The US tax system By mauiboy (Read 692 times)

[mauiboy]

Wading through the minefield that is the US tax code is soul destroying! In the past (in another country) tax was subtracted from wages and it was always right (no idea how they managed that when the couldn't organise a tickle in a brothel).
Now it seems like by default I am paying more for less but also have to engage in some complicated ballet of mathematics to get money back.
Given the IRS costs 12.5bn a year to run, I think there would be some savings to be made by grossly simplifying the tax code.
3 tax brackets (low earner, comfortable and filthy rich), a simple flat tax free allowance per member of the household. No deductions allowed (if its business related, the company can pay) any any fiddling gets you thrown in the volcano. No capital gains low rates for main income. No fancy offshore trusts (see the volcano again).
With respect to targetting specific groups with assistance, make it an application and payout system rather than tax breaks. Potentially more expensive upfront but easier to track entitlement fraud.
The sad thing is the system could be far simpler and fairer AND we would probably end up paying less. Whilst my suggested scheme is probably far from perfect it's mean to be illustrative
I don't mind paying taxes but it shouldn't take an army of accountants for it to be fair. Neither should it take an army on the other end to stop folks fiddling. Apparently the IRS brings in something like 120bn a year in underpayments (genuine mistakes and outright dodgyness) , thats a huge chunk of cheating!

[jhbietz]

I like the idea of a national sales tax instead of income tax. Every dollar spent in this country would be taxed weather it was legally earned or not. Any money you save would not be taxed until you spend it. I read that 2 to 3 cents on a dollar would bring in more money then the income tax. It would also greatly reduce fraud.

[wolfhound]

The IRS has long needed an overhaul. I feel that the Fair Tax concept would be the easiest and fairewst wayt to handle taxation. And dont forget that in addition to the federal tax, we pay state and local sales tax, in many cases state income taxes.,federal and state taxes on fuel, federal luxury taxes and on and on!!!

[mauiboy]

oh god don't I know it lol although 4.167% gst is better than 20%vat in europe!

Sales only tax (tx has this at a state level right) is a decent idea if it could be implemented, fairly, however I think that it would make saving a fortune rather than spending it more attractive to the rich.

Hawaii's state tax has far too many bands at close intervals and the same crazy hodepodge of deductions etc. If the whole thing were simplified the govt would collect more money, the volcano would be full of cheats, we would all pay less tax and a whole load of bean counters could be redeployed to useful work. On the whole it would have to make the country more competitive right? The bands would probably be closer to 7, 15 and 25% with maybe 7500 tax free per household member (technically dogs are dependants for tax reasons right? how about fish, theyre pretty dependant on me).

It did make me chuckle, someone wrote to the paper suggesting the state simply not pay tax refunds to help the budget crisis. If that were the case I would set my witholding to 30/30 and pay no tax until year end, watch the states cash flow then

[Smorkle]

Mar 3, 2011 7:36:04 GMT -6 jhbietz said:

I like the idea of a national sales tax instead of income tax. Every dollar spent in this country would be taxed weather it was legally earned or not. Any money you save would not be taxed until you spend it. I read that 2 to 3 cents on a dollar would bring in more money then the income tax. It would also greatly reduce fraud.

While I agree with you that if we were making up a tax system from scratch that a national sales tax would be the fairest way of collecting taxes. The problem I see with changing to a "fair tax" (yes I've read Neal Bortz's book) is that people who have scrimped and saved their whole lives have already paid taxes on the money they have saved. Yes, I know that 401K plans and pensions come out pre tax, but other money you have saved up has been taxed.... HEAVILY. Changing to a consumption tax would in effect tax you again on the same money you have already paid taxes on when you earned it. Double (or even triple) taxation is far from "fair."

I favor a flat tax on individual tax payers only. No deductions of any kind. Corporations would be exempt. Let me explain why "big corporations" shouldn't have to pay taxes. They currently don't pay their own taxes. YOU DO! You may not realize it, but a portion of the price of every good or service you purchase is going to pay the corporation's taxes. If a company makes and sells widgets that cost $1 to manufacture and ship to the store, they might sell it for $1.30 to gain a 30% profit. But they have to pay taxes on that income of 36% so they need to sell the widget for $1.41 to cover their profit and the taxes (36% of 30¢=10.8¢) A flat tax on every individual would make it so that the CEO's would pay more of that out of their own pockets and not pass the costs on to customers who buy their products.

Our tax system is so convoluted and cumbersome that NO ONE knows how it works. I saw a TV News show a few years back where they took a guys tax information to several different accountants just to see if any of them would be similar and guess what? ALL of the entries were different. This should not be the case. How did Ray Stephens put it? "If 10% is good enough for Jesus, it ought to be good enough for Uncle Sam.

[jhbietz]

To get a simple tax system that is fair for everyone I'm willing to take the hit on my savings. Most of it is in a 401k that is per tax anyway. The best thing about a national sales tax is that the more you spend the more your taxed. If your living large you pay more tax, if you live frugally you pay much less.