According to Article I, Sec. 8 of the Constitution:
The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States

Therefore, the only legal tax, which is also the only fair tax, is a flat tax. And for those people that think the poor and working class will suffer as a result of this, think of it this way:

The wealthiest 5%, for argument's sake, take in 80% of all income earned in the United States. The remaining 20% is distributed amongst the masses. Under a flat tax system, without the loopholes that exsist in today's tax code, simple math would dictate that the top 5% would pay 80% of the revenue that goes into the federal coffers. The remaining 95% of us would only be responsible for paying 20%. Under the current system, the wealthiest people only pay 50% of the total federal revenue!

Anybody disagree?

Some facts need to be brought up, unfortunately I have to look them up, so I don't speak foolishly.
But the wealthy pay 'only' 50%??? If that is true, what would you have them pay? Don't forget most of the 'wealthy' are also major employers and philanthropists. Remember many poor families already pay no tax, and get tax rebates back (something that has always confounded me).
I agree with the flat tax plan, but don't think it would make it through congress.

Your arguments sake figures are a little off from my recollection, but I will try and find the actual figures.

IRS data from 2000 tax returns:

Top 5% - 56.47% of all income taxes;
Top 10% - 67.33% of all income taxes;
Top 25% - 84.01% of all income taxes.
Top 50% - 96.09% of all income taxes.
The bottom 50%? They pay a paltry 3.91% of all income taxes.

The top 1% is paying more than ten times the federal income taxes than the bottom 50%
The top 1% earns 20.81% of all income.
The top 5% earns 35.30% of the pie.
The top 10% earns 46.01%;
The top 25% earns 67.15%,
and the top 50% earns 87.01% of all the income

*Data covers calendar year 2000, not fiscal year 2000 - and includes all income, not just wages, excluding Social Security

In theory, I've always liked the idea of a flat tax. Like any plan, though, it has it's problems.

One concern of mine is hiding money off-shore. I don't know if closing tax loophopes would solve this. I don't see how we could possibly stop people from putting their money in untouchable foreign accounts. Any solutions?

I know the current system is confusing and unfair. The way it stands now, not only should we have a constitutional right to counsel in court, we need a right to an accountant to pay our taxes

Once you get your facts straight,Stefan, you really would not like the flat tax. Even most conservative proponents of a flat tax propose a flat tax on income over a certain designated amount to make the flat tax politically feasible.

Hugo: While I agree with you that the poor shouldn't be taxed, is it actually constitutional not to under Article I, Sec. 8?

Dontreadonme: How much of the income the super-wealthy in this country earn through offshore investment do you figure gets reported to the IRS? Since the IRS doesn't receive all of the data accurately, would that not have a detrimental effect on their statistics as to earnings?
As far as "how much I would have them pay"... I look at it this way. When the super-wealthy have to choose between heating their home in the winter or food, then I will have sympathy for them. Until then, they'll have to try Hallmark. Such is the price of opportunity.

Jaime: I totally agree that the hiding of income by people wealthy enough to get away with it is wrong and needs to stop. Unfortunately, a solution to the problem would be difficult and could have horrific economic consequenses, essentially driving those with money out of our country. If anybody has any suggestions on this, I would love to hear them.

Obviously the courts have held that the 16th Amendment allows progressive taxation. Of course, I ain't a real big fan of many judicial decisions.

Even if the courts held up the 16th Amendment, am I correct in that the congress never fully ratified it?

Stefan, since you have no fiscal sympathy for those who have worked hard all their lives to achieve prosperity, what are your thoughts on the death tax. Should wealthy people be able to pass on money and assets to their children?

To be fair, if there were no social programs to help those less fortunate, then I might agree the disparity between rich and poor would be antithetical to what our country stands for. But with a progressive tax code, the rich already do their fair share to bridge the gap.

By the way, I'm not wealthy by any means, but I work harder than most for what I do earn and I get peeved knowing my taxes helps compensate professional welfare recipients.

I think that should be reserved for it's own thread. Please feel free to start it.

And btw, be nice. Stefan is new here, none of us know how much sympathy he has for anything.

OK, I was just quoting Stefan, but in the interest of civilized debate.. I apologize

Hey, dontreadonme109, you're right. I owe you the apology (Can I call you dtom109 for short?)

In fact, that point is where I diverge with Stefan. A flat tax is a good idea, but I think the rich don't need to get robbed in the process. I resent when democrats try and make others feel guilty for wanting to keep their own money when others are having trouble paying their bills. Sure it sucks that people freeze and starve, but it also sucks when the government robs Peter to pay Paul (sorry for my lack of nice language but "sucks" describes it pretty well).

I know I'm going to get hammered for this (*ducks and waits*)

I prefer the rich. No poor person ever gave me a job.

Well, frankly, I would love to be in a financial position where I had to pay that much in taxes. Considering the rich generally become rich by standing on the backs of those who are not rich, is it not fair that they give something back? Just a thought.

The rich generally become rich by providing other people with jobs. Bill Gates is an excellent example.

I think the Federal Government should get out of the income tax business all together. They've shown they can't make it simple and fair. It's a hodge podge response to various interests and keeps a lot of accountants and tax lawyers employed.

I think the government has three legitimate sources of revenue 1. tariffs, 2. use fees, 3. assets tax.

The latter I would like to discuss. I think the tax should be flat, comprehensive (no loopholes, deductions or whatever) and should be applied to any property that is not public, including overseas properties held by American citizens, businesses or residents (That takes care of the off shore properties problem). NonAmerican person's or businesses located in other countries who own American property should also pay the tax.

On the matter of deductions I would make one single pragmatic exception. I think the first 5 to 10 thousand dollar of assets should be deducted so the IRS doesn't have to waste time and money and get on people's nerves running down every beat up old truck, guitar, or backpack that might represent the principle asset of some poor person.

The tax would be low percentage wise, probably less than two percent, and would be much fairer than a flat income tax because income relative to assets is generally higher the farther down the financial ladder you go.

A big problem for many is that churches and other nonprofit organizations would be taxed at the same rate and of course donations wouldn't be deducted except as a lessening of taxable assets for the donor. Perhaps there is a constitutional problem with the churches but frankly the problem should be the other way around. A taxable donation implicitly involves everybody in the donation because the nondonor has to pay more taxes to make up the difference. This would level the playing field and make donations truly donations and not partially a tax dodge.

Three things I like most about the flat asset tax idea is 1. it's simple, 2. it's mostly cheat proof(Hard to hide a house or car) and 3. its much fairer than anything we have now or could conceivably have under any kind of income tax system.

I appreciate that its too rational to probably ever fly and would be a horror to special interests on all sides of the political spectrum.

I also think there is an important principle here. Government expenditures should be up front and over the table so everybody can see and judge them. Tax exceptions amount to under the table, unacknowledged government payoffs. There is something sleazy and Mafia like about them.

Well, there goes nothing. At least I put it on the table.

I would have a income tax based on one category which would be individual. All individuals would get a deduction of some amount. Probably something like 50 to 80 thousand. After that amount of income, all would be on a flat rate.

Eliminating sales tax and replacing it with a transfer tax would be the next step. Anytime money is used in an exchange, you will pay for this "useage". As it is now, many large sums of money are used but not taxed as the transaction is not a retail tranaction. It would be fair to tax all transactions the same instead of just the end users.

Eliminate property taxes, death taxes, excise taxes, and various nickle and dime taxes.

It is time to eliminate coporations as money shields. All coporations are owned by people. The money earned by the coporations should be atributed to the owners and those individuals taxed like everyone else.

-----------

That would be a good base to create revenue for government programs. I can see some tweaks, such as property tax to support fire districts and taxes used to discourage consumption but these excepts should be rare.

Stefan, I, too, would love to be in a financial position to give. That is the key word, "give." If I were rich, I would give LOTS of money away (teaching people how to make their own money).

But should I be forced to hand over a larger share by government mandate? No.

I also don't like the idea of "rich by standing on the backs of those who are not rich." While that happens, it is an exaggeration of the norm. Many small business owners have work ethics that are beyond the average worker or were willing to put themselves through more schooling to get that extra degree and earn more money. They don't stand on the backs of anyone. They open businesses, create jobs and provide shirts for those not-rich backs.

That is why I think a flat tax, without loopholes, is more fair than the current system. Everyone would pay an equal percentage of their earnings. If we're going to tax, a flat tax is probably the fairest method. I think Gray Seal has put forth a very well articulated plan. Would you be interested in running for Congress? (Although Dingo offers an interesting idea on solving the overseas assets problem - you could run, too. You're both in different states, you wouldn't have to run against each other or anything )

Could we not resort to the tired old 'on the backs of those whose are not rich'?

The rich give back plenty by not liquidating their businesses after their first million or so and taking early retirement. No poor person owns a company that employs people and contributes a good or service to the country.

Yes there are unscrupulous fatcats, just as there are conniving poor people taking advantage of the system. I believe liberals paint everything with such a large brush without looking at how things actually work in the economy.

Personally I would look at any fair tax system that did not add anguish and raise my blood pressure every April 15th.

Human greed, Smith's "invisible hand", has created more good than all the charities and social programs combined.

Another solution to throw on the table...

All taxes collected will be through a national sales tax and abolish all other taxes (income, payroll, property, tariff, inheritance, etc). What makes this "fair" is that the rich will pay more than the poor. Also, it is semi-voluntary, in that, you are the one who decides how much you want to give to the government by deciding how much you want to spend on something. (eg you'll pay more to the government on that Ferrarri than on that Ford)

It's also interesting to note that only 10 states had no budget shortfall for 2002 and 4 of them didn't collect state income tax (Alaska, Nevada, Texas, Wyoming). There are three other states that don't collect income taxes (Washington, Florida and South Dakota). South Dakota also had second lowest budget shortfall out of the other 40 states. My guess on Florida was that 9/11 affected tourism. And the hi-tech crash affected Washington.

Sources:
http://www.acenet.edu/hena/facts_in_brief/...4_01_02_fib.cfm
http://www.govspot.com/know/incometax.htm

OK, now I'm hurt. Nobody asked my opinion.

I think that eliminating all taxes except sales tax is a bad idea. That would mean that the sales tax would have to be a very large %, and frankly, My parents, who aren't rich, but actually quite poor when you look at their past, will have a great deal of problems is sales tax soars that high. the tax on food will also be increased, so every time you eat out, you won't pay just 5-10 dollars on yourself, but closer to $20.

I think that the main thing that is helping rich people, is the exsitence of tax - free bonds. The government will pay a lower interest to any money in these bonds, but their is no taxes on them. A lot of rich people, say, can put in $1 million in these bonds, and not pay ANY taxes for this income. 2 or 3 % is quite a lot when you add it to a couple of million.

I know for sure, as i stated in another post, that ALMOST all congressmen and Presidents, vice pres. and the cabnet are EXTREMELY rich. All senators and the president are obviously rich. a few of the represetatives are not. So how do you presume that a bill that eliminates ALL loopholes be passed? You're telling them that they cant save money. You're telling the rich Democrats (ex. Bill Clinton, Al Gore, Tom Cruise, Bill Gates, etc.) that they have to pay the high tax rates that support. Not many rich people are willing to give that much. At least rich repub.'s are honest. They dont wanna pay the high percents.

Now, a lot of people are blaming George Bush for haveing very little money in reserve (for the gov.). Now, if Bill Gates, who is a democrat btw, is really pro high taxes, why won't he give any extra money that will make a difference, such as $5-10 billion? he has over 60 billion, so why not spare 1/6? He is pro giving a large percent to the poor and helping the country, right?

L. Zeved

Better get over that, L.Z. Very rarely will anyone be specifically asked for an opinion. Think of it this way - if the forum is open then your opinion is wanted

You bring up a good point, though - the corruption of our legislators. It sure seems they have NO interest in listening to the desires of their constituents. Just look at thread - we have people posting for tax reform that fall onto all parts of the political spectrum. We ALL agree that the system is unfair. YET - our legislators show little to no regard to what we want. They are too busy ramming unwanted legistlation down our throats without consulting us.

So what does it take to start a Constitutional Convention and bypass our good for nothing lawmakers?

Jaime, I think that several third parties have tried to stir up debate on major political overhaul, but the entrenched two party system stifles new and creative ideas.

They ram unwanted legislation down our throats, because they know they can get away with it. The alternative candidates are not a serious threat (unfortunately).

We do need a major change in the system, but in calling for a constitutional convention, do you advocate changing the constitution or just decreeing that all politicians be run out of town tarred and feathered?

Oooh! I vote for tarred & feathered!

I was actually being a bit facetious in calling for a Constitutional Convention. I LOVE the Constitution pretty much as is - with the exception of the income tax amendment. I guess that is really what I would want to focus on.

I just think that our legislators will refuse to listen to us until we force it down their throats. I just don't know how to get them to listen. I have written to Kingston, Miller and Cleland (my state rep & senators) a number of times on a number of issues. I have only gotten ONE response from any of them EVER.

Mike has even asked to have a meeting with Kingston (on a different issue) and he has NEVER responded to us. Next step is to demand his time. It shouldn't have to come to that.

The fact is an asset tax can lead to the destruction of family businesses and the loss of homes for individuals with a low income stream, sales taxes are regressive. Our current Federal tax is progressive,so are capital gains. Social security, sales, and property taxes are regressive. The best tax is a flat tax on income over a certain level. Eliminate welfare programs, the overbloated military, phase outt SS and that burden will be low for all American's.

Sure, sales tax would be higher, but then there'd be ZERO income tax. Surely all the money forked over to the governement every April 15 could buy a lot of hamburgers at Mickey Ds.

HR 2717 is only a 15% national sales tax. So a hamburger originally at $1 would only be $1.15. Or a meal for a family of $20 would be $23. Not too way beyond the reach of even the poor.

What are the reasons to favor a sales tax over a transfer tax ?

I'm not familiar with the transfer tax, what exactly is it?

Sales taxes are regressive. They also punish consumption. I assume a transfer tax is the same as a value added tax where an item is taxed at each stage of production.

Seeing how we're a consumer oriented society, I can see why people would not be too in favor of a national sales tax.

However, I believe the way to increase wealth in a society is not in consumption, but production. I'm for systems that encourage production and discourage consumption. Currently we have a massive trade imbalance and would I would like to see the US export more than it imports. We need to stimulate and encourage businesses to produce more here in America. A VAT would encourage more businesses to go overseas. By discouraging consumption, we would also be encouraging investing. And that investment money in turn would be used to increase our productivity.

Production and consumption are two sides of the same coin. Not much use producing something that cannot be consumed. The real choice is between a tax system that favors savings vs. consumption. The best thing is for a tax that is as neutral as possible on this issue. The income tax fits that bill.

But one thing with our current income tax system is that it punishes people for making more money. Now, with a flat rate income tax system, I can see how it can be more neutral.

production going up and comsumption going down, would be catastraphic. That is already what is happening.

People aren't consuming very much, so production goes down. Because production goes down, companies layoff workers.

Excess inventory sitting in a warehouse costs the company money. They can't afford to increase production while consumption decreases.

***********

The LAST thing we need is yet ANOTHER tax. Either overhaul the current tax system, replace it, whatever. But do not just ADD to it. What we need is for the money we have to be better spent.

Example: In my state (Oregon) we're currently running 2 BILLION dollars short. Lawmakers have been scrambling with many many special sessions...getting ready to layoff cops, teachers and the like. They are also wanting to implement a sales tax (OR is one of 2 states which has NO sales tax whatsoever)

The problem with their proposal, is that they are not getting rid of any of our other taxes (property, income, etc) They are just adding to it.

A week ago or so, the Statesman Journal (Salem, OR's newspaper) printed an article about a few things that were in the new budget submitted to congress by our governor. Get this:

1) Laptops for ALL OR lawmakers. (EST Cost: 800k+)
2) Cross walk repairs around capital. (EST Cost: 2.5 MILLION)

GIMME A BREAK! we're running a HUGE (2Billion is huge when your state only has 5 million people in it) deficit, your cutting cops, but want to give yourselfs laptops?

<bush sr> no new taxes, it simply would not be prudent </bush sr>

I wonder what other kinds of crap we can cut out, to make the system more efficent, WITHOUT the need for additional taxes.

--cheers

Great points Patriot!

I too am an Oregon resident, but I'm military and stationed outside the state, so I am exempt from state income tax thankfully.

My mother who lives in Salem, is being taxed to death, she is going to sell her home and rent to get out from under property taxes.

Wow, an Oregonian, AND one in the armed services? Cool. I salute you sir...thank you

Anyhoo, whats this I hear about Salem getting a entertainment tax? My folks live in Salem. They said something about Video rentals and other things being taxed.

Anyhoo, sorry to go off topic, Just had to say hi to my fellow Oregonian

--cheers

Thank you sir....And thanks for the bit on entertainment tax, I'll have to ask my mom about that..

Cheers back at'cha

A transfer tax is not the same as a value added tax. A transfer tax taxes the exchange of currency while a value added tax taxes the production of a good whether there is money involved or not. I believe the transfer tax to be the best of the three between a retail tax, value added tax, or a transfer tax. Those entities using large sums of money will be taxed for use of the currency they are doing for free currently. It is regressive to only tax the retail end and exclude large transfers of moneys. I am basically against the government taxing exchanges not involving currency, hence, do not like the value added tax.

Which of the three do you prefer and why ?

I actually have another idea I would like to throw out on the table... How would everybody feel about eliminating federal income tax altogether, and running a massive scale federal lottery instead? Let the chronically stupid pave the way to prosperity! What do you think?

Ha! Thats the best idea I've heard yet!

Somebody is going to get hurt more in any tax scheme. You left out the enhancement of income to apartment dwellers, a much larger group when it comes to low income streams. Also what makes you think the very low asset tax on small businesses would be any greater than the income tax they are paying right now.

My tax is so much simpler and fairer with much more integrity (Hard to cheat) than anything else offered here I think if people took off their blinders and their narrow special interest biases they would embrace it immediately.

Just a for instance; income taxes and sales taxes (Throw in transfer VAT taxes) are much easier to cheat and so the honest person is punished far more than with an asset tax.

I get to disagree with Dingo...

I view your asset tax the complete opposite way you do. An asset tax would be an exacerbation of current property taxes. Property taxes are bad for the following reasons:

-- They are punitive

Property taxes punish people for having things and improving ones property. It is an asset to the community for people to have nice buildings and grounds. They punish people for having something. All taxes are punishing ( discouraging ) something. Do we want to discourage people from owning property?

-- They are capricious and arbitrary

Determining the value of real estate and dwelling is a highly subjective thing. Ask two people what they would pay for a specific piece of property and you can get widely varying answers.

-- They are extremely vulnerable to favoritism

Some individual is going to make the call as to what a property is worth. It is a subjective decision. It is so easy to move the value up or down, if you have any sort of outside influence. The opportunity for kick-backs is easily evident. But I am not just talking about criminal activity alone. Say you know the property owner from high school days. That might be reason enough to not raise that particular property 10 K, maybe 5K is good enough.

------

A asset tax would compound the property tax problems. I can envision a paperwork nightmare. Who is going to inventory everyone? How often does it need to be updated? Who is going to place a value on the inventory? Do we want the government to have a list of everything we own? The opportunity for inaccuracy and cheating would be immense.

Your goals of a tax system which is simple, fair, and approaching fool-proof (even writing it makes me chuckle) are criteria which should be the focus.

A simple income tax system ( which would be better called a compensation tax) would be a step towards these three criteria. I also think the transfer tax would fit the three criteria as most transactions over a thousand dollars are electronic currently.

That's an interesting one. The entire government funded by a lottery. Since I never gamble, I'd be for it. Though it'd seem weird that the world's only superpower is funded by a lottery. I'm also not sure if people would be willing to spend that kind of money on lottery tickets. Assuming $2 trillion needs to be collected. Also tack on $600 billon in lottery winnings. That's around $10000 of lottery tickets that needs to be purchased by every single person every year. For a family of 3, that's $30,000 each family would have to spend just on lottery tickets. It seems like it's easier for the USG to force people to pay that than for people to voluntarily buy lottery tickets with that much money.

Now, if we radically scaled back the government, it might then be possible ....

Let's put it this way... Without all states even participating in lotteries, the states hauled in better than $45Billion in the year 2000. If it were set up right, and the stakes were high enough, people would participate heavily. Look at the way people pack the stores when the Powerball jackpot hits over $100Million. Could you imagine the turnout for a $1Billion drawing? The revenue that would be generated from all 50 states participating would be astonishing, I'm sure.

Ok... Maybe you wouldn't be able to eliminate income taxes, but you'd at least reduce the burden on the taxpayers, working class and wealthy alike.

Why don't we also have government run bordellos and drug parlors. Let us let the gamblers, dopers and whore-mongers pay a large share of our taxes.

Hmmmm... There's a thought. At least the above mentioned would be regulated.

Not only would the pimps profits go to the government, the whore would have to report her income and she could no longer claim welfare benefits. We win three ways.

Grey Seal, you take the traditional view point that taxes are to "encourage" or "discourage." Taxes should be strictly to raise revenues as simply and fairly as possible. If the government wants to hand out cash awards for well kept property then we can higher a bunch of home "aesthetes" who will dispense "community enhancement" payments. Excuse me while I pull my tongue out of my cheek.

And as you suggest all taxes are punitive to somebody.

As far as property valuation, its been going on for years. You simply look at what comparable property is selling for as a starting basis. Obviously the call isn't going to be perfect, what is? And yes you have to hire honest, competent evaluators. What else is new?

I don't think you need to inventory every piece of jewelry for instance. Let's say the tax is 1.5%. If you have a law that says deliberate underestimating can get the difference confiscated as a minimum if it is discovered why risk so much to avoid the insurance of honest payment of the tax. The government would simply accept a lump sum estimate.

I continue to maintain that the assets tax is the fairest and least avoidable tax and nothing you've said changes my view. Of course I know it doesn't have a chance in hell at the present time.

Frankly I can think of far more formidable points of opposition. The tax on churches and the tax on overseas assets would be two.

I like the lottery, a voluntary tax. Personally I'd rather gamble on the market.

Revise tax laws to reduce taxes on activities that benefit society - like employment tax (including employer contributions to SS, health care, worker's comp.). Make up lost revenue by increasing taxes on activities that contribute to dysfunction in society - resource extraction, pollution, packaging, corporate lobbying, advertising. Such taxes cascade up, to encourage more social and environmentally sound behavior.

Instead of taxing corporate profits, what if corporations were required to pay out their profits each year to shareholders? Profits would be taxed as shareholder income. Corporations would lose their incentive to shift profits around the world, seeking the lowest tax rate. If corporations are taxed on activities like resource extraction, or the use of carbon fuels, perhaps these taxes, harder to avoid, would slow corporate expansion, keeping markets more competitive.