And of course when asked about how this would create a larger deficit, he never actually asserts that his flat 14.5% tax across the board would actually balance the budget.
But here's the crazy thing: his proposal isn't even a flat-tax policy! He agrees that the first $50,000 for a family of four shouldn't be taxed. That's a progressive tax plan. And it makes sense right - up to a certain amount of income, one makes so little money that need a bit more help than others to get by. Makes sense...but then you could logically assert the converse - that those making so much money need far less help than others to get by, and therefore could be taxed more without affecting their lifestyles.
And this is why a progressive tax plan works in the United States - there exists an income level based on the cost of consumer staples, housing, and transportation, that allows one to be a productive member of society. And so the further away from you get from that magic number (or delta of that number), the more that taxes have an effect either on the individual or the community as a whole. A family cannot get by on $1 a year. A billionaire simply does not need a billion dollars. The burden on them is far different - which is why their tax burden should reflect that.
>He agrees that the first $50,000 for a family of four shouldn't be taxed.
I live in an expensive part of Chicago. $50k for me has nothing in common with some rural Alabama family making $50k. This is one of the reasons why the flat tax is wrong. It lacks the flexibility and subtlety of a more complex tax system. In a nation this large with so many different wealth levels, a non-progressive tax is just asinine. But it engages conservative low information voters who just want easy cowboy-ish answers to complex problems, especially if they're the ones in he rural south who will benefit from this kind of plan more than northern Democratic urban dwellers.
The current federal system doesn't change thresholds based on where you live either, so that criticism seems a bit unfair? How would a system that did change the thresholds even work? If there were some tax benefit involved with owning or renting residential property in really expensive areas, prices for those areas would just increase even more to compensate.
Keep in mind, the income tax rate would still be marginal, so you'd only be paying tax on your income beyond $50k. (I don't recall this specifically from TFA, but it did say Arthur Laffer helped out and I really doubt he'd approve a system with a $7250 discontinuity.)
I think I speak for everyone in Alabama (which I'm not) when I say "if you want a cheaper apartment, move out of the Loop and ride the subway!"
That is precisely what is necessary. Businesses have to continually cut complexity to keep costs down and stay competitive, but for a government, especially the federal government of the richest nation in history, the costs of steadily rising complexity are low, and personal consequences minor. Often times complexity is retained or expanded unnecessarily purely for political reasons, such as representatives of districts refusing to close redundant military bases that the Pentagon doesn't even want for fear of losing their seat in the next election.
One of the biggest problems in our government was never implementing a way to refactor without grand upheaval. Also they didn't really think about scale very well and campaign funding restrictions. I feel we are in a place right now where special interest is more important than public.
What significant law do you think is outdated and unnecessary, the repeal of which wouldn't be controversial? Let's limit discussion to the federal level since we're talking about a Presidential candidate.
Why the restriction on "significant" laws? Most laws are significant to some people, and a vast morass of insignificant laws is arguably worse than a single law that affects everyone, since they greatly increase the cost of doing anything without hiring expensive counsel and hoping that the courts and IRS will agree with his/her interpretation of your particular case.
That's the thing. It wouldn't matter if repealing a law was controversial. They'd have to repeal one, if they wanted a new one. They'd obviously start with the least controversial...
That's the thing; we're in love with our code, even though we all know it's awful and needs to be refactored. No one has the time or motivation to do it, because we're all burnt out and trying to constantly push features :)
I like to see a law or amendment that evens the playing field by making it unlawful for government officials and officers to lie. A federal officer can lie to you but you can't lie to them. I think that's BS.
Absolutely. I've always thought all laws, sans the constitution & bill of rights, should be wiped out every so many years. That would also include the tax code.
I've always wondered exactly where the line is between ignorance and messaging for politicians. Like, when he says, "[Obama's] redistribution policies have led to rising income inequality and negative income gains for families."
He can't actually believe that is a strictly true statement. I'd think that any Republican politician with an understanding of economics would have to believe that a president's policies are at best contributory rather than a distinct cause. I get it as messaging; if one believes that progressive taxation has side effects that cause inequality, then they'd want to gloss over things to blame the presidency for it. So, I tend to believe that most politicians have private meetings where they talk about what they actually think is going on, and then translate it into brain-deadening messaging for the public. But sometimes I wonder if for a lot of these politicians, how much of what they say is actually because of willful ignorance rather than messaging.
Like that guy with the snowball that argued against global warming, that almost definitely has to be chutzpah rather than stupidity, right? Like, he would understand the concept that just because a stock price spikes down, it could still be true that the stock market is going up over time. So he has to secretly understand the argument about global warming, right? And then we waste our time trying to explain how a snowball doesn't disprove anything, and he doesn't care because he already knows that. There's got to be a term more accurate than chutzpah for someone that deliberately lies and plays dumb, knowing they can get away with it.
>most politicians have private meetings where they talk about what they actually think is going on, and then translate it into brain-deadening messaging for the public
Yes, sort of, but the reality of these things are so well understood all politicians that there's not often that much of a reason to discuss these things outright.
When a politician (and by "politician," I do not mean a single person. I mean an amalgam of the politician, their staffers, and their advisers) are weighing an issue, the actual merits of the arguments are just a part of the equation. They're weighing the interests of various groups and constituencies, they're considering coalitions and alliances and favors, and making a pragmatic decision. Usually a mix of their conscience, their constituents, their fundraisers, and their party.
Rand is a bit of an outlier on this front because he is a legitimate True Believer, but he's still a pragmatic true believer.
Then they hire someone like me to turn it into the soul deadening messaging.
But, yes, these people understand both sides of the issue. They are usually very smart. And if they don't understand the other side of the issue, their close advisers do.
It's too bad, really. The general public gets more engaged for presidential elections, and they start caring about the actual issues, but then there's no resource to allow the citizen to drill down into the actual argument as deeply as they'd like, so they can try to understand it to the depth that a close adviser would. So instead they hear a bunch of bull and they get disillusioned and go back to voting while uninformed. Which is really what the politicians want, anyway.
Maybe you could use the word "sophistry"? I don't agree for TFA, however. Paul didn't have much chance anyway, and in proposing this he pretty much drops out of the running completely. You can't get far without the corporate executive class bankrolling your superPAC. So, it's not perfect (he's keeping the mortgage deduction!), but relative to most politicians it's a good effort.
And every year the Internal Revenue Code grows absurdly more
incomprehensible, as if it were designed as a jobs program
for accountants, IRS agents and tax attorneys.
I think this is a point people across the political spectrum agree with. It does not follow, however, that simplifying the tax code would require a regressive flat tax. One could easily imagine a simplified tax code that still has progressive tax brackets.
The left will argue that the plan is a tax cut for the
wealthy. But most of the loopholes in the tax code were
designed by the rich and politically connected. Though the
rich will pay a lower rate along with everyone else, they
won’t have special provisions to avoid paying lower than
14.5%.
This would be a massive tax cut for the wealthy, unequivocally – a 25.1 % lower tax rate for the top bracket. The idea that this cut would be offset by closing unnamed loopholes is disingenuous at best. A 14.5% tax rate also conveniently matches the current maximum capital gains tax rate of 15%, which is the effective tax rate the ultra wealthy already pay.
> A 14.5% tax rate also conveniently matches the current maximum capital gains tax rate of 15%, which is the effective tax rate the ultra wealthy already pay
That's exactly the point. So now the middle class can pay what the wealthy already pay.
> A 14.5% tax rate also conveniently matches the current maximum capital gains tax rate of 15%
Well, except that 15% is the next tier down from the top capital gains tax; the top tier is 20%.
Plus the fact that 14.5% does not match 15%. If you don't believe me, I'll give you $14.50 for the "matching" $15.00 and repeat that until you're convinced.
Taxes aren't arbitrarily iterative (they only hit once a year), so your "repeat until you're convinced" is kind of a poor analogy. 14.5% is comparable to 15%, and lower (which incentivises people to quit using the capital gains cheat), but not much lower. That level of sophistication in and of itself shows that this is not total crackpottery, but at least somewhat well-thought out.
This is the fundamental problem. Everybody wants a simpler tax system. But nobody can agree on which parts to remove, or how to change it. The current system is close to what you get when everybody tries to get what they want. Even if you blew it up and started over, I think you'd get back to the current state pretty fast.
Edit: everybody can stop replying to my comment proposing your favorite simplified tax system and explaining why it's great. You're missing the point here. If you want to discuss your favorite tax system, make a top-level comment.
Flat tax + basic income is the only sane way forward. Most other systems lead to stupid incentives, unjust inequality, and over priced accountants.
For example. Assume a household of two people. one earns $20k per year, the other earns $80k per year. With a 50% tax and a $10k (after tax) per year basic income you get the following:
2*$10k + 0.5 * ($20k + $80k) = $70k
Now if each partner earned the same you would get:
2*$10k + 0.5 * ($50k + $50k) = $70k
Which is exactly what you want. The problem with income splitting measure that try to replicate this is that they lead to a perverse disincentive to divorce. So in the first example, the person earning $80k would no longer be able to offload part of his income to the lower paying person, and the two persons effective income decreases just when their expenses double. Furthermore it discriminates against people that are single, which is politically expedient, but unjust.
It also solves the welfare and old age security paperwork problem. There are some other problems: like having a higher tax rate to pay for all this basic income, but ultimately I think it would unleash more minds on problems that matter instead of setting up family trusts for the wealthy.
Another way to go is get rid of income tax altogether and replace with a national sales tax. Nice thing about that is that you can exempt essential things like unprepared food. That way the effective tax rate is much lower if you're a low earner, since most of your money will be spent on essentials.
No more IRS is another bonus, and since most states already have a sales tax the infrastructure is already there.
Your proposal sounds good, but I doubt it'll fly, because the people who like the idea of basic income and the people who like the idea of a flat tax have almost no overlap.
My point is that everybody agrees on simplifying the tax code but nobody can agree on how, so it probably can't happen.
"It also solves the welfare and old age security paperwork problem. There are some other problems: like having a higher tax rate to pay for all this basic income, but ultimately I think it would unleash more minds on problems that matter instead of setting up family trusts for the wealthy."
A basic income is unsustainable. As more and more people become dependent on it, taxes will only increase over time and we will run out of tax dollars. In addition to this, there will be massive inflation.
"instead of setting up family trusts for the wealthy."
I see where this is going now: the wealthy need to be punished for earning more money than the rest of us. This has never really been a good strategy historically for creating a happy and free society.
The ironic part is that the more rules you impose on the public in terms of taxes and money, the less mobility the lower and middle classes actually have. The rich can just leave the country and still make a killing with new laws in place like what you propose. The middle and lower class don't have the luxury making it that much more difficult to start and run a company (which is really the only way to have true economic freedom).
"Things would be better if we did away with the system."
"But what about when things go wrong?"
"Well, there would be agreements in place to handle that."
"Yes, that's called a 'system of government.'"
Or, "The government shouldn't tell me what to do."
"The word 'govern' literally means 'to conduct the policy, actions, and affairs of people.' That is, in fact, the whole point of government: to tell you what to do."
I remember a comment on HN a little while ago which went something like, "Why does the government need to get involved? Why can't people just come together and figure out how to deal with it?" I replied pointing out that this is what government is.
"Taxes are complicated" translates to: "People don't understand the rules for tax brackets that don't apply to them and think they are getting screwed over. So let's change the tax laws to save those(people or businesses) making more than $100k a year some money while doing nothing to help those making less."
I'm not in favor of any of the flat tax proposals... but this is the tax system where receiving a 1099 for from-home software development means you literally have to get out a tape measure and measure the room where you did the work. The exemption allowance worksheet on the W-4 is similarly insane. There's a lot that could be done to make the tax system here less complicated without touching the tax rates themselves.
There's some interesting bits like the earned income tax credit for the working class stays, and the first 50,000$ of income of a family of 4 wouldn't be taxed.
Capital gains are left unmentioned (probably because they're being abolished, and this is most likely going to reduce the effective tax rate on capitalists to ~0.0% -- no capital gains, no estate tax, no gift tax, so in essence taxes will finally be 0% for the oligarchy. Policy like this helps pave the way for what we all know is true: we're going to meet the first trillionaires in our lifetime).
The other critical problem they don't mention is:
* $2 trillion dollar tax cut = $2 trillion dollar revenue cut.
There is no mention of cutting spending, and there IS mention of "growing economy", so there is only one conclusion: "Liberal Stimulus". When you cut revenue by $2 trillion and leave spending the same, you end up issuing debt to cover the deficit. It's the same debt-driven tax scheme literally every republican has proposed since Reagan (who did the exact same thing perfectly: tax cuts + spending increases = growing economy and growing debt).
Debt isn't that bad for a state. A state isn't a company and has to make a profit. It's there to provide infrastructure, stability, and security.
As long a state can afford to pay the interest rates, how high the debt is matters less. Especially for the major economies in the world today it's even less problematic. The USA, China, Japan or any other G7 state is basically safe from bankruptcy, because it would disrupt the world economy too much. Just look at the banking crisis and the bailouts there.
Capital gains tax is mentioned:
"I devised a 21st-century tax code that would establish a 14.5% flat-rate tax applied equally to all personal income, including wages, salaries, dividends, capital gains, rents and interest."
There is a mention of cutting spending towards the end:
>And because the best way to balance the budget and pay down government debt is to put Americans back to work, my plan would actually reduce the national debt by trillions of dollars over time when combined with my package of spending cuts.
Of course, anyone can claim their unworkable tax system is great when coupled with unspecified spending cuts.
Oh, another right-wing "flat tax" guy. Somehow, these simplified tax schemes always result in lower taxes for rich people.
The tax code is complicated because of lobbying for exceptions. Propose removing some of those exceptions, and the lobbyists will line up in the House and Senate office buildings. (There's a book about that, "Showdown at Gucci Gulch". The cover picture is of lobbyists lining up.)
Readit News
And of course when asked about how this would create a larger deficit, he never actually asserts that his flat 14.5% tax across the board would actually balance the budget.
But here's the crazy thing: his proposal isn't even a flat-tax policy! He agrees that the first $50,000 for a family of four shouldn't be taxed. That's a progressive tax plan. And it makes sense right - up to a certain amount of income, one makes so little money that need a bit more help than others to get by. Makes sense...but then you could logically assert the converse - that those making so much money need far less help than others to get by, and therefore could be taxed more without affecting their lifestyles.
And this is why a progressive tax plan works in the United States - there exists an income level based on the cost of consumer staples, housing, and transportation, that allows one to be a productive member of society. And so the further away from you get from that magic number (or delta of that number), the more that taxes have an effect either on the individual or the community as a whole. A family cannot get by on $1 a year. A billionaire simply does not need a billion dollars. The burden on them is far different - which is why their tax burden should reflect that.
I live in an expensive part of Chicago. $50k for me has nothing in common with some rural Alabama family making $50k. This is one of the reasons why the flat tax is wrong. It lacks the flexibility and subtlety of a more complex tax system. In a nation this large with so many different wealth levels, a non-progressive tax is just asinine. But it engages conservative low information voters who just want easy cowboy-ish answers to complex problems, especially if they're the ones in he rural south who will benefit from this kind of plan more than northern Democratic urban dwellers.
Keep in mind, the income tax rate would still be marginal, so you'd only be paying tax on your income beyond $50k. (I don't recall this specifically from TFA, but it did say Arthur Laffer helped out and I really doubt he'd approve a system with a $7250 discontinuity.)
I think I speak for everyone in Alabama (which I'm not) when I say "if you want a cheaper apartment, move out of the Loop and ride the subway!"
says who?
The law is so complex in America, that you probably break several laws a day, without knowing.
And it costs law makers little to make new ones, and it's a pain to get rid of old ones.
I'd love to see
a) a huge clean up of out-dated and unnecessary laws.
b) then a cap on the total number of laws. If they want to add a new one, they need to repeal an old one.
(Allow for very minor growth over time as society becomes more complex).
He can't actually believe that is a strictly true statement. I'd think that any Republican politician with an understanding of economics would have to believe that a president's policies are at best contributory rather than a distinct cause. I get it as messaging; if one believes that progressive taxation has side effects that cause inequality, then they'd want to gloss over things to blame the presidency for it. So, I tend to believe that most politicians have private meetings where they talk about what they actually think is going on, and then translate it into brain-deadening messaging for the public. But sometimes I wonder if for a lot of these politicians, how much of what they say is actually because of willful ignorance rather than messaging.
Like that guy with the snowball that argued against global warming, that almost definitely has to be chutzpah rather than stupidity, right? Like, he would understand the concept that just because a stock price spikes down, it could still be true that the stock market is going up over time. So he has to secretly understand the argument about global warming, right? And then we waste our time trying to explain how a snowball doesn't disprove anything, and he doesn't care because he already knows that. There's got to be a term more accurate than chutzpah for someone that deliberately lies and plays dumb, knowing they can get away with it.
Yes, sort of, but the reality of these things are so well understood all politicians that there's not often that much of a reason to discuss these things outright.
When a politician (and by "politician," I do not mean a single person. I mean an amalgam of the politician, their staffers, and their advisers) are weighing an issue, the actual merits of the arguments are just a part of the equation. They're weighing the interests of various groups and constituencies, they're considering coalitions and alliances and favors, and making a pragmatic decision. Usually a mix of their conscience, their constituents, their fundraisers, and their party.
Rand is a bit of an outlier on this front because he is a legitimate True Believer, but he's still a pragmatic true believer.
Then they hire someone like me to turn it into the soul deadening messaging.
But, yes, these people understand both sides of the issue. They are usually very smart. And if they don't understand the other side of the issue, their close advisers do.
It's too bad, really. The general public gets more engaged for presidential elections, and they start caring about the actual issues, but then there's no resource to allow the citizen to drill down into the actual argument as deeply as they'd like, so they can try to understand it to the depth that a close adviser would. So instead they hear a bunch of bull and they get disillusioned and go back to voting while uninformed. Which is really what the politicians want, anyway.
Deleted Comment
[1] https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_Unite...
That's exactly the point. So now the middle class can pay what the wealthy already pay.
Well, except that 15% is the next tier down from the top capital gains tax; the top tier is 20%.
Plus the fact that 14.5% does not match 15%. If you don't believe me, I'll give you $14.50 for the "matching" $15.00 and repeat that until you're convinced.
If you allow the first $50K tax-free, it's not really regressive, is it?
Oh crap, "flat tax."
This is the fundamental problem. Everybody wants a simpler tax system. But nobody can agree on which parts to remove, or how to change it. The current system is close to what you get when everybody tries to get what they want. Even if you blew it up and started over, I think you'd get back to the current state pretty fast.
Edit: everybody can stop replying to my comment proposing your favorite simplified tax system and explaining why it's great. You're missing the point here. If you want to discuss your favorite tax system, make a top-level comment.
For example. Assume a household of two people. one earns $20k per year, the other earns $80k per year. With a 50% tax and a $10k (after tax) per year basic income you get the following:
Now if each partner earned the same you would get: Which is exactly what you want. The problem with income splitting measure that try to replicate this is that they lead to a perverse disincentive to divorce. So in the first example, the person earning $80k would no longer be able to offload part of his income to the lower paying person, and the two persons effective income decreases just when their expenses double. Furthermore it discriminates against people that are single, which is politically expedient, but unjust.It also solves the welfare and old age security paperwork problem. There are some other problems: like having a higher tax rate to pay for all this basic income, but ultimately I think it would unleash more minds on problems that matter instead of setting up family trusts for the wealthy.
No more IRS is another bonus, and since most states already have a sales tax the infrastructure is already there.
My point is that everybody agrees on simplifying the tax code but nobody can agree on how, so it probably can't happen.
A basic income is unsustainable. As more and more people become dependent on it, taxes will only increase over time and we will run out of tax dollars. In addition to this, there will be massive inflation.
"instead of setting up family trusts for the wealthy."
I see where this is going now: the wealthy need to be punished for earning more money than the rest of us. This has never really been a good strategy historically for creating a happy and free society.
The ironic part is that the more rules you impose on the public in terms of taxes and money, the less mobility the lower and middle classes actually have. The rich can just leave the country and still make a killing with new laws in place like what you propose. The middle and lower class don't have the luxury making it that much more difficult to start and run a company (which is really the only way to have true economic freedom).
"Things would be better if we did away with the system."
"But what about when things go wrong?"
"Well, there would be agreements in place to handle that."
"Yes, that's called a 'system of government.'"
Or, "The government shouldn't tell me what to do."
"The word 'govern' literally means 'to conduct the policy, actions, and affairs of people.' That is, in fact, the whole point of government: to tell you what to do."
Whitest Kids You Know illustrated this perfectly in a sketch routine
Capital gains are left unmentioned (probably because they're being abolished, and this is most likely going to reduce the effective tax rate on capitalists to ~0.0% -- no capital gains, no estate tax, no gift tax, so in essence taxes will finally be 0% for the oligarchy. Policy like this helps pave the way for what we all know is true: we're going to meet the first trillionaires in our lifetime).
The other critical problem they don't mention is:
* $2 trillion dollar tax cut = $2 trillion dollar revenue cut.
There is no mention of cutting spending, and there IS mention of "growing economy", so there is only one conclusion: "Liberal Stimulus". When you cut revenue by $2 trillion and leave spending the same, you end up issuing debt to cover the deficit. It's the same debt-driven tax scheme literally every republican has proposed since Reagan (who did the exact same thing perfectly: tax cuts + spending increases = growing economy and growing debt).
>And because the best way to balance the budget and pay down government debt is to put Americans back to work, my plan would actually reduce the national debt by trillions of dollars over time when combined with my package of spending cuts.
Of course, anyone can claim their unworkable tax system is great when coupled with unspecified spending cuts.
1) The economy would grow and so would revenues 2) Cut spending: food stamps, social security, education, etc. But lets not mention defence.
The tax code is complicated because of lobbying for exceptions. Propose removing some of those exceptions, and the lobbyists will line up in the House and Senate office buildings. (There's a book about that, "Showdown at Gucci Gulch". The cover picture is of lobbyists lining up.)