The 15% Tax Rate • Hacker News Board

Re: The 15% Tax Rate

#21

Post by comicjk » Sun, Jan 22, 2012, 4:05 PM UTC

mseebach wrote: post #18

So when an investor pays 15% "income" tax, it's on money that his company already paid 28% tax on (for a total of 39.8% tax). But as it's capital gains, there's a capital investment - money which again had to be earned, taxed and subjected to a risky investment. It seems to me that if the benchmark tax rate is 40% (AVC says his brothers pay 40-50% on their salaries), and the 15% rate is raised, it would be beneficial…

At least in the US, the average actual corporate tax rate is much lower than the statutory (by about half). Corporations get deductions far beyond what individuals do.

Re: The 15% Tax Rate

#22

Post by mattgreenrocks » Sun, Jan 22, 2012, 4:05 PM UTC

nkohari wrote: post #12

sunsu wrote: post #6

I would much rather see a completely consumption based tax system. The mortgage interest and charity reductions could easily be left in.

If you replaced all taxes with a simple sales tax, it'd be even more regressive, since a gallon of milk (for example) has a higher relative cost to someone who makes $20,000 than someone who makes $2,000,000. Also, it could have an unintentionally bad effect on our (now very consumer-driven) economy. You don't want to discourage people from spending money.

What if we special-cased the essential consumables a bit? Not very elegant, and probably a bit exploitable, but I can't think of any glaring holes (yet).

As for your second objection, I don't see the issue. If they don't want to be taxed, they can forego buying something.

Re: The 15% Tax Rate

#23

Post by [deleted] » Sun, Jan 22, 2012, 4:06 PM UTC

rdouble wrote: post #20

meric wrote: post #17

How about replacing income tax with a consumption tax? The current tax system encourages speculative investment for capital gain and discourages investment for passive income due to lower tax rates on capital gain. Just look at the dismal amount of dividends paid out by companies in the US compared to Australia, where many companies pay out over 50% of their profits in dividends. A person who earns a $10m a year but…

A person who earns a $10m a year but only spends $20,000 pays close to the same tax as a person who earns $10m and spends all $10m. Only if you ignore sales tax and other taxes incurred when spending money (hotels, fuel).

[deleted]

Re: The 15% Tax Rate

#24

Post by yummyfajitas » Sun, Jan 22, 2012, 4:07 PM UTC

nkohari wrote: post #12

sunsu wrote: post #6

I would much rather see a completely consumption based tax system. The mortgage interest and charity reductions could easily be left in.

If you replaced all taxes with a simple sales tax, it'd be even more regressive, since a gallon of milk (for example) has a higher relative cost to someone who makes $20,000 than someone who makes $2,000,000. Also, it could have an unintentionally bad effect on our (now very consumer-driven) economy. You don't want to discourage people from spending money.

On the other hand, a consumption tax taxes people proportionally to the benefits they receive from society. It might be less progressive w.r.t. income than our current system, but it is arguably more fair.

It's also hardly clear that the tax burden is even felt by the rich. Consider an investor with millions in investments who only consumes $50k/year. He would like to invest in his new venture, a medical search engine. But because of the taxation, he has less money for this investment. Think: who is forced to consume less as a result of taxation? The rich man continues to consume $50k/year. Instead, goods and services have been redistributed from the medical search engine to government uses.

The real question about taxing investors: do we believe the government will spend the money better than Fred Wilson would?

Re: The 15% Tax Rate

#25

Post by pwg » Sun, Jan 22, 2012, 4:08 PM UTC

> And then I often think of my two brothers who probably pay 40-50% of their income each year in federal, state, and local taxes. It just seems so unfair.

If the author really thinks his 28% tax rate is very unfair in light of his two brothers paying 40-50% taxes, he could donate the difference between 28% and 40-50% for himself to the Treasury each year, and effectively be paying a 40-50% rate.

Re: The 15% Tax Rate

#26

Post by cnorgate » Sun, Jan 22, 2012, 4:08 PM UTC

I love the idead of a flat tax. I think H&R Block might not be so excited by something like that though... imagine if we could all file our taxes in under 5 minutes??? The accounting industry would certainly take a hit...

This is perhaps another reason there is such opposition to removing tax deductions and simplifying the code. There are tonnes of people who need a complex tax code to make their current jobs relevant. So much inertia holds us back from getting to a better place.

Re: The 15% Tax Rate

#27

Post by ck2 » Sun, Jan 22, 2012, 4:09 PM UTC

Income is income is income.

If you make over six digits I don't care what the source is, no-one should get a special rate. Because once you hit that level, there is no way you could convince anyone you are "suffering" even if you decided to work 12 hours a day. At that level work is a choice, where the millions making 4 or 5 digits have no choice.

Re: The 15% Tax Rate

#28

Post by gwillen » Sun, Jan 22, 2012, 4:09 PM UTC

yummyfajitas wrote: post #8

Fred 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…

http://www.gocomics.com/tomthedancingbug/2003/03/08/

Re: The 15% Tax Rate

#29

Post by corin_ » Sun, Jan 22, 2012, 4:11 PM UTC

"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."

So change the current system to prevent wealthy people from paying lower rates, don't just move the goalposts and call it a goal.

The fact that more money often means you can pay lower tax rates doesn't mean those people shouldn't be paying higher tax rates, just that the current laws aren't doing a good enough job at getting them to pay higher rates.

Re: The 15% Tax Rate

#30

Post by Geekette » Sun, Jan 22, 2012, 4:11 PM UTC

A good precursor to the tax discussion would be heightened transparency via public access to all tax returns. E.g. Since 2002, all Norwegian citizens' salaries and net worth has been accessible to all.

Amongst other things, it would give a better picture of political candidates' motivations as they propose various tax "reforms".