Get rid of the Income tax?

Earlier I posted: Of the working wage earners, without any deductions, making $10,000+ a year, 100% pay federal income taxes.

Let me rephrase: Of the working wage earners (filing a W-4 with an employer), without any deductions, making $10,000+ a year (reported income), 100% pay federal income taxes. I'm not going to say they report all the under-the-table income.
If you were single in 2013 and made $10,000.00 you paid $0.00 tax due to the standard deduction.
If you made $10,004.00; still $0.00.
But at $10,005.00 the tax rate kicks in. Paid $1.00.
$20,000.00 = $1,058.00
$50,000.00 = $5,935.00
$75,000.00 = $12,185.00
$100,000.00 = $18,500.00
$200,000.00 = $38,864.00
But I don't envision anyone making over $25K per year not having deductions.

The modern tax system of most nations can be read a s a list of winners (those who get tax deductions/breaks/writeoffs/etc.) and losers (the rest of us who pay for these deductions/breaks/writeoffs etc.)

Income tax is philosophically the worst sort of tax, while a straight consumption tax is the best (people can adjust their expenditures to minimize the taxes they pay). If we do insist on an income tax, then a flat or single tax with little or no deductions should be applied; a very low rate can still generate a large amount of money, but the distortions that taxes place on the economy (particularly malinvestment into favoured places due to "tax efficiency") will be drastically reduced or eliminated.

Downside? Less opportunity for graft on the part of the politicians.

You forgot about those poor, now unemployed, taxation accoutants.

Thucydides wrote:The modern tax system of most nations can be read a s a list of winners (those who get tax deductions/breaks/writeoffs/etc.) and losers (the rest of us who pay for these deductions/breaks/writeoffs etc.)

Income tax is philosophically the worst sort of tax, while a straight consumption tax is the best (people can adjust their expenditures to minimize the taxes they pay). If we do insist on an income tax, then a flat or single tax with little or no deductions should be applied; a very low rate can still generate a large amount of money, but the distortions that taxes place on the economy (particularly malinvestment into favoured places due to "tax efficiency") will be drastically reduced or eliminated.

Downside? Less opportunity for graft on the part of the politicians.

A consumption tax would still widen the rich-middle-poor gaps. Perhaps a 10% sales tax, in conjunction with additional import taxes, luxury taxes, savings account taxes, and investment dividend profit taxes.
But I still go with a flat rate income tax, on all income (including income in kind) with no deductions.
Those political campaign funds? That's income. Tax it.

My problem is that I cannot agree to a complete cut of welfare without some other support system BUT changes are REQUIRED! I have a good knowledge of history and I recognize that our current system grew out of past depressions, disasters and societal failures that left decent people without lifelines. While many communities and ethnic groups had forms of self-help and relief, there were many who fell through a very weak support web. Yet now, we have inculcated a frighteningly large portion of society that lives on permanent welfare from government.

What I want is something like if not identical to the proposed FAIR tax system (fairfax.org) which replaces income tax (eliminate IRS) with a national consumption tax combined with a minimum government stipend to individuals & families. The latter replaces a corrupted EITC while insuring a safety net.

Yes, it is something almost unbelievable to create given all of the stakeholders in our current tax system but as a seasonal tax preparer, out US Tax System is a NIGHTMARE!

Zakharra wrote:

The E wrote:It amazes me how much you guys seem to trust in corporations to pass on operational savings to their customers.

They do that anyways. The cost of business is always passed onto the customer. Sometimes in a very small way (gaining more money in volume) or in larger price rises. There is no reason why corporations shouldn't pass on the cost of doing business, to expect them to eat the cost (permanent costs, not one time monetary expenditures like fines) as long as they are reasonable about it. after all over time the costs of doing business will rise on their own.

You're saying the opposite of what he's asking. Yes, businesses pass their costs onto the consumer in the form of increased prices, but I don't see them dropping the price if their costs go down. They seem to prefer to "invest" the difference in executive bonuses and dividends rather than capital projects or decreasing prices for their consumers.

I think having more publicly traded companies is part of the problem. It has moved more of the focus from the long term good of the company to short term profits.

Zakharra wrote:

The E wrote:It amazes me how much you guys seem to trust in corporations to pass on operational savings to their customers.

They do that anyways. The cost of business is always passed onto the customer. Sometimes in a very small way (gaining more money in volume) or in larger price rises. There is no reason why corporations shouldn't pass on the cost of doing business, to expect them to eat the cost (permanent costs, not one time monetary expenditures like fines) as long as they are reasonable about it. after all over time the costs of doing business will rise on their own.

Starsaber wrote:You're saying the opposite of what he's asking. Yes, businesses pass their costs onto the consumer in the form of increased prices, but I don't see them dropping the price if their costs go down. They seem to prefer to "invest" the difference in executive bonuses and dividends rather than capital projects or decreasing prices for their consumers.

I think having more publicly traded companies is part of the problem. It has moved more of the focus from the long term good of the company to short term profits.

I believe there is a hidden assumption here. Corporations that don't pass their saving to customers will operate under a disadvantage to those businesses that do pass their savings along. The big incentive is to make more aggregate profit by selling more. I believe this is a sound belief. Large corporations aren't the only businesses out there. Smaller businesses will take that advantage quick as a wink. Large corporations like Wal-Mart already operate under that business model. If competitors don't follow suit, Wal-Mart gets bigger quicker.

Bottom line is that in a competitive environment, businesses won't have much choice but pass along savings.

There's another assumption that some people have about corporations; how to spend the profits. Some people seem to think that corporate profits should be plowed back into the company (smart corps do that with some of their profit), others think it should be spent on enlarging the payroll and/or benefits for the workers (smart corps will treat their workers decently), and others see to think the government should tax the ever-loving hell out of the corp, especially the larger ones because they have enough money to spare. All of that is wrong.

All a corporation (for profit one) is required to do is make money for the shareholders. It is not in business to make a better working place/environment for the workers, or to provide benefits for them or to provide a superior product (although that is a good idea if it wants to succeed). A corporation's sole purpose is to provide profits for the investors, ie the shareholders. The only people who are owned money in a corp are the shareholders. Everything else is a distant secondary. some people might not like or agree with that, but that is a fact. If a company cannot make enough profit to keep the shareholders happy, it will die.

That being said, a smart company does reinvest some of its profits back in the company for R&D, keeping the workers happy (decent pay and benefits as long as they are beneficial to the survival of the corporation) and paying the investors a healthy sum. Corporations also have to look at the bottom line and decide what is best for the company, which can mean some hardships for the workers if the company moves to a different location. Which can be because of many reason; from regulations of some kind, to taxes being too high, to it just being cheaper to build its products elsewhere.

One thing I do think though is that they should pay taxes, but it should be a fair tax because if that company isn't profitable it will either go out of business or leave; and no company should be looked at as a cash cow to be milked.

Zakharra wrote:snip

One thing I do think though is that they should pay taxes, but it should be a fair tax because if that company isn't profitable it will either go out of business or leave; and no company should be looked at as a cash cow to be milked.

I see no problem with seeing companies as cash cows. The idea is to optimize the tax revenue from those cash cows. Businesses are better milk producers than meat animals. Treating businesses as a producer of milk is better than treating it as a steer to be slaughtered.

To that end a sales tax (set properly) increases production and income tax tends to suppress production. Tax revenues can easily be higher under a sales tax regime and tax payers would pay those higher taxes more willingly. If that is true and I believe it is, why keep the income tax when revenue could be increased under a sales tax? Does the philosophical desire to tax income offset the practical benefit of increased tax revenues? I would say, no.

PeterZ wrote:
I believe there is a hidden assumption here. Corporations that don't pass their saving to customers will operate under a disadvantage to those businesses that do pass their savings along.

You're delusional. You must be. If recent history shows us anything it's the opposite.

Companies, big companies especially, never pass on all their saving but do pass on all their costs and then some.
For easy evidence, track interest rates to the cash rate, or fuel prices to the cost of crude.
(I think you guys call it the bank rate or discount rate)

When they do drop prices without dropping costs, it's to try and muscle the smaller guy out.