How do we fix the economy???

gcomeau wrote:

biochem wrote:
That's where the 73000 page tax code is working against us. With that kind of material to work with there is always a loophole.

While the tax code is overly complicated it is not even in the remote neighborhood of 73000 pages. That is just another popular fiction spouted by GOP politicians who know their audience couldn't possibly be bothered to fact check them.

From what I've read the tax code is 3000 pages of laws passed by congress and 70,000 pages of IRS regulations. Fairly typical for these days actually. Congress has been outsourcing its rule making authority to the bureaucracy for decades. Republicans and Democrats are both guilty of this. They don't want to do anything that will offend anyone and cause them difficulty in their re-election. So they outsource the bad-guy stuff to the bureaucracy. I would dearly love to see the Supreme Court shoot down some of these statutes on the basis of separation of powers and actually make congress do their job for once.

Annachie wrote:Truth be know, the first line in any realistic taxation reform plan is probably: "After I stage a sucessful coup ..."

Sent from my SM-G920I using Tapatalk

probably true.

biochem wrote:

gcomeau wrote:
While the tax code is overly complicated it is not even in the remote neighborhood of 73000 pages. That is just another popular fiction spouted by GOP politicians who know their audience couldn't possibly be bothered to fact check them.

From what I've read the tax code is 3000 pages of laws passed by congress and 70,000 pages of IRS regulations. Fairly typical for these days actually. Congress has been outsourcing its rule making authority to the bureaucracy for decades. Republicans and Democrats are both guilty of this. They don't want to do anything that will offend anyone and cause them difficulty in their re-election. So they outsource the bad-guy stuff to the bureaucracy. I would dearly love to see the Supreme Court shoot down some of these statutes on the basis of separation of powers and actually make congress do their job for once.

Biochem,

Do you know if the agency regulations have the same weight as executive orders? If they do, then those 70,000 pages of agency regulations can be eliminated with a stroke of a pen. Other interpretations have to replace what was eliminated, but the replacements require no congressional action.

If however the next administration rescinds that 70,000 pages and then asks congress to provide a replacement, future administrations would have more difficulty in rebuilding what was removed.

biochem wrote:

gcomeau wrote:While the tax code is overly complicated it is not even in the remote neighborhood of 73000 pages. That is just another popular fiction spouted by GOP politicians who know their audience couldn't possibly be bothered to fact check them.

From what I've read the tax code is 3000 pages of laws passed by congress and 70,000 pages of IRS regulations.

Again, nope. Tax code + all IRS regs are not even 10,000 pages. Again, too complex... but nowhere in the neighborhood of the crazy claims thrown around by right wing politicians on a regular basis. And most of that has to do with overly complicated financial transactions and special cases the average person never has to worry about, ever.


The only way you get to 70,000 pages is if you also drag in all the case law, which is absurd. Basically, if you take all the court cases and precedents and rulings on any case about tax issues and you throw them all together with all the actual law and regulations THEN you could get over 70,00 pages.

But that has as much to do with how long the tax code has been around and people have been going to court over it as it has to do with the complexity of the code. Anyone trying to claim to you that the tax code is 70,000 pages is playing you.

The US probably doesn't have a strong enough federal government, or one that is free enough from big business to implement my next suggestion.

Why not introduce a law that overides all other tax legislation and mandates individual punishment for those who "Deliberately connive to deprive the citizens of the country of their just due of taxes, regardless, of technical legal points"? This to be determined on a "reasonable man basis", by a jury of non technical people.

I do find the comments below regarding how we shouldn't be looking to tax the rich more, to be very strange. I'm retired now, but when working in a well paid job I and my peers had so many legal tax minimisation avenues that it was easy to pay less tax than a base worker. I didn't take advantage of them all, and when I copped two full tax audits over a decade the investigators commented on how I could have legally paid quite a bit less.

Spacekiwi wrote:Not an economist, but what if the corporate tax rate was switched for a business tax rate, like a value added tax?
So a business doesnt pay direct tax, but has a non tranferable tax on its goods and services. So a company cant offshore profits, as their moeny as already been taxed at point of sale?


Would this work?

The big guys aren't paying the VAT either.

The companies split themselves into multiple wholely owned subsidiaries to take advantage of tax law. For tax purposes the subsidiaries are treated as individual companies even though 100% of the stock is owned by the parent company. Amazon for example has a subsidiary located in Luxemberg and pays 3.5% VAT to Luxemberg and not the higher UK VAT etc. The lawmakers seem to be attempting to fix it but keep running into the law of unintended consequences. And of course if they are successful the brilliant accountants they employ will just come up with another scheme.

biochem wrote:

Spacekiwi wrote:Not an economist, but what if the corporate tax rate was switched for a business tax rate, like a value added tax?
So a business doesnt pay direct tax, but has a non tranferable tax on its goods and services. So a company cant offshore profits, as their moeny as already been taxed at point of sale?


Would this work?

The big guys aren't paying the VAT either.

The companies split themselves into multiple wholely owned subsidiaries to take advantage of tax law. For tax purposes the subsidiaries are treated as individual companies even though 100% of the stock is owned by the parent company. Amazon for example has a subsidiary located in Luxemberg and pays 3.5% VAT to Luxemberg and not the higher UK VAT etc. The lawmakers seem to be attempting to fix it but keep running into the law of unintended consequences. And of course if they are successful the brilliant accountants they employ will just come up with another scheme.

Worse yet, Biochem. Those accountants are franchising. I saw a report on a few I believe Welsh small businesses that are setting up legal and accounting structures that are letting them take advantage of such loop holes.

As Microsoft found out, the more complex and kludgey the structure software the more likely for there to be an opening for hackers to take advantage of. The same lesson applies to laws, especially tax laws where the incentive to circumvent rises directly with the size of the tax.

Annachie wrote:You do realize that there were 17 tax brackets for income tax in the US when Reagan was elected, topping out at 70%, just for singles alone. (I just went and checked)

The number of brackets is completely irrelevant.

More importantly however, did anyone actually pay 70% tax on their TOTAL combined incomes, or did they reach a 70% marginal tax rate?

Marginal tax rate is the tax you pay on your last earned X amount of money, NOT what you pay on your total income.
And using marginal tax for comparison is a very common trick from the rightwing to make taxes sound much higher than they are.

Checking, today USA has a marginal tax rate ceiling of 39.6%.

And indeed, after a bit of searching i found that USA did NOT have a taxrate of 70%, they had a MARGINAL taxrate just over 70% from roughly 1963 to 1980.
And a marginal taxrate of around 90% from 1953 to 1963.

And you know what, funny thing that...
I could be evil and point out that last time marginal taxrate was taken below 30%, just happens to be in the 1920s, which just happens to be followed a few years later by the "great depression".

Roughly the same amount of time after the reduction, as the 2008 depression came after the rate reductions GWB introduced.

Funny coincidence that.

Couldn´t get a direct link but try asking google for "taxableincome_attach.pdf".
Lots of not so amusing charts and statistics in it.

Annachie wrote:Anything that simplifies that mess was good, and 70%really is too high.

It may be too high if it is what they pay in total tax on their combined income, but in this case it is a marginal tax rate which means the overal tax rate could be anything from there to near zero.

If i pay 10% on my first 10000 earned, then 20% on my next 10000, then 75% on my next 10000, i´m paying a marginal tax of 75%, but the overall taxrate is ~32%.

And the taxrates and brackets was not the part that was messy, the loopholes and various ways to conduct tax evasion was.

Also, if someone have an income of 200.000/year, then a tax of 35% will be noticeable, but if someone else have an income of 200.000.000/year, then even if they pay 70% actual taxes, they still earn more after tax PER DAY, then the first person earns per year.

Still think it´s too much?

Annachie wrote:I'd have the tax free threshold at over the minimum wage, actually over the poverty line as well which should be less than the minimum wage but might not be.

That is one idea that should be implemented indeed.

Annachie wrote:Get rid of company tax (the big boys don't pay it anyway) and a bunch of other taxes.

No, get rid of the ridiculous loopholes, then lower the rate.

Because otherwise the bigwigs will just exploit this new loophole that you created.

Michael Everett wrote:The Labour Party after WWII ended up raising the top income tax rate to over 70%, in some cases up to 90%. Result? The rich people noped out of the UK, taking their money with them which combined with several other factors to leave the economy a mess that took several decades to recover (including an IMF bailout).

I´d say paying back warloans had at a lot to do with it as well...

Michael Everett wrote:What many people forget is that even if rich folk do not give away loads of money in charity, they still help (slightly) with the economy. They pay for artists, artisans, mechanics, secretaries... a rich person can easily have a staff of a hundred or more, that's a hundred salaries directly supporting families plus things like yacht buying (keeping shipyards in business), expensive cars, fine food (restaurants, their suppliers etc)...

Seriously, don´t tell me you really believe that?
That´s just one other variant of praising the "trickledown-effect", an effect that has in recent years, AMAZINGLY, been proven to be essentially nonexistant.

Evidence of the last century even tentatively suggests that overtaxing the rich to the point where they ALL leave the country is less damaging for the overall economy than pampering them.

What you describe above MIGHT have been true to at least some extent 300 years ago, but today it´s not even in the same zip code as reality.

And BTW, charity tends to be NOT beneficial.

Michael Everett wrote:Sure, many became rich simply because they were lucky or inherited it, but others became rich because of something that they did, invented or made work and many of them created companies which in turn provide employment and a product that people want.

Yeah, and surprise surprise, even in a country where the marginal taxrate at the time was something like 80-90%, people still invented and started businesses, and still managed to get rich.

But the more of a nations assets you concentrate in fewer hands, the less well that nation tend to function, the less well its economy tends to run and the more there tends to end up being troubles.


A modern nation essentially runs on money CIRCULATING.

It doesn´t matter if rich people spend their money, because MOST of the time, they spend them far SLOWER than government or the not rich, which means money circulates less, which in practical terms means you have a reduced GNP/GDP, which makes it a double whammy, because while the GNP overall is reduced, the GNP in the hands of the majority of people is reduced again due to rich dudes effectively hoarding a larger share.

biochem wrote:That sounds like a reasonable place to start. The numbers and the tax % would have to be tinkered with until they came up with a revenue neutral solution.

And here is essentially the reason why USAs public budgets are screwed.

Why ever would you want a revenue neutral solution? USA is racking up debt faster than even its richest 1% is racking up bank accounts.

You need to raise taxes until you have a BUDGET neutral solution, PLUS a little bit extra for actually paying off your debts.
You´re about 2 steps from pulling a Germany in the 20s, and the only reason events haven´t skidded off that direction in the last decade is because China hates the idea of a broke USA unable to pay for their modernisation.

But US politicians are so scared of even mentioning the possibility of tax raises, that noone does what´s needed, while any raises that happen tend to be done as covertly as ever possible, which means they´re usually of the less good kind.

The biggest problem is power hungry politicians. If you get rid of all of the deductions/exemptions except the threshold, there goes a huge portion of their power. They delight in being able to use their power over the tax code to reward friends (and those who donate large sums of money to their campaigns) and punish those they dislike. Which is why the current US Tax code is something like 73,000 pages long!

Not quite that simple, but that is certainly a TOO big chunk of the problems.