Fundamental Tax Reform for the United States Federal Government

K

kmarinas86

#1
YouTube Video
YouTube - RED PILL OR BLUE PILL, LIGHT OR DARK SIDE

Detailed Paper
http://www.geocities.com/kmar86/Fundamental_Tax_Reform_for_the_United_States_Federal_Government.doc

Excel Chart
http://www.geocities.com/kmar86/Fundamental_Tax_Reform_for_the_United_States_Federal_Government.xls

FairTax?
FlatTax?
Income Tax?

No. None of the above is satisfactory.

Why not lower the payroll tax rate as your business spends more money on labor?

Why not lower the dividend tax rate as your business earns more profits?

These things are possible if taxation was calculated simply as:

spending*(sales-spending)/sales

From "no spending" up to "spending equal to 100% of sales", the tax goes from 100% of nothing, to nothing of 100%. With the abolition of "traditional" taxation, a business has two choices to eliminate all of its taxes. It can choose a primarily a cost reducing strategy in which it pays less taxes by reducing its costs below 50% of sales. Otherwise, it may choose a labor, land, and capital investment strategy, in which it spends more of the money in excess of 50% of its sales in order to reduce or eliminate taxes. The former is equivalent to subsidizing the business if it is exceptionally strong at making profits, because it would be possible for net profits to rise faster than profits. The latter is equivalent to subsidizing investment in labor, land, and capital in excess of 50% of sales, because it would be possible for spending on these items to rise faster than the company's net profits would fall.

Subsidization of profits above 50% of sales:
profits=50%*sales increased by an additional 10%*sales increases net profits by 11%*sales (10% subsidy)
profits=60%*sales increased by an additional 10%*sales increases net profits by 13%*sales (30% subsidy)
profits=70%*sales increased by an additional 10%*sales increases net profits by 15%*sales (50% subsidy)
profits=80%*sales increased by an additional 10%*sales increases net profits by 17%*sales (70% subsidy)
profits=90%*sales increased by an additional 10%*sales increases net profits by 19%*sales (90% subsidy)

Subsidization of expenses above 50% of sales:
expenses=50%*sales increased by an additional 10%*sales decreases net profits by 9%*sales (10% subsidy)
expenses=60%*sales increased by an additional 10%*sales decreases net profits by 7%*sales (30% subsidy)
expenses=70%*sales increased by an additional 10%*sales decreases net profits by 5%*sales (50% subsidy)
expenses=80%*sales increased by an additional 10%*sales decreases net profits by 3%*sales (70% subsidy)
expenses=90%*sales increased by an additional 10%*sales decreases net profits by 1%*sales (90% subsidy)

RATIONAL AGENTS THINK ON THE MARGIN (fact of economics)
 
C

commiekiller

#2
YouTube Video
YouTube - RED PILL OR BLUE PILL, LIGHT OR DARK SIDE

Detailed Paper
http://www.geocities.com/kmar86/Fundamental_Tax_Reform_for_the_United_States_Federal_Government.doc

Excel Chart
http://www.geocities.com/kmar86/Fundamental_Tax_Reform_for_the_United_States_Federal_Government.xls

FairTax?
FlatTax?
Income Tax?

No. None of the above is satisfactory.

Why not lower the payroll tax rate as your business spends more money on labor?

Why not lower the dividend tax rate as your business earns more profits?

These things are possible if taxation was calculated simply as:

spending*(sales-spending)/sales

From "no spending" up to "spending equal to 100% of sales", the tax goes from 100% of nothing, to nothing of 100%. With the abolition of "traditional" taxation, a business has two choices to eliminate all of its taxes. It can choose a primarily a cost reducing strategy in which it pays less taxes by reducing its costs below 50% of sales. Otherwise, it may choose a labor, land, and capital investment strategy, in which it spends more of the money in excess of 50% of its sales in order to reduce or eliminate taxes. The former is equivalent to subsidizing the business if it is exceptionally strong at making profits, because it would be possible for net profits to rise faster than profits. The latter is equivalent to subsidizing investment in labor, land, and capital in excess of 50% of sales, because it would be possible for spending on these items to rise faster than the company's net profits would fall.

Subsidization of profits above 50% of sales:
profits=50%*sales increased by an additional 10%*sales increases net profits by 11%*sales (10% subsidy)
profits=60%*sales increased by an additional 10%*sales increases net profits by 13%*sales (30% subsidy)
profits=70%*sales increased by an additional 10%*sales increases net profits by 15%*sales (50% subsidy)
profits=80%*sales increased by an additional 10%*sales increases net profits by 17%*sales (70% subsidy)
profits=90%*sales increased by an additional 10%*sales increases net profits by 19%*sales (90% subsidy)

Subsidization of expenses above 50% of sales:
expenses=50%*sales increased by an additional 10%*sales decreases net profits by 9%*sales (10% subsidy)
expenses=60%*sales increased by an additional 10%*sales decreases net profits by 7%*sales (30% subsidy)
expenses=70%*sales increased by an additional 10%*sales decreases net profits by 5%*sales (50% subsidy)
expenses=80%*sales increased by an additional 10%*sales decreases net profits by 3%*sales (70% subsidy)
expenses=90%*sales increased by an additional 10%*sales decreases net profits by 1%*sales (90% subsidy)

RATIONAL AGENTS THINK ON THE MARGIN (fact of economics)
Firstly this system is overly complex yet its theoretical benefit to efficiency is clear.
However it has the same problem of all complicated "fair" taxation schemes...it distorts the market by pushing people into making decisions (even if those decisions are correct) It stunts progress simply by interference and would divert resources into abusing its complexity through financial engineering thus reducing its intended efficiency improvement.

Mostly though i dislike it because it infringes freedom by taxing some morethan others based on decisions they make

a flat tax is the nearest thing concievable to a fair tax...
 
H

Howe Itis

#3
A fair tax plan is flawed. If you need "X" dollars in tax revenue, and a rich guy is paying based on his income, all he will have to do to avoid taxation is slow his spending and accumulate wealth. Then, because of his ability to avoid taxation due to the fact he has a much higher discretionary income, that same tax has to get shifted to people whose discretionary incomes are lower and cannot avoid it.

A flat tax will definitely shift the tax burden to the middle class when you consider that the wealthiest few pay a grossly disproportionate share of income taxes.

In either case, taxes on the middle class go up and not down....
 
C

commiekiller

#4
A fair tax plan is flawed. If you need "X" dollars in tax revenue, and a rich guy is paying based on his income, all he will have to do to avoid taxation is slow his spending and accumulate wealth. Then, because of his ability to avoid taxation due to the fact he has a much higher discretionary income, that same tax has to get shifted to people whose discretionary incomes are lower and cannot avoid it.

A flat tax will definitely shift the tax burden to the middle class when you consider that the wealthiest few pay a grossly disproportionate share of income taxes.

In either case, taxes on the middle class go up and not down....
The top part I agree with
but the bottom is illogical...

Currently its the poor who pay a disproportionate share of income tax i.e 20% as opposed to 40%...that is proportion and the wealthier pay more.
a flat tax to me is proportionate to evrybody and unchallegeably fair...
but your right...its us middle-class that always seem to get screwed over...
 
H

Howe Itis

#5
The top part I agree with
but the bottom is illogical...

Currently its the poor who pay a disproportionate share of income tax i.e 20% as opposed to 40%...that is proportion and the wealthier pay more.
a flat tax to me is proportionate to evrybody and unchallegeably fair...
but your right...its us middle-class that always seem to get screwed over...
The second part is logical. If the top 5% pay 57.1% of all income taxes, to be per capita based, they would only have to pay 5% of all income taxes. If you want that to be the case, then be prepared to have the other 52.1% shifted to you.

Tax distribution
 
H

Howe Itis

#6
The top part I agree with
but the bottom is illogical...

Currently its the poor who pay a disproportionate share of income tax i.e 20% as opposed to 40%...that is proportion and the wealthier pay more.
a flat tax to me is proportionate to evrybody and unchallegeably fair...
but your right...its us middle-class that always seem to get screwed over...
Looking at the above-figures, apparently the screws to you aren't so bad. If you want to get down to why you feel so constrained by taxation, it is because your discretionary income in no way compares to that of the very wealthy. Discretionary income should rightfully be a factor that is considered in terms of the appropriation of taxes.
 
C

commiekiller

#7
The second part is logical. If the top 5% pay 57.1% of all income taxes, to be per capita based, they would only have to pay 5% of all income taxes. If you want that to be the case, then be prepared to have the other 52.1% shifted to you.

Tax distribution
ahha now i understand you.
i wasnt suggesting it should be proportionate on a per capita basis...that would be absurd and only achievble through a lump sum tax or something.
i meant it should be proportionate to income... a simple rate of say 25% on everybody regardless of earnings. How could that be in anyway unfair?
 
C

commiekiller

#8
Looking at the above-figures, apparently the screws to you aren't so bad. If you want to get down to why you feel so constrained by taxation, it is because your discretionary income in no way compares to that of the very wealthy. Discretionary income should rightfully be a factor that is considered in terms of the appropriation of taxes.
not really because what you suggest is an attempt to equalize discretionary income on all income scales which messes with incentives..
 
H

Howe Itis

#9
ahha now i understand you.
i wasnt suggesting it should be proportionate on a per capita basis...that would be absurd and only achievble through a lump sum tax or something.
i meant it should be proportionate to income... a simple rate of say 25% on everybody regardless of earnings. How could that be in anyway unfair?
You'd never raise enough money, and more people would find themselves on welfare. It is a vicious cycle when a tax policy actually impoverishes the poor or brings down the marginal middle class.

A tax on wealth would be more fair. Just tax x% of net worth above a base level.
 
W

william the wierd

#10
I think the flaming leftist Warren Buffet (not a joke) got it right on graduated consumption taxes.
A VAT that exempts a very limited number of necessities: groceries, medical care, homestead rent/mortgage and children's/work clothing; combined with the abolishment of individual and corporate income tax would stimulate exports and reduce outsourcing.