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Stanford Professor Loses Political Battle To Simplify Tax Filing Process

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Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#71

Post by narag »

smt88 wrote: post #7
oDot wrote: post #6

I've always wondered, why can't we just pay one tax? Say make income tax 1.5x what it's now and cancel all other taxes. That way it'll be even easier!

Wealthy people are against that. They prefer regressive taxes, like sales tax, that will be shift much more of the burden to the poor. In fact, there's a whole batshit-crazy tax plan called FairTax that proposes changing all taxes to a simple sales tax.

They prefer regressive taxes, like sales tax

I don't buy that. Yes, I know it seems logical, but in practice it's not so clear cut. With deductions, rich people end up paying very little for income tax. With sales tax (or VAT) the person spending more pays more, and it's more difficult to escape.

This issue is very unintuitive and numbers tend to hide reality. Let me put an example on how numbers can fool us.

In my country, Spain, there has been a recent discussion about what economic model we want. Left wing parties argue that in countries like Denmark (that's seen as a very good place to live) taxes are higher than ours.

But that's terribly misleading. The important number is how much money you're left with after paying taxes and what you can purchase with it. Our salaries are too low so, even if the tax percentage is lower, and prices are a little lower (not in Madrid or touristic areas) we still are poorer after taxes and we have worse public services.

Tourism is poisoned candy.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#73

Post by dingaling »

hnal943 wrote: post #48
keithnz wrote: post #26

Earlier quoted context omitted.

In new zealand, we got rid of having to do tax returns for salaried/wage earners a number of years ago. Makes life easy for a vast majority of people. You can still do a return if you want to though. For the tax department it cuts down on how much infrastructure they need.

I think that's optimizing the wrong thing; people should be aware of the amount they are paying in taxes.

In the UK each pay-as-you-earn taxpayer ( I.e. tax calculated automatically and deducted from net income ) receives an annual statement of their tax and figuratively how it was spent e.g. £800 on health, £105 on defence etc

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#74

Post by thinkloop »

javajosh wrote: post #40
KZeillmann wrote: post #25

Earlier quoted context omitted.

How do we "fix money in politics" without chilling free speech?

We put all candidates online, for free. They are not allowed to spend money on getting elected - although they can spend their time (generally speaking, sometimes studying, a particular problem, history, how other countries do it, etc). Citizens subscribe to individuals, and groups of individuals, that best reflect their views. Additionally, citizens will be exposed to views that are slightly or significantly differe…

Candidates need to be able to reach voters in the best way they see fit. Online favors candidates that appeal to younger voters. This includes giving speeches, debating, advertising, etc., which takes funding. So we allow candidates to collect donations up to a reasonable limit.

Unrelated to that there are private citizens, unaffiliated with the candidates, that want to exercise their free speech by publicly endorsing a candidate. They do not collaborate with the candidate. They just speak through any medium they like. How do you suppress that without suppressing free speech?

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#75

Post by smt88 »

lsaferite wrote: post #33
smt88 wrote: post #7

Earlier quoted context omitted.

Wealthy people are against that. They prefer regressive taxes, like sales tax, that will be shift much more of the burden to the poor. In fact, there's a whole batshit-crazy tax plan called FairTax that proposes changing all taxes to a simple sales tax.

Honest question, why is it batshit-crazy?

One reason is that it's impossible to enforce. If sales tax were that high, it would give retailers a huge incentive to under-report sales on the billions (trillions?) of transactions in the US each year. The same way it's hard to catch drug dealers for tax evasion, it's hard to catch retailers who want to avoid charging/paying sales tax.

With the income tax, you have employers reporting and a far small surface area of cheaters to police. It's still a massive effort to police it, but not nearly as large as FairTax would be. FairTax is essentially a scheme to eliminate enforceable taxes, although I'm not sure its creators intended it that way.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#76

Post by pilom »

lsaferite wrote: post #33
smt88 wrote: post #7

Earlier quoted context omitted.

Wealthy people are against that. They prefer regressive taxes, like sales tax, that will be shift much more of the burden to the poor. In fact, there's a whole batshit-crazy tax plan called FairTax that proposes changing all taxes to a simple sales tax.

Honest question, why is it batshit-crazy?

The biggest argument against it is that it is incredibly regressive. Poor people generally spend higher percentages of their income on stuff where rich people save higher percentages of their incomes. So for example, Joe makes 51k/year but spends 50k/year. At the 23% tax rate that FairTax proposes, he pays $11.5k - a $2.5k "prebate". This works out to an effective tax rate of ~18% (with today's tax plan Joe's effective rate would likely be about 7.5% for income taxes and 7.5% for Social Security and Medicare. I.e. a lower tax burden.)

Compare that to a rich person. Susan makes 250k per year but only spends 150k/year and saves the other 100k. She pays 23% on the 150k = 34.5k minus the 2.5k prebate which makes for an effective tax rate of 12.8%. I.e. Susan makes more each year but pays a lower rate of taxes. These numbers get even more insane when you have 10 million in income but only spend 1 million a year. We basically are subsidizing investing and rich people are the biggest investors.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#77

Post by ccvannorman »

ThomPete wrote: post #38
gamblor956 wrote: post #14

Correction: this proposal would not have simplified taxes (i.e., the California tax code). It would merely have simplified the filing of tax returns for the most common case, salaried workers receiving all of their income from a single source. Very big difference. HRBlock and Intuit are heavily vested in maintaining the current tax filing system. They are not, however, meaningful players in the attempts to rewrite th…

I am not sure I see what you mean with "merely" it's quite a big thing not to have to deal with it every year. In Denmark and many other countries this is a non-issue. The US should be too but too many interest from the lobbying of people like Intuit.

This is the correct answer to American's "That won't work because ..." on this thread. Turn your head to the right and take a look at Europe where it is plainly working just fine. Turn your head back left and look at how F'd up taxes are in the U.S. and it's pretty clear that objectively we have no excuse other than "some small minority of people are profiting from a broken system and are going to keep it that way."

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#78

Post by moomin »

chiefofgxbxl wrote: post #24

Just for thought: suppose the tax system became so simplified that only goods X, Y,and Z were taxed at rates a,b,c. You pay aX+bY+cZ in taxes per year. It would be easy for voters to campaign their politicians to lower tax rates and easily verify. Obviously in the real world there aren't 3 levers to adjust: there are probably thousands or tens of thousands. Apart from the lobbying, politicians may themselves desire t…

I'm going to argue something a bit different: the overall tax revenue is roughly equal to government spending. The complexity of the tax code is to some extent a distraction. It's complex, and has winners and losers, but ultimately you'd need to raise the same amount whatever you did.

If you really want lower taxes, you need to be honest: you'll be taking that money from someone else. Even then, it's amazing how many politicians trailblaze cuts in spending that don't really make a difference.

Want to make a huge difference to the US tax base? Take a look at defence spending. And don't pretend it won't cost some people dearly if you cut it.

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#79

Post by TeMPOraL »

noobermin wrote: post #20

I'm going to say this until I'm blue in the face: fix money in politics, and half of these issues will no longer be intractable.

A more important question I never see addressed is how you prevent "money in politics" from unfixing itself as soon as you're done with the fixing? Money and political influence are two sides of the same coin - power. Money gives more influence, which attracts more money, and so on, in a positive feedback loop. How do we break, or at least control, that loop? Is it even possible?

Re: Stanford Professor Loses Political Battle To Simplify Tax Filing Process

#80

Post by whyenot »

California has the initiative system that means ultimately the voters can make changes to the system without involving a recalcitrant or corrupt legislature. For better or worse, many of the big changes in government in the state were enacted through this process. For example, proposition 13, which drastically changed property taxes, proposition 14, which moved the state to a "top two" primary system, proposition 11 and 20, which changed redistricting and made it less partisan. etc. etc. Moreover the side with more money for advertising doesn't always win these proposition elections.
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