Fair Taxation: Finding the Right Method

[wolram]

What is a fair method of taxation?

http://en.wikipedia.org/wiki/Tax_reform

I would support a purchase tax, if staple food, bread, potatoes, medical care etc were untaxed, in other words the very basics for life.

 

[russ_watters]

That depends mostly on your definition and application of the word "fair".

 

[russ_watters]

I would support a purchase tax, if staple food, bread, potatoes, medical care etc were untaxed, in other words the very basics for life.

That method would be extremely complicated and not very reliable. For example: is a car a "basics for life"? Clothes? Perhaps we should tax clothes at Bloomingdales, but not Target? A pound of ground beef at the supermarket vs a $35 fillet?

I don't think it is possible to adequately/accurately separate needs from wants to ensure a reasonable progressive tax system. Futher, I think it would be damaging to the economy to heavily tax consumer spending, which is prime mover of the economy. Since your taxes are taken out of your paycheck, you don't see the mony (except on tax day), whereas if you had to think about a 25% sales tax, you'd consider it every time you reached for your wallet to buy something.

 

[wolram]

That method would be extremely complicated and not very reliable. For example: is a car a "basics for life"? Clothes? Perhaps we should tax clothes at Bloomingdales, but not Target? A pound of ground beef at the supermarket vs a $35 fillet?

Russ, i meant only certain food stuff.

you'd consider it every time you reached for your wallet to buy something.

And this is bad?

 

[russ_watters]

Russ, i meant only certain food stuff.

But that's exactly the problem: someone has to judge all of these particulars. Can you imagine the application/appeals process? In Philly, we're dealing with variances for the anti-smoking legislation. It is 1 issue for 2 classes of bars, but it is an enormous problem.

And this is bad?

People will pull out their wallet, think about it, then put their wallet back in their pocket. For a capitalist economy, that's disastrous for several reasons:

-Businesses that get taxed will be wiped out.
-People will spend less on consumer goods and the economy will grind to a halt.

 

[wolram]

But that's exactly the problem: someone has to judge all of these particulars. Can you imagine the application/appeals process? In Philly, we're dealing with variances for the anti-smoking legislation. It is 1 issue for 2 classes of bars, but it is an enormous problem. People will pull out their wallet, think about it, then put their wallet back in their pocket. For a capitalist economy, that's disastrous for several reasons:

-Businesses that get taxed will be wiped out.
-People will spend less on consumer goods and the economy will grind to a halt.

Oh, well i am open to suggestions that would make paying fairer and make the collecting of it less cumbersome, for sure we are paying people to collect the money from us.

 

[russ_watters]

I think the basic thing that needs to happen is to cut 99% of the exemptions from the existing tax code. You'd probably be able to do it without affecting how much people pay, but you'd save billions in admin expenses and people would have a short, 1-page form to fill out (probably reduce delinquency, too).

BTW, your proposal isn't all cons - it has one pro that I can see: it would create incentive for lower-income people to make smarter decisions with their money. Drive through a poor neighborhood and you see far too many satellite dishes, for example. But reducing everyone's spending is the negative side of that sword.

 

[turbo]

I think the basic thing that needs to happen is to cut 99% of the exemptions from the existing tax code. You'd probably be able to do it without affecting how much people pay, but you'd save billions in admin expenses and people would have a short, 1-page form to fill out (probably reduce delinquency, too).

This is a sane and probably fair way of reforming our tax codes, though there are some powerful business lobbies and special interest groups that have managed to get tax exemptions written into the codes, targeted especially to benefit them. Resistance to your method would be very strong, especially from Agri-conglomerates, auto-giants, etc.

Wolram, one problem with broad-based sales taxes is that it disporportionately taxes the poorest families. People with very modest incomes necessarily have to spend almost all of their earnings just to get by, while wealthy people need to spend far less of their income (proportionally), and can make investments that benefit them in the long run. The poorer families might not get hit with sales taxes when they buy food (at least in Maine, there are no sales taxes on food apart from candies, junk foods, etc), but when they buy clothing and shoes for themselves and their children, energy to heat their homes, cleaning supplies, etc, they pay taxes on all these things. Repealing Maine's 5% sales tax would result in an immediate boost in consumer spending, which is the driving force in the local economy. How do we make up the lost revenue? Russ' idea is a very good one, though cronyism and bribery in our state capitol (lobbying is the nice name for it) would make it very hard to get such a reasonable proposal heard. We have a proposal on this year's ballot called TABOR (Taxpayer's Bill of Rights). Essentially it caps any increase in taxation to no more than the inflation rate plus a formula based on population growth. If it passes, that will be a bitter pill for the politicians, who seem to find new ways to spend tax money every day.