The 15% Tax Rate
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The 15% Tax Rate
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Re: The 15% Tax Rate
#2Requests for startups: Kill the IRS.
Re: The 15% Tax Rate
#3> I've heard a number of arguments over the years against a flat tax. One is that a flat tax is regressive meaning that it penalizes lower income earners by taxing them at the same rate as higher earners. But I think we are all coming to realize that the current system may be even more regressive since most wealthy people find ways to pay lower tax rates.
Let me preface this by saying, I don't necessarily disagree with the ideas presented in this article, however that quoted bit is a very weak argument. Essentially the author is arguing that because the current system is regressive that justifies moving to a flat tax rate. However this does not actually provide an argument for why a flat tax rate is less regressive, rather he only asserts that the current system is not ideal.
If you're going to sell people on the idea, you've definitely got to come up with some strong arguments for your proposal and not just arguments against the current implementation. I think such arguments exist, but this isn't a great presentation of them.
Re: The 15% Tax Rate
#4When a 10% corporate tax and 10% income taxes for individuals were introduced in Bulgaria, government ministries and agencies started increasing their indirect taxes to balance their budgets. Suddenly if you are running a business you'll have to pay weird registration fees and if you are fined the fine will be huge too.
Also, If everyone paid 15% (in total) I doubt it would appear fair. Wealthier people may benefit more from government policy, why should they pay the same amount?
A low flat tax rate isn't realistic. Maybe if it was higher it might have worked, but you'll have to have welfare spending to offset taxing people into poverty. Which practically the same as having a progressive tax rate in the end.
Re: The 15% Tax Rate
#5> I've heard a number of arguments over the years against a flat tax. One is that a flat tax is regressive meaning that it penalizes lower income earners by taxing them at the same rate as higher earners. But I think we are all coming to realize that the current system may be even more regressive since most wealthy people find ways to pay lower tax rates. Let me preface this by saying, I don't necessarily disagree wi…
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Re: The 15% Tax Rate
#6I would much rather see a completely consumption based tax system. The mortgage interest and charity reductions could easily be left in.
Re: The 15% Tax Rate
#7> I've heard a number of arguments over the years against a flat tax. One is that a flat tax is regressive meaning that it penalizes lower income earners by taxing them at the same rate as higher earners. But I think we are all coming to realize that the current system may be even more regressive since most wealthy people find ways to pay lower tax rates. Let me preface this by saying, I don't necessarily disagree wi…
Wouldn't a flat tax with a nice high threshold be as non-regressive as you could get? Say X% of everything you make over $30k? Poor people pay roughly zero. Rich people like us pay almost exactly X%.
Sorted.
Extra points if the government looks at everybody's W-2s & 1099s, decides how much it needs and calculates an X accordingly for that year. Then sends me a bill.
Re: The 15% Tax Rate
#8Fred Wilson chooses non representative numbers to make his point: But there is a bigger issue here and that is whether it is good policy for someone of Mitt Romney's or my wealth to pay a lower tax rate than the average hard working american citizen.
Mitt Romney and Fred Wilson are atypical cases.
The bottom quintile pays 4.3% of income in tax, assuming they have any income. The middle quintile pays 14.2%, the nation as a whole pays 20.7%, and the top quintile pays 25.8%. The top 1% pays 31.2% [1].
The difference between the CBO and Fred Wilson's analysis is corporate income taxes.
Suppose Fred Wilson buys 1 share of twitter worth $100. Twitter then makes $10 of profits, which it does not distributed as dividends [2]. This is taxed at the rate of 15-35%, so twitters balance sheet expands by $8.5/share, i.e. Fred Wilson's 1 share is now worth $108.5. He then sells, and pays 15% cap gains, earning back $107.22. To me that looks like a 27.8% tax rate.
So yeah, go ahead and tax cap gains at individual income rates. But eliminate the corporate income tax while you are at it.
[1] http://www.cbo.gov/ftpdocs/100xx/doc10068/effective_tax_rate...
http://www.cbo.gov/publications/collections/tax/2010/graphic... (Graphs are for 2007 data, not 2006 data. Not much difference though.)
[2] Dividends are taxed at individual income tax rates, except sometimes.
Re: The 15% Tax Rate
#9I think the key takeaway here is that complexity is a completely different thing than policy.
We've had all sorts of politicians make all kinds of great speeches about various policies to implement with the tax code.
All that got us was a complex mess. Inside that mess was a lot of corruption paid for by lobbiests. You can hide a lot of cronyism in a tax code. I think no matter what you want the tax system to do, as technologists we can ask you to make it do that in a very simple, understandable way. So I support a flat tax, but not because it's "fair." I care about structure, I don't care about fair. Make it understandable, and then we can all decide whether it's fair or not. We'll vote people in and out of office depending on whether it's fair or not. Make it complex and we're stuck just voting on tax code depending on how emotionally somebody's speech appeals to us. We've found that while this will work for a few decades, it's not scalable over longer periods of time.
Re: The 15% Tax Rate
#10The ability to give tax breaks is one of the most powerful things a congressman can do. Take that away and the congressman will have a hard time justifying (or attracting) bribes/campaign donations. I really don't see congress voting to reduce their own power.