive assets. 1 is increasingly untenable and 2 isn't much of a loss for the nations using the NAT since they're merely losing an unproductive owner class while cultivating a productive owner class.

-------- Empty the Cities --------


[ Parent ]

Yup (none / 0) (#140)
by tetsuwan on Thu Nov 18, 2004 at 05:31:23 PM EST

It's up to the Swiss people to protect its banks. They are very safe, I'd say. EU would launch an attack on Russia long before it ever attack Switzerland. The fact still is that Swiss banks are used for tax evasion and would be more so if a NAT was introduced. The money managing would bring jobs and prosperity to Switzerland without taxation; the only problem would be diplomatic pressure from the US.

Njal's Saga: Just like Romeo & Juliet without the romance
[ Parent ]

The Swiss have fought as mercenaries (none / 0) (#155)
by jeremyn on Thu Nov 18, 2004 at 10:00:22 PM EST

In the last 300 or 400 years. Reading Clancy is good for historical knowledge.

[ Parent ]
Ah, but Swedes have done that too (none / 0) (#169)
by tetsuwan on Fri Nov 19, 2004 at 03:39:54 AM EST

In all sorts of wars. We've criminals who fought for serbia in an effort to "kill the muslim hounds". There's the people in the French legion étrangéré, and so on. Mercenaries are by no means unique to Switzerland. The question is whether Switzerland in itself was involved, did the swiss have to go out to defend their homes? No.

Njal's Saga: Just like Romeo & Juliet without the romance
[ Parent ]

Another idea (none / 1) (#99)
by pyro9 on Thu Nov 18, 2004 at 11:15:47 AM EST

One idea I saw to control unfair assessment of property is a sort of put up or shut up system.

If you believe you have been over assessed, you have the right to demand that the government buy the property at their assessed value immediatly. If the government believes you have under-reported your property's value, it may demand to buy it from you at that price immediatly. In the case of owners under-valuating, this could be managed by proxy.

Faced with the prospect of actually having to make the transaction, both government and citizen will tend to valuate fairly.

Sentimental value and the simple desire to not have to move can be covered by adding appropriate percentages. To take a (VERY) extreme example, lets say that through various unfair influences, my $70,000 home gets taxed as a $500,000 asset and Bill Gates' mansion gets valuated at $st under the tax floor). I will happily demand that the government fork over the $500,000, and buy Bill's place for $200,000 (which will become it's new valuation for tax purposes unless I voluntarily increase it).

In the more reasonable form, where my house is fairly valued near $70,000, I have little fear that someone will pop up and demand to buy it for $140,000, and at the same time, I don't end up being taxed on it. If someone is stupid enough to pay me $140,000 (and assume a tax burden in the process!), the $70,000 profit should go a long way to covering my need to move.


The future isn't what it used to be
[ Parent ]
Weird (none / 1) (#110)
by curien on Thu Nov 18, 2004 at 12:29:13 PM EST

That is a huge erosion of property rights. I mean, what's the point in "owning" property if some Joe Schmoe can just walk up and demand it?

--
This sig is umop apisdn.
[ Parent ]
Eminent domain (2.50 / 2) (#121)
by Baldrson on Thu Nov 18, 2004 at 01:30:12 PM EST

That is a huge erosion of property rights. I mean, what's the point in "owning" property if some Joe Schmoe can just walk up and demand it?

Thats just an extension of the right of eminent domain. Eminent domain compensation is Constitutional.

-------- Empty the Cities --------


[ Parent ]

Limited (none / 0) (#136)
by pyro9 on Thu Nov 18, 2004 at 03:48:19 PM EST

They can't just walk up and demand it. They will have to pay twice what YOU said it's worth, and assume that double tax liability unless/until they can sell it off.

I agree that there are still issues with that proposal to be worked out. The basic intent is to prevent you from knowingly undervaluing your property to avoid taxes. One thing that comes immediatly to mind is that if there is no significant dispute in valuation, you're not subject to a forced sale. Another would be that the offer of a forced sale leaves you with the option to adjust your valuation instead.


The future isn't what it used to be
[ Parent ]
+1FP Ridiculous Idealism == Interesting Discussion (1.75 / 8) (#25)
by sllort on Wed Nov 17, 2004 at 05:59:37 PM EST


--
Warning: On Lawn is a documented liar.
Which ridiculous ideals get aired? (2.25 / 4) (#26)
by Baldrson on Wed Nov 17, 2004 at 06:03:23 PM EST

When the US currency collapses due to loss of its reserve status as US debt held around the world gets called in there are going to be some "ridiculous ideals" implemented to replace the ridiculous ideals currently implemented.

The question is which "ridiculous ideals" will be ready for adoption when the truly ridiculous ideals have caused the collapse of the dollar?

-------- Empty the Cities --------


[ Parent ]

Wrong (none / 1) (#29)
by sllort on Wed Nov 17, 2004 at 06:14:03 PM EST

Ridiculous policy will be implemented, with ideals as mere smokescreen. You mention Huey Long - perfect example. Idealism has not caused the collapse of the dollar; rather the American people and their propensity to elect profoundly stupid politicans are the culprits. Idealism is wonderful, because it points out that doing the right thing is immensely simple and immensely good, yet it has no place in the real world of American politics: a gutter trench filled with naked, bloody knife fighters pretending to be gentlemen, posturing for their prey before they put the knife in.
--
Warning: On Lawn is a documented liar.
[ Parent ]
True enough... (2.50 / 2) (#32)
by Baldrson on Wed Nov 17, 2004 at 06:24:55 PM EST

You're correct however there are situations where things do get clarified and people have to find simple solutions to a sea of problems and they can't fuck around or they just die.

-------- Empty the Cities --------


[ Parent ]

I believe history teaches us (none / 1) (#86)
by sllort on Thu Nov 18, 2004 at 10:08:03 AM EST

That most will usually opt to just die.
--
Warning: On Lawn is a documented liar.
[ Parent ]
Still an unfair tax. (2.57 / 7) (#30)
by mcgrew on Wed Nov 17, 2004 at 06:15:04 PM EST

I agree, the national sales tax is cruel to the poor and middle class.

However, what you are proposing is a national property tax. Property taxes are even more evil than sales taxes.

An income tax can always be paid. ALWAYS. The only reason for not paying your income tax is sloth.

A sales tax can likewise always be paid, even if it's painful.

But property tax... I'm against even local property taxes. I've known retired people who have lost their homes because they could no longer afford the property tax.

Your tax would remove all freedom, even the imagined freedom we have now.

It's possible to get "off the grid," to buy a few acres in the country, do without electricity, use a cictern or well for water, grow your own food and say "fuck the rat race," living like my great grandparents lived in the 19th century.

Your tax makes this impossible, rather than simply unlikely.

A fair tax would be a flat iuncome tax, with no deductions whatever, for anything. BUt you know as well as I do that that's even less likely than your "fair" tax.

How about we simply tax fairs?

"The entire neocon movement is dedicated to revoking mcgrew's posting priviliges. This is why we went to war with Iraq." -LilDebbie

You missed the subsistence exemption (3.00 / 2) (#31)
by Baldrson on Wed Nov 17, 2004 at 06:22:46 PM EST

in excess of levels typically protected under personal bankruptcy ... The levels typically protected by personal bankruptcy can be approximated by the median price of housing an individual added to the median capitalization of a job in the economy.

So, how much do you think that is?

-------- Empty the Cities --------


[ Parent ]

Property taxes can always be paid (2.00 / 4) (#38)
by ror on Wed Nov 17, 2004 at 06:57:41 PM EST

A property tax payment is never larger than the value of the property.

And honestly, a property tax makes a whole lot of sense. There is a finite amount of surface on the Earth. The question is: Are you making proper use of the land?

Land is rented. Sorry, that's a fact of modern life.

[ Parent ]

Are you making proper use of the land? (3.00 / 2) (#79)
by parabolis on Thu Nov 18, 2004 at 08:34:06 AM EST

The question is: Are you making proper use of the land?

And that question begs the questions of what constitutes a proper use of land and who makes such determinations. I suspect you will find these questions have no real objective means of answering them.

[ Parent ]
Quite simple: (2.80 / 5) (#111)
by Pxtl on Thu Nov 18, 2004 at 12:34:19 PM EST

Is it generating income, or are you generating enough income to justify your possession of the land?  Either you're makign money off of this property, or you can afford the luxury of owning it from your personal income.  Otherwise, you're squatting - the fact that you may have paid for it at some point in the past doesn't mean its not being wasted now.

My concern is this: property tax might encourage people to destroy their own property.  Pollute land, throw out appliances and vehicles, all to push the value down.

The government response to that problem might be some very nasty nanny-state stuff (what do you mean I can't take my car to the demolition derby?  That's what I bought it for!).

[ Parent ]

Not quite that simple (none / 1) (#123)
by parabolis on Thu Nov 18, 2004 at 01:49:09 PM EST

Is it generating income, or are you generating enough income to justify your possession of the land?

You answered the first and easiest of the questions I posed by restating your opinion. You avoided explaining why I should accept you criteria as valid. How can you justify taking my private property away from me because I have failed to use it in a way that makes you happy?

[ Parent ]
I understand your objection (2.50 / 2) (#40)
by speek on Wed Nov 17, 2004 at 07:05:49 PM EST

But consider:

With a property only tax, no one has to report anything except their property, which you essentially have to do when you purchase it anyway. After that, you're done. You can live off the grid from that point on. If you buy a residence only, below the subsistence level, which is fairly high, you have no tax. Furthermore, for those that own a ton, but don't have the income to pay the tax, you're essentially saying to them, "if you're not using it, sell it to someone who will". Compare that to an income tax which only takes money from those who are productive and gives a free pass to those squatting on fortunes.

Also, renters essentially live off the grid with the property tax. They pay it, but it's not their responsibility, and it's not their name. They report nothing whatsoever. So really, it makes living "off the grid", or at least, without being tracked by the government, much more likely.

--
al queda is kicking themsleves for not knowing about the levees
[ Parent ]

Amendment (2.80 / 5) (#56)
by rusty on Wed Nov 17, 2004 at 11:12:09 PM EST

A fair tax would be a flat tax on gross income (of any kind) over some floor level, which should be set annually based on cost of living. I would favor setting this floor rather high -- like way above the poverty level. Something that pretty much rules out taxing anyone who doesn't have at least some modicum of discretionary income after being able to afford food, clothing, housing, and transportation. I agree with no deductions beyond the basic income level.

____
Not the real rusty
[ Parent ]
That is in the right direction (none / 0) (#90)
by pyro9 on Thu Nov 18, 2004 at 10:14:31 AM EST

I support a move to an asset tax, but would support your proposal as at least moving in the right direction. I would call for the formula to compute that floor level to be encoded into the law indexed to a real cost of living to prevent the passive expansion of the tax that we got with the original income tax.


The future isn't what it used to be
[ Parent ]
Small business? (none / 1) (#144)
by wurp on Thu Nov 18, 2004 at 06:19:10 PM EST

Wouldn't that essentially eliminate small business?  If I make a 5% return on the product I move, I pay 20x as much tax on my profit as someone who just works for a living.
---
Buy my stuff
[ Parent ]
Inventory turnover (none / 0) (#149)
by Baldrson on Thu Nov 18, 2004 at 08:07:00 PM EST

If you have a huge inventory you are turning over very slowly then, at some level yes you'll run into problems with the NAT.

But in general, no, you won't be worse off with the NAT since you'll probably have a good portion of your business operating with zero taxation of any kind. Remember, bankruptcy protects both home and tools of the trade so much of your business will fall within the standard exemption if its typical of the capitalization of a job.

What sort of turnover rates were you presuming on what sort of inventory?

-------- Empty the Cities --------


[ Parent ]

I was responding to rusty (none / 0) (#151)
by wurp on Thu Nov 18, 2004 at 08:26:12 PM EST

not re: NAT
---
Buy my stuff
[ Parent ]
what you missing (none / 1) (#59)
by nomoreh1b on Thu Nov 18, 2004 at 01:15:53 AM EST

the fairtax bill affects urban poor and rural poor differently. Both get the same prebate-which means the rural poor will be much better off.

[ Parent ]
Boo Fuckin' Hoo (2.62 / 8) (#67)
by Peahippo on Thu Nov 18, 2004 at 05:01:54 AM EST

I've noticed that modern America acts as a "bribocracy". People act on bribes to assault other population sectors and to protect their own resulting fiefdoms.

We went through a massive expansion of corporate wealth, and -- oh, what a coincidence! -- corporate taxation has dropped significantly.

We're on the tail end of a massive stock bubble, and -- oh, lookie! -- the inheritance tax is going away.

We're still rising through a housing bubble, and -- oh, wouldja lookit that! -- people are now complaining that property taxes are too high.

I predict that property taxes will go away too. The only thing left will be murderous levels of income taxes, since the only population left is the unbribed one: the working middle class and poor. Without the means to resist assault, taxes upon them will continue to rise until they are utterly broken men.

This is the America we REALLY want: a sociopathic land of bribed men who fully support SWAT teams kicking in the doors of people who are not themselves. Issues of progressive taxes are being literally gutted with each passing year.

We're doomed. But in such doom, there will be marked opportunity for a determined man with a rifle and a hard heart. Frankly, I'm looking forward to it.


[ Parent ]
now complaining? (none / 0) (#82)
by wiredog on Thu Nov 18, 2004 at 09:11:07 AM EST

California passed Proposition 13 in the 70's.

Wilford Brimley scares my chickens.
Phil the Canuck

[ Parent ]
CA != Nation [nt] (none / 0) (#190)
by Peahippo on Fri Nov 19, 2004 at 11:18:25 AM EST



[ Parent ]
Not an issue (2.25 / 4) (#88)
by pyro9 on Thu Nov 18, 2004 at 10:08:57 AM EST

IIRC, the proposal calls for asset taxation to begin only when your recorded assets exceed bankrupcy protection. That means that a reasonable house and cars will not end up taxed at all.

It's possible to get "off the grid," to buy a few acres in the country,...Your tax makes this impossible, rather than simply unlikely.

A few acres in the country without city water or electricity is quite likely to be valued below the level of bankrupcy protection. Land that far out in the country is dirt cheap (pun intended, so sue me :-) and a house without modern convieniances will have a low market value even if the owner personally values it greatly.

The objective is to do away with income tax for several reasons. The first on most people's minds is to avoid the annual 1040 shuffle. By the time you add up the stolen hours of labor on the part of each individual and employer, the price of that shuffle is quite high.

A more fundamental issue is the nature of taxes. A government should tax what is undesirable to society. Apparently, our society believes that income is bad but mindless accumulation of property is good. If we believe the opposite, then we should implement an asset tax. If we believe that sales are bad, we should implement a sales tax.

When the income tax was first implemented, it was supposedly not to affect the average American at all. It was set up so that most people's income was below the level where they were even required to file a tax return. Unfortunatly, the income levels were set to absolute dollar amounts rather than being indexed values. Over the years, inflation raised the absolute numbers and allowed Congress to passively expand the tax to affect nearly everyone. A key benefit to the asset tax is that it is to be indexed to bankrupcy protection (that is, the cost of a reasonable home, transportation and tools of your trade).

It wasn't covered in this article, but another key part of this is that investments are not counted as assets. So if you don't want to pay taxes on your mansion, mortgage it and invest. Pay the mortgage from investment dividends. Income is good, capital gains are good, investing wealth in new business is good, sequestering wealth in yachts and a home for each season is bad.


The future isn't what it used to be
[ Parent ]
The nature of taxes... (none / 0) (#267)
by kurtmweber on Tue Nov 23, 2004 at 01:03:32 AM EST

...is to not exist. It's not government's job to shape society.

Kurt Weber
Any field of study can be considered 'complex' when it starts using Hebrew letters for symbols.--me
[ Parent ]
Fair Tax (2.75 / 4) (#33)
by zenofchai on Wed Nov 17, 2004 at 06:29:29 PM EST

Let's see... there are a couple of missed typos, but let's ignore them.

Let's see... this is Baldrson again, but let's ignore that. Of late some of the more interesting articles which kept me in discussion for days have come from this epochal author.

This is indeed a very interesting topic to me and which was discussed a bit here at K5 under my diary The Fair Tax Act. Not knowing the details of the NAT system which you propose, my first reactions would be that even granting the exemptions, it creates a situation where (1) the government is strongly incented to assess the highest possible property values it can and (2) individual property owners which no income but "valued" property would be forced to sell to pay their tax.

For me, for the NAT to work it would have to exclude the primary residence and its attached lands. One wonders how much that would effect the income earned the government through the NAT system.

Also, it seems to me that you mis-represent the strength of the "negative income tax" portion of the National Sales Tax (FairTax(TM)). There is an interesting (albeit horizontally compressed for effect) graph over at the FairTax FAQ: Is the FairTax progressive? Do the rich pay more and the poor pay less as a percentage of their spending?

I look forward to learning more about the NAT, +1 for an informative article.
--
The K5 Interactive Political Compass SVG Graph

See my post below (3.00 / 3) (#35)
by Nursie on Wed Nov 17, 2004 at 06:37:27 PM EST

The so called "Fair Tax" taxes families with more mouths to feed more on their essentials than it taxes individuals without children, who don't need to spend as much to survive. Historically the opposite has always been done.

Meta Sigs suck.

[ Parent ]
but (none / 1) (#39)
by zenofchai on Wed Nov 17, 2004 at 06:58:10 PM EST

doesn't the Fair Tax stipulate a larger monthly "dole" for families with more mouths to feed, for this very reason?

regardless, goodness knows a little encouragement against having that 6th child might not be the worst idea ever to be voiced.
--
The K5 Interactive Political Compass SVG Graph
[ Parent ]

Well yeah, that seems fine (2.50 / 2) (#41)
by Nursie on Wed Nov 17, 2004 at 07:08:31 PM EST

And I don't have kids and don't have plans to, so I'd rather not pay to gve parents tax breaks (on top of what I pay for schools)

Meta Sigs suck.

[ Parent ]
Shouldn't we be removing the incentive to breed? (2.00 / 2) (#233)
by toganet on Sun Nov 21, 2004 at 09:31:55 AM EST

We've got population problems looming as it is -- and consider the fact that Latinos are multiplying faster than whites, and this quickly becomes an issue that the red states will get behind.

Johnson's law: Systems resemble the organizations that create them.


[ Parent ]
The fertility rate (none / 0) (#262)
by NoBeardPete on Mon Nov 22, 2004 at 04:11:20 PM EST

The fertility rate in the US has been at or below the replacement rate for a little while now. If it wasn't for immigration, the population would soon start to fall. This does not suggest to me that we need to start removing incentives for people to have children.


Arrr, it be the infamous pirate, No Beard Pete!
[ Parent ]

It does... (2.66 / 3) (#36)
by Baldrson on Wed Nov 17, 2004 at 06:47:15 PM EST

Let's see... there are a couple of missed typos, but let's ignore them.

The story was moved to vote in record time. Some people really didn't want to see this discussed or submitted in a flawless form.

For me, for the NAT to work it would have to exclude the primary residence and its attached lands.

As it does. The subsistence exemption based on bankruptcy protection is precisely what you say.

Also, it seems to me that you mis-represent the strength of the "negative income tax" portion of the National Sales Tax (FairTax(TM)).

I'll have to dig out the references for the $6k figure but the "FairTax(TM)". The proposal isn't going to be implemented by the Bush administration exactly as described on the "FairTax(TM)" site.

-------- Empty the Cities --------


[ Parent ]

Why shouldn't they be forced to sell? (1.75 / 4) (#43)
by ror on Wed Nov 17, 2004 at 07:13:43 PM EST

Honestly, if someone has no income and they're living in a high value area, they do not deserve it.


[ Parent ]
how morally upstanding of us! (3.00 / 4) (#49)
by zenofchai on Wed Nov 17, 2004 at 08:05:07 PM EST

let us go and take the property of those who do not deserve it, and pick those who deserve it more to receive the benefits.
--
The K5 Interactive Political Compass SVG Graph
[ Parent ]
You could (none / 0) (#62)
by nomoreh1b on Thu Nov 18, 2004 at 01:32:46 AM EST

HAve a land tax in which people could stay in their property the rest of their life-they simply couldn't sell it if they were behind on taxes. Now, the fact that Baldrson's proposal has a healthy exemption, means that lots of people will have a little bit of property _really_ free and clear. All you have to do to avoid being forced to sell your property is to pick a property in a not so high price area.

[ Parent ]
ficticious situations (2.60 / 5) (#37)
by zenofchai on Wed Nov 17, 2004 at 06:56:03 PM EST

Bob owns a large apartment building he inherited from his father (his older brother got the condos at the beach). Bob isn't particularly wealthy, and currently rents the 20 units at $500 per month, bringing a gross income of $10,000 per month or $120,000 per year. With upkeep costs, maintenance workers, paving the parking lot, and so on, let's call his yearly profit $50,000. Let's assume that the apartment complex is assessed at $1 million USD.

Questions:

  1. How much tax does Bob currently pay? (I honestly don't know how rental property works with current income taxes).
  2. How much tax would Bob pay under NAT?
  3. How much tax would Bob pay under FairTax, assuming that he spends 100% of his income?
Fred inherited the sprawling family farm from his beloved parents. It used to be worth $100,000 a few years ago, but now that the suburbs have begun to grown around it, it is assessed at $1 million USD. Fred is content to just live there happily and doesn't want to sell, rather he wants to just live out his life on the family farm which goes back for generations. Fred carves out a meager income of $20,000 from farming part-time.

Questions:

  1. How much tax does Fred currently pay?
  2. How much tax would Fred pay under NAT?
  3. How much tax would Fred pay under FairTax, assuming he spends 100% of his income?
Obviously NAT works out incredibly well for people who (1) currently pay some tax and (2) own land which is valued at or below the exemption rate, or are able and willing to sell their property -- people who own as little as possible. The FairTax seems to work out best for people who don't spend as little as possible (effective tax rate increases as total spending increases). The current income tax works best for those with the least income.

I think we can agree that the current income tax system is in jeaopardy of falling on its head (witness Italy with its 1.2 or whatever workers per retiree), and is of course "unfair" in its application. Let's answer some of these questions and learn what we can about NAT, shall we?

Personally I still prefer the FairTax proposal -- it at least seems to stand some snowball's chance of being implemented, supported as it is by a handful of senators and a good number of representatives. But as always I am open to new ideas (it's the damned liberal in me, I confess!).

The primary concern with me is no longer the "poor guy will lose his house" argument or even "well even Bill Gates shouldn't have to move out of his house because he can't pay the property tax on it". The prime concern is that those will assets (let's call them the Haves) will take their business acumen and liquid personal wealth elsewhere to avoid the property taxes. But I think this concern falls flat -- after all, their liquid personal wealth and businesses would be worth more in a United States under the NAT -- no sales tax to dampen their liquid wealth and no income tax to dampen their business seeking more income.

As I've often admitted I'm absolutely no student of economics and admire those who grasp it well. But instead of a "waving my hands here, yessirree this here plan is da bestest!" I would like to be treated to a detailed (but not too detailed, remember I am a simpleton after all) explanation of why this works.

(And about the free market democracy -- dream on! Neither the Republicans or the Democrats have any interest in voting themselves out of power!)
--
The K5 Interactive Political Compass SVG Graph

Critical threshold formulae (3.00 / 4) (#46)
by Baldrson on Wed Nov 17, 2004 at 07:18:09 PM EST

Here are the formulas for calculating critical thresholds for the NAT -- as given from the original white paper:

Let's say ROR is the BEFORE TAX rate of return an entity can typically
get from its assets including capital gains as well as profits.  Let's
say ITR is the income tax rate and ATR is the government debt rate
and therefore would be the hypothetical asset tax rate.  Let's say
the entity owns net assets with a market value totaling MV.  

For simplicity, let's ignore the standard exemption and assume
that the capital gains tax rate is the same as the income
tax rate:

The income I = ROR*MV  
Income tax IT = I*ITR  
After income tax income AITI = I-IT
After income tax rate of return AITROR =  AITI/MV
Asset tax AT = MV*ATR
After asset tax income AATI = I-AT
After asset tax rate of return AATROR = AATI/MV

Now we can ask:

What how efficient does a business currently have to be in order
to prefer the NAT over the current tax system?

This is the same as asking:

At what values of ROR is AATI>AITI?

First let's set AATI=AITI:

I-AT = I-IT                ; Substituting for AATI and AITI
I-MV*ATR = I-I*ITR            ; Substituting for AT and IT
MV*ROR-MV*ATR = MV*ROR-MV*ROR*ITR    ; Substituting for I
ROR-ATR = ROR-ROR*ITR            ; Dividing by MV
1-ATR/ROR = 1-ITR            ; Dividing by ROR
ATR/ROR = ITR                ; Subtracting 1
ROR = ATR/ITR                ; Solving for ROR

So if your BEFORE tax rate of return on net assets is greater than
the hypothetical asset tax rate divided by the income tax rate,
you want the NAT.  If it is less, you want the present system.

In terms of current AFTER INCOME TAX rates of return, this translates to:

AITROR = AITI/MV            ; Definition of AITROR
AITROR = (I-IT)/MV            ; Substituting for AITI
AITROR = (I-I*ITR)/MV            ; Substituting for IT
AITROR = (ROR*MV-ROR*MV*ITR)/MV        ; Substituting for I
AITROR = ROR-ROR*ITR            ; Simplifying
AITROR = (ATR/ITR-ITR*ATR/ITR)        ; Substituting for ROR
AITROR = ATR/ITR-ATR            ; Simplifying
AITROR = ATR*(1/ITR-1)            ; Collecting ATR

So under current conditions (approximately)
Setting ATR = .06    ; Interest on national debt is about 6%
Setting ITR = .28    ; Income tax is about .28% (ignoring social
security)

AITROR = .06*(1/.28-1)
AITROR = .154

In other words, if our current after tax (ignoring social security tax)  
income (including capital gains) is more than 15.4% of our net assets,
we benefit from the NAT.  We'll call the AITROR at which we prefer
the NAT over the current tax system the "Critical AITROR".  For each
Critical AITROR there is an implied "Critical AITI" which is simply
the level of after tax income one must be making under the current
income tax system, in order to prefer the NAT.  

If we factor in the standard exemption (E) as well (still ignoring
social security tax relief) the Critical AITROR is given by the formula:

Critical AITROR = (1/ITR-1)*(1-E/MV)*ATR

The Critical AITI is given by:

Critical AITI = MV * Critical AITROR

Now,

Setting E = $100,000:

Critical AITROR = (1/.28-1)*(1-$100,000/MV)*.06

For various values of MV (market value of net assets), then the
Critical AITROR's (still ignoring social security tax relief) are:

MV        Critical AITROR    Critical AITI/YEAR
$0 - $100,000    0%            $0
$150,000    5.1%            $7650
$200,000    7.7%            $15,400
$300,000    10.3%            $31,200
$500,000    12.32%            $61,600
$1,000,000    13.77%            $137,700

These are the figures that are most relevant to wealthy retirees
and other individuals who pay no social security.

The most regressive of all taxes, Social Security payroll tax, is
at 15.3% of your income (I) up to $53,400 (split 7.65% for you and
your employer half and half).  Taking this into account, for
incomes (I) up to $53,400, ITR is close to 40%, so adjusting
for social security, the critical AITROR without the exemption
is only 9%.  With the exemption the formula is:

Critical AITROR = (1/.40-1)*(1-$100,000/MV)*.06

This formula is a good approximation for MV's up to approximately
$500,000.  As MV values rise beyond $500,000, the Critical AITROR
factor of .40 decays, approaching .28.

For each level of net asset ownership, there is a critical after
income tax income (AITI) above which we prefer the NAT over the
current tax system.  This critical AITI is simply the critical
after income tax rate of return one one's assets, multiplied
by one's assets.  

Taking into account social security tax relief under the NAT, as
well as the $100,000 standard household exemption on net assets,
the critical AITI levels needed to prefer the NAT are:

For various values of MV (market value of net assets), the
levels of income we need to prefer the NAT over the current
tax system are approximately:

MV        Critical AITROR        Critical AITI/YEAR
$0 - $100,000    0%            $0
$150,000    3%            $4500
$200,000    4.5%            $9000
$300,000    6%            $18,000
$500,000    7.2%            $36,000

**************

 

-------- Empty the Cities --------


[ Parent ]

possible answers (2.66 / 3) (#47)
by speek on Wed Nov 17, 2004 at 07:29:03 PM EST

Bob may have to sell his rentals and become a productive member of society. But look, he doesn't have to pay tax on the sale. Hell, he doesn't even have to report the earnings from the sale. Alternatively, Bob could raise his rental rates and try to compete with his renters buying homes on which they'll have to pay no taxes. The NAT sucks for landlords - strikes me as a win.

Fred's situation is more difficult, but not unfair in a strictly economic sense. Who's going to complain that their property gained 10x in value? Fred can sell the farm, go buy a new one that costs $100,000, and keep all of the $900,000 profit. It sucks on a personal level for Fred, but I don't feel sorry for him in nearly the same way I would for poor families deaing with a national sales tax or paying income tax on their two jobs.

As for businesses moving overseas to avoid the tax - first, they wouldn't be moving to Europe where they'll have to pay much higher taxes on the employees incomes. Although they'll be paying tax on property values, they'll pay none on income, on tax lawyers and IRS audits.

--
al queda is kicking themsleves for not knowing about the levees
[ Parent ]

And... (none / 0) (#154)
by DavidTC on Thu Nov 18, 2004 at 09:32:26 PM EST

...Bob could always turn his apartments into condos and sell them off one at a time.

With no sales tax, he Property rental is an idiotic game, anyway. Anything we can do to stop it is a good idea.

-David T. C.
Yes, my email address is real.
[ Parent ]

Landlords (none / 0) (#312)
by signal15 on Mon Nov 29, 2004 at 02:10:02 AM EST

Tell me how Bob is not a productive member of society being a landlord. If it wasn't for landlords, many people who do not have credit or the money to afford a house would be homeless. In addition, at least in MN, landlords end up financing the schools that children living in their apartments attend. Renters get a refund each year for the portion of property tax that their rent went to. So, Bob may not be doing a whole lot of work running his apartment building which he inherited, but he's still providing housing to people who otherwise wouldn't have it if there were no landlords, and he's (probably unwillingly) paying the property taxes which mostly go to schools (at least in my city).

[ Parent ]
Good and bad (none / 0) (#313)
by Nursie on Mon Nov 29, 2004 at 06:02:32 AM EST

If there were no landlords then it would be impossible to rent homes and that would be A Bad Thing(TM). However you can't have too many landlords either. Look at what has happened in the UK.
We have had a housing boom to the extent that prices were on the up and up for years, and noone thought it would stop. ever. (retards!). So people bought property. The world+wife decided it was good to be a landlord. This had two effects:
1) Flood the rental market so rent in some places like London plummeted.
2) Heat up the already overheated UK housing market even further so pricing first time buyers out of the game.

At the moment I can't afford to buy a small one bedroom flat in a nice part of London. I can easily afford to share the rent on a huge townhouse in a reasonable part though.

So, too many landlords can be a bad thing. All I'm waiting for is the price-drop that's around the corner when everyone realises they've strangled the new money that comes into the market at the bottom and the great big fantasy that UK house prices are at the moment comes to an end.....

Meta Sigs suck.

[ Parent ]
Bob and Fred Hate the NAT and support Bush (2.80 / 5) (#48)
by Baldrson on Wed Nov 17, 2004 at 07:53:42 PM EST

As given in my prior response:

For various values of MV (market value of net assets), the
levels of income we need to prefer the NAT over the current
tax system are approximately:

MV        Critical AITROR        Critical AITI/YEAR
$0 - $100,000    0%            $0
$150,000    3%            $4500
$200,000    4.5%            $9000
$300,000    6%            $18,000
$500,000    7.2%            $36,000

**************

Both Bob and Fred have assets well above $500,000 and neither have after tax rate of returns greater than 7.2% so both of them hate the NAT.

On the other hand, neither of these guys can be seen as particularly good citizens for obvious reasons.  People like them hoard real estate and do deprive others of an equity stake in their own subsistence assets.  Meanwhile they ask folks other than themselves to die for protection of their asset rights.  

-------- Empty the Cities --------


[ Parent ]

protection of their asset rights (2.00 / 2) (#102)
by zenofchai on Thu Nov 18, 2004 at 11:48:59 AM EST

Meanwhile they ask folks other than themselves to die for protection of their asset rights.

Can Bob or Fred "opt out" of this protection and just have private guard patrols, or, egads, rely on the non-aggression of their neighbors?
--
The K5 Interactive Political Compass SVG Graph
[ Parent ]

Enclaves and opting out... (none / 1) (#120)
by Baldrson on Thu Nov 18, 2004 at 01:23:39 PM EST

Can Bob or Fred "opt out" of this protection and just have private guard patrols, or, egads, rely on the non-aggression of their neighbors?

This is sort of like a question that came up in a prior discussion of self-determination/secession where someone asked if Nebraska were to "opt out" of the United States, how would it be fair to the States that paid full taxes and offered conscripts for defense?

The answer is, it wouldn't be fair but then if _heartland_ areas opt out of the Union then this indicates something is seriously worng with the way the boundaries of the the Union are drawn up anyway. Moreover, it makes sense to have mutual defense treaties that amount to a mutual reinsurance network backed by military and police duties from the participants. NATO isn't too far from this, even given its obvious problems. The question in that case is what can the participants of such a mutual reinsurance network expect to have to pay as part of their monetary premium? I think it clearly depends on at least two variables:

  1. How much are they contributing in the way of personnel.
  2. How much as they asking be insured?
Number 2 posits basically the same thing already stated -- that their assets be assessed and they pay in proportion to their coverage minus their personnel committment to the mutual reinsurance network. This is basically the NAT proposal already described above.

PS: No you _can't_ just expect your multimillion dollar estate to be left unmolested by your neighbors. Property rights are not natural rights. We create those rights with certain reciprocal obligations.

-------- Empty the Cities --------


[ Parent ]

natural property rights (none / 0) (#125)
by zenofchai on Thu Nov 18, 2004 at 02:10:51 PM EST

I certainly agree that property rights are not natural rights; this is an easy notion when the property is land (be it undeveloped or "improved" with a house, etc). But I have problems with my own logic when I think about property as the "shirt off of my back" -- "surely I have a natural right to not have my shirt taken from me, or my wallet (even empty) taken from me," I want to tell myself, even while I do not believe that land property rights are natural rights.

Also, if land property rights are not natural rights, then why bother with any eminent domain compensation, why allow the use of force to "defend" your land property at all?
--
The K5 Interactive Political Compass SVG Graph
[ Parent ]

Agreed with limits.. (none / 1) (#127)
by Baldrson on Thu Nov 18, 2004 at 02:22:29 PM EST

"surely I have a natural right to not have my shirt taken from me, or my wallet (even empty) taken from me," I want to tell myself, even while I do not believe that land property rights are natural rights.

What you are talking about is what I am calling vital or subsistence assets. Yes there is a natural way to view your relationship to your shirt -- it is an extension of your body -- part of what keeps you alive. People are built to defend their vital interests. Note the difference between vital interests and economic interests. They overlap but they are _not_ the same.

-------- Empty the Cities --------


[ Parent ]

subsistence, shelter, and recreation (none / 1) (#135)
by zenofchai on Thu Nov 18, 2004 at 03:32:04 PM EST

So I perhaps finally understand. There eventually has to be someone deciding whether a person's house is their "vital shelter" and their "economic interest nice thing". If it is their "vital shelter" it should not be taken from them as a natural right, but if it is their "economic interest nice thing" then no such natural right exists, and we can feel morally justified to tax it.

Your proposal simply allows us to define the boundary between "vital shelter" and "economic interest nice thing" through an economic formula, attempting to remove the (arguably nearly always) loathesome aspect of human corruption in the decision.

So that is my "complete jackass layman's terms" interpretation at this time. If I understand it correctly, then I at once prefer this system to our current system (well almost anything is better than our current system) but I would still prefer a national sales tax (with a negative income tax) to a national asset tax. Although your complex (to me it is very complex, perhaps to you it is like simple addition) formula does purport to remove corruption in assessment of taxes, I feel that it opens a large window of opportunity and incentive for those who can under-represent or otherwise hide the value of their property to do so. (Take insurance with out-of-country companies, for example.) Additionally, the complex formula begs for special interest attention to tweaking and manipulating the parameters.

The national sales tax's main pitfalls are (to me) that they incent buyers to find sellers who will sell goods or services to them without assessing the sales tax -- under "FairTax" this would be used goods markets, business-to-business goods and services markets, rental markets, and black markets for goods and services.

Used markets -- under "FairTax" used goods would be exempt, as the national sales tax is only applied to the first sale of a new item. To me, this has several benefits instead of drawbacks. Lower-income families could shop at used markets with their full, untaxed income, without paying a national sales tax. The purchase of second-hand and recycled goods would be incented to the tune of 30% of the purchase price, not counting the difference in sales price between the new and used good. While we may not want to produce "fewer things" (as this requires fewer people to do the producing!) in the end I find the "used market" exemption a good one.

I'll skip B2B and rental for a moment to discuss the "black market" area. Already there are some common at least "gray" market areas where people shop, not necessarily to avoid the current 5-7% sales taxes, but in that these markets generally do not assess tax in exchange for their goods or services. When visiting a farmer's market booth, for example, very few that I've patronized have asked for sales tax. Roadside vendors selling fresh fruit, for example. I simply do not believe that the general populace will seek out black markets, even for higher end items such as computers and the like (perhaps especially so for computers as they require things like warranties and might need to be returned, etc).

The "rental" market is an interesting area which comes to light under a national sales tax. Since there is no sale to be taxed, rental of items (such as movies, cars, houses, etc) are taxed as a "service". So there really is no "loop-hole" here.

The "business-to-business" market exemption falls under the same definition: only the first end-use sale of a new item or service is to be taxed. This is where, I think, the most tax avoidance effort will be exerted. But we already have programs and processes for this exemption today, in fact I can walk down to Staples and flash a nice little Employer Tax ID card and not pay sales tax.
--
The K5 Interactive Political Compass SVG Graph
[ Parent ]

So (none / 0) (#311)
by signal15 on Mon Nov 29, 2004 at 02:03:20 AM EST

Kind of unrelated, but there was an article about the great wealth of the Vatican and how much of their assets was due to land they've owned for hundreds of years and it's appreciated. Since the catholic church is not taxed in the US, it's reasonable to assume that over time they may gain a ton of property because of this. Buy it up when people can't afford the tax, and then sit on it. Since they don't have to worry about the tax, they can hold it forever.

[ Parent ]
Question (2.66 / 3) (#42)
by ror on Wed Nov 17, 2004 at 07:09:55 PM EST

How well does an asset tax work when there is trade with other countries on income tax? What makes you think that companies won't just store stuff outside of the country, leaving the middle class out in the rain again, since they keep everything at home?


It's all give by the following table (3.00 / 3) (#50)
by Baldrson on Wed Nov 17, 2004 at 08:07:06 PM EST

For various values of MV (market value of net assets), the
levels of income we need to prefer the NAT over the current
tax system are approximately:

MV        Critical AITROR        Critical AITI/YEAR
$0 - $100,000    0%            $0
$150,000    3%            $4500
$200,000    4.5%            $9000
$300,000    6%            $18,000
$500,000    7.2%            $36,000

**************

AITROR is After-Income Tax Rate of Return on MV
AITI is the After-Income Tax Income (take home)

Basically what happens is idle wealthy companies migrate their assets elsewhere and people who are productive with their assets migrate to the country with the NAT.

-------- Empty the Cities --------


[ Parent ]

aha (none / 1) (#54)
by ror on Wed Nov 17, 2004 at 09:00:17 PM EST

But why don't the productive companies keep most of their assets elsewhere while working in the NAT country?

Hmm, I suppose export/import taxes could fix that loophole. Still, that's just another transferring tax, like sales and income.

[ Parent ]

Trade tariffs are exactly what you use there. (2.50 / 2) (#55)
by Baldrson on Wed Nov 17, 2004 at 09:54:03 PM EST

Tariffs are traditionally meant to protect the defense infrastructure of the country from foreign interference.

There is a direct conflict here, of course, between international interdependency, which is supposed to prevent war, and national independence, which is for war preparedness. The correct solution to this problem is to have other countries adopt the NAT rather than to have countries that adopt the NAT avoid protectionist tarrifs.

Moreover, there are such things in the insurance industry known as "Acts of God" which are made worse by too much global interdependence. A natural result of such interdependence is specialization and therefore centralization of key components of the global economy which become vulnerable to Acts of God as well as terrorism/extortion.

-------- Empty the Cities --------


[ Parent ]

errr..... (none / 0) (#107)
by bankind on Thu Nov 18, 2004 at 12:02:26 PM EST

Interdependency (that could avert war) is not the first reason to oppose tariffs, increases in welfare/income is far more proven/relevant/pressing.

Then you bring up exogenous shocks as a deterrent to interdependence (which you get a bit wrong, the issue is more related to playing interest/x-change rate games, s.a. Japan pre-Plaza accord). Furthermore, autonomy during one of your `acts of god' would be far more destructive, with a strong transport infrastructure sourcing is very easy to accommodate (look at the migration speed of textile production in Southeast Asia or a Honda distributed production network sometime). Or just look at North Korea when that train exploded.

But then I guess the "third sector/civil society" that you propose as a result of a "market democracy" would solve all those problems.

"Insurgents are blowing up pipelines and police stations, geysers of sewage are erupting from the streets, and the electricity is off most of the time -- but we've given Iraq the gift of supply-side economics." -Krugman
[ Parent ]

Why should location matter (none / 0) (#94)
by pyro9 on Thu Nov 18, 2004 at 10:52:52 AM EST

There is no reason that location has to matter. If you live in or do business in the U.S. you can be taxed based on your total assets, wherever they may be.

It can even be shown to be fair enough. The U.S. does end up spending money to protect it's citizen's foreign assets (primarily in the form of diplomacy and military action, or at least demonstrable readiness for military action), so why shouldn't that service carry a price?

It might also be reasonable to tax or tarrif the export of wealth while crediting the import of wealth. By wealth, I mean wealth to society rather than personal wealth. That is, exporting jobs is a net export of social wealth.


The future isn't what it used to be
[ Parent ]
Sorry, higher property taxes are bad. (2.33 / 6) (#52)
by sudog on Wed Nov 17, 2004 at 08:18:18 PM EST

They make it harder for poor people to live in homes, and force them into the country where they can afford to buy and live in, houses that subsequently don't have access to the services and quality of life a city potentially provides.

Try again.


Cities are a security risk for rich and poor alike (2.20 / 5) (#53)
by Baldrson on Wed Nov 17, 2004 at 08:31:35 PM EST

The big difference between the NAT and the fair tax in terms of urban vs rural conflict (red vs blue America) is the NAT decentralizes jobs, services and infrastructure as well as population.

This is because the NAT reflects the cost to the government of providing security to assets. The subsidy of centralized asset ownership has hyper-urbanized the population and made the cost of living in urban areas higher than it should be for people who aren't rich while subsidizing rich people who set up up dense, and therefore militarily and politically vulnerable structures.

-------- Empty the Cities --------


[ Parent ]

land taxes (none / 1) (#61)
by nomoreh1b on Thu Nov 18, 2004 at 01:25:07 AM EST

I would suggest you look seriously at land taxes work. The trick is to exempt the value of buildings.

[ Parent ]
tax-exempt entities (3.00 / 8) (#57)
by cronian on Thu Nov 18, 2004 at 12:02:42 AM EST

What would be the impact on tax-exempt foundations, and religious organizations. Presumably, they would be exempt from this tax. For instance, I could see the Catholic church uses its tax-exempt status to become major leaser. Land lords could be undercut by these organizatons.

While some may think it is better thing if more of the economy is controlled by non-profits and religious institutions, I'm not sure if that is a good or a bad thing.

We perfect it; Congress kills it; They make it; We Import it; It must be anti-Americanism
While importantt -- A Second Order Issue (2.75 / 4) (#58)
by Baldrson on Thu Nov 18, 2004 at 01:13:28 AM EST

There doesn't seem to me to be any reason to exempt any class of entities, other than the source of conscript and technology, ie: subsistence households and inventors (as opposed to assignees), from the NAT.

However, if there is going to be porkbarrel politics it is best played out in terms of what assets are exempt than what income and/or sales is exempt/deductible.

-------- Empty the Cities --------


[ Parent ]

politics (none / 0) (#142)
by cronian on Thu Nov 18, 2004 at 05:58:50 PM EST

If you want to get rid of any tax-exempt status, politically, that is whole other issue. The thing is that if this were implemented by congress, they would sure as hell make sure tax-exempt entities stay tax-exempt.

If the tax exemption was done only for certain types of assets, some people there is going to be an incentive to have those assets. A lot of buildings would suddenly get turned into "churches".

Companies, that compete with tax-exempt institutions, pretty much only have to pay a tax on their profits, so the non-profit organizations don't really have that much of competitive advantage. However, with the estate tax the whole equation is changed, more drastically. Of course, to become a non-profit, you have to get approved by the IRS, which isn't always so easy to do for the small business man.

We perfect it; Congress kills it; They make it; We Import it; It must be anti-Americanism
[ Parent ]
Um... (none / 0) (#152)
by DavidTC on Thu Nov 18, 2004 at 08:50:47 PM EST

Doesn't this issue already exist? With regard to non-profit organizations?

The IRS, or whatever organization would be doing this, isn't run by idiots. They're not going to let you set up a non-profit organization designed solely to own all your stuff so you don't pay taxes, just like, right now, you can't invent a church to run your business and still take profits from it.

The only issue that exists is real non-profit organizations turning around and making money (Which is legal for non-profits to do, despite what some people think.) by leasing their properties to others, which they can do cheaper because they don't pay taxes.

So all you have to do is say that 'If a non-profit organization leases its property to someone who is not, itself, non-profit, that someone has to pay the taxes, for the amount of time of the lease.'. (Of course, the non-profit organization is free to reduce the lease price by that amount, so they're paying the taxes.)

You might want to put in a minimum time limit there...sometimes churches get leased for a single event. I'd say you have to lease it at least a day before paying any taxes on it.

Or just say 'If the property is leased more than X days a year to non-non-profit people, you have to pay taxes on the whole year.'.

Non-profit organizions being exempt is not really important here.

-David T. C.
Yes, my email address is real.
[ Parent ]

it does exist but not in the same way (none / 0) (#210)
by cronian on Fri Nov 19, 2004 at 09:55:31 PM EST

You could try to tax it somehow, but it isn't that simple. Right now, if a profitable non-profit makes x dollars, and pays it to one of their employees then the employee pays income tax. On the other hand, if the non-profit makes money, and then pays its employee, there is absolutely no tax involved.

Now, consider $100,000 property, which is anually taxed 1% annualy by the feds. Suppose, it can only be rented for $900/year. A for-profit can't has to pay $1000 in taxes, and only gets $900 in rent, so owning it isn't profitable for them. So, some non-profit buys it. Now, they can come away making $900/year.

If there is just income tax, the for-profit landlord, might have to give the government a share of his $900, but he could still make a profit along with the non-profit.

The other thing is that when what was previously profitable becomes unprofitable to own, some people are going to rush to liquidate their assets, so they no longer have to pay the taxes. Tax-exempt institutions would likely be the recipients of property, which has become just a tax liability.

We perfect it; Congress kills it; They make it; We Import it; It must be anti-Americanism
[ Parent ]
Very valid point (none / 1) (#89)
by xutopia on Thu Nov 18, 2004 at 10:12:00 AM EST

It is happening in the province of Quebec in Canada. The church which owns a lot of land is currently leasing (though at a very low price) to entities which pleases them such as brotherhoods and other connex thing. They don't make a fortune with their land but they prefer to lease it and keep control of it rather than selling it to something useful if it isn't helpful to religion.

[ Parent ]
Even partial adaption of NAT (2.85 / 7) (#63)
by nomoreh1b on Thu Nov 18, 2004 at 01:42:12 AM EST

Quite a few analysts think that firtax at 23% of gross (or 30% of net) won't be high enough to be revenue neutral. A deal could be easily cut to reinstate some corporate or asset taxes so that the fairtax would _never_ be more than than 23%--and possibly even excempt some important items like food, medical care and medicine from the fairtax. One idea I've had is to simply move the existing corporate taxes to a tax purely based on capitalization of a corporation(value of bonds plus stock outstanding). Like the fairtax that would be simple to collect(just have the company issue some stock to the US treasury every year-say 1% of capitalization for every publicly traded company(and the treasury can sell that stock off gradually). To the extent these large companies have monopoly power, this kind of tax wouldn't be a drag on the economy. I suspect the full NAT proposal would require a constitutional admendment. Anyhow, the Democrats better figure out what kind of deal they are going to cut here. I tend to think it is time to cut the CPA's loose.

where "fairtax" = national sales tax -nt (none / 1) (#78)
by Baldrson on Thu Nov 18, 2004 at 08:20:59 AM EST


-------- Empty the Cities --------


[ Parent ]

Constitutionality (3.00 / 3) (#80)
by Baldrson on Thu Nov 18, 2004 at 08:38:48 AM EST

I suspect the full NAT proposal would require a constitutional admendment.

I can see your argument for the US since aside from the 16th amendment, which is specifically about income tax, the only thing the US Constitution says about taxation is:

Clause 3: Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.

It appears the original intent was that Federal taxes be collected from the States rather than from individuals, but that the taxes be collected on a per-head basis. What this does is encourage States to establish policies that generate the most wealth per capita, and then to somehow tax that wealth to pay Federal taxes.

In practice this is violated everytime there is any sort of tax imposed by the Federal government outside of income (including capital gains). The way around this is to position the revenue raised as a "use fee" or "service fee" of some sort. This avoidance of the "tax" restrictions of the Constitution is applicable in the case of the NAT since what it amounts to is a fee for the service of protecting the legal rights of asset holders. The rationale for the NAT exemption is the retainer fee due citizens as subject to conscription.

-------- Empty the Cities --------


[ Parent ]

Hmmm.... (2.66 / 3) (#109)
by Pxtl on Thu Nov 18, 2004 at 12:17:28 PM EST

while normally I'm all for state's rights, the problem with a state-by-state approach to taxation would be the race to the bottom - you'd have tax-haven states where the rich would congregate and rule from.  Since their combined income would be significan enough that they could easily handle the per-capita costs of the state.

In other words, lets say the rate is set at $10000 a head.  As a state fills with rich people, the state can distribute that burden more easily, reducing the tax demand on each rich person as they become a larger proportion of the population, taking less and less of the poor's burden per person.  Meanwhile, in  state losing this migration, the poor carry more and more of the burden.

To legislators, it becomes obvious what to do: entice the rich to come to your state with favourable tax policies.  As they move in, the deficit will solve itself.

Leaving the poor holding the bag.

[ Parent ]

Many founders were pioneering inventors (none / 1) (#165)
by Baldrson on Fri Nov 19, 2004 at 02:27:28 AM EST

Its important to understand the mentality of someone who sees the world as an opportunit to create wealth through inventions. That was the mentality of the founders. They didn't see things in terms states paying taxes by getting money to move there. Rather they saw a wide open frontier and a burgeoning age of invention combining to create wealth with the entrepreneurial spirit of pioneers. Its a very different view of the world than the one dominant today.

-------- Empty the Cities --------


[ Parent ]

NST Constitutionality (none / 1) (#134)
by Baldrson on Thu Nov 18, 2004 at 03:20:33 PM EST

I suspect the full NAT proposal would require a constitutional admendment.

What is the constitutional basis for the national sales tax? Or is that going to require an amendment?

-------- Empty the Cities --------


[ Parent ]

the only problem I see (3.00 / 5) (#71)
by minerboy on Thu Nov 18, 2004 at 06:28:04 AM EST

Is that it it assumes that assets are easily and equitably appraised. If implemented there will be alot of power in the hands of those that assess propeerty. My experience (as someone who pays several thousand dollars of property tax) is that current assessments are wholly unfair. I'm all for a NAT otherwise.



Stop Living in a Fantasy World! (2.30 / 10) (#72)
by Peahippo on Thu Nov 18, 2004 at 06:41:07 AM EST

SARCASM ... ON!

No tax can be considered "fair" if it ever takes money out of the capable hands of the producers of American wealth ... i.e. the million- and billion-aires who sit in their mansions with all their financial records open before them. It is manifestly unfair to place a tax on the making of entries in spreadsheets.

Instead, taxation should fall upon the lossy motions of society ... upon the movement of wheels and of sweaty limbs. Look at all the energy being converted into heat by those motions! What a waste. It's far better to honor and promote the efficient movement of fingers over a keyboard as yet another large number is put into a spreadsheet cell.

SARCASM ... OFF!

You'd have to be smoking a particularly good species of plant to actually believe not filing a tax return is a benefit to governed society. Other than the IRS fighting tooth and nail for continued institutional existence, the control methods of withholding and filing are faaaaar too useful for government to ever give up. Withholding means several things; the government:
  1. has completely conned employers to collect taxes for them for free
  2. gets taxes instantly, as soon as income is taxable ... no delays
  3. can steal your money efficiently, via garnishment
  4. can give itself an interest-free loan
  5. targets the income population, not the asset population
Withholding is evil enough. But it gets worse. Filing allows the government to essentially own your very ass. You become a government asset, not a person with rights. Based upon your perfectly legal filings, they can come and seize anything they want, using their own standards for fines, fees and evaluations. Basically, filings open up the citizen to assault by the Federal and State governments. Each time -- like a fucking fool -- you sign your 1040, you give the government explicit permission to attack you.


misplaced urgency (2.60 / 5) (#73)
by bankind on Thu Nov 18, 2004 at 06:44:54 AM EST

Given the horrendous trade deficits due to deindustrialization of the US, and looming loss of the US dollar's status as the world's reserve currency to China or possibly the Euro, such political games benefiting the rich amount to little more than rearranging the deck chairs on the Titanic.

There are currently three major theories on the current account dollar situation in the US, Paul Craig Robert's view is (ironically just like his flawed view of trade) a mix of the bleakest bits of each: informal Britton woods, intertemporal distortions, undeisciplined fiscal spending, evil Chinese, etc etc.

I'm just curious how you are trying to tie together fiscal debt and trade deficits, without considering the continued massive amounts of international capital flows in search of secure investment to balance riskier emerging market investments? That's Greenspan's view, and seems the most logical.

Still a twin deficit situation (fiscal and current account) is bad not of itself, but because it can squeeze out private investment.

But going all the way back to your first contention, do you really think the "trade deficits are due to deindustrialization?" Seems to me the other way around, ie deindustrialization due to trade deficits--increased productivity abroad.

The reason I point this out is because I don't understand why this issue is at all raised in an article on tax reform. It seems like you are implying urgency because of urgency in a separate issue.

"Insurgents are blowing up pipelines and police stations, geysers of sewage are erupting from the streets, and the electricity is off most of the time -- but we've given Iraq the gift of supply-side economics." -Krugman

PCR and Deficits (2.33 / 3) (#113)
by Baldrson on Thu Nov 18, 2004 at 12:44:07 PM EST

First, I'm certainly not going to try to defend Paul Craig Roberts generally except to say he's starting to realize how seriously -- uhh -- "incomplete" supply side economic theory was.

His article on China's approach to the reserve currency situation is an indication of his recognition that something went fundamentally wrong with the US economy.

Still a twin deficit situation (fiscal and current account) is bad not of itself, but because it can squeeze out private investment.

It most certainly can and that is precisely why the NAT rate is pegged to government debt rate. You don't want all your wealth ending up in government debt instruments or you won't have any risk capital. Indeed, the only people you want putting their wealth into government debt instruments are the folks with low net assets. The NAT achieves that.

But going all the way back to your first contention, do you really think the "trade deficits are due to deindustrialization?" Seems to me the other way around, ie deindustrialization due to trade deficits--increased productivity abroad.

Industrialization is driven by lowered labor costs which can be driven by technological advance and/or reducing wages to populations that operate more labor-intensive industrial technology. If you really _like_ slavery you can even engage in technological "advances" that increase the labor requirements while decreasing the skills required.

A lot of people really dislike slavery.

Since 1973 productivity growth in the US and indeed the West stagnated compared to the prior century. I think this is due to a shift toward a view of economics that views 'economic development' as involving a kind of global slave trade, with the predictable effects. History has seen this sort of thing before in slave societies -- and the results are not pretty.

Deindustrialization of the US is directly attributable to this fundamental attraction to slavery and de facto antipathy to inventors -- the creative act -- as the signature of nobility in the US. This can be seen in the trend of the ratio of patent royalties that end up in the pockets of inventors as opposed to acquisitors. This, in turn, has corrupted the very concept of intellectual property until we see the nightmare of international IP law at work today.

The reason I point this out is because I don't understand why this issue is at all raised in an article on tax reform. It seems like you are implying urgency because of urgency in a separate issue.

It is as urgent to the US and much of the West as is the loss of the middle class -- particularly the technically adept middle class. Indeed, if you view things in terms of the cost of reproduction, rather than just cost of living, the effects of various social, cultural, political and economic changes in the West have been nearly genocidal.

Yes its urgent.

-------- Empty the Cities --------


[ Parent ]

slavery? genocide? (2.50 / 2) (#128)
by bankind on Thu Nov 18, 2004 at 02:22:53 PM EST

First, I'm certainly not going to try to defend Paul Craig Roberts generally except to say he's starting to realize how seriously -- uhh -- "incomplete" supply side economic theory was.

Well that is good to hear, I thought you might be some sort of acolyte of his jibber-jabber.

His article on China's approach to the reserve currency situation is an indication of his recognition that something went fundamentally wrong with the US economy.

China's policy has caused a fucking unbearable cycle of overheating and cooling that, when using household data, shows the chinese GDP going negative every 3=4 years. The Chinese government value of US assets (dollars) as the major holding of their foreign reserve is a testament to soundness of US policy. There is a big difference between a change and a forecasted change. If China starts dumping dollars that is one thing, but Today as of right now they still hold them, thus the US economy must be seen as stable in the future by the financial ministry of China (and Japan, Korea, etc etc.). They would dump if their was a serious threat. No reason not to.

You don't want all your wealth ending up in government debt instruments or you won't have any risk capital. Indeed, the only people you want putting their wealth into government debt instruments are the folks with low net assets.

Portfolio theory includes risk diversification. There is always a demand for risky capital, which is why junk bonds exist. Risk capital isn't affected by an investment squeeze, it is the medium-low risk investments that have to complete with higher long-term bond returns. Your basic production capacity-infrastructure-tech-capital type investments.

Regarding your second point, the size of the assets does not exclude it from portfolio theory.

Industrialization is driven by lowered labor costs

First off, most economic historians point out that the relation of industrialization in Europe was a direct effect of the plague reducing labor supplies and increasing wages (which is observable) thus creating a need to save labor (through capital advances).

Now you seem to somehow suggest this as means to justify your belief of global "slavery." Now if this were true and low wages cause industrialization, why hasn't Africa developed in the last 50 years? It certainly has lower wages than anywhere in Asia (including China and India). It even has had much more foreign aid than any country in Asia (including Japan) during the past 50 years.

The Democratic Republic of the Congo or Malawi has a far lower wage rate than Ho Chi Minh City, but Nike builds factories in HCM city, because the wage rate is only one factor in overall unit costs. These jobs came from Thailand, which came from southern China, from Taiwan, South Korea, northern Mexico, from one day way back in Lowell Massachusetts.

That ain't slavery, that's development, son.

the effects of various social, cultural, political and economic changes in the West have been nearly genocidal.

Do you write for Mises.org?

"Insurgents are blowing up pipelines and police stations, geysers of sewage are erupting from the streets, and the electricity is off most of the time -- but we've given Iraq the gift of supply-side economics." -Krugman
[ Parent ]

China and geopolitical manipulation (3.00 / 2) (#129)
by Baldrson on Thu Nov 18, 2004 at 02:31:46 PM EST

China's policy has caused a fucking unbearable cycle of overheating and cooling that, when using household data, shows the chinese GDP going negative every 3=4 years. The Chinese government value of US assets (dollars) as the major holding of their foreign reserve is a testament to soundness of US policy.

I see this as an exceedingly naive view of China's monetary policy. Geopolitics is a major factor here and Roberts is correct to point out that there will come a point when China will be able to demand things of the US government with the threat of rendering the US government insolvent. That may already be the case.

If the only argument against this is that China would lose the US market, then the question is exactly how dependent is an industrially and agriculturally self-sufficient nation on US markets?

-------- Empty the Cities --------


[ Parent ]

naive? (none / 0) (#159)
by bankind on Fri Nov 19, 2004 at 12:59:01 AM EST

I see this as an exceedingly naive view of China's monetary policy.

I'll take the opinion of a Nicholas Lardy on Chinese monetary policy over Roberts any day.

If the only argument against this is that China would lose the US market, then the question is exactly how dependent is an industrially and agriculturally self-sufficient nation on US markets?

You'll be standing alone if you think China is self-sufficient. Not even Chinese officials make that claim (it is why they control prices on grain so severely which is a major input to the growth). It was also one of their major contentions in the WTO negotiations for getting developing country status (which failed). Not to mention that there is no even a labor shortage in southern China (yeah, that is true, wages are increasing jobs are not getting filled).

So regarding your question, it isn't a concern because the conditions are not there. China has a huge demand for steel, concrete, oil, energy, and industrial chemicals that they can't meet (in part because of SOEs).

Economic analysis usually requires a person to look at numbers before they make claims.

"Insurgents are blowing up pipelines and police stations, geysers of sewage are erupting from the streets, and the electricity is off most of the time -- but we've given Iraq the gift of supply-side economics." -Krugman
[ Parent ]

Invention and Self-sufficiency (none / 1) (#163)
by Baldrson on Fri Nov 19, 2004 at 02:18:49 AM EST

If the only argument against this is that China would lose the US market, then the question is exactly how dependent is an industrially and agriculturally self-sufficient nation on US markets?

You'll be standing alone if you think China is self-sufficient.

I don't but that is the trend. They're going to need some technological advances but believe me, they've been throwing enough young women at the technologists that have been displaced from reproductive niches in the US during the last 20 years that they're going to end up with some fairly heavy hits within the next 10 to 20 years. There's already a lot of traffic between here and there.

-------- Empty the Cities --------


[ Parent ]

if you (none / 0) (#171)
by bankind on Fri Nov 19, 2004 at 06:33:28 AM EST

are interested in this beyound rather odd speculation about future unforeseen advances in technology from some secret society trade ring, the worldbank has an excellent book on the China and the WTO.

It has some more conrete examples of dependcy fpr China under the WTO than the sex trade you are (i guess) on about.

"Insurgents are blowing up pipelines and police stations, geysers of sewage are erupting from the streets, and the electricity is off most of the time -- but we've given Iraq the gift of supply-side economics." -Krugman
[ Parent ]

Erratum: labor costs (none / 1) (#130)
by Baldrson on Thu Nov 18, 2004 at 02:35:47 PM EST

I had erroneously written:Industrialization is driven by lowered labor costs

To which you correctly responded: First off, most economic historians point out that the relation of industrialization in Europe was a direct effect of the plague reducing labor supplies and increasing wages (which is observable) thus creating a need to save labor (through capital advances).

I should have said, "Industrialization is driven by the desire to lower labor costs as a portion of the economy." The rest of my argument holds.

-------- Empty the Cities --------


[ Parent ]

still wrong (none / 0) (#160)
by bankind on Fri Nov 19, 2004 at 01:19:43 AM EST

"Industrialization is driven by the desire to lower labor costs as a portion of the economy."

You still can't explain with that argument why industrialization occurs in sectors with large labor inputs first-light industries. If capital sought to match labor inputs, Capital intensive modes of production would migrate to low wage countries. the inverse is the case.

There is no golden mean mixture between labor and capital and no drive to match inputs-there is such a concept in the Solow Model of Growth, but it does not concern firm decisions and only looks at growth dynamics). Different sectors have different requirements. However, the single drive of all firms is to reduce overall unit costs (of final output).

This is an important distinction because it means development does not occur where labor is cheap, but where the overall investment climate is more efficient. It also explains why there is so little development in most of Africa.

Infrastructure matters. The development in East Asia is less slavery and more the emergence of an affluent middle class. Happened in Japan, Korea, Taiwan, Thailand, Malaysia, Singapore.

Your arguement does not hold and there is no example, anywhere of it being the case.

"Insurgents are blowing up pipelines and police stations, geysers of sewage are erupting from the streets, and the electricity is off most of the time -- but we've given Iraq the gift of supply-side economics." -Krugman
[ Parent ]

Risk is dependent of government policy. (none / 1) (#131)
by Baldrson on Thu Nov 18, 2004 at 02:44:57 PM EST

Portfolio theory includes risk diversification.

And a key component of portfolio theory is the rate of return on investments in government debt instruments. To discuss portfolio theory without regard to public policy on taxation and monetary policy that are the parameters of the theory is getting the cart before the horse.

Risk capital isn't affected by an investment squeeze

Yes it is. If I have to investments that return the same rate in their proforma projection and one is a lower risk investment, guess what happens?

This is exactly the situation we encounter when government goes out with the IRS to collect taxes at gun point on behalf of investors in government debt instruments. No venture capitalist can go out with a gun and make mother nature yield up a more economical technology.

-------- Empty the Cities --------


[ Parent ]

didn't say that (none / 0) (#161)
by bankind on Fri Nov 19, 2004 at 01:59:18 AM EST

And a key component of portfolio theory is the rate of return on investments in government debt instruments. To discuss portfolio theory without regard to public policy on taxation and monetary policy that are the parameters of the theory is getting the cart before the horse.

I said that a government deficit does not affect high risk investments, it certainly does impact low-medium risk assets-from a rise in the inerest rate of gov. bonds. that does relate to monetary policy.

But as far as tax policy is concerned, the issue of the current deficit is from the spending not from the revenue. Overall reform is needed in Congress, not in the IRS and the urgency is to reform there first.

If I have t[w?]o investments that return the same rate in their proforma[nce] projection and one is a lower risk investment, guess what happens?

NO NO NO, you missed the point, there is always I need to have risky holdings as part of your protfolio (if your holdings are based on modern portfolio theory). If the risk on government bonds increases, then they compete with low-medium risk assets. This doesn't affect high risk holdings or have anything to do with a gun wielding IRS.


"Insurgents are blowing up pipelines and police stations, geysers of sewage are erupting from the streets, and the electricity is off most of the time -- but we've given Iraq the gift of supply-side economics." -Krugman
[ Parent ]

Average risk (none / 1) (#167)
by Baldrson on Fri Nov 19, 2004 at 02:42:55 AM EST

there is always I need to have risky holdings as part of your protfolio (if your holdings are based on modern portfolio theory). If the risk on government bonds increases, then they compete with low-medium risk assets.

There are _two_ dimensions here -- risk and return -- are there not? There is only so much investment capital to go around so when you suck a bigger chunk of that into government debt instruments by offering a higher rate of return at low risk, the whole distribution of investment shifts to lower risk and at some high level of risk you see investment capital dry up completely.

-------- Empty the Cities --------


[ Parent ]

no right (none / 0) (#170)
by bankind on Fri Nov 19, 2004 at 06:21:33 AM EST

portfolio theory implies distributed risk, as in assets that cover a range of investments from low risk to high risk. If goverment bonds increase in return they become in compitition with assets of low risk. this isn't a totem pole where the bottom get removedand the whole thing drops. Instead, most risk managers classify holdings by risk, say high medium and low. A change in government bond returns would mean that there is a change in low risk assets and I need to re-adjust within the low-risk holdings.

there are different ways to manage an investment, but if you are using modern porfolio theory, this is how it is done. Regardless of how dear money is, holdings based on MPT will have diversified risk. Changes in interest rates will only alter the size of total private investments-not a specific risk catagory.

Investment capital never dries up, instead it flows to assets that match needed risk-return holdings. Just look at the emerging markets bond boom post the IT bust-up in the US.

"Insurgents are blowing up pipelines and police stations, geysers of sewage are erupting from the streets, and the electricity is off most of the time -- but we've given Iraq the gift of supply-side economics." -Krugman
[ Parent ]

Furthermore! (2.25 / 8) (#74)
by Peahippo on Thu Nov 18, 2004 at 07:02:47 AM EST

If you think that the wealthy won't exempt themselves from consumption taxes, you are a jackass. Any law can be countered or avoided through the exertion of enough money. Corporations make themselves tax-exempt simply by filing some papers and paying various fees. The rich have more than enough loopholes as it is, taking advantage of definitions of "charity", "income", "deferment" and the like, to avoid much taxation.

Look, here's how it will probably play out: The National Sales Tax (because that's EXACTLY what it is) is imposed, and let's further assume that by some act of divinity the IRS is actually abolished. Immediately, the wealthy will jump onto "supply consortiums" that will be setup for "business" purposes as a loophole. You'll find the wealthy eating dinners in their own, comfy homes, not paying NST for the food (since it's a "business dinner") and not paying NST for the heat and electricity (since those will be for a "business meeting"). Since the working man can't afford the fees to setup the "business" paperwork for his life, he will have to bear the NST on the food he eats and the gas/electricity he uses.

We have that now; a lot of tax evasion is taking place through utterly fraudulent methods. But who's going to actually check up on such things if the NST is implemented? The IRS? BUT YOU DISBANDED IT!!

All methods of taxation that involve complications will involve loopholes that can be stretched widely enough by money to allow even more money to flow through. The only Fair Tax is a FLAT ONE: If you earn or own X, you THEREFORE OWE Y% OF X. Period. No exceptions. But that doesn't allow the rich to escape taxation. So we can't ever have a flat tax, oh no, what a fucking travesty THAT would be!

If the American people stop worshipping wealth and corporations, all this bullshit will come to an abrupt stop. But most Americans are scared and envious little bitches ... and they will continue to earn the government they are getting.


Hmm, Sounds Like VAT (none / 0) (#209)
by czolgosz on Fri Nov 19, 2004 at 09:29:17 PM EST

Your evasion scenarios sound a lot like some of the chicanery involved in evading VAT (a national sales tax) in the UK.

The other thing to worry about is the likely event that they introduce the national sales tax but don't give up the income tax. Now you have the complexity of two systems. Note that the UK still has income tax alongside VAT. This is the likely outcome in the US as well.


Why should I let the toad work squat on my life? --Larkin
[ Parent ]
some questions (none / 1) (#76)
by m a r c on Thu Nov 18, 2004 at 07:32:30 AM EST

How do you stop people from owning income generating assets overseas and receiving tax free income? Since your tax is asset and not income related then any asset outside of the scope of the US is void from taxation. At least currently if I receive rental income from an overseas property I must declare said income and pay tax on it.

I have a question about the NAT too; if it seeks to find equilibrium between govt debt levels and taxation does this mean that govt actions such as war will result in increases in taxation levels? Currently the goverment has the opportunity to buffer financial debts by having a deficit and not passing this directly on to the taxpayer. It will have to be paid sometime in the future but because of the buffer the goverment can make financially unpopular decisions without immediate impact.
I got a dog and named him "Stay". Now, I go "Come here, Stay!". After a while, the dog went insane and wouldn't move at all.

Depends. Tarrifs or... (2.50 / 2) (#77)
by Baldrson on Thu Nov 18, 2004 at 07:57:10 AM EST

This scenario seems to be coming up often enough to deserve a bit more analysis.

What you do depends on what problem you're trying to solve.

First, let's talk about the foreign country that has the hard assets sitting there generating income that it never sees much of. What country is going to want to have the job of defending assets while the money generated by those assets immediately exits without taxation? This doesn't seem to be a problem for the NAT country since the NAT country is getting all the gravy off the top without having to provide any military, police, legal infrastructure, etc. in support of said assets.

Perhaps the problem is that the assets being relocated are producing something of vital national security interest, rendering the NAT country dependent on the other country?

If so this brings us to the second way of responding:

Tarrifs are used to enhance the local production of things that are vital to national security. Use them as necessary. The NAT isn't trying to deal with foreign policy except indirectly by making a stronger populus.

-------- Empty the Cities --------


[ Parent ]

True for physical assets (none / 1) (#84)
by m a r c on Thu Nov 18, 2004 at 09:27:46 AM EST

You make some good points and certainly I agree with you regarding a country having to defend an asset that it gets no gain out of. I suppose that I thought that a country was there to defend its citizens and not its citizens' assets.

If we discuss other aspects such as liquid assets (shares,etc) how does NAT deal with this? Surely if land was the only thing being taxed then everyone would sell up and put their money into other asset types.
I got a dog and named him "Stay". Now, I go "Come here, Stay!". After a while, the dog went insane and wouldn't move at all.
[ Parent ]

Individual Duty and Corporate Assets (2.00 / 2) (#118)
by Baldrson on Thu Nov 18, 2004 at 01:08:19 PM EST

I suppose that I thought that a country was there to defend its citizens and not its citizens' assets.

I have a different view on the relationship of the citizens to the government. The citizens themselves are the foundation of the defense of the nation, starting with self-defense, and the government is their vehicle for providing a mutual insurance group. It is their duty as citizens to provide assistance in defense of each other so the exchange is fair at the individual level. No net debt is incurred. Indeed, this extends to the properties exempt from bankruptcy confiscation due to the fact that not only are these vital to the individual's survival, but the individual owning that level of asset is typically capable of providing self-defense of those vital assets.

If we discuss other aspects such as liquid assets (shares,etc) how does NAT deal with this? Surely if land was the only thing being taxed then everyone would sell up and put their money into other asset types.

This can be handled in a couple of different ways:

  1. The corporation is not taxed on its assets -- only the shares of the corporation are taxed.
  2. The shares of the corporation are not taxed, only the corporation is taxed on its assets.
There is the classic problem, of course, of corporate limited liability and what fair compensation should be for this additional level of protection, but I'm not attempting to address that issue here -- merely laying out a couple of alternatives based on how the liability debate resolves itself.

-------- Empty the Cities --------


[ Parent ]

Not necessarily (none / 0) (#92)
by pyro9 on Thu Nov 18, 2004 at 10:34:27 AM EST

then any asset outside of the scope of the US is void from taxation.

If the owner lives in the U.S., there's no reason why the asset being somewhere else needs to be exempt.

be paid sometime in the future but because of the buffer the goverment can make financially unpopular decisions without immediate impact.

I would argue that that is actually the problem! It is grossly unfair to allow the government to burden people who aren't old enough to vote (or perhaps not even born yet) in order to garner political favor today. Congress as a whole has proven itself not to be financially responsable enough to be granted unlimited credit.


The future isn't what it used to be
[ Parent ]
but how does the govt know about the asset? (none / 0) (#96)
by m a r c on Thu Nov 18, 2004 at 10:59:37 AM EST

I agree that the asset shouldn't be excempt, but how does the govt know where it is or how much its worth? At best they will only know how much income it is generating...

Yes, it is a problem if any govt is going into defecit but in some cases it has to make some choices that may be beneficial for the country but are immediately unpopular (lets say the current war). If your personal tax went up directly because of this how many people would support it.
I got a dog and named him "Stay". Now, I go "Come here, Stay!". After a while, the dog went insane and wouldn't move at all.
[ Parent ]

foreign assets (none / 0) (#101)
by pyro9 on Thu Nov 18, 2004 at 11:46:34 AM EST

but how does the govt know where it is or how much its worth?

In most countries where such an asset would be safe enough to make a worthwhile tax shelter, the title will be a matter of public record. In addition, the money will have to be transferred out of the U.S., a process that already results in a report to the IRS.

but in some cases it has to make some choices that may be beneficial for the country but are immediately unpopular (lets say the current war).

It is up to Congress to explain the importance to the people and take the heat if the people are not amused. That's the nature of democracy. The people who would be affected by the move are exactly the sort who understand the concept of return on investment. Genuine national insecurity is bad for business. If congress cannot explain it's importance or sho that it is a legitimate obligation, perhaps it shouldn't be done.


The future isn't what it used to be
[ Parent ]
Tying the NAT rate to govt. debt interest rate (none / 1) (#156)
by Baldrson on Thu Nov 18, 2004 at 11:08:01 PM EST

I have a question about the NAT too; if it seeks to find equilibrium between govt debt levels and taxation does this mean that govt actions such as war will result in increases in taxation levels? Currently the goverment has the opportunity to buffer financial debts by having a deficit and not passing this directly on to the taxpayer. It will have to be paid sometime in the future but because of the buffer the goverment can make financially unpopular decisions without immediate impact.

Part of the reason for tying the NAT rate to the rate of interest on the national debt is to recognize that during war the primary beneficiaries of the sacrifices made by the populus are the folks who have the most assets to protect from foreign confiscation. Everyone might have their lives on the line but the dynastic families have the territorial assets being protected.

What this means is that when deficit spending for war takes place, the tax on the dynastic families goes up incrementally -- just as most families sacrificing to protect, disproportionately, those dynastic assets.

Another reason for tying the NAT rate to the rate of interest on the national debt is to remove a key parameter from political favoritism. Moreover, it is simply the right number to use given the way the net present value formula (with risk adjustement) produces the value of any asset with the government guaranteed rate of return the minimum level of fiscal risk offered by the society.

-------- Empty the Cities --------


[ Parent ]

Best version of a "Net Asset Tax" (none / 0) (#85)
by Highlander on Thu Nov 18, 2004 at 10:01:54 AM EST

I suggest that such a "Net Asset Tax" would be calculated on the event of death, when inheriting:

For every year that the heir is younger than the one who died, tax the value of what is inherited at a rate equal to the rate of interest on national debt.

(To get what is left to inherit, divide by (1+rate)to the power of(years difference)).

Note that the above rule has at least one neat thing going for it: if grandpa dies, pa inherits, and dies quickly, the son inherits the same amount as he would have inherited if grandpa had made him the heir directly.

That is, tax is still paid twice, but it adds up to the same.

The Bush "fair tax" sounds just like a value added tax to me, doesn't the USA have this already, just like Europe ?

While this seems a bit unfair towards the poor, it really would remove a lot of IRS hassle from the working populace.

But if the USA didn't have a VAT yet, it would add hassle to the shopkeepers.


Moderation in moderation is a good thing.

US does not have a VAT [nt] (none / 0) (#103)
by speek on Thu Nov 18, 2004 at 11:49:25 AM EST


--
al queda is kicking themsleves for not knowing about the levees
[ Parent ]

No VAT, state sales tax (2.50 / 2) (#112)
by curien on Thu Nov 18, 2004 at 12:39:32 PM EST

A "VAT" is so-called because it is included in the price of an item. Here in Germany, if I buy a E10 item, I can hand the cashier a E10 bill. Back in Virginia (with a 6% sales tax), if I bought a $10 item, I'd have to pay $10.60 at the register.

So no, we don't have a national sales tax or VAT in the States, but it wouldn't cost retailers much (if anything) if we implemented one because they already have the infrastructure in-place for paying state sales tax.

--
This sig is umop apisdn.
[ Parent ]

The problem with an inheritance tax (none / 0) (#321)
by vectro on Mon Dec 06, 2004 at 12:47:41 PM EST

... and why only stupid people pay it in the US:

It is difficult to define the difference between inheritance and gifts given before death. Someone who knows  his end is near can set up "revokable trusts": basically a gift to heirs that can be revoked later on. Even if you denied this ability, there are other ways: For example, a corporation whose charter gives the heir ownership but not control.

The point of all of this is that while many find large inheritances hard to stomach, they are difficult to tax well.

“The problem with that definition is just that it's bullshit.” -- localroger
[ Parent ]

Sales Tax vs. Asset Tax (2.83 / 6) (#87)
by duffbeer703 on Thu Nov 18, 2004 at 10:08:36 AM EST

You must have missed the last 200 years of history, because land ownership hasn't been a wealth driver for some time.

Any other asset can be easily moved outside of the United States by people with real resources. Middle-class people with $100,000 in the bank for retirement or college savings would be left holding the bag.

You also bring up enforcement problems. If I have $200,000 and don't want to pay taxes, how do you track my assets if I use it to buy TVs or iPods? Is the government going to require reporting of every asset that I own?

The other problem is how to you establish the value of assets? Real Property is already taxed at the local level and by most school districts, imposing additional tax liabilities would actually decrease the value of property overall.

For example, I own a home valued at approximately $150,000. I pay my town, county and school approximately $3,500/yr in property taxes. I pay about $9,000/yr in income taxes. If you add $7,000 to $9,000 in property tax liability to my property, banks will have to absorb the extra default risk and will write loans at higher rates to cover that risk. Real property will lose value.

On the other hand, a Doctor who makes $200,000/yr who spends his money on vacations and luxury goods  (which are expensive and depreciate in value rapidly) will pay little or no tax.

Whenever you find "white papers" on new tax or financial systems hosted on Geocities, you should look at them critically. Just like the libertarians and black helicopter people, these amateur economists really have no clue.

re: Sales Tax vs. Asset Tax (none / 0) (#106)
by kero on Thu Nov 18, 2004 at 12:02:17 PM EST

You must have missed the paragraph that basically said if it has a deed, title, or is insurable it will be taxed. So your 200k Doctor is still going to have his house, car, jewels, etc. taxed or he will be sad when it is stolen. It sounds to me like this tax punishes you for having disposable income unlike a national sales tax that punishes you for not having one.

[ Parent ]
BS (none / 1) (#114)
by curien on Thu Nov 18, 2004 at 12:44:41 PM EST

a national sales tax that punishes you for not having [disposable income]

Jesus fucking Christ. You wouldn't pay sales tax on rent/mortgage and utilities, and you'd probably pay a reduced tax on food. Sheesh.

C'mon folks, it's not that difficult. We already do it with state sales taxes. It's not like it's a foreign concept here, people.

--
This sig is umop apisdn.
[ Parent ]

Ok... (none / 0) (#143)
by duffbeer703 on Thu Nov 18, 2004 at 06:08:24 PM EST

Anything is insurable.

The 200k Doctor can rent a luxury apartment, lease a car and shop with cash. His wealth will be safely sent overseas to avoid taxation.

The only people being hurt by this tax are middle class people with assets, but not enough assets to protect via trusts or a numbered account in Switzerland or the Caymans.

It also encourages consumption and discourages savings and ownership. The sales tax taxes consumption and eliminates the huge "under the table" economy.

Then think about the horrific impact asset taxes would have on the housing market -- that alone would plunge the US economy into depression.

Everyone always screams "tax the rich"... but the real money has always been in the huge volume of the middle class. For every luxury Lexus Toyota sells, it moves 10 or more Corollas and Camrys.

[ Parent ]

The 200k Doctor would just buy T-Bills (none / 1) (#150)
by Baldrson on Thu Nov 18, 2004 at 08:15:51 PM EST

What's the median price of a home? Whats the median capitalization of a job? Add those together and you have the level of assets your $200K Doctor can own free of any and all taxes. Why wouldn't he buy a condo? Lease a car? Well the leasing company has to pay the NAT on the car so its going to be paid by the Doctor anyway. Why not buy a reasonable car since its probably covered under the standard exemption anyway? As for the rest of his income why doesn't he invest in the US where he has no capital gains, value added, sales or employee income taxes to pay? Is he so stupid that he can't do well in that environment? Why isn't the country where he sends his money going to tax him?

-------- Empty the Cities --------


[ Parent ]

Read the story & thread dude (none / 0) (#178)
by duffbeer703 on Fri Nov 19, 2004 at 09:07:44 AM EST

We're talking about the notion of replacing the current tax structure with an Asset tax.

Asset Taxes mean that you tax accumulated wealth, including investments & property.

Countries like Switzerland and the Cayman Islands have a very private banking system and no taxation on assets. Anyone faced with a 5% tax on the money they have in the bank would open up such an account to avoid the levy.

[ Parent ]

Negative Income Tax (3.00 / 3) (#137)
by zenofchai on Thu Nov 18, 2004 at 03:50:01 PM EST

Negative income tax combines the simplicity and "fairness" of a flat tax with the outright dissolution of the need for social security and welfare systems, as well as the repeal of minimum wage laws.

The gist: everyone pays a flat tax (say 20%). Everyone gets $10,000 per year from the government. (This is admittedly similar to Martin Luther King's proposal for a social dividend.)


A negative income tax is a method of tax reform that is popular among economists, but has never been fully implemented. It was developed by United States economist Milton Friedman in 1962. It is commonly used as a method of implementing a guaranteed minimum income system.

A negative income tax would replace the current progressive income tax system used throughout most of the western world. This would be replaced by a flat tax of, say, 25%, but each tax payer would also be given $10,000 by the government. Thus a person earning only $4000 per year would pay $1000 in taxes, but overall would receive a net gain of $9,000 from the government. A person making $40,000 would be at the break-even point, and would neither pay taxes or receive any benefits. A person making $1,000,000 per year would pay close to the full 25% tax, as the $10,000 would count little towards relieving their tax burden.

A negative income tax solves several problems with current systems. According to its proponents, it would eliminate the welfare trap; the minimum wage. Although it is often thought of as a method of implementing a social dividend, it can also be viewed as an employment subsidy with the main effect of reducing wage costs, especially for the lowest-qualified jobs. Seen in this light it can be seen as most beneficial to labour-intensive industries and less so to capital-intensive ones. Some critics of the negative income tax contend that, in effect, such as scheme is a subsidy given to employers of low-qualified jobs so that they do not really have to spend the money to adequately pay their workers.

Its main drawback is the same as any income-based tax system: that it requires a good deal of expensive reporting and supervision in order to avoid fraud. In any case the subsidy effect would probably cause a long-term reduction in unemployment although it would probably not have a long-term effect on net wages since, in the absence of a legal minimum wage, employers would compensate for it by offering a lower gross wage.

A negative income tax can be but is not necessarily a guaranteed minimum income. A GMI has to provide enough money to survive on; a NIT could be as low as few hundred dollars and a 2% tax rate implemented by a city government. GMI systems also often have other major reforms, such as the elimination of the minimum wage and the ending of most current social welfare programs.

While the notion has long been popular with economists, it has never been politically feasible to be implemented. In part this is because of the very complex and entrenched nature of the current tax codes in most countries that would have to be rewritten under any NIT system.

A fascinating proposal, to be sure. However it does have one of the flaws that any income-based tax system does which also contains any entitlements for non-workers (social security) or the poor (welfare): in societies of imbalanced rations of worker/non-worker the financial burden of the worker can be too great to bear, resulting in collapse or deterioration of the system.

That's one reason I like the national sales tax (along with the social dividend which accompanies it in the "Fair Tax" proposal): everybody buys things, there is no "worker/non-worker pyramid" to support.

However, a NIT (negative income tax) system which does away with welfare, social security, and minimum wage laws would be an interesting proposal to examine. Without the artificially propped up minimum wages (there is no need as everyone received at least the minimum social dividend) prices for goods will be driven down through market competition. The challenges are what to do with people who refuse to be productive, i.e., they sit at home and collect their social dividend, do no work? Well the majority of these people will spend 100% of this divident, putting that money back into the system (supply side economics) and those that do not spend will therefore invest (most likely in savings accounts), putting capital into the hands of those who can invest more aggressively.
--
The K5 Interactive Political Compass SVG Graph
[ Parent ]

addendum (3.00 / 3) (#138)
by zenofchai on Thu Nov 18, 2004 at 03:51:20 PM EST

and no, my desires for a negative income tax have absolutely nothing to do with my desires to quit my job and sit at home playing world of warcraft for the next couple of years. nothing at all. really.

cough

ok I admit, I want to leech on the labour of others for a while. call it a character flaw.
--
The K5 Interactive Political Compass SVG Graph
[ Parent ]

We already have that to a certain extent (none / 1) (#141)
by duffbeer703 on Thu Nov 18, 2004 at 05:58:50 PM EST

Low income families recieve an earned income tax credit of around $2,500/kid depending on income.

Even middle class families get tax benefits. One of my coworkers makes ~$60k, has a stay at home wife and four children and pays 6% total in state (NY) and federal income taxes. I pay about 28%.

[ Parent ]

Moral Hazards (3.00 / 2) (#203)
by cr8dle2grave on Fri Nov 19, 2004 at 06:07:26 PM EST

...it does have one of the flaws that any income-based tax system does which also contains any entitlements for non-workers (social security) or the poor (welfare): in societies of imbalanced rations of worker/non-worker the financial burden of the worker can be too great to bear, resulting in collapse or deterioration of the system

Economists call this a moral hazard, as in creating a situation where one is rewarded for "immoral" behavior. NIC plans definitely represent a moral hazard, but my understanding of Friedman's response to this is that the Welfare State already represents a moral hazard of equal magnitude and, from a purely economic perspective, social entitlements in the form of direct cash subsidies have a far less deleterious effect upon the economy than do centrally administered programs.

---
Unity of mankind means: No escape for anyone anywhere. - Milan Kundera


[ Parent ]
Hmmm (none / 0) (#293)
by Pxtl on Wed Nov 24, 2004 at 01:08:31 PM EST

An odd side effect of that: it also doubles as welfare, and creates a sort of pseudo-minimum-wage.  After all, if you could get 10000/yr doing jack shit, or you can get 14000/yr doing backbreaking labour for a pittance, I think I'd just quit and try to lower my living needs to below the 10g mark.

It also protects families - often a complaint of direct taxation is that a housewife get ignored.  This allows the housewife to collect welfare.

Or are you applying the 10G freebie only to people who work?  That may be better, and leave the traditional overbeaurocratic welfare system in place, as many unemployed people can't really be trusted to manage their money and need to receive it in foodstamp form or else they'd waste it - but the current system also has all sorts of flaws.

[ Parent ]

Are you sure (none / 1) (#95)
by Ward57 on Thu Nov 18, 2004 at 10:56:49 AM EST

that an asset tax wouldn't slow the rate of investment.

Of course it would (2.50 / 2) (#98)
by curien on Thu Nov 18, 2004 at 11:14:55 AM EST

It would also discourage people from saving money for hard times. Or college. Or retirement. And we all now how great of any idea discouraging people from saving for retirement is!

--
This sig is umop apisdn.
[ Parent ]
We allready give people exemptions for those thing (none / 0) (#105)
by Pxtl on Thu Nov 18, 2004 at 12:02:06 PM EST

There are already exemptions on income tax for saving money through insurance, retirement funds, etc.  These could be reapplied to a wealth tax.

And why would it discourage investment?  Aren't investments already taxed?  Oh wait, Bush did away with the dividend tax (the reasoning was specious - he shouldn't be cutting the tax on dividends, just count an increase in value of your stock portfolio as income, same as your dividends, thus eliminating the apparent bias against dividends).

And besides - what's more important, a country that wants to work successfully?  Or a country that wants to invest?  To me, a) is more important.  Right now there is far more incentive to be a market speculator than an actual productive member of society.  Income tax is a detterent to a successful employment.  Sales tax is a deterrent to the economy - people can't buy as much as they usually do, especially the more spendthrifty lower-income folk.

The fact is that a wealth tax forces society to be productive - if you spin your wheels, you lose money.  Meanwhile, income tax discourages people from gathering income - once you have cash (however you got it) you kick back freely.

The real problem with wealth tax is that it is unimplementable.  How do you guage a person's "wealth" - look at the fiasco of taxing used-car-sales and how difficult it is to get fair government appraisal of a used vehicle, then apply that to your entire ownings.

Personally, I think a wealth tax would also be good as it would encourage businesses to give more dividends, rather than accumulate equity - and dividends are a cornerstone of a stable market (hence the importance of eliminating the anti-dividend bias in investment taxes).

[ Parent ]

No, investments aren't taxed (none / 1) (#108)
by curien on Thu Nov 18, 2004 at 12:16:30 PM EST

If I put $10000 into a CD, won't ever pay a dime in taxes on that principle. Only the income is taxed (sometimes). One way of looking at a NAT system is as a "tax on not spending money".

--
This sig is umop apisdn.
[ Parent ]
The NAT exemption adderesses that. (3.00 / 2) (#117)
by Baldrson on Thu Nov 18, 2004 at 12:54:33 PM EST

How much do you think the NAT exemption would total out to be?

How much do you think the typical couple has in assets at retirement?

-------- Empty the Cities --------


[ Parent ]

I don't know (none / 0) (#162)
by curien on Fri Nov 19, 2004 at 02:04:00 AM EST

and I don't know, respectively. You tell me.

--
This sig is umop apisdn.
[ Parent ]
An educated guess. (none / 1) (#176)
by Baldrson on Fri Nov 19, 2004 at 08:43:43 AM EST

The median price of a home is about $170,000. The median capitalization of a job is a bit more difficult to estimate but let's say its $100,000. If you divide home price by 2 to get the price of housing an individual, and add the job capitalization to it you can end up with $200,000 in net assets before you even file a tax return.

As of 1992 when I did the research for the paper an average retired couple had close to $100,000 in net assets.

-------- Empty the Cities --------


[ Parent ]

It would shift investments to more production. (none / 1) (#116)
by Baldrson on Thu Nov 18, 2004 at 12:53:17 PM EST

If you stop taxing the profits of an investment what do you think that does to the incentive for investment?

Its pretty simple really -- if you have a lot of assets right now you have this welfare safety net called government debt instruments that renders you something of a welfare queen.

If you remove that safety net for rich people, you stop corroding their character with welfare and you get more productive investments.

-------- Empty the Cities --------


[ Parent ]

+1 FP (Solid Presentation, Good Idea, Don't Agree) (2.66 / 3) (#122)
by nine4mortal on Thu Nov 18, 2004 at 01:42:19 PM EST

I like your general way of thinking, and I believe it will promote (has promoted) some thoughtful discussion on what is a very interesting and important issue. +1 FP.

Philosophically I like your idea in many respects, but I think that your system has the same problem the current one does: it would be wide open to assaults by clever accountants and/or lobbyists. The rich will somehow figure out how to get their money into non-taxable assets of one form or another, just as they figure out how to get their income classified non-taxable today. (You suggest some assets would not be taxed.) When they fail at that, they can abuse the process of appraising property (such as a home) that has not been purchased recently because such value judgments are highly subjective. You might discover the wealthy would figure out how to get their mansions and boats appraised for very little.

Also, I think savings should be encouraged and not discouraged to a large extent. This is one of the few things I like about the current system that taxes income, but gives you a (fairly) free ride on everything you save. In your system, I would be encouraged to spend any excess that I was going to be taxed on on things that would lower my net asset value, like massages and fancy dinners. Your system encourages excesses by those with money. The current system encourages them to invest to a greater extent.

Nevertheless, I like your post.

-9
"Nine for Mortal Men doomed to die..."

LESS subject to politics... (2.80 / 5) (#133)
by Baldrson on Thu Nov 18, 2004 at 02:54:15 PM EST

The NAT is inherently less subject to politics than the other unfair taxes simply because its foundation isn't as flawed as the others. This requires less work in the rest of the tax code to make it workable.

For instance, sales taxes have to have some relief for consumers. Also, sometransactions exempted and not others just because businesses have to buy and sell things. There are all kinds of places to create justifications for loop holes in both of these places. Income taxes have the same problems because some specific expenses have to be exempted and others not.

With the NAT the only clear parameter that you have to play politics with is the number of dollars in net assets you exempt. That's one number. You can try to argue that assessment methods are rife with opportunity for corruption but the fact of the matter is eminent domain proceedings and existing property tax systems have already created these shennanigans so you get a net reduction in shennanigans.

If you really object to creator-owned intellectual property on the grounds that its special pleading for technologists -- despite the fact that invention is at the root of human existence -- then I might concede you a partial victory. A NAT that doesn't exempt creator-owned intellectual property is vastly preferable to the other systems of taxation -- its just that you don't seem to understand how seriously fundamental technology/creation of wealth is in the political battle. Acquisitors have a fundamentally different view of human social dynamics and they are the source of all the political haggling -- not creators of wealth.

-------- Empty the Cities --------


[ Parent ]

Why? (none / 0) (#186)
by cdguru on Fri Nov 19, 2004 at 10:56:17 AM EST

For instance, sales taxes have to have some relief for consumers. Also, some transactions exempted and not others just because businesses have to buy and sell things.

Today, businesses are taxed on a number of things that individuals are not taxed upon. One of these, in some places at least, is their current assets. I don't see any reason for sales tax exemption for businesses because they have to buy and sell things. I do see, just as it is today, that things bought for resale would not be taxed because the end consumer pays the sales tax.

As to providing some kind of sales tax relief for consumers, again, why? If they have been relieved of all other tax burdens and tax collection is automatic by the seller, where is there a "need" for relief? Some states currently have extremely complicated sales tax systems which differentiate between food sold for later consumption and food consumed on the spot. Differences for medicine and other large items also abound. Hopefully, we could avoid all of that and just tax everything at the same rate. But, even with those complexities in the system I don't see any "politics" at work.

[ Parent ]

Real simplification going back to common law (none / 1) (#198)
by Baldrson on Fri Nov 19, 2004 at 02:15:19 PM EST

Some states currently have extremely complicated sales tax systems which differentiate between food sold for later consumption and food consumed on the spot. Differences for medicine and other large items also abound.

That's precisely my point.

Hopefully, we could avoid all of that and just tax everything at the same rate.

The NAT does just that, and does so without the need for any negative sales tax or other new constructs. Bankruptcy protection of vital assets is one of the most stable parts of law going back to common law. Use it and you legislate just one number, the standard exemption -- the rest is left to normal accounting of business value.

But, even with those complexities in the system I don't see any "politics" at work.

There are all kinds of politics at work under the guise of "protecting the little guy". This all derives from the violation of the common law principle of a homestead's subsistence value as inviolate -- something the lairds like to violate all the time for obvious reasons. As long as they can keep the discussion on everything but assets they win and everyone else loses. Indeed, even they lose because they shouldn't be lairds -- they should be mid-level managers in a much more prosperous, positive-sum society.

-------- Empty the Cities --------


[ Parent ]

Who is supporting FairTax? (2.66 / 3) (#132)
by zenofchai on Thu Nov 18, 2004 at 02:47:33 PM EST

A "FairTax"-associated bill is currently in both the Senate and House.

My Representative, David Price (D-NC) co-chairs the Democratic Budget Group and has an entire page on his site devoted to Taxation Issues. He has actually testified against the national sales tax proposal (which doesn't seem to mention any of the negative tax aspects) and has another page devoted to his comments on the subject. He even posts charts and other Microsoft Word documents against the tax.

One of his statements: A progressive tax is sound economic policy, and it is indicative of an advanced and enlightened society where those who have reaped the benefits of living in a free, stable, and prosperous land understand their obligation to contribute to the common good. is actually a little frightening. First of all, using language like "sound economic policy" is one of those argumentative trickeries to dismiss dissention outright. Also, a progressive tax is absolutely not indicative of an advanced and elightened society -- because it purports to force the understanding and obligations which should naturally occur in this "enlightened" society. A progressive tax is a clear signal that the government most certainly does not believe its society to be enlightened.
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The K5 Interactive Political Compass SVG Graph

Huh? (none / 0) (#172)
by chemista on Fri Nov 19, 2004 at 07:21:36 AM EST

You are confusing "enlightened" with "batshit crazy." There's a tremendous difference between deciding, under no obligation, "I shall send []% of my wages to the government, for that is surely my fair share," and "If everyone in my income class must pay []% -- and others with different incomes pay [series of other rates] -- we can all maximize the mutual benefits deriving from our government." The former is an automatic invitation to freeloading, of course.

[ Parent ]
sending money to the government is batshit crazy (none / 0) (#174)
by zenofchai on Fri Nov 19, 2004 at 08:22:07 AM EST

perhaps one of the most inefficient ways yet devised to help those who need it is to send money to the federal government.
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[ Parent ]
Is it inefficient? (none / 0) (#188)
by ajs on Fri Nov 19, 2004 at 11:00:21 AM EST

I'm not convinced that the federal government is inefficient.

Granted, not every dollar goes to FEMA, but if you combine the beneficial (not in terms of long-range political goals, like warfare, but real contributions) results of tax dollars in terms of managing public land, disaster relief, medical payments, social welfare, law enforcement, etc... then I think you will find that compared to most charities, the federal government's overhead is actually rather small as a percentage of taxes collected... at least that's been the case when I've heard the numbers run during peacetime. Now it might be different, as war is expensive. That's a valid point against, but I'd be curious to know how it averages out over the long haul.

-- Aaron Sherman <ajs@ajs.com>
[ Parent ]

efficiency of a system (none / 0) (#191)
by zenofchai on Fri Nov 19, 2004 at 11:20:23 AM EST

One of the more humorous anecdotes (well from a darker kind of humor I guess) is that we could better have used taxes spent on social services on paying half of the recipients to dig holes and the other half to fill them. There are several layers of bureaucracy in between the taxpayer and the recipient of social services, some of them admittedly necessary, all of them rife with the inefficiencies of any corporation with no competitors.

Further, the determination of to whom the social services should be given, and from whom the funds for this should be taken, are basically the two questions which are used to divide and conquer the American citizenry by politicians on both sides. (The most recent election which focused so strongly on moral issues aside, perhaps -- more on this below.)

But by bringing up war you certainly hit the nail on the head. Every shell expended in Iraq carries the implicit approval of every American taxpayer. Every abortion performed using funds from social services programs; every marriage benefit granted; every capital punishment sentence executed; every non-violent drug offender's costs of imprisonment; these too carry the implicit approval of every American taxpayer. This is actually the logical crux of the religious right's arguments against abortion rights and gay marriage -- they feel these acts to be immoral and reject as unconscionable the very idea of being forced to pay for them. Every government act in a democracy carries the implicit approval of the governed.

One of the questions at the St. Louis presidential debate was from a young lady who asked Senator Kerry how he would guarantee that none of her tax money would be spent on performing abortions (perhaps it was stem cell research, or "partial birth abortions" specifically?). Kerry did not directly answer the question. This is the kind of question which cannot be answered by our government, because so many people disagree fundamentally on the allocation of their money for certain purposes.

For some, it is "the immoral war". For some, it is gay marriage, abortions, and the like. Many people (myself excluded) are simply greedy or selfish and do not wish to donate any of their income or property to others. Some (myself included) simply do not believe that the federal government has proven itself a worthy steward. Some (myself included) wonder if it is right to force the greedy or selfish to part with their property.

Personally I am very much for social programs. I would gladly pay an even higher tax were I certain that this money would serve the common good. However I balk at doing this because I am not only suspicious, but certain that the persons in whom I would entrust my property would squander, waste, and, almost worst of all, divert this money for their own political gain, and likely towards a few actions which I abhor.

I don't have a better answer; in fact I do personally agree with most of my Representative's positions and have voted for him in every opportunity and will likely continue to do so. I merely point out two tiny items of discussion and suddenly I am "shouting him down" (not your words, I grant). I personally find Representative Price to be one of the best that Washington has to offer, as even if I might disagree with a point here or there I do believe him to be an honest, honorable public servant.
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[ Parent ]

OMG, a political representative... (none / 1) (#179)
by Pxtl on Fri Nov 19, 2004 at 09:23:09 AM EST

...who is giving polite and informed commentary on issues, rather than shrill flamebait.

HE'S A WITCH!  BURN HIM!

Figures - first politician that actually is trying to provide civilized discourse and you want to shout him down with economics-as-religion anti-tax nonsense.

Fscking Libertarians.  You mock the fundies and the commies, even though you've just replaced an obsessive worship of the invisible man in the sky or the loving benevolent State with the invisible hand of Adam Smith.

Blind faith is stupid no matter what you put it in.  Libertarians are no better than those they mock.

[ Parent ]

shouting him down? (none / 1) (#187)
by zenofchai on Fri Nov 19, 2004 at 10:59:40 AM EST

Where did I say I was shouting him down? I've actually exchanged several polite letters with the good sir, engaging in this "rational discourse" of which you speak.

One of us, sir, is shouting the other down. I invite you to determine which.

Also, I most certainly do not ascribe to economics-as-religion and nearly every Libertarian and I differ very greatly on opinions on that matter. I am waaaay too liberal for the Libertarian Party. I proudly wear the label "communist" on many occasions.

But yes, I do mock the fundies. Many fundies happen to be Libertarians, don't forget.
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The K5 Interactive Political Compass SVG Graph
[ Parent ]

In that case (none / 0) (#189)
by Pxtl on Fri Nov 19, 2004 at 11:02:45 AM EST

I apologise... I've developed something of a knee-jerk reaction to the Libertarian monotone mantras of "Flat Tax" or "Fair Tax" or even "No Tax".

[ Parent ]
No worries (none / 0) (#192)
by zenofchai on Fri Nov 19, 2004 at 11:36:17 AM EST

I'm actually a fairly vociferous supporter of Representative Price -- I agree that he is a reasonable, honest, honorable person.

The "Fair Tax" proposal (national sales tax plus a social dividend) actually intrigues me to no small degree. Instead of allowing even good politicians (or ranting but pursuasive K5 authers such as Baldrson) to manipulate my opinion, however, I would like to thoroughly entertain the full repurcussions of the notion, before dismissing it out of hand as "too Libertarian" an idea. In fact, if Baldrson doesn't like it, this actually creates a not small amount of appeal.

The "social dividend" part of the "Fair Tax" plan (and here I shall repeat nto only my words on several comments and diary entries but also those of others) is an idea proposed by both Martin Luther King and Milton Friedman. Now, any idea which can garner two such bedfellows certainly warrants some investigation.

The "national sales tax" part of the "Fair Tax" plan seems to be rejected out of hand by my fellow liberals (I am very far to the left, mind you) because it is "not progressive enough". I devoted a diary into asking what shape the taxation graph should look like.

I abhor the current system because it is rife with social engineering, loopholes which only the wealthy exploit, special interest exceptions, and the like. I would favor ridding the tax code of all exceptions and deductions immediately, and leaving the mysterious "brackets" as is rather than continuing down this path of deducting some things yet not others, allowing our citizenry to be manipulated by "tax credits" promises, and the like.

As a staunch liberal, I have come to the conclusion that any system based on income tax will fail to support our programs in fairly short order. With our deficit and our entitlement programs set up as they are, with money moving from those who earn money to those who do not, and with the numbers of those who do not rising much, much faster than those that do (retiring, leaving the workforce, etc), we begin to create an unsupportable and precarious situation. Imagine a pyramid inverted, with the source of funds coming from fewer people going to more.

This is why basing our government revenue system on income is a fragile thing; down economies result in down income; a larger retiree and unemployed population, which as a liberal I desire our government to assist, requires unsupportable tax levels.

So, in summary: I would like our social entitlement programs to continue. I do not like the stewards of these programs, but we have what we have. I do not believe that our income-based revenue source is sustainable over the next 50 years. I support much discussion and research into both the "Fair Tax" and Baldrson's "National Asset Tax" proposals. Of the two, I have a clear choice: the "Fair Tax".

Peace.
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The K5 Interactive Political Compass SVG Graph
[ Parent ]

Interesting, but isn't this a disincentive? (2.60 / 5) (#139)
by cdguru on Thu Nov 18, 2004 at 05:18:05 PM EST

While it might seem "simplier", I can't see that taxing (and providing a corresponding disincentive) to any sort of wealth accumulation (measured in terms of assets) is a good thing.

Let's think about this in terms of a choice a consumer has: they can buy an item of long-term value (say a car) or they can have a nice vacation. An asset tax provides a strong incentive for the vacation vs. the car as you are not taxed on the vacation.

One of the goals of the tax code is to provide incentives to the taxed citizens. It is not necessarily doing that very effectively today, but the incentives are there. This would change virtually all of the current "incentives" drastically. For example, there would be no benefit to the taxpayer in purchasing a house vs. renting. There is a strong disincentive towards purchasing a piece of property and renting it out, so many people with rental homes and small apartment buildings would abandon the practice. It would make more sense for all investments to be in offshore accounts, and such offshore accounts would be shielded in secrecy to prevent their being taxed as assets.

I am not talking about assets of billionaires here, but the folks down the street that have the ability to invest some extra money. They could renovate a house and rent it out, put the money into a mutual fund, or have a week in Tahiti. In the '70s and '80s the house renovation made sense, much more so than a mutual fund. Recently, the mutual fund made more sense and may continue to do so for a while, but this is still an asset and provides capital for businesses in the US. A vacation in Tahiti is nice and, because it has no lasting value, isn't taxable under such a scheme. Is that really the kind of incentive we want programmed into the economy?

This seems like a system designed to remove anything of lasting value - assets - from the population and replace it with simple consumerism. Not "consumerism" in terms of supporting and benefiting consumers but the simple act of consuming and replacing what is being consumed. Yes, this is an extension of Wal-Mart and "Wal-Martism" where there are no assets and only commodities. My reaction to this is that is one of the silliest ideas I've ever heard of.

a little contradictory (none / 0) (#145)
by speek on Thu Nov 18, 2004 at 06:27:00 PM EST

You say: there would be no benefit to the taxpayer in purchasing a house vs. renting

and then immediately after that you say: There is a strong disincentive towards purchasing a piece of property and renting it out...

These can't really both be the case. If renting is discouraged, it's because the tax costs of being a landlord have gone up with a NAT. But, the landlord will just pass thoses costs onto the tenants. Meanwhile, a single typical residence will fall completely under the minimum exemption which means that owning your own home becomes cheaper than renting - compared to our current situation. So a NAT provides a strong incentive for people to own home rather than rent, and it provides a disincentive for people to become landlords. Win-win, in my book.

Also, I don't think stock market investments are taxed under this NAT - I could be wrong, you'd have to ask Baldrson. If it were up to me, the tax would only be on real estate.

--
al queda is kicking themsleves for not knowing about the levees
[ Parent ]

No double taxation under NAT (none / 1) (#147)
by Baldrson on Thu Nov 18, 2004 at 07:39:50 PM EST

Also, I don't think stock market investments are taxed under this NAT - I could be wrong

Whether the stocks are taxed and not the corporations on their assets, or the corporations are taxed on their assets and not on their stocks is pretty much a secondary issue.

As for limiting all assets taxed to real estate -- now you're getting into Henry George territory and you should probably be looking at a single tax on land value or any other inherently limited asset rather than real estate generally, which includes improvements.

The reason I have an ongoing (but fairly amicable) disagreement with the LVT crowd is twofold:

  1. They don't provide a reasonable basis for a standard exemption for subsistence - and I consider this a fatal flaw.
  2. They don't account for the fact that the higher the value the "improvement" on a piece of land, the more costs it places on the protection responsibilities of the government.
Other that that, I'm with Milton Friedman, among others, who think that the Georgist LVT is probably the least distorting of major taxation schemes under wide-spread consideration. (Friedman's admission about LVT goes a long way toward absolving him of his role in imposing payrole withholding -- but he has a long way to go before absolved. Actual implementation of the LVT with subsistance exemption would pretty much absolve him in my opinion but he does have to cash out his Nobel Prize credibility before he dies.)

-------- Empty the Cities --------


[ Parent ]

Land Value Tax (none / 0) (#183)
by cdguru on Fri Nov 19, 2004 at 10:48:27 AM EST

Why would ordinary people purchase land (rather than just renting) if land was the only thing that was taxed? This would seem to push towards a landowner-tenent sort of society which is specifically what people have come to the US to avoid. The mere fact of wide distribution of land ownership in the US has been viewed as a stabilizing factor - check out many landowner-tenent countries in Central America for examples of how hard people have tried to get away from this sort of system. Taxing land ownership pushes towards that in a big way and would certainly centralize ownership in fewer and fewer hands.

I can't see that being good for anyone.

[ Parent ]

See my point #1.. (none / 1) (#195)
by Baldrson on Fri Nov 19, 2004 at 01:55:41 PM EST

As I said, the Georgists have failed to provide a fundamental arguement for a subsistence exemption and this is a fatal flaw. The bankruptcy protection exemption of the NAT is well founded (clear back to common law which protected the Yeoman class of England from what happened to the kindly tenants of lowland Scotland during the lowland clearances that led to the flight of the Scotch-Irish to the new world).

-------- Empty the Cities --------


[ Parent ]

LVT is a neat idea (none / 1) (#196)
by joib on Fri Nov 19, 2004 at 01:58:14 PM EST


Why would ordinary people purchase land (rather than just renting) if land was the only thing that was taxed?

Same reasons as nowadays, i.e. do whatever you want with your own land (within the limits of the law). Yes, owning land would cost some money, but OTOH land prices would also fall, as the land value can be viewed as the rental value divided by the interest rate. When the land is taxed, the land tax has to be subtracted from the rental value, and thus the value of the land falls.


This would seem to push towards a landowner-tenent sort of society which is specifically what people have come to the US to avoid. The mere fact of wide distribution of land ownership in the US has been viewed as a stabilizing factor - check out many landowner-tenent countries in Central America for examples of how hard people have tried to get away from this sort of system. Taxing land ownership pushes towards that in a big way and would certainly centralize ownership in fewer and fewer hands.

I think the effect of LVT might in fact be just the opposite. The feudal societies like medieval Europe (or Central America per your explanation) happened largely because at some point the ruler(s) of the country gave the right of land ownership to their cronies. What then naturally happened was that these cronies could sit on their asses and watch their wealth grow, while the serfs worked their asses off.

This won't work in an LVT model, since the land owner has to pay a (largish) tax to the government, perhaps even as much as the rental value of the land (as proposed by Ricardo). Thus, to make a profit the land owner has to provide some added value from the land (farming, mining, building houses etc.). Just renting the land leaves the owner with a zero profit. And surprisingly, the land owner in fact cannot pass on the cost of the LVT to his tenants, since if he charges more rent than the rental value the tenants will buy their own land instead (remember that as I explained above the price of land will drop under an LVT model) or move elsewhere.


I can't see that being good for anyone.

Nah, the only big losers would be real estate speculators and exploiters.

Anyways, the bottom line is that in some way, all taxation is bad in that it distorts the free market, but of the common forms of taxation (income, sales, capital, tariffs) LVT distorts the market the least, since the supply of land is constant regardless of demand, and thus there will be no deadweight loss even if land is highly taxed.

[ Parent ]

Home ownership vs. renting (none / 0) (#182)
by cdguru on Fri Nov 19, 2004 at 10:43:26 AM EST

Your mistake is that assuming there is any incentive towards purchasing a house. Renting = 0 tax. Purchasing first home (below taxation limit) = 0 tax. No difference. This would likely reduce the number of house purchases in the US by at least 30%, maybe as high as 50%.

However, for the potential landlord, you have the balance between purchasing visible asset in the US and being taxed on it vs. purchasing invisible asset outside the US with no tax. Or, just not purchasing any taxable asset. Less tax is the result.

Yes, it would be possible to simply pass the tax expense along in the rent to the renter. That is certainly how it works today. The difference is that today there are tax incentives for the landlord to purchase, improve and rent out the property. Remove these and you remove that incentive to own the property in the first place. This would likely result in fewer landlords. At the same time reducing the incentive of people to actually purchase a home (because of no tax difference to them) could result in rental property being chased after by a larger pool of renters. Might be nice for the non-tax-adverse landlords, but it would likely be very renter unfriendly.

Finally, the only way this works is to tax all assets. Stock, cars, high-end stereos, computers, jewelry, boats, everything. If it is an asset worth more than some minimal amount it needs to be taxed. This is similar, but probably not exactly the same as the "personal property tax" in some states (CT, for example) which I believe applies to just about everything over some minimal value.

I suspect one issue with this is that there are serious misconceptions as to how tax-adverse some people are. No matter what you do, they are going to find a way to pay less tax. If that means changing what they spend money on, they will do that. If it means buying things differently, they will do that. All in the name of avoiding paying taxes. So, be very sure you like the potential consequences of any sort of proposal.

[ Parent ]

landlords pass on costs (none / 0) (#197)
by speek on Fri Nov 19, 2004 at 02:01:36 PM EST

Tenants pay them. Neither of these is an option - it is the way it is. No landlord will choose to lose money in order to not pass on their tax costs. Since landlords will incur high property taxes, tenants will incur high property taxes. Individual home owner will not. Therefore, owning your own home has a tax advantage vs renting under a NAT.

I don't see your argument that all assets must be taxed. You can't avoid owning real estate. Businesses require real estate to do manufacturing, office work, farming, recreational services etc. You can move out of the country, but there's going to be a balance between A) the resulting drop in property values, B)taxes that other countries impose + export to US costs, and C) reduced labor costs associated with not having to pay income taxes, or any other sort of taxes.

--
al queda is kicking themsleves for not knowing about the levees
[ Parent ]

goals of the tax code (none / 0) (#146)
by zenofchai on Thu Nov 18, 2004 at 07:32:43 PM EST

the only goal of the tax code should be to raise the necessary funds. anything else becomes open to a litany of "my exception or goal is important" special interests.
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[ Parent ]
Taxation system (none / 0) (#148)
by jd on Thu Nov 18, 2004 at 08:05:00 PM EST

The first thing that people need to consider is that you can't get more money out of people than they have. This means that you're going to have to tax people with more money to a higher degree.

(A trivial example: If you're bankrupt, penniless, flat-broke, homeless and jobless, you can't pay a damn cent 'cos you don't have that to pay. Therefore, if you tax those who are better off even a cent, you're taxing those with more to a higher degree.)

The second thing you need to consider is the consequence of having no central authority. Think Afghanistan, after the Russians left, or Somalia for the past few decades. There was no real central authority, and the result was utterly catastrophic. Compare these with countries with strong Goverments, and you'll see that a central authority is better than anarchy.

The third thing you have to consider is that services aren't free, and that a lack of services usually leads to decay. California, New York and Oregon have strong public transport systems, for example, and have strong, thriving communities. Those States with little or no infrastructure are generally (but not universally) poor, have little industry and generally don't fare well on smog.

All in all, then, I think there are some good reasons for believing that the money is necessary. So, how to apportion who pays what?

The existing taxation system is banded, so people just over a band pay disproportionately more than those just below. You can actually earn less by being paid more. This is not a good idea, but it's inevitable when you have a discrete system.

"Flat" taxes are even worse, because the only way you can earn enough to pay for all the infrastructure is to tax those who are earning very little practically all of their income. You create debt traps, that way, and there's no real way out, no matter how hard they work.

This leaves a function tax. A function tax is where you enter what you earn into a continuous function, and you get the amount of tax out. If you earn N cents more than someone else, you will pay between 0 to (N-1) cents more in tax, no matter where you are on the function. This means that if you earn more, you will ALWAYS be paid more, AND you will always pay more.

In a function tax, you don't have complex tables, where X, Y and Z are exempt, W is exempt for the first N%, etc. The function would likely have only two or three variables, such as the sum total of all you earned (regardless of source), the sum total of all you needed to pay in order to earn that amount (regardless of destination) and maybe the sum total value of all assets not otherwise included (regardless of what they are).

Three numbers. That's the absolute most you should need to put in. The function would map those three variables to a simple surface, from which you'd calculate the amount in tax.

Because this is a very simple taxation system, there would be much less uncertainty of what counted where. It's money coming in, going out or staying put. It's hard to get much simpler than that. You certainly wouldn't need a computer a few tens of thousands times more powerful than the ones that put astronauts on the moon, just to know what's going on.

With such a taxation system, you can dispense with sales tax entirely. Since the tax is a function of what you have, it's already figured in. Same with property tax and car tax. Unless you're the Sessame Street Count (who loves to count!), you probably want to count things once. Not once for every applicable tax code and tax system.

It also takes care of death duties, since that is a transfer of wealth, and the function is primarily about transfers.

It's probably not the perfect system, but I'm willing to bet it turns out to be closer to whatever society eventually decides is "fair" than anything in place today.

misunderstanding tax brackets (3.00 / 2) (#158)
by polyglot on Fri Nov 19, 2004 at 12:52:23 AM EST

"people just over a band pay disproportionately more than those just below. You can actually earn less by being paid more"

This is not correct - the tax rate over each threshold is a marginal rate: it applies only to the money earned over the threshold. i.e. you don't pay (making numbers up here) 20% on incomes of less than $30k and 30% on incomes of more than $30k. A person on $35k pays 20% on the first $30k and 30% on the last $5k.

The current progressive income taxation system is a "function tax" as you describe it - tax paid is a continuous function of income. Because there are thresholds, the first derivative of payments is not continuous, but (importantly) there are no discontinuities in payments. Someone earning slightly more than a threshold does not pay disproportionately more than someone just under that threshold.

That's not to say that there are not issues with the current system. In Australia for example, tax brackets are not effectively indexed for inflation, so as incomes and the cost of living rises, the tax rate also increases as a percentage of real income. Ignoring bracket-creep is a primary reason that Australia currently has its highest-taxing government ever


--
"There is no God and Dirac is his prophet"
     -- Wolfgang Pauli
‮־
[ Parent ]
Oh, contrair you can get more money (none / 0) (#166)
by modmans2ndcoming on Fri Nov 19, 2004 at 02:37:10 AM EST

a sales tax would get the money at the POS. that means that even sales on credit are collectable. poor people have the most credit debit. they already spend more than they have. so the government can get more out of them by leveraging a sales tax to get at the credit assets.

[ Parent ]
A good point (none / 0) (#185)
by ajs on Fri Nov 19, 2004 at 10:51:54 AM EST

Your point is an excellent one, though I'm sure it works against the popular opinion of a sales tax ;-)
-- Aaron Sherman <ajs@ajs.com>
[ Parent ]
NEW FAIR TAX FORM. (2.33 / 3) (#157)
by Wulfius on Thu Nov 18, 2004 at 11:15:11 PM EST

Figure (1): ______________ (Taxable income)
Figure (2): __________ (10% of Taxable income)

In the table below, allocate the 10% of your tax to an area you wish your money to support:
(eg: Health: 5%, Education 5%)

[___] The Military (Defence of nation).
[___] The Military (Offensive and nuclear weapons)
.
[___] Internal security forces and intelligence.
[___] Corporate subsidies (Corporate welfare).
[___] Social programmes (Social welfare)
[___] Crime prevention.
[___] Science.
[___] Education (Primary and Secondary)
[___] Education (Universities and research)
[___] Space exploration
[___] Political party subsidies and electoral reform.
[___] Foreign aid
[___] Foreign governments military aid
[___] Religious fundamentalism
[___] Current favourite bugbear (Eg: War on terror, War on drugs)
[___] Infrastructure (Roads, Railroads, Ports, Internet)
[___] Job creation

.


---
"We must believe in free will, we have no choice."
http://wulfspawprints.blogspot.com/ - Not a journal dammit!

I always thought this was a great idea... (none / 0) (#175)
by claes on Fri Nov 19, 2004 at 08:26:46 AM EST

Just think of the advertisements each branch of the government would put on TV to get people to send them money!

NOAA: sound of wind, rain, thunder, "When things get ugly, who do you turn to."

NIST: Guys in white coats with clipboards "Every wonder why all your appliances work reliably? Well, that's just part of what we do for you".

And of course the military (But they do that already to get recruits. The marines have great ads).

-- cleaes

[ Parent ]

Your form makes no sense (none / 0) (#184)
by ajs on Fri Nov 19, 2004 at 10:49:44 AM EST

Your form is broken down in terms of major news media hot topics. It would be impossible to allocate money in that way (as many programs would fall into either none or many of the categories).

The right way to do this would be a form that listed the budgetary sub-divisions of the congress and executive branches.

The Judicial branch should, IMHO, recieve a fixed fraction of the combined Congressional and Executive funding.

-- Aaron Sherman <ajs@ajs.com>
[ Parent ]

I don't think this would be sustainable (none / 0) (#206)
by dejohn on Fri Nov 19, 2004 at 08:02:58 PM EST

I don't get the impression from my observations of the general population that this would work. Most citizens haven't the foggiest idea how to appropriately allocate funds for the greater good of the whole population. People don't know how to manage countries and with a form like this would be easily susceptible to special interest groups. It is true that "the people would get what they wanted", but as we all know, that is not always a good thing...

[ Parent ]
Better Yet (none / 0) (#212)
by John Milton on Sat Nov 20, 2004 at 02:40:47 AM EST

Which Senator would you like to give this money to?


"When we consider that woman are treated as property, it is degrading to women that we should Treat our children as property to be disposed of as we see fit." -Elizabeth Cady Stanton


[ Parent ]
10% of my tax? (none / 0) (#213)
by the77x42 on Sat Nov 20, 2004 at 03:09:46 AM EST

where does the other 90% go?


"We're not here to educate. We're here to point and laugh." - creature
"You have some pretty stupid ideas." - indubitable ‮

[ Parent ]
Where? (none / 0) (#261)
by Shajenko on Mon Nov 22, 2004 at 04:09:42 PM EST

Into a big black pit we call the federal government ;)

[ Parent ]
5% Nukes, 5% Space Exploration (none / 1) (#218)
by Sesquipundalian on Sat Nov 20, 2004 at 10:30:00 AM EST


Did you know that gullible is not actually an english word?
[ Parent ]
defence/offence? (none / 0) (#224)
by Rich0 on Sat Nov 20, 2004 at 10:23:43 PM EST

Uh, how would you break down defence and offence?  And why are nuclear weapons classified as offence?  In all of history they have only been used twice offensively, and any major nation today would only use them in retaliation (making them essentially a defensive tactic).

The purpose of tanks/bombs/guns/whatever is basically to kill people.  What makes them offensive or defensive is the policies surrounding their use.  One policy might be, "if you step across this line, we'll nuke your capital."  Another might be "if you have oil and don't sell it at a price we like, we'll invade you."  

In any case, what will you do when you find that nobody checked off infrastructure (sounds boring), and 80% of the money coming from the red states is marked for religious fundamentalism?

In any case, roads should be paid for by anybody who drives on them - it shouldn't be on a donation basis...

[ Parent ]

Maximum of 10% (none / 0) (#260)
by Shajenko on Mon Nov 22, 2004 at 04:09:07 PM EST

In any case, what will you do when you find that nobody checked off infrastructure (sounds boring), and 80% of the money coming from the red states is marked for religious fundamentalism?
They're only deciding where 10% of the tax is going directly. The other 90% is allocated by their representatives.

I see this mostly as an experiment: who can allocate tax money better? The people, or their representatives?

As it's an experiment, we don't want to just change it so 100% is decided by the people at large, unless they prove that they can do well with 10% first. Maybe even only 1%. That's still a hefty chunk of money.

[ Parent ]
Not any more fair (none / 1) (#168)
by ope557 on Fri Nov 19, 2004 at 02:56:08 AM EST

The problem I see with this tax is that it is based on the unproven assumption that those with higher value assets can afford more taxes to keep the assets. I don't think that this is necessarily true. Especially for the middle class and to some extent the lower class. If you buy property today which is the most you could possibly afford then you are toast if the property value goes up. It seems grossly unfair that people should have to consider selling assets they have worked hard for because their investment is actually working out for them but now they can't afford to own it anymore.

It also would mean that you have to pay the same amount of tax no matter what happens in your life. Lose your job? Lose a spouse and a second family income? Doesn't matter, you still owe $x in taxes for assets you bought when times were better.

It also seems that it would make a deeper impact on the middle class harder than those more rich. A two acre plot of land will net the same amount of taxes whether the owner has $10M in the bank or is living paycheck to paycheck. However, the person who is living paycheck to paycheck will have a lot harder time coming up with the money to pay the taxes.

In the end this really seems the least fair of any of the proposals around. The national sales tax has reduced consumer confidence and lower spending written all over it. However, I would take it over this proposal. At least with the NST you can adjust your spending as you fiscal situation changes. Ultimately I think a move to flat income tax is the most fair of anything I have heard.



You misunderstood. (none / 1) (#173)
by Baldrson on Fri Nov 19, 2004 at 08:17:46 AM EST

"tax net assets, in excess of levels typically protected under personal bankruptcy" means your criticisms are basically invalid.

For an individual, here is what a typical FAQ on bankruptcy says you can keep:

13. Can I keep my home and personal property? As for real property in many states, dependent upon which exemption scheme is selected and your circumstances, you may exempt up to $100,000 in equity. When calculating your equity you should use a value that is based upon a forced liquidation as opposed to the best selling conditions to arrive at a value for your home. Once you determine this value, subtract the amount owed plus selling and transfer costs from the value to calculate the equity.

As for personal property, in California, you are permitted exemptions for a variety of personal property. This includes, automobiles, household furnishings and personal effects, jewelry, tools of the trade, retirement plans, unmatured life insurance, personal injury awards, earnings, animals and some other miscellaneous property. The value of each exemption and which exemptions can be used are determined by the statutory exemption scheme is selected. Again, state laws vary.

Perhaps the reason so many people reading the description of the NAT fail to understand the importance of, or even the existence of, the bankruptcy exemption is because so many people don't have any concept that they can protect their vital assets from creditors. That says something pretty negative about society.

To state in terms you may have a great deal of difficulty misunderstanding:

If the level of bankruptcy protection is set to some reasonable figure, say $150,000, then you can have up to $150,000 in net assets and not even file.

If you have $150,001 in net assets you pay the government about a nickle -- that's 5 cents.

Follow so far?

Here's a plausible formula for calculating your NAT:

.06*(your_net_assets - 150,000)

If that formula is negative you don't file a tax return and you pay nothing.

If it is positive, you can easily pay the NAT.

-------- Empty the Cities --------


[ Parent ]

Many people would lose their homes. (none / 1) (#177)
by riverheart on Fri Nov 19, 2004 at 09:04:30 AM EST

The level of bankruptcy protection for home equity listed above, $100,000, is a half to a third of the actual home price in this area. My home is currently assessed by the county at $202,000; its optimal sale valuation is higher. It is paid off. It is also the only asset I have.

Under the NAT proposal, homeowners who have fallen upon hard times would be required to take out home equity loans every year to pay the NAT, thus risking their homes. For example, I had less than $7,000 last year in earnings due to being unemployed for much of the year, and have received about $5,000 in earnings this year due to not being paid the over $8,000 I am still owed in back pay by my former employer. Calculating the NAT at the ratio above, I would owe about $3,000 per year, and would have to take out a home loan to pay this. Add in my annual property taxes of about $2,500 and homeowner's insurance of $1,000, and there is no money left on which to live. The only way we made it through these past two years is via having no mortgage.

My home is assessed at less than many others in my area, and homes rise in valuation the closer one is to the major city nearby. I live in one of the least expensive parts my area, but one which is rising rapidly in home valuation. That's great from a standpoint of net worth, but does little for me in real life unless I am willing to put my house at risk.

[ Parent ]

That' all true except you missed one big thing... (none / 1) (#194)
by Baldrson on Fri Nov 19, 2004 at 01:50:00 PM EST

Right now the incentives for capital sources are to invest in lower return investments meaning they are less likely to fund firms at the technological forefront. Under the NAT, stockholders would very quickly become intolerant of a risk-aversive management culture and find folks who knew their particular business domain down to the nuts and bolts because those are the guys who know where to put the capital to get the highest return. Since there is no taxation on the capital gains or revenues, the stockholders get a much bigger bang for their buck from higher risk, more technology-literate execs and managers.

You'd not only be employed more of the time, your income would probably be higher and you'd have to pay no taxes on that income.

-------- Empty the Cities --------


[ Parent ]

I also forgot to mention another big thing.. (none / 1) (#199)
by Baldrson on Fri Nov 19, 2004 at 03:04:48 PM EST

Recall that part of the proposed reform is a citizen's dividend which, combined with the subsistence exemption, would provide a base level of income free from taxation, regardless of your employment status or history. The amount of income it would provide would depend on how much fiscal authority the populus could retrieve from their "representatives" via the citizen's dividend.

This gets into the way you address the fundamental flaws pervading the electoral process -- the subject of a future K5 article. That may well be the next article I write

-------- Empty the Cities --------


[ Parent ]

How do you handle non-liquid assets? (3.00 / 2) (#180)
by ghjm on Fri Nov 19, 2004 at 10:17:17 AM EST

Let's say I'm a senior developer at a hot startup (let's call it Blue Cap Software). I've been in the software business for twenty years, and over that time I've managed to accumulate $60,000 equity in my house, buy two cars, and stash (through both contributions and equity growth) another $60,000 in my retirement fund. My total assets happen to be $150,000, just at the limit of the personal exemption. In addition to this, I also have a bunch of vested options - twenty thousand of them. My "strike price" is fifty cents, so it would cost me $10,000 to exercise my options and become a shareholder. However, I haven't done this yet.

Here are some scenarios:

1. Blue Cap is privately held and has a policy of not discussing its valuation with employees. Their last round of financing valued the company at $2.50 per share, but as a mere developer (even a senior one), I don't know this. If you believe that the company is really worth what the investors paid for it, then my options have an unrealized net value of $40,000. Perhaps I owe $2,400 in taxes. How do I find out that I owe this tax? Do I really owe it?

2. After the investment round but before tax time, Nanosoft announces that they own a patent covering everything Blue Cap sells. The courts have upheld the patent and Nanosoft refuses to license on any reasonable terms. Customers are deserting Blue Cap by the boatload, my last three paychecks have been late, and I have resumes out with everyone who will take one. Tax time rolls around. In this scenario, do I still owe $2,400 in asset taxes? If so, why?

3. Blue Cap counter-sues Nanosoft and somehow manages to prevail in court, winning a $100 million settlement. All the fickle customers, plus more, return to the fold, and we're shipping orders as fast as we can staple the CDs to the floppy disks. Blue Cap IPOs and its stock becomes the darling of Wall Street, opening at $80 and climbing to $130 over the first two weeks of trading. My options are now worth $2.59 million, although I can't yet realize any of this money because of the six-month moratorium on employee trading. I'm praying that the price will stay high long enough for me to sell, but I don't really believe the company is worth anything near its current share price. Tax time rolls around. Do I owe $155,400 in asset taxes? If so, how do I pay it?

4. Over the six months after the IPO, the market recovers some of its rationality regarding Blue Cap stock. The assets that were worth $2.50 a share in private hands are really only worth $4.50 as a public company (which I knew all along), and market pricing eventually reflects this. By the time I'm allowed to sell, flipping the options would only net me $85,000. I decide to hang on to them because I think the company's fundamentals are strong and the $4.50 price is likely to appreciate quickly. Do I owe $5,100 at this point? If I previously owed $155,400 from last year's taxes, am I now entitled to a refund or credit of some sort? What if I sold my house and moved into a fleabag apartment in order to pay last year's taxes - do I now get cash back so I can buy a house again? Conversely, if I failed to pay my taxes last year because the money just didn't exist - can I count the unpaid tax as a liability against my assets, to avoid paying tax this year? More importantly, have I become a criminal as a result of this?

5. Eventually, the stock rises to $10 and I finally decide to exercise and sell the options. Exactly how much tax is due on this? The sale price is $200,000, but that isn't really the asset value. At the very most, the asset is worth $190,000, because I have to exersise the options (which costs me $10,000) before I can sell them. However, if I can deduct my cost basis from the net asset value, then shouldn't I also deduct the $162,900 that I paid in taxes in order to continue to own the asset? So do I owe $11,400, or do I owe $1,626?

-Graham

[ Parent ]

Double taxation and the NAT (none / 1) (#193)
by Baldrson on Fri Nov 19, 2004 at 01:31:09 PM EST

In general the way you find out the value of an asset is to go to a bank and ask them how much of a loan you can take out using the asset as collateral. The reason the treasury rate is used as the tax rate is because that's the figure that goes into the bank's net present value calculation with risk adjustment applied not to the interest rate but to the expected profit stream.

That said, there are two ways to handle corporations under the NAT:

  1. Charge the corporation the NAT on its net assets but not the share holders.
  2. Charge the shareholders for the market value of their shares and don't charge the corporation for its net asset holdings.
You've just made a good case for assessing the NAT against a privately held corporation's assets rather than the shares held.

In general, no bank is going to want to accept employee shares in a privately held corporation as collateral on a loan precisely becuse they'd have such a hard time estimating their net present value.

When the officers of the corporation go to the bank for a loan, its another matter altogether. Any time a potential investor or buyer looks at a privately held corporation, they're going to want to look at the corporation's books. Of course there will be corporations that will committ accounting fraud. That happens all the time. Its the business of the loan officers to figure this out. The way I've suggested this be handled with regard to large privately held corporations is to require them to insure their assets with domestic property insurance carriers that are required by law to adhere to generally accepted accounting practices. This isn't fool proof -- nothing about assessment is -- but it is the most obvious way to handle privately held corporations.

-------- Empty the Cities --------


[ Parent ]

How is this invalid? (none / 0) (#215)
by ope557 on Sat Nov 20, 2004 at 03:23:48 AM EST

Current example, houses where I live are selling for somewhere around $500,000CDN but they were selling for about $300,000CDN three years ago. Not great houses, just a market gone wild. So, people who bought a house three years ago would have based their budgets on a $300,000 house or about $9,000/year in taxes among all of the other expenses. Three years later their taxes for the house are $12,000/year. That's not a minor difference. The thing is people will buy assets based on what they can afford on the day that they purchase the asset, not on what the asset might be worth on five years.

I see a lot of people getting screwed by the tax when the value of their asset jumps up quickly. People should be thrilled when an asset they own appreciates in value, not saying "I guess I'll have to sell the house because I can't afford the taxes anymore".

The problem I have with this tax doesn't adjust when your financial situation changes, income tax and sales tax do. If I lose my job I pay no income tax, spend on only things that I need so I pay less sales tax but my asset tax is exactly the same as it was before. Conversely, if I start making more money my asset tax is still the same, my total contribution to the government doesn't change even though I am "benefitting" more from the economy. Tax on income is the most fair way to tax everyone. Make more, pay more. I know, it sucks. Taxes suck but government needs to get money from us somehow.



[ Parent ]
Just move further out. (none / 0) (#216)
by Baldrson on Sat Nov 20, 2004 at 04:05:12 AM EST

Current example, houses where I live are selling for somewhere around $500,000CDN but they were selling for about $300,000CDN three years ago. Not great houses, just a market gone wild.

Why not just sell and move further out to where the property values allow you to buy a median price house and sink the rest into government debt guaranteed debt? Your property will still increase in value and the remainder will pay out exactly what you need to pay taxes -- no loss of principle.

If you say "the jobs are in the city" I say, "No, they moved out with you due to the fact that they were subject to the same tax incentives."

-------- Empty the Cities --------


[ Parent ]

Stupid - Feferal vs State Tax (1.50 / 2) (#181)
by n8f8 on Fri Nov 19, 2004 at 10:41:21 AM EST

The national sales tax would replace a national income tax. Property taxes are state and local taxes, not federal taxes.

Sig: (This will get posted after your comments)
Not fair at all (2.66 / 3) (#200)
by The Real Lord Kano on Fri Nov 19, 2004 at 03:42:43 PM EST

What about people who have worked their entire lives to buy the assets that they now have. Like their homes.

These people paid incometaxes while amassing their personal fortunes, now these people will be taxed again on assets that they bought using taxed income?

Out tax system isn't perfect, but if we change it we must make sure that the new system is better, not just different.

LK

Transition (3.00 / 2) (#201)
by Baldrson on Fri Nov 19, 2004 at 04:09:14 PM EST

These people paid incometaxes while amassing their personal fortunes, now these people will be taxed again on assets that they bought using taxed income?

The transition from the current system to the NAT isn't as simple as just passing the NAT with no transition period for precisely the reason you describe.

The problem is this: How much weight should be given to the "amortization" of prior taxes paid into the system? The simplest way of doing this is to tax only increase in asset value from the date the income tax is terminated. Another, perhaps more accurate, way of accounting for prior taxes is to actually approximate how much they would have paid in NAT and compare that to what they did pay under the current system. Then credit or debit them based on the difference with some prorate.

On the other hand, there is a lot of damage done to the system by the concentration of wealth that has already occurred and a lot of political patronage for wealth concentration that arose simply because of wealth concentration. This requires remedial action. What form that remedial action should be is a good question as well, but it almost certainly shouldn't impact any but the most wealthy.

You raise an important point. Thanks.

-------- Empty the Cities --------


[ Parent ]

A few thoughts (2.83 / 6) (#202)
by glassware on Fri Nov 19, 2004 at 05:58:22 PM EST

Here are a few comments on taxes that I hear frequently. Feel free to disagree with them if you like - I'd be interested to know if I have any of these wrong.

1) A tax system should be simple.

Part of the reason we hate the IRS so much is that the tax system is complicated. This causes errors and omissions, which increase the anguish of filing taxes.

2) A tax system should be perceived as "fair".

A tax system should not cause you to look at your neighbor and think, "He's getting a free ride." This applies both to neighbors who are millionaires and neighbors who are homeless and broke. Everyone should pay a reasonable amount.

3) A tax system should not punish you for being successful.

You should not have to fear that you will suffer some unusual or unexpected tax burden if you are struck by good fortune, whether earned or unearned. Even people who are successful or lucky should be perceived to pay a "fair" tax, as in rule #2.

4) A tax system should not cause additional harm to people who are unsuccessful or unlucky.

If you are unable to afford food or shelter, the tax system should not cause you additional burden. However, this rule should not allow people to avoid paying their fair share.

5) A tax system should not cause you to make bad decisions.

If there is a strategy for reducing your taxes, it is reasonable to expect people to consider this strategy. Although some behavior-based tax breaks seem harmless (buying a house, saving for retirement), others (having children, generating losses) may have both positive and negative effects. The tax system should not encourage behavior unless there is virtually unanimous consent that the behavior is desirable.

6) It is not right to tax savings, only income.

If a tax system taxes savings, it is in fact employing a behavior-based deduction - one that offers a deduction to those who spend the exact same amount as they earn. This specifically discourages savings, which conflicts with rule #5. Additionally, it conflicts with rule #2, since two neighbors who earn the same amount of money can pay different tax rates: one might only be taxed on their income, and the other neighbor might be taxed not only on income but also on their savings; which does not feel "fair".

--

Considering these factors, I prefer a flat tax with a small set of fixed deductions. For example, imagine a 20% flat tax on income from all sources - salary, dividends, inheritance, capital gains, rent, interest - and a flat $15,000 deduction given to everyone to cover the cost of living; a deduction for mortgage on your primary residence; and a deduction for dependents based on the cost of living deduction above.

This system, albeit imperfect, does not appear to punish anyone nor provide a dramatic windfall for anyone. Consider a few scenarios:

  • A millionaire dies and leaves a fortune to two children. The children each receive half the inheritance and pay the same tax rate as everyone else. The standard deductions that apply to everyone are too small to make much of a difference in this tax situation, so there are no tricks nor schemes the millionaire can consider to reduce this tax burden. Therefore, the tax system frees the millionaire from worrying about their estate's taxes, and the poor neighbor doesn't feel that the millionaire gets a special break.

  • A middle-class person is laid off and receives unemployment insurance while looking for a job. If the salary rate drops below the basic deductions, this person will not be taxed until they regain a livable wage. If the person is unemployed for part of the year, their tax rate will drop (due to the fixed deduction levels), which can potentially help reduce the impact of the job loss. The person's neighbor knows that the person is paying their fair share while employed, and will soon resume paying their fair share when re-employed.

  • A business considers taking on debt to expand into new operations. The business is still taxed at a single predictable rate on all existing operations, and the new operations will only be taxed on new income generated. Therefore, the business can make decisions in its own best interest without the additional burden of tax planning.

  • An average unmarried worker receives a sizable raise from $40,000 to $60,000. Previously, the worker only had $25,000 of taxable income; now the worker has $45,000 of taxable income. However, this new income is taxed at the same, consistent, predictable rate. The worker is not blindsided by tax brackets or excess wage laws, and has straightforward expectations of their increased tax burden - it is directly proportional to their income.

    --

    There is no tax system that will get rid of the "I hate givin' money to da gubmint!" factor. The best we can do is take a fair share of income in a consistent and predictable manner. Although tax reform on such a dramatic scale may be unreasonable, similar ideas have been proposed in the past and I personally would consider this an improvement over our existing system.



  • A was actually around during Rostenkowski (none / 1) (#204)
    by Baldrson on Fri Nov 19, 2004 at 06:33:46 PM EST

    You are talking about the same goals set forth during the 1986 reform of the tax code.

    Let me give you a clue. Your approach has been tried and just doesn't work.

    -------- Empty the Cities --------


    [ Parent ]

    Washington Post Article on Rostenkowski's Reform (none / 1) (#205)
    by Baldrson on Fri Nov 19, 2004 at 06:40:10 PM EST

    Check out this Washington Post article on the fate of Rostenkowski's reform:
    One of Ronald Reagan's greatest legislative achievements -- the Tax Reform Act of 1986 -- was the most extensive overhaul of the federal tax system since the income tax was created in 1913. The sweeping way that it slashed rates and blew away billions of dollars of narrow tax breaks, Reagan said, was "a triumph for the American people and the American system."

    That was then.

    Today, while vestiges of the historic measure remain, the tax code has been allowed to revert in many ways to its pre-1986 form and politicians of both parties are eager to push it back further. It has been repopulated with dozens of targeted tax breaks and its rates have not only gone up, but the number of brackets have multiplied. "The trend these days is to go in the opposite direction of the '86 act," said Allen Schick, a political scientist at the University of Maryland.

    ...


    -------- Empty the Cities --------


    [ Parent ]

    Problems (2.50 / 2) (#249)
    by m50d on Sun Nov 21, 2004 at 02:56:34 PM EST

    Point 6 is wrong, and point 5 shows it. You say "The tax system should not encourage behavior unless there is virtually unanimous consent that the behavior is desirable". The point is that there *is* virtually unanimous consent that saving is bad for the economy, and therefore bad for the country. So it is perfectly reasonable to tax savings.

    An average unmarried worker receives a sizable raise from $40,000 to $60,000. Previously, the worker only had $25,000 of taxable income; now the worker has $45,000 of taxable income. However, this new income is taxed at the same, consistent, predictable rate. The worker is not blindsided by tax brackets or excess wage laws, and has straightforward expectations of their increased tax burden - it is directly proportional to their income.

    But this isn't fair, because the value of money is less if you have more of it. The "taxable income" idea is a start - if you think "has straightforward expectations of their increased tax burden - it is directly proportional to their income." is a good thing, why not say all income is taxable? Answer: because you know that isn't fair.

    Probably the fairest way to do it is something like this: you pay 5% of all your income. Then you pay 5% of all your income - £10000, as long as that is positive. Then 5% of all your income - £20000, and so on. Naturally this makes things more complicated, and means there are cheats like employing your wife to do nothing. But that's the price you pay for fairness. Points 1 and 2 are, as far as I can see it, fundamentally incompatiable.

    [ Parent ]

    What? (none / 1) (#259)
    by NoBeardPete on Mon Nov 22, 2004 at 04:07:59 PM EST

    Saving is bad for the economy? Maybe if you're stashing bills under your mattress, that's bad.

    Think about it this way. You've got some money, which means you can make some decisions about how some resources are used. You can, for example, buy some toys, which means you're arranging for some raw materials to be consumed, and some people to spend time working to turn these into toys, which you will then presumably play with. Alternately, you can invest it. For the sake of example, suppose you spend it to finance a small fraction of a new toy factory. You are arranging for some raw materials to be consumed, and some people to spend time working to turn these materials into a toy factory.

    Directing resources into new productive endeavours is generally good for the economy, as compared to cashing the resources out in the form of consumable goods.

    Now, suppose your money is in a bank account, or is being invested by a financial guy. Really, what you're doing is asking them to invest it into productive endeavours for you, without you needing to do the work of figuring out where the good opportunities are. So this is closer to spending it on a new productive endeavour than it is to hiding it under your mattress.


    Arrr, it be the infamous pirate, No Beard Pete!
    [ Parent ]

    Grandmother dies, (none / 1) (#207)
    by Quila on Fri Nov 19, 2004 at 08:05:40 PM EST

    Leaves an expensive house to her just-getting-by granddaughter who now cannot afford the huge asset tax and therefore loses a house that's been in the family for a hundred years.

    "In the family" (none / 1) (#208)
    by GenerationY on Fri Nov 19, 2004 at 08:27:15 PM EST

    I've seen this quite a few times and I still don't understand it; its just an argument from sentimentality. And not a very good one at that, in the family 100 years is barely a generation. Make that a 1000 years and it might be a consideration, but even then, a very minor one.

    She wouldn't lose it anyway, she'd sell it presumably therefore having the asset of cash rather than the liability of a house she can't even begin to afford to maintain.

    [ Parent ]

    Furthermore (none / 0) (#211)
    by blaaf on Sat Nov 20, 2004 at 01:26:48 AM EST

    Selling the house isn't her only option anyway. She can take out a mortgage on the house, and then use the cash to pay the taxes. If she can't afford the taxes, then she can move into a humbler abode.

    There should, however, be government controls to prevent gentrification from pricing low income families out of house and home, whether through taxes or rent, but that is a distinct case from Grandma living in a mansion. If you get the mansion, you will pay taxes on the mansion.

    [ Parent ]

    You're starting to notice my point (none / 0) (#217)
    by Quila on Sat Nov 20, 2004 at 10:16:04 AM EST

    There will be many loopholes in such a tax so that it would be fair to lower-income people and for various other circumstances. Rich people will take advantage of those loopholes, which will then have to be tightened, etc...... Welcome to where we are now.

    In addition to that, our current tax accounting industry will shift to asset hiding instead of income hiding. We've simplified nothing.

    Besides, I do have a principle against this. This scheme is like current property tax, where the you effectively rent your property from the government instead of actually owning it. This will extend that principle to all things.

    [ Parent ]

    Which would you rather have... (none / 0) (#219)
    by Baldrson on Sat Nov 20, 2004 at 10:37:26 AM EST

    A tax system in which you pay rent to the government on yourself, such as the current one, or a tax system in which you are required to pay insurance premiums on your property to the government?

    -------- Empty the Cities --------


    [ Parent ]

    Or... (none / 0) (#220)
    by codepoet on Sat Nov 20, 2004 at 11:11:16 AM EST

    Or one where you just pay for things you buy so that there's no hiding, no loopholes, and no problems.  Give the poor tax relief and move on.

    Liberals just don't want it because conservatives recommended it.  Blah.

    -- The cynical can often see the sinister aspect of a cup of coffee if given enough time.
    [ Parent ]

    wrong (2.50 / 2) (#230)
    by brain in a jar on Sun Nov 21, 2004 at 02:27:08 AM EST

    The problem with taxes on buying products, is that if you are super rich you pay (as a percentage) very little tax indeed.

    Why? Because a lot of your wealth is tied up in assets and does not get "spent". If you own huge tracts of land, this does not correspond to expenditure, so you pay no tax on this. If you own large amounts of stock the result is the same.

    In comparison, if you are relatively poor and most of your income goes on rent and buying food and fuel for your house you pay tax on the majority of that income.

    Tax relief is not a real solution, because then all you are doing is redistributing wealth from the middle class to the poor while the super-rich continue to get essentially a free ride.

    Which is probably why Bush's republicans love the idea so much. It is certainly consistent with their earlier moves to reduce or abolish capital gains tax.

    Hence the rest of us bear a disproportionately large part of the tax burden.


    Life is too important, to be taken entirely seriously.
    [ Parent ]

    Still wrong (none / 0) (#263)
    by esrever on Mon Nov 22, 2004 at 07:47:23 PM EST

    How does one acquire one of these wildly valuable 'assets' of which you speak without paying a wildly large amount of tax?  How does one enlarge one's holdings as a wealthy individual without paying a large amount of tax?

    Explain how this is giving a free ride to the rich?

    Audit NTFS permissions on Windows
    [ Parent ]

    Well (none / 0) (#268)
    by brain in a jar on Tue Nov 23, 2004 at 05:38:54 AM EST

    Purchase taxes (for example Value Added Tax VAT in the UK) are generally not charged on purchases of stocks and shares or on purchases of land.

    Also, if you already have huge amounts of assets when the tax is enacted, you will not have to purchase them while the tax is enforced.

    Also, one can enlarge ones wealth through capital growth, e.g. appreciation in the value of the land and investments that one holds. This is the reason we have (or in the case of the US, used to have) capital gains tax. The point is that if you are really rich a great deal of your wealth exists simply to produce more wealth by being shifted from one potential investment or store of wealth to another. Only a proportion of your income goes on things like cars, food, fuel and rent which are likely to be taxed.

    Taxes which disproportionately effect the wealthy, such as estate tax and capital gains tax are being dismantled by Bush's republicans and they are proposing purchase tax instead of income tax as part of the same plan. I.e. the plan where the poor and the middle classes foot most of the tax bill.


    Life is too important, to be taken entirely seriously.
    [ Parent ]

    Doesn't pass the smell test (none / 0) (#319)
    by Quila on Fri Dec 03, 2004 at 10:10:42 PM EST

    The point is that if you are really rich a great deal of your wealth exists simply to produce more wealth

    I'm working-class with little investment. My most expensive car was a $30,000 sports car, with the second family car being worth $8,000. Now this guy I know has a Porsche GT-3, and his friends collect Ferraris and even a McLaren F1 ($1M to buy, $50K/year maintenance -- if nothing goes wrong). I would definitely say they've paid consumption tax porportionate to their wealth when compared to me.

    Taxes which disproportionately effect the wealthy, such as estate tax and capital gains tax are being dismantled by Bush's republicans and they are proposing purchase tax instead of income tax as part of the same plan. I.e. the plan where the poor and the middle classes foot most of the tax bill.

    That sounds contradictory. You seem to be complaining that people who were "disproportionately" taxed are no longer taxed so. By the definition of that word, that means that the rich are now being taxed more proportionately, in other words, fairly.

    So, what's the incentive to work hard and get rich if you know you'll just get screwed by the government if you succeed?

    [ Parent ]

    It's not about simplification... (none / 0) (#251)
    by Elendale on Sun Nov 21, 2004 at 04:43:36 PM EST

    The wealthy have... well, wealth. The poor have income. Nobody who understands anything about the financial reality of America disagrees with this. Why do we tax income and not wealth?
    ---

    When free speech is outlawed, only criminals will complain.


    [ Parent ]
    Income vs. Wealth (none / 0) (#318)
    by Quila on Fri Dec 03, 2004 at 09:59:01 PM EST

    Why do we tax income and not wealth?

    Because to get wealth you must have received it in some way, and that's taxed. It'll be no simpler or better or fairer -- the rich will be able to shift around assets just as they shift around their income right now.

    [ Parent ]

    Current situation with inheritance taxes (none / 1) (#221)
    by nomoreh1b on Sat Nov 20, 2004 at 12:51:02 PM EST

    I've known families that have lost properties like this via inheritance taxes. At least with an asset tax, folks have some time to adjust-and a substantial exemption.

    [ Parent ]
    Grandma is safe (none / 0) (#239)
    by Stevesm on Sun Nov 21, 2004 at 12:44:56 PM EST

    The family manse wis safe as long as she has been paying her tax. The the heirs simly continue paying the tax ... we do that now it is called real estate tax. OTOH, of she chaeated and did not pay the tax the heirs are in big trouble.

    [ Parent ]
    tax (1.33 / 3) (#214)
    by the77x42 on Sat Nov 20, 2004 at 03:13:43 AM EST

    I'm more inclined to make things fairer by cutting pointless government bodies:

    -military
    -homeland security

    I think that would free up a couple hundred billion dollars.


    "We're not here to educate. We're here to point and laugh." - creature
    "You have some pretty stupid ideas." - indubitable ‮

    Yeah, that's brilliant... (none / 0) (#227)
    by skyknight on Sun Nov 21, 2004 at 12:11:50 AM EST

    Cut a couple of the few legitimate things in which the government is engaged. If you want to argue the merit of various exercises of military force, fine, but cutting military expenditures is almost always stupid.

    It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
    [ Parent ]
    Cutting military expenditures. (2.00 / 2) (#240)
    by Arker on Sun Nov 21, 2004 at 01:01:15 PM EST

    To a point, I tend to agree with you. Defense is one of the few things that the government really does need to do.

    But the US has a military right now that is far more expensive than any reasonable defensive force would be - and is quite obviously not designed for defense. It's an offensive force, built around incredibly expensive things like aircraft carriers and overseas bases, which have no relation to defense whatsoever (except insofar as they make us less secure, by being provocative and making enemies unecessarily.)

    The military budget could be slashed, and the funds remaining in it would still be more than sufficient to fund a defensive force capable of defeating the top 10 militaries in the world, combined, were they foolish enough to attack.



    [ Parent ]
    The US is not an island unto itself... (none / 0) (#245)
    by skyknight on Sun Nov 21, 2004 at 01:36:52 PM EST

    and we can't just throw up turrets. We have to have the capacity to intervene in the offensive activities that threaten our interests, which are diverse and many of which lie outside our territorial boundaries. Were the US entirely self-sufficient, then it would be a different matter, but clearly that is not the case.

    It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
    [ Parent ]
    umm... strongly disagree (none / 0) (#247)
    by the77x42 on Sun Nov 21, 2004 at 01:45:04 PM EST

    despite the filth that you are lead to believe, the twin towers thing was not an 'attack on america' it was a 'terrorist attack'. no matter how much offense or defence you have, you aren't going to stop individual, suicidal, terrorist attacks. furthermore, the US isn't even close to being attacked by any other country around.

    canada has a military, england and europe have strong militaries... if the US was attacked you don't think they could rely on other countries to help them?

    figures that a country with the shittiest social care and education that their military would be the 'best' (read: most funded) in the world. it's pointless.


    "We're not here to educate. We're here to point and laugh." - creature
    "You have some pretty stupid ideas." - indubitable ‮

    [ Parent ]

    Um... (none / 0) (#248)
    by skyknight on Sun Nov 21, 2004 at 02:22:43 PM EST

    Did I say anything about terrorism in my post? Do you always feel obliged to shoot down the straw man?

    It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
    [ Parent ]
    straw man? (none / 0) (#258)
    by the77x42 on Mon Nov 22, 2004 at 01:43:07 PM EST

    what are the two reasons for having a defence/offense?
    1. terrorism
    2. being invaded by another country
    both are stupid. that was my post.


    "We're not here to educate. We're here to point and laugh." - creature
    "You have some pretty stupid ideas." - indubitable ‮

    [ Parent ]
    You're completely ignoring my above post. (none / 0) (#278)
    by skyknight on Tue Nov 23, 2004 at 05:39:13 PM EST

    An enemy does not have to set foot on your land to cause you problems. There are plenty of ways that he can muck things up for you remotely, and if you don't have the ability to engage him outside of your borders then you have serious problems. You should not take the fact that we don't have serious problems as evidence that we don't need mobile offensive capacity. Rather, we don't have such serious problems precisely because we have such capacity.

    It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
    [ Parent ]
    right... (none / 0) (#282)
    by the77x42 on Wed Nov 24, 2004 at 03:18:02 AM EST

    ... so communism really was a threat after all... oh, and starting wars in south america went leaps and bounds in stopping the drug trade in the US...


    "We're not here to educate. We're here to point and laugh." - creature
    "You have some pretty stupid ideas." - indubitable ‮

    [ Parent ]
    It's intervention that is the problem (none / 0) (#255)
    by Arker on Mon Nov 22, 2004 at 05:45:19 AM EST

    It's over a century of intervention around the globe that has brought us to this point. Much of the world now hates us, and even our traditional allies regard us with a mixture of fear and resentment. Down that path lies madness, and we've gone way too far down it already.

    It's time we got back to a truly republican foreign policy - peace, friendship, and trade with all, entangling alliances with none.

    Every time we intervene in the affairs of another nation, we make no friends - only allies of the moment who can and will turn against us later if necessary. Which is as it should be, if you think about it - why would we expect another country to place our interests above their own, even if we have helped them here and there? We wouldn't do that for them. The French saved our asses in the Revolution, but we weren't about to risk our own for them a few years later.

    At the same time, while our allies of the moment are just that - momentary allies who will turn on us if they need to later, we also make enemies in every intervention. Neighboring rivals to regimes we support. Internal resistance to regimes we support. Every time we prop up a dictator, we make enemies of the people he oppresses. And while the friends we make in these little adventures are fleeting, the enmities built last much longer.

    By propping up the Shah, we made enemies of the Iranian people who suffered under his rule. By installing Saddam in Iraq, we made enemies among his people. When we supported Iraq as a counterweight to Iran, we further antagonised the Persians. We still have enemies in Iran, but where is our old friend and creation Saddam? Where are our friends in Iraq? The only group in Iraq that cares much for us at the moment is the Kurds, but they haven't forgotten where Saddam got his gas from, and they'll turn on us too, the moment it's in their own interest to do so. All of our intervention in that area has made us lasting enemies, but only the most impermanent of 'friends.' And it's made us far less secure.

    The same story applies everywhere we've gone. The Somalians just love us, right? The Salvadorans, the Hondurans, the Okinawans... the North Koreans may well hate us forever, while the South Koreans will turn their back on us the moment it's safe to do so. Every group in the former Jugoslavia seeks to use us against the other, but none hesitate to turn their weapons on our 'peacekeepers' when they get in the way of settling old scores.

    The simple fact, that should be obvious to anyone with the slightest grasp of human nature, is that you don't make friends travelling around the world with guns and bombs getting involved in other peoples quarrels. This is not 'isolationism' and it has nothing to do with any delusions of being 'an island unto ourselves.' No one likes an Empire, although many will collaborate with one for their own gain, as long as it serves them. And no Republic has ever managed to maintain that form of government, and the liberty of its citizens, for very long, while behaving as an Empire abroad.



    [ Parent ]
    I don't disagree... (none / 0) (#279)
    by skyknight on Tue Nov 23, 2004 at 08:22:10 PM EST

    that we've really burned ourselves with our cynical real-politik. I think it's appalling, really, what we've done to meddle in the affairs of others. If we could with a straight face say that we really were about promoting liberalism (in the classical sense of the word, not the modern sense), then it might be justifiable, but really just about all of our "nation building" and such has been thinly shrouded manipulation for short-sighted hegemonic purposes. We would do well to stay out of a lot of places and focus on our problems at home.

    However, I still think that we need to have a strong military that can project power around the globe. Having that power is completely distinct from actually exercising it, and it's important to remember that. Our military dominance has actually paid huge dividends for the world as a whole, as other nations have basically given up on the arms race and instead focused on developing more humanitarian causes. China is not racing to build more tanks than us because it would be a wholly futile endeavor. This is a good thing for everyone.



    It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
    [ Parent ]
    Liberalism (none / 0) (#284)
    by Arker on Wed Nov 24, 2004 at 06:25:48 AM EST

    Well I disagree with that on a couple of levels. First off, while I agree with you that most of the intervention has been cynical and real-politik driven, it's oxymoronic to try and promote liberalism at metaphorical sword-point. And the interventions that have been driven by that ideology, rather than real-politik, have been just as disastrous. Look at former Jugoslavia as an example. It's appalling what we've done there - and that intervention in large part served as a precedent for the even more appalling mess in Iraq.

    As to the second paragraph, I really do think it's a mistake first off to think that a nation that has such power can forever resist the temptation to use it. I think it's just too dangerous - and I mean to us, to our system. And I'm not at all convinced that the effect on others, on balance, has been positive - though even if I thought it was, the effect on our own system would still be the most important for us to consider. But while our enemies may see that direct military confrontation is futile, that doesn't mean they cease to be enemies, it means they find 'assymetrical' ways to attack us instead. It's our clear superiority in conventional military forces that really sparks the terrorism. And the aggressive stance that such armament clearly portrays is a challenge and a threat to other nations, a provocation simply by it's existence.

    I really think that if we want to promote liberalism around the world (and I do) the way to do that is simply to be a good example - something we haven't been for some time now.



    [ Parent ]
    Not to mention... (none / 0) (#300)
    by beergut on Wed Nov 24, 2004 at 05:23:26 PM EST

    We got da bombs.

    Nuclear fucking weapons, baybee!

    Seriously, though... I find it ridiculous that we don't, as a nation, simply throw up our hands and say, "Fuckit" to the world. Bring home our troops and put them on the Mexican border, cut the size and scope of our military, but concentrate on building really destructive big-bombs and delivery systems.

    "Trade with us and we're your friends. Ignore us, and we'll ignore you. Fuck us, and we'll destroy you with the press of a button."

    Seems simple enough to me.

    i don't see any nanorobots or jet engines or laser holography or orbiting death satellites.
    i just see some orangutan throwing code-feces at a computer screen.

    -- indubitable
    [ Parent ]

    Lol (none / 0) (#306)
    by Nursie on Fri Nov 26, 2004 at 06:00:51 AM EST

    You don't need bombs any bigger than you already have! If they get any bigger you'll be taking a sizeable chunk out of the planet if/when you eventually use them!

    Meta Sigs suck.

    [ Parent ]
    Tactical vs. Strategic offensive (none / 0) (#265)
    by kurtmweber on Tue Nov 23, 2004 at 12:49:01 AM EST

    Tactical offense can take place under strategic defense. Assuming that a given nation has already been attacked, it is a legitimate defense to go after the attackig nation's means of waging war--it's tactically offensive, but it's strategically defensive. Was I clear? I'm not so sure I was...

    Kurt Weber
    Any field of study can be considered 'complex' when it starts using Hebrew letters for symbols.--me
    [ Parent ]
    What else do the Democrats have to offer? (none / 0) (#222)
    by nomoreh1b on Sat Nov 20, 2004 at 01:08:06 PM EST

    Here's the thing, it looks rather likely that fairtax will be given some serious debate in congress--and may even pass. Baldrson has been talking about NAT for a while-and more recently folks like Nader are starting to suggest some similar ideas-though on not as radical a basis as Baldrson. I haven't seen any other seriously interesting ideas coming out of the Democratic establishment here. IF fairtax passes, it will be an incredible win for the very rich. NAT can overcome that side effect. I don't see much else on the table that would. Any other serious suggestions here?

    Monopoly aspect of extreme wealth (none / 0) (#223)
    by nomoreh1b on Sat Nov 20, 2004 at 01:50:37 PM EST

    From a standpoint of economic theory, folks like Henry George-and more recently Ralph Nader, are correct that extreme wealth is an appropriate object of taxation. Extreme wealth carries with it an aspect of monopoly power. The extreme wealthy can do things like buy politicians the general public cannot-or simply take advantage of "niches" in things like property development that are only really accessible to the extremely wealthy. Frank Smith at U of Chicago claimed that you typically saw some monopoly power set in with fewer than 20 players in a market--and you certain have areas where there are say fewer than 20 large property owners. Taxation of something with characteristics of a monopoly(this isn't a black white issue but a spectrum) isn't easily passed onto the general public. Anyhow, adopting Nader's proposed wealth tax of 1% of value of estates over $5 Million would mean that food, medical care and medicine could be exempt from fairtax(particularly if some pollution taxes were thrown into the mix). That would be a significant boon to the average working person--and would be economically sound. I also expect it would be politically popular if pursued correctly.

    The Big Lie (1.16 / 6) (#225)
    by Krueger Industrial Smoothing on Sat Nov 20, 2004 at 11:50:50 PM EST

    The Big Lie being used to promote this so called 'Fair Tax' is the same one that has been used for many years to argue in favor of a 'Flat Tax' --  the idea that a simpler tax system is automatically more 'fair'.

    This is simply not true.  While 'Simple' and 'Fair' are not mutually exclusive -- a tax can be simple or fair or both -- a simple tax is not necessarily a fair tax.

    The fairest tax is a progressive tax with no deductions.  For example:

    if person 'A' makes $20,000 and pays a tax rate of 5%, he is left with $19,000 after taxes.

    if person 'B' makes $1,000,000 and pays a tax rate of 20%, he is left with $800,000 after taxes.

    Person 'B' paid condiserably more taxes, but also has a whole lot more left over after taxes than person 'A'.  This is the fairest tax -- you pay more if you can afford to pay more.

    A 'National Sales Tax' is in fact, nothing more than a variation on the 'Flat Tax' idea and is nothing more than another in a long line of scams whose sole purpose is to shift the burden of taxation from those who can afford to pay to those who cannot.

    In order for a Flat Tax to generate the same income as the current tax system, it would require a tax rate of 19-20 percent, a fact that is not disputed by proponents of the Flat tax.  This represents a tax increase for people with lower incomes, who currently pay less than 20% and  a significant tax cut for the wealthy who pay more than 20%.

    The same political party that ruled the White House when slavery was ended nearly 150 years ago, now wants to create a new form of slavery -- economic slavery.


    Eh... (none / 0) (#226)
    by skyknight on Sun Nov 21, 2004 at 12:09:00 AM EST

    You go on about fairness, as if it is a quantifiable metric, stating that one system is fair, and another is unfair, without ever bothering to justify your metrics. Has it occurred to you that not everyone is of precisely the same mind as you, and that you might need to persuade us with logic and reason?

    Also, pray tell, what is "economic slavery"?



    It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
    [ Parent ]
    Okay...but (none / 0) (#236)
    by DDS3 on Sun Nov 21, 2004 at 10:54:33 AM EST

    Nice try, but your argument completely ignores the fact that social programs are already in place to help low income people.  This means that the very poor would wind up paying pretty much nothing while the very rich would be paying their share.  The difference between that and what currently happens is that the poor get benefits, the middle and upper middle class pay the bulk of taxes, and the extremely wealthy pay little to nothing.

    Would shifting it so that everyone pays their share be a bad thing; keeping in mind that the poor and very poor would still not be punished?


    [ Parent ]

    The uber-rich... (none / 1) (#250)
    by Elendale on Sun Nov 21, 2004 at 04:09:07 PM EST

    Make everything themselves. They buy nothing and subsequently pay nothing in taxes. Those dollars the ultra-corporations are currently paying in taxes vanish. Taxes get raised on everyone else.

    And that $6,000 rebate on a family of four? Yeah, single moms get fucked up the ass. Have a nice day, single moms.

    Hey, you wanna know what'll really help your situation? Go sleep around and have another kid or two. Then you'll get a $6,000 rebate. Too bad kids are bloody expensive, eh?

    And immigrant workers count for determining how big all those red states are but they don't get to work? That sounds familiar. In fact, it's a page taken right out of the book of the Southern Plantation Owners back when they wanted their slaves to count as citizens but to simultaneously deny them the right to vote. It gives them more votes and, hey, who cares about anything else?


    ---

    When free speech is outlawed, only criminals will complain.


    [ Parent ]
    We'll have to agree (none / 0) (#317)
    by DDS3 on Fri Dec 03, 2004 at 07:03:39 PM EST

    to disagree.

    Your mommy example is pretty covered all ready.  Any system is open to abuse, so the bulk of your comments are readily ignored.

    Then you bring up immigrants.  I personally could care less if an illegal is paying into the tax pool.  I helps make up for the cash that is paid that ISN'T being taxed right now.  You wanna live in this country, I have no problem with you paying your share of taxes.


    [ Parent ]

    What you are misssing (none / 0) (#243)
    by nomoreh1b on Sun Nov 21, 2004 at 01:15:17 PM EST

    Is the Fairtax proposal contains a "prebate". Folks spendnig less than the poverty level pay no net tax. Folking spending less than $50-70K/year pay less tax than they do now--as do the very high income folks that tend to save a lot (largely folks now earning over $120K/year). The folks that really have a problem here are folks that live in very high cost of living areas. For example, the guy in Silicon Valley earning $30/hour--and working 60 hours/week--and spending on housing, car expenses, food out to maintain that schedule may find that approach is no longer viable.

    [ Parent ]
    There is nothing fair about it (none / 0) (#256)
    by Roman on Mon Nov 22, 2004 at 12:33:01 PM EST

    Fair is just a word, it does not mean anything. I am not an american, I live in Canada, and I am opposed to the progressive taxation. I am for a flat tax, no matter what is fair. What I noticed is that in a heavily socialistic states, like USSR where I came from or like in Canada where I live today people expect everything to be 'fair' with a side-note saying that 'fair' - means equal. So they are talking about equality, but not exactly. How do you figure that a person paying 5% income tax is equal to a person paying 20% income tax? There is no equality and that is the basic premise of life. I am not for equality, I am in fact for fairness, and fairly speaking, I am for a flat tax. Let it be 15% flat income tax, and I am fine with people making a 1000,000 a year only to pay 150,000 tax. It's good, it's fair, it does not force you into 'equality' crap. Progressive taxation is the major reason why I have my own corporation in Canada, so I can write off a lot of money as corporate expenses, which are taxed lower than personal expenses. That's why I pay myself a salary between 30 and 60K a year, while still spending well over 150 grand a year. Does that sound fair? This is what people do, they figure out ways to go around what the dumb ass society set up as 'fair'. Give me a flat 15% tax, and my salary will be fully declared.

    [ Parent ]
    Even if you could still avoid it? (none / 0) (#270)
    by Nursie on Tue Nov 23, 2004 at 07:36:58 AM EST

    I don't think you would declare it at all. If people can find away around, they will. If you get away with no tax on the money above 60K at the moment, what's the incentive to change that?

    Also, if it was flat, it's likely that above 15% would be necessary.

    Meta Sigs suck.

    [ Parent ]
    Right now... (2.33 / 3) (#228)
    by skyknight on Sun Nov 21, 2004 at 12:16:33 AM EST

    we have an income tax, and the effect is that people lie by exaggerating expenses. One day, perhaps, we will have an NAT, and the effect is that people will lie by undervaluing things. The accounting methods will change, but the situation will be functionally equivalent. He who retains the most lawyers wins.

    It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
    Not really... (none / 0) (#232)
    by ShadowNode on Sun Nov 21, 2004 at 06:37:45 AM EST

    Local property taxes already work this way.

    [ Parent ]
    Yeah, but... (none / 0) (#234)
    by skyknight on Sun Nov 21, 2004 at 10:32:11 AM EST

    presumably an NAT extends to more than just real estate, right?

    It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
    [ Parent ]
    ya but... (none / 0) (#235)
    by DDS3 on Sun Nov 21, 2004 at 10:50:58 AM EST

    Ya, but the greater the expense of the item, the harder it is to undervalue it.  As a rule, the government couldn't care less if you undervalue the pack of gum and they make two cents versus three.  On the other hand, how often do you think you'll be able to undervalue: your car purchase, home purchase, groceries, utilities, clothing, so on and so...  Simple fact is, when you're dealing with businesses, it's a lot harder to devalue things and hide it.  Granted, I'm sure you would see some abuse, but things like that already exist and the abuse is much, much harder to hide.

    It also opens the door for the government to better audit and deal with the enties which would still require reporting.  After all, the IRS would not disappear.  This means that they can suddenly do a much, much, much better job of policing who's paying taxes and that they are paying taxes based on fair market rates of goods.

    In other words, it ensures that everyone pays their fair share.  Gasp...what a concept.  If more people understood how rampant tax evasion is, they would be all for proposals like these.  I know someone whos income is roughly 2x mine and they usually pay the same, or LESS in income taxes than I pay.  And I'm not talking about chump change here.  Between illegal reporting and mile wide loop-holes, things have got change because a large portion of people in the US are NOT paying anything close to their fair share of taxes.

    [ Parent ]

    Why folks will not cheat (none / 0) (#238)
    by Stevesm on Sun Nov 21, 2004 at 12:41:10 PM EST

    A wealth tax includes a natural incentive not to cheat. Wealthy people use there assets for personal gain. Here is an example: If I own a house worth 1 million and I trick the system so as to st the value at 500,000. And then I try to sell the house, I can only sell it for 500,000 or pay a huge past tax. The only possible exception of to owners of non-prodcutive assets, e.g. collectibles that for some reason will never be sold such as a family heirloom.

    [ Parent ]
    The big assets (none / 0) (#242)
    by nomoreh1b on Sun Nov 21, 2004 at 01:07:03 PM EST

    Are hard to cheat on:

    privately held land. The assessment is a matter of public record.

    Publicly traded stocks and financial instruments. Again, it is VERY hard to lie about the value of these assets or if you own them.

    The stuff folks can cheat on, is stuff like collectibles, gold. Personally I would just exempt this sort of thing from a wealth tax and focus on the stuff that it clearly a matter of public record.

    [ Parent ]

    Spot on! (none / 0) (#286)
    by nairobiny on Wed Nov 24, 2004 at 08:19:10 AM EST

    Indeed, I can (anecdotally) confirm that this already happens. Here in the UK, inheritance tax is paid at 40% on assets above a certain level.

    I have seen the tax authorities actively seek out ways to help taxpayers reduce their bills by accepting 'soft' probate values for assets - e.g. allowing bottom-end-of-range valuations for property assets, or low valuations for difficult-to-value items such as antiques, books.

    If all tax were paid this way, the richer elements of society would be able to afford the best lawyers/accountants and get the lowest valuations. The poorer elements of society would get ****ed by the system.

    [ Parent ]
    Yup. (none / 0) (#287)
    by skyknight on Wed Nov 24, 2004 at 08:27:43 AM EST

    People just don't get it. Poor people can't win the game of taxation. The rich will always find a way to evade taxes. Their wealth affords them the resources to protect it, something that the guy struggling to pay his bills will never have. Whenever taxes that involve accounting get jacked, the burden will fall on the poor guy doing his own taxes every time. If taxation is ever to be fair, it needs to be done on an entirely objective basis that is applied uniformly. Taxation cannot be fair as long as it is based upon such ill-defined notions as income or property. Of course, not only do the rich have the ability to maneuver around tax laws, they also have the leverage to influence their writing. There really is no winning situation to be had here, apart from curing people of their idiotic dependence on the government that results in oppressive taxation. All forms of taxation suck, each in its own special way.

    It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
    [ Parent ]
    Silliest idea in a while... (2.66 / 3) (#231)
    by slashcart on Sun Nov 21, 2004 at 02:39:43 AM EST

    While I appreciate the author's sincere attempts to find solutions to societal ills, I must say that I find the proposal very silly and believe it's results would be disastrous. I skimmed the linked article and found what I think is the foundation of the entire argument:

    The net present value formula allows asset value to be calculated as the size of a low-risk loan that one could pay off (amortize) with the after-tax profit stream generated by an asset, adjusted for risk.... The widely used net present value formula, being based on these government supported interest rates, indicates the real rate of interest on the national debt is the rate of negative asset taxation the economy pays to all wealth in society and therefore quantifies the level of capital welfare pervading society.

    No, no, no... This completely ignores the time function of money and the discount rate. It implies that the real interest rate of risk-free investments is 0% (!!!) and anything above that represents a kind of welfare to the rich.

    That can be easily disproved. If the "pure" interest rate is 0% then it would be worthwhile for a foreigner to borrow at 0%, invest in a risk-free investment like T-Bills, then return the initial capital after having made money. This is a "riskless arbitrage" (e.g. I get money for free by shifting it around without investing any in the first place) and since all riskless arbitrages represent economic disequilibriums, the real "pure" rate of interest must be higher than 0% (duh).

    Since the real pure interest rate is higher than 0%, this legislation would have the effect of forcing pure interest rates down to 0% for the vast majority of investors in the U.S. economy (above-average asset holders). Since there is no incentive to invest for them any more, their logical behavior would be: 1) flee the country (with their money) before this legislation takes effect; or 2) liquidate all assets beyond $100,000 and spend the money. Both of these would quite literally spell death for the U.S. economy.

    There would be other disastrous effects as well. If you tax assets at the rate of interest on T-Bills then that implies that T-Bills now have a 0% rate of interest, since they are assets. Why would I invest in government securities when I am guaranteed (by law) a 0% rate of return? The most logical thing for every significant investor would be to liquidate all T-Bills. Since the U.S. gov't has a rotating debt (as do almost all industrialized countries) this would cause an immediate financial crisis far beyond that of the Great Depression, followed by the immediate bankruptcy and default of the U.S. gov't.

    ...I don't wish to explain, in great detail, the huge number of fallacies found in the article. That would take more energy than I'm willing to devote. However, I can assure readers of this: you are not being "screwed" out of your money by higher-income people. There are a few ways to distribute wealth somewhat more equally without severely damaging the economy; but the only people who know anything about economics do not appear to favor wealth redistribution. This is one of the reasons that wealth redistribution schemes always fail: the only people who would know how to do it are not inclined to it.

    Wealth Tax (none / 1) (#237)
    by Stevesm on Sun Nov 21, 2004 at 12:34:41 PM EST

    Your retort is fill of ad hoc reasoning. OF COURSE a wealth tax would require massive rethinking of investments, but that is the idea. Lets start with T bills. Are T bills a good idea for the government? T bills are a rather effective way of adding to the tax burden of the middle class by off-loading their tax burden to the interest bearing accounts of the T bill holders. This Bushism today enriches China and the ultra rich by selling our tax futures much as the Romans sold the right to be a tax collector. The real effect of a wealth tax would be to rationalize wealth. There is little VALUE to society of accumulation of wealth unless that wealth somehow contributes productive capital. If Bill Gates took his 100 billion and invested it in Chinasoft, the loss to the US economy would be inestimable, yet under our system the ONLY incentive is the moot possibility that US investments are more profitable or more secure. Similarly. if Bill takes his 100,000,000,000 and builds an artificial pleasure island in Puget Sound, only minimal value accrues to society. A wealth tax, if well written can encourage use of Bills $$ in productive ways. Of course the curse and the blessing of this prayer is in its details.

    [ Parent ]
    What you are missing (none / 0) (#241)
    by nomoreh1b on Sun Nov 21, 2004 at 01:02:50 PM EST

    Is that recent rates on T-Bills have been rather absurdly high in recent decades. In the presence of stable currency, something like T-Bills traditionally earned %1-%2. For example, a lot of rich folks could have theoretically made lot of money in recent decades by being more on the inside of decisions at the Federal Reserve than the general public. Now that said, I tend to favor land laxes over general wealth taxes _except_ that we need some kind of wealth concentration tax to curtail the use of monopoly power by wealthy individuals and corporations. When Walmart comes into an area, drops their prices to bankrupt local merchants and then raises prices--that is really just a use of monopoly power. That is why Nader's proposal of a 1% wealth tax on estates over $5 Million strikes me as reasonable-particularly when we are facing the fairtax proposal that will really be a big tax break for the very rich(with a few bones thrown to the rural poor). However, in the present situation, starting to tax T bills with a wealth exemption would tend to move US assets from foreigners to US assets--and move smaller US investors out of international markets. That may not be such a bad thing-particualrly when you consider the present situation is so messed up the alternative may be an out and out default.

    [ Parent ]
    This comment is fundamentally flawed thinking (none / 1) (#252)
    by pierrebz on Sun Nov 21, 2004 at 05:07:58 PM EST

    ... 'the only people who would know how to do it are not inclined to it' ...
    The notion that only the ideas presented by a specialized elite are worthy of serious consideration leads to cyclic failure.
    It demolishes diversity, like destroying a rain forest does.
    The creative solutions that can best get you out of trouble will usually be missed by those who are too close to the problem.
    Until they allow the child's clarity to bring out the reality that the emperor is wearing no clothes, the tailors aren't much help to anyone.

    ... 'I don't wish to explain' ...
    The only persuasive remark is a good argument. If you are unwilling to offer one, then spare us the petty critique. You only waste your time and ours.

    [ Parent ]
    Gross misreading (none / 0) (#253)
    by Baldrson on Sun Nov 21, 2004 at 08:23:47 PM EST

    the real rate of interest on the national debt is the rate of negative asset taxation the economy pays to all wealth in society and therefore quantifies the level of capital welfare pervading society.

    This ... implies that the real interest rate of risk-free investments is 0% (!!!)

    No, it implies that if someone doesn't have to do anything but sit on their assets to make money -- not even take any risks -- they are receiving welfare. I'm virtually stating a definition of welfare.

    The whole "time value of money" justification for this, when applied to the government going out and holding guns to other people's heads to collect your interest payments for you, is clearly of the Austrian school and is precisely the kind of thinking that led to the collapse of the Austro-Hungarian empire.

    -------- Empty the Cities --------


    [ Parent ]

    Brookings Institute on Fairtax (none / 0) (#244)
    by nomoreh1b on Sun Nov 21, 2004 at 01:19:33 PM EST

    The Brookings Institute issued a whitepaper on the fairtax proposal. I think the big omission here is they miss the geographic effects of the fairtax and how fairtax tends to be good for the rural poor-and bad for the poor in higher cost of living areas.

    Do some research... (none / 0) (#294)
    by jhigh on Wed Nov 24, 2004 at 01:32:06 PM EST

    He has been rebutted.
    AlwaysRight.org
    [ Parent ]
    Where is the truth? (none / 0) (#303)
    by nomoreh1b on Thu Nov 25, 2004 at 02:45:03 PM EST

    I'm honestly not sure where the truth is between the fairtax advocates and the detractors like Gale. I _can_ see some advantages from fairtax-the question is what are the side effects. While I can understand the need for tax simplification, I can see no particular advantage to giving a huge profit to wealthy investors that have profited under the existing system. For example, I would rather see a slightly lower fairtax rate or higher prebate-and add enough of a corporate tax so the stockmarket would experience only modest increases after fairtax. That could be done quite simply by having a tax on capitalization of publicly traded companies administered by the SEC(i.e. simply require companies issue 1% of their shares to the US treasury every year-and handle bonds similarly). Yes, is is clear the US needs more, broad based savings. For the most part that means getting more people into homes they actually one-and with a basic portfolio of lower risk investments-or tools of their trade and ownership in their employer. Dramatically boosting stock values and increasing the already huge holdings of the uber rich isn't necessary to have a functioning US market economy.

    [ Parent ]
    Fairtax and the Religious agenda (1.66 / 3) (#246)
    by nomoreh1b on Sun Nov 21, 2004 at 01:39:42 PM EST

    Now, what folks are missing here is the agenda. Fairtax, win for the fundies-because fundies as a group are unlikely to itemize their taxes and the movement to a fairtax means that all donations to fundie churches will be paid with pretax dollars.

    On top of this, we'll increasingly see social services and education delivered via churches. With 2 more supreme courts judges, Bush will be able to put voucher based education in place--and overturn Roe vs. Wade(which will mean that states can then ban abortion).

    However, the big wammy, Bush plans to allow any business to hire any Mexican worker they want. Now those folks won't get to vote once they are in the US-but they will get counted in the 2010 census for purposes of representation. The big electoral winner? Probably agricultural Red States(and red counties in California).

    Now consider how the transition to citizenship will be handled. Guest workers won't have an instant track to citizenship/voting. Most likely testing requirements (i.e. literacy in English will get stiffened). Right now, about a third of all hispanics immigrants are Evangelicals-and most of the rest nominally Catholic. After the changes in immigration policy, I expect the portion of Hispanics that transition to citizenship will be increasingly evangelical. Why? Because the only practical way for poor folks to get the education necessary to pass the citizenship exams will be through a church.

    It is no secret here that I have grave hesitations about US immigration policy. I suggest that other folks here consider the whole picture of what is happening under Bush and consider what substantial constituencies might be convinced to leave the GOP.



    Income tax just plain sucks (2.33 / 3) (#254)
    by Armada on Sun Nov 21, 2004 at 11:18:10 PM EST

    Money equals power.

    The US Government holds a monopoly of coercion, and rightly so, to prevent individuals from coercing each other. Right now the amount of money invested in the federal government gives said government great power.

    In order to live, I need a way of making money. Working is the easiest way. A tax on income means that I'm supporting the limitless power over the government by working, and thus living.

    A shift to a national sales tax would not stop my contributions to the federal government as I would still need to spend money in order to live. But I would spend it much wiser, just like others would.

    It would also bring the sheer cost of the government into the spotlight. The IRS could be all but eliminated. It would put the perspective of a "big brotherish" government in the minds of those that now see a friendly teddy bear able to solve society's ills.

    Since the New Deal, the federal government's power has spread to be able to police its own citizens and wage wars overseas. Such was not the case before the New Deal and even the Civil War. The two wars the US government tried to engage in from 1817 to the start of the Civil War (the brief period in which there were no excise taxes) were both largely unfunded and thus given up on.

    The elimination of an income tax would do a great deal to prevent the US government from being able fund wars outside of the country. This is a good thing. The government should only concentrate on defense spending. Why is it that a "Department of Defense" is briefing the US on an offensive "War in Iraq"?

    The only sad thing is that if such a national sales tax were implemented there would be a shit-ton of tax lawyers and accountants out of their jobs. But that does not bother me, I'm sure they'll adapt. Arguing that such a tax would affect the "poor" is like arguing that Bush's tax cuts during his first term hurt the unemployed.

    Taxes on businesses? (none / 1) (#264)
    by skim123 on Tue Nov 23, 2004 at 12:25:46 AM EST

    So would a new sales tax or asset tax be just for individuals, or for businesses, too? The current tax code seems ideal for businesses - it encourages them to reinvest their earnings - buy more supplies, hire more people, build a new facility, etc. This reinvestment benefits many folks, from new hires, to the guys making the equipment being purchased. (Granted, there are too many ways to hide gains that benefit only the pockets of the upper management and stock holders.)

    If you had a sales tax for businesses, it would encourage them to buy less, no? Or to find loopholes, like rather than company X buying widgets from company Y, they'd make some arrangement, like they form some sort of business allegience where they share product lines, so company X gives company Y $x worth of doohickeys, and Company Y gives company X $x worth of widgets. (Don't know if I'm making sense here.)

    Finally, it seems like an asset tax would encourage companies to be small and dynamic. Move the manufacturing plants to Mexico, outsource the office work to India. Reduce the total amount of assets in the US, and give that extra money saved from the asset tax as bonuses to the CEOs or dividends to the stock holders.

    Money is in some respects like fire; it is a very excellent servant but a terrible master.
    PT Barnum


    The only fair tax... (none / 0) (#266)
    by kurtmweber on Tue Nov 23, 2004 at 01:01:59 AM EST

    ...is no tax.

    Kurt Weber
    Any field of study can be considered 'complex' when it starts using Hebrew letters for symbols.--me
    I know you've told us all before, but.. (none / 0) (#269)
    by Nursie on Tue Nov 23, 2004 at 07:33:18 AM EST

    How would your tax-free society work? Would the be a government? How would it get anything done? Would everyone constantly have to defend their stuff at gun point? etc etc.

    Meta Sigs suck.

    [ Parent ]
    Two things (none / 0) (#273)
    by kurtmweber on Tue Nov 23, 2004 at 11:25:16 AM EST

    First--pragmatics are irrelevant. If something is the morally right thing to do, it should be done no matter what. Second--why not heavy fines on (real) criminals. That would pay for everything government REALLY needs to be doing; and besides, they're the reason we need government in the first place, so why shouldn't they pay for it?

    Kurt Weber
    Any field of study can be considered 'complex' when it starts using Hebrew letters for symbols.--me
    [ Parent ]
    What's a "real" criminal? (none / 0) (#274)
    by Nursie on Tue Nov 23, 2004 at 11:37:16 AM EST

    What's a real criminal?

    also, pure ideology will usually fail in the face of human behaviour, which is why ideology in its pure form usually fails (witness the soviet union, subverted by the power hungry and corrupt).

    You'll also have a hard time finding any two people agreeing completely on a set of morals, let alone a whole society, so doing things that are somehow morally right is going to be tricky. Is it morally right to give bread to someone who is starving and impoverished or is it morally right to keep your money to yourself?
    Is it morally wrong that the government force people to pay into an education system they may not be using or is it morally right to allow all disadvantaged kids a shot at an education and a decent life (funded by everyone)?



    Meta Sigs suck.

    [ Parent ]
    Ignoring the real issue (none / 0) (#275)
    by kurtmweber on Tue Nov 23, 2004 at 12:44:10 PM EST

    A real criminal is someone who initiates force or fraud against the person or property of another without his consent.

    Is it morally right to give bread to someone who is starving and impoverished or is it morally right to keep your money to yourself?
    That, in and of itself, is not a moral issue. The moral issue is government coercion. Coercion against those who have not themselves initiated coercive force is NEVER justified and should NEVER be done, regardless of the consequences. The end does not justify the means.

    Is it morally wrong that the government force people to pay into an education system they may not be using or is it morally right to allow all disadvantaged kids a shot at an education and a decent life (funded by everyone)?
    Now you're getting it...

    Kurt Weber
    Any field of study can be considered 'complex' when it starts using Hebrew letters for symbols.--me
    [ Parent ]
    Yes, that's the issue (none / 0) (#283)
    by Nursie on Wed Nov 24, 2004 at 05:39:25 AM EST

    And I was asking what your take on it was. You seem to think that if one simply acts on what's morally 'right' then the path is obvious and the action will never be wrong. I was pointing out that there is a hell of a lot of grey area there and that if you follow what one person thinks is morally right then you indubitably end up shafting someone else. How would you get around that?

    Meta Sigs suck.

    [ Parent ]
    Charity, PR... (none / 0) (#299)
    by beergut on Wed Nov 24, 2004 at 04:58:08 PM EST

    It's not exactly a tough thing to find a big company who wants to "make good" with the public by donating large heaps of cash for one good cause or another.

    Yes, it helps their bottom line at tax-time. But, it also ingratiates them to their buying public when word of their good deeds is known.

    In the case where you have no coerced education system, you can be sure that Monsanto, Microsoft, Archer-Daniels, and other megalithic corporations would chip in. Oh, and so would Joe Jew, and Carl Christian, but not (yielding to a subpsychic urge to inflame) Ishmael Islam, unless the school was a Madrassa teaching youngsters how to blow themselves up on busses.

    Question: has the run-of-the-mill education in this nation, as well as real literacy, improved or degraded since the institution of the Federal Department of Education in 1976?

    If you cannot say, "It has improved markedly", then this program (and the very idea underlying it) is a failure, and must be abolished.

    i don't see any nanorobots or jet engines or laser holography or orbiting death satellites.
    i just see some orangutan throwing code-feces at a computer screen.

    -- indubitable
    [ Parent ]

    Criminals will fund the government? (none / 1) (#276)
    by generaltao on Tue Nov 23, 2004 at 03:16:28 PM EST

    And you think this is a good idea? :)

    Where are these criminals going to get the money to pay these heafty fines?  Most criminals are not exactly actionable.

    If they ARE actionable, their assets are usually ill-gotten gains.  So it wouldn't be criminals funding the government, it would be victims of crime.

    In both cases, it would be against the government's interests to lower crime rates.

    The only other manner in which value could be extracted from criminals without merely using criminals as middlemen between the government and the law-abiding citizen's wallet is to use criminals for labour.

    Then you wind up with a government that is RUN by criminals (not that it isn't already).

    I don't want to live in the world you prefer to taxation.

    [ Parent ]

    If I join a club (none / 0) (#271)
    by curien on Tue Nov 23, 2004 at 10:05:51 AM EST

    is it fair to require me to pay dues?

    --
    This sig is umop apisdn.
    [ Parent ]
    lousy analogy (none / 0) (#272)
    by hobbified on Tue Nov 23, 2004 at 11:24:47 AM EST

    and how many people who you know that 'joined' their club willingly? If you're a citizen of your country by virtue of having been born there, that's not you.

    [ Parent ]
    Have you tried (none / 0) (#281)
    by curien on Wed Nov 24, 2004 at 01:59:15 AM EST

    renouncing your citizenship?

    Yes -- the automatic membership does kinda suck. It's not like you're forced to remain a member though.

    --
    This sig is umop apisdn.
    [ Parent ]

    Some simple math: (none / 0) (#277)
    by skintigh on Tue Nov 23, 2004 at 05:14:51 PM EST

    Lets pretend the national sales tax is 30%.

    Now lets assume there are 4 catagories of people: lower class, midle class, upper class, and Bill Gates.

    Someone in the lower class will generally spend every penny they earn on things like food, clothing, utilities, and rent.  I'm assuming rent will not be taxed.  So, let's say 80% of Mr. Lower Class's income is taxed.
    Tax rate = 30% * 80% = 24%

    Let's say Mr. Middle Class spends half his income on taxable items, the rest on rent, services, and some investment.
    Tax rate = 30% * 50% = 15%

    Mr. Upper Class spends only 10% of his earnings on items, the rest goes into investments and his multiple homes
    Tax rate = 30% * 10% = 3%

    Bill Gates couldn't spend 1% of his income on taxable things if he tried.
    Tax rate = 30% * 1% = 0.3%

    Thus, according to the GOP, it is "fair" for the poor to have an income tax that is 80 times higher than that off Bill Gates.

    Those of us who remember history class will note that Democracy flourished in Greece when taxation was based on the ability to pay.

    One might even suggest that a "fair" tax would be based on ability to pay, for instance, a tax based on *expendible* income.  Instead, we keep seeing ideas come out of the GOP that greatly benefit the wealthy, like a "flat" tax (not pased on ability to pay) and now one that obviously rapes the poor while letting the upper class pay little or no tax.

    Dude, (none / 0) (#280)
    by skyknight on Tue Nov 23, 2004 at 08:24:13 PM EST

    I just realized that your name is like an anagram of mine with letters missing. It's just got one letter missing and one vowel changed. Weird.

    It's not much fun at the top. I envy the common people, their hearty meals and Bruce Springsteen and voting. --SIGNOR SPAGHETTI
    [ Parent ]
    Even weirder (none / 0) (#297)
    by skintigh on Wed Nov 24, 2004 at 04:12:22 PM EST

    is that my name is just my first initial followed by my last name, but everyone thinks I'm some perv with the name "skintight." Even Outlook thinks I'm a perv and "corrects" my email adress to "skintight" whenever I type it.

    [ Parent ]
    simply a straw man attack (none / 0) (#285)
    by ChaseBase on Wed Nov 24, 2004 at 06:45:43 AM EST

    Hmmm... all the criticisms a tax scheme that no one has proposed would make me mad too... if they were relevant.

    I am stunned that in all the comments, no one bothered to look up the details of the tax plan, or read any arguments in favor of it.

    The facts:
    1) Citizens would receive a full rebate quarterly, based on the poverty line for their family. For instance, a small family might receive 26% of about 28,000 or $6,760 dollar annually. That makes the Fair Tax a PROGRESSIVE tax.

    2) Rich people currently pay very few taxes, largely because they have no income in the traditional sense, having acheived critical mass, and also because they exploit loopholes in the complex tax code. Since rich people with large saving still spend like crazy, and since there would be no loopholes, they would pay significantly more. That makes the fair tax a PROGRESSIVE tax system.

    3) Every detailed economic review of the actual tax plan that has been conducted has concluded that retail prices would drop 10% within 1 year due to the reduced business taxes, and that he vast majority of this (90%+) would be passed onto consumers almost as quickly in most industries.

    4) The IRS currently spends 30%-40% of its revenues to administer the tax system! With a simple tax system, the government can collect 25%-30% fewer taxes without impacting revenues.

    5) In fact the 26% figure is the high-end estimate. Most planners believe that the national tax rate could be 18%-23%. Especially when you consider point 1 above, it is difficult for me to understand how a tax system that has ALL income categories paying significantly lower taxes without changing government revenues could harm people so much.

    This has me wondering why K5 members are such fans of coervice taxation. Do you want to punish the rich so much that you can't handle a system that happens to be great for them as well as everyone else?

    [ Parent ]
    Thank you (none / 0) (#288)
    by jhigh on Wed Nov 24, 2004 at 10:18:02 AM EST

    It's nice to see someone that actually understands the fair tax commenting on it. What noone fails to understand is that with the rebates poor people would pay NO TAX AT ALL. Unlike now, where they still pay FICA, etc. The libs are terrified that if we do this poor people may actually stop being poor and thus one of their core constituencies will disappear.
    AlwaysRight.org
    [ Parent ]
    Hmph. (none / 0) (#292)
    by Pxtl on Wed Nov 24, 2004 at 12:57:27 PM EST

    I am one of those people you hate: a person who accepts that many people do not take care of themselves, and the nanny-state must do it for them.  Do you know what happens at tax-rebate time to the poor?  They by assloads of beer, lottery tickets, and hit the casinoo.  Increasing the day-to-day load on the poor and then giving it back to them in a lump sum won't improve their quality of life - it will decrease it, with the exception of a weekend of decadence.  Ordinarily that would be fine if it was just themselves they were screwing over, but that kind of lifestyle is not healthy for families, and it also increases the burden on soup-kitchens in the like because more people "live poor" regardless of their actual financial status.

    Fact: anything that increases the lump-sum nature of personal revenue will be unhealthy for poor people who can't take care of themselves.

    But most people don't agree with me.  I'm an odd leftist - I futilely believe on helping the all of poor for those few people who genuinely need a leg up, while realising that the lions share of them are cock-ups who have noone to blame but themselves (and possibly whatever parents and schooling raised them to be blithering idiots).

    [ Parent ]

    Ummmm (none / 0) (#296)
    by skintigh on Wed Nov 24, 2004 at 04:09:49 PM EST

    you honest thing the "libs" hate poor people and want them to be poor?  Is that really a rational thought?

    I bet you wonder why no one listens to you and rolls their eyes when you open your mouth...

    [ Parent ]

    So your argument is (none / 0) (#289)
    by Nursie on Wed Nov 24, 2004 at 12:29:13 PM EST

    that the very poor would pay no taxes, and the very rich already don't pay any taxes so it would be a good thing if we could get them to pay anything at all?

    Personally I like the idea that business should pay a lot of tax. I like the idea the rich pay disproportionately more than anyone else (because there is no way that they got there on their own, they did so either off the labour of other people or by inheritance).

    Meta Sigs suck.

    [ Parent ]
    Hmm... (none / 0) (#291)
    by Pxtl on Wed Nov 24, 2004 at 12:51:47 PM EST

    actually, that's one of the few surface merits I can see of this - it would make it easy to extract taxes from previously teflon businesses.  Of course, that creates its own problems  of "multi-taxation" - ie the sale of raw materials are taxed, the sale of simple components the raw materials are made into is taxed, the sale of parts the simple components are made into is taxed, and then the sale of end-user products is taxed again.  It would decrease commerce, encouraging businesses to do everything in-house, rather than ever going through a "sale" - this same problem occurs with sellers of used goods.  Corporations would have to become ivory-tower megaliths to survive... well, more so.

    So what sales aren't taxable?

    [ Parent ]

    My problem with it... (none / 0) (#298)
    by beergut on Wed Nov 24, 2004 at 04:46:57 PM EST

    It is easy, currently, to distinguish between staple items (potatoes, meat, tee-shirts, etc.) and non-staple items (candy, soda, Gucci handbags). Retail sales taxes should be levied that way, rather than by this "rebate" scheme.

    Consider:

    Thirty years down the road, this nation is in need of some kind of enema to clean us up.

    Now, if you and your family had come to depend on that check from Uncle Sugar every month, are you going to be in a big hurry to change things, even when the alternative to changing them is watching the country fizzle and then explode? Nope.

    Sounds kinda like the Socialist Security problem looming on the horizon, doesn't it? Can we all agree that that system is a complete clusterfuck?

    How about "Great Society" programs? Has the number or percentage of "poor" people decreased since those policies were enacted? Nope. How about literacy rates, family cohesiveness, and "bootstrapping"? Not really, no.

    Why would you choose to further ensconce the notion of the infallibility of The Great Provider into the minds of those who, quite frankly, could use a good sharp dose of reality to rouse them out of their slumber, so they can tend to their own problems, rather than relying upon me to do so?

    To my mind, the FAIR tax, and any scheme like it, is yet more social-policy meddling by Leviathan.

    We'd be so much better off if we just got rid of the IRS, and instituted a graded, categorized retail sales tax (zap people for consumption, especially overt, and promote savings!) or kept the Income Tax, but flattened it, cut it to no more than 10%, and closed ALL loopholes.

    I like the first alternative a lot better, because at least then I can have some kind of control over how much, and when, I pay Uncle Sugar his love-money, and I'm encouraged to save, and punned for consuming. The second would be fraught with problems, unless a Constitutional Amendment went with it, concretely clearing up fiscal issues, mandating balanced budgets, and requiring a supermajority in the Congress, and the approval of 50%+1 of the state legislatures to increase the tax rate (or, make the rate part of the Amendment, and require another to raise rates!)

    i don't see any nanorobots or jet engines or laser holography or orbiting death satellites.
    i just see some orangutan throwing code-feces at a computer screen.

    -- indubitable
    [ Parent ]

    Adam Smith had something to say on this (none / 0) (#290)
    by freality on Wed Nov 24, 2004 at 12:47:14 PM EST

    "[Four maxims regarding taxes]:

    1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.  The expense of government to the individuals of a great nation, is like the expense
    of management to the joint tenants of a great state, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim, consists what is called the equality or inequality of taxation....

    2. The tax which each individual is bound to pay, ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence, and favours the corruption, of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty.

    3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it....

    4. Every tax ought to be so contrived, as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the state."

    - Wealth of Nations

    Some other pieces of wisdom from him:

    "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce."

    "Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things."

    Please print this on a stone tablet... (none / 0) (#301)
    by nairobiny on Thu Nov 25, 2004 at 08:47:26 AM EST

    ...and then nail it to Gordon Brown's forehead. 66 stealth taxes since 1997 and counting...

    [ Parent ]
    You claim it's a straw man (none / 0) (#295)
    by skintigh on Wed Nov 24, 2004 at 04:06:59 PM EST

    yet only one of the five points you list even comes close to addressing my point.

    My point is that the more you earn, the less % tx you pay.  That is the opposite of "fair."  You counter that the poor will get a rebate.  How nice, the government wont just be walking on the backs up of the poor and middle class, they will be getting interest free loans from the poor while the poor try to make due with 25% less spending power.  I suppose they can just give up food, or shelter or something.

    The rest of your points are very good and deserve discussion, they are just unrelated to my point.

    While on the subject of stuff not related to my point, how would this system work in border states?  Already towns on the border of NH complain they lose shoppers to the sales-tax free state and during the holidays people drive hours to go shop in NH, all over a meager 5% tax.  Imagine what will happen to all the towns that are withing an hour of Canada or Mexico when there is a 20-30% tax!

    guess i need to spell it out (none / 0) (#302)
    by ChaseBase on Thu Nov 25, 2004 at 11:41:26 AM EST

    Thanks for your reply, and sorry if I was a bit hostile. When I say the tax is progressive, I mean it... let me explain. For the sake of simplifying the argument, let's say that the poverty line is fixed (rather than being a function of family size, etc) at 25,000. Let's also say that people who earn up to 100,000 will spend 95% of their income (the actual figure is more like 98% except at the very top of this range). Also for simplicity's sake, we'll assume the tax rate is an even 25%.

    If I earn up to 25,000 I effectively pay 0% tax because of the rebate.

    If I earn 31,578 and spend 30,000 I pay 25% tax on 5,000 for an effective tax rate of 4%

    If I earn 36,842 and spend 35,000 I pay 25% tax on 10,000 for an effective tax rate of 7%

    If I earn 52,631 and spend 50,000 I pay 25% tax on 25,000 for an effective tax rate of 12.5%

    If I earn 100,000 and spend 95,000 I pay 25% tax on 75,000 for an effective tax rate of %15.

    As you can see no matter what basic assumptions we make, we get a steep progressive tax in this range.

    Since very rich people don't spend all of their money, the tax isn't progressive in this way for them. However, very rich people also currently don't pay much income tax.

    As I argued below... very rich people will pay significantly more taxes on this plan because it is spending-driven and they can't hide their spending the way that they currently hide their income. So in a different way, this tax is still progressive.

    Nuff said.

    [ Parent ]
    How do you work this out? (none / 0) (#305)
    by Nursie on Fri Nov 26, 2004 at 05:52:23 AM EST

    If someone spends 30K then they have bought 24K worth of stuff and payed 6K in sales tax.

    They are allowed 25K tax free. Does that include or exclude the tax? What I mean is, do they get tax back on the first 25K spent or on the first 25K before tax?

    If it's on what's spent then they get a rebate of 20% of 25K (The tax they paid in their first 25K), or 5 grand. If it's pre-tax then they get a rebate of 25 percent of 24K, which is six grand (all the tax they payed). So they are either taxed at 3.33 percent or at 0 percent. Which is it?

    (Whichever it is, your figures are out in your example).

    Also, yes, you get a progressive tax in those ranges, but it falls again as the income goes beyond this range and people stop spending everything they earn. The range you have given is the middle and working classes, not the rich. Your argument still seems to be that getting the rich to pay anything is a bonus. It isn't, at all. They should pay more than the lower income brackets because they can afford it.

    If I earn 500K and spend 200K then I get tax on 175K and effectively pay either 6.75% or 7% depending how you work it out.
    This is back at the level of someone earning 35/40K. Which is nuts.

    Meta Sigs suck.

    [ Parent ]
    How to calculate (none / 0) (#320)
    by bwcbwc on Sun Dec 05, 2004 at 10:37:25 PM EST

    Since the $6k is a rebate your total spending is purchases + tax, so you can earn $30,000 and still break even: $24k spent + $6k tax = $30k.

    Another factor: if you happen to spend MORE than your income in a given year, you end up losing out even more, so I see the Bush tax as discouraging credit card debt. Here's a question: would interest paid be taxable? This would be a nice reversal if it applied to business.

    Actually that's my biggest question about the Bush proposal: Are businesses taxed for items they purchase? Or do they get to use their "sales tax IDs" to get out free.  Given the administration's track record, I'm very suspicious on this point.

    [ Parent ]

    Here's a thought: (none / 0) (#304)
    by Pxtl on Thu Nov 25, 2004 at 03:35:03 PM EST

    Rebate is monthly, not yearly.  That would help a great deal, I think.

    [ Parent ]
    Not Quite (none / 0) (#307)
    by nomoreh1b on Fri Nov 26, 2004 at 12:39:54 PM EST

    The fairtax proposal benefits folks at the very bottom economically-particularly those living in lower cost of living areas _and_ the people with the very highest incomes that are inclined to save. Remember, right now, poor folks are paying over 15% in FICA tax that will be eliminated under fairtax. There is a "middle" group that will pay more tax than they do now--and a whole class of white collar tax preparation jobs will be eliminated.

    I don't think the GOP thinks that fairtax as it now stands will be the proposal actually adopted. I expect to see food,medicine and medical care eliminated from taxation. If the Democrats have half a brain, they'll argue for expansion of some kind of corporate taxation-but make the collection and assetment of these taxes much simpler-the pollution taxes Ralph Nader has been pushing also deserve consideration but that is something much trickier to work out.

    What i think the folks here-and the Dem analysts are missing is how hated the IRS is in the rural areas.There are real reasons why the rural areas voted red. Quite frankly, the rural former supporters of the New Deal feel rather betrayed by much of the recent agenda of the democratic party around issues like immigration, affirmative action and busing(i.e. a whole class of newer rural residents moved to escape that policy)-as well as the more obvious social issues.

    I fully expect the GOP to get a just as nutty in pursuing their religious agenda as the dems were in pursuing political correctness. We will see a massive movement of patronage jobs from the secular federal bureaucracy into situations where fundamentalists make the hiring decisions.

    [ Parent ]

    The real enemy (none / 0) (#308)
    by GenerationY on Sun Nov 28, 2004 at 12:11:32 AM EST

    politicians once more.

    Why? The debate about tax never seems to go away and always breaks down to two sides; the flat amount paid is the important thing, the proportion of income is the important thing. This is a variation that adds assets to the mix.

    Why can't we just finally sort out which side of the fence we are sitting: flat amount vs. proportion. The issue is fudged and taxes are hidden and hidden some more. It ends up a bit of everything and its only really clear whats happening at the extreme ends of the income distribution, and even then that doesn't factor in, for the poor the complexities of benefits (the people handing them out don't understand them so I very much doubt the people potentially receving them do. For the rich there is of course the accountant(s) influence to consider, offshore funds, buying into Government schemes and investments even that rate preferential tax breaks. And so it goes on.

    I have reached the point where no longer even care about fairness.
    I'd be prepared to trade it all for a bit of clarity for once. As it stands talking tax is pretty much just chasing your own tail.

    Fair? More like ridiculous (none / 0) (#309)
    by wallinbl on Sun Nov 28, 2004 at 09:09:39 AM EST

    I'm a person who saves money, and spends little. Your so called "fair tax" would tax me for not spending. On top of that, it would tax me for keeping it year after year. That's absurd. How many times do you need to tax my money? Income taxes and sales taxes make sense because you're only taxing each dollar once. You want to tax the same dollar over and over and over. There's absolutely nothing fair about it. I love the way that liberals and such think something is fair as long as it punishes those who have and spares those who don't.

    Question for you (none / 0) (#310)
    by nomoreh1b on Sun Nov 28, 2004 at 12:51:29 PM EST

    At what point do you feel that concentration of wealth might be a bid absurd? Baldrson's proposal would have a significant exemption. Nader's proposal has a higher exemption($5 Million) and lower rate(1%). I've worked rather hard for my and have little to show for it but significant tax payments that have benefited rich parasites. I see no reason why folks "just scraping by" should be taxed.

    [ Parent ]
    Really? (none / 0) (#314)
    by azurensis on Mon Nov 29, 2004 at 11:33:23 AM EST

    >Income taxes and sales taxes make sense because you're only taxing each dollar once.

    No, that same dollar is currently being taxed once as income and once if you buy something with it. No difference.

    [ Parent ]

    A "Fair" Tax is a beneficial one (none / 0) (#315)
    by mcrbids on Mon Nov 29, 2004 at 12:49:18 PM EST

    Yes, you heard it. Beneficial.

    Rather than try to be "Fair" with a tax we should use the power of the tax to promote behavior that's otherwise beneficial.

    Taxes on cigarettes reduce society's cost of medicare, and improve the productive life of citizens.

    One of the biggest problems faced by the US is the threat to its soverignty through its dependence on foreign oil. So, I propose a direct tax on fossil fuel energy consumption.

    If income tax were cut in half, and the difference made up taxes on fossil fuel energy consumption, the net effect to the US Govt. in tax revenues would be non-existent. The net effect on society would be nill. But the effect on gasoline and fuel consumption would be dramatic.

    Measure energy to consistent units, and tax per joule, erg, watt-hour, caolorie, or whatever unit is agreed upon. Make it consistent.

    Gas prices would rise, and so would checking accounts. Suddenly, giant, unsafe, inneficient SUVs become much less attractive, and the true costs of shipping un-necessarily become very clear.

    It could be phased in over a 5 or 10 year span to minimize the impact on society, but it would be a huge step forward in promoting alternative (read: patriotic) energy.
    I kept looking around for somebody to solve the problem. Then I realized... I am somebody! -Anonymouse

    You tax flows, not stock (none / 0) (#316)
    by nlscb on Mon Nov 29, 2004 at 01:14:43 PM EST

    Flows are when wealth transfers from one person to another. A sale is a good example of this. One exchanges cash for a good or service. These are best to tax.

    Stocks are things like savings and capital. These are unwise to tax. A good example of this is real estate taxes, which most certainly hit poor land holders hard when there land appreciates in value. Your net asset tax would do exactly this. Not to mention, it would be a nightmare to enforce. Sales taxes have the huge advantage of being very simple to enforce.

    Comment Search has returned - Like a beaten wife, I am pathetically grateful. - mr strange

    A Fair Tax | 319 comments (300 topical, 19 editorial, 0 hidden)
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