Taxes

[LovetoGiveRoses]

Should taxes be reduced or do you want to see them continue to increase? Do you want to increase the tax rate at the higher end (high incomes) or do you want it reduced? For those of you who don't care about the high end taxes (high incomes) check the bolded part below.

Hints of a subtle tax reform strategy
Bruce Bartlett

It is now clear from the way the Bush administration has handled the buildup to war against Iraq that it is following a long-term political strategy. It is perfectly willing to endure months of criticism for lack of decisiveness and even allow members of its Cabinet appear to argue in public, all toward the end of achieving its ultimate goal.

I suspect that something similar is under way with regard to tax policy. President Bush started his effort with a plan for cutting marginal tax rates. He was criticized by people, such as myself, for not doing more, faster. The phase-in of the rate reductions enacted last year are indeed too slow for maximum economic impact. However, given political realities, I concede that it may have been impossible to do more under the circumstances.

Nevertheless, the rate reductions do move us in the right direction, however slowly. The question is, The right direction toward what?

Economic theory is quite clear that high marginal tax rates are bad for economic growth.People make all kinds of important decisions about investments, lifestyles and careers based on tax considerations. The most obvious is the choice of whether to rent or buy a home. Clearly, the deductibility of interest and the tax exemption for capital gains on a primary residence (up to $500,000 every two years for a couple) is a major motivation to buy, rather than rent.

But people make many other important decisions about their lives based on taxes, as well, even if they are not fully aware of them. For example, people must decide whether to buy taxable bonds or tax-free municipal bonds, buy stocks more likely to appreciate in value and be taxed at lower capital-gains rates or those with high dividends that are taxed as ordinary income, and to develop careers as wage employees or as self-employed entrepreneurs.

Such decisions are all based to a large extent on tax considerations. Ideally, decisions about whether to work for oneself or another, to save or consume, to invest in one form or another should not be related to taxes at all. People make such decisions based on their own judgments about what skills they possess, how much risk they are willing to bear, their age, family status and other factors. Taxes ought not to be one of them.

In theory, we should strive for what economists call tax neutrality. Perfect neutrality cannot be achieved so long as there are taxes. But there are greater and lesser degrees of it.

Right now we have a tax system that is very far from neutrality.

Taxes bias investment and work decisions in ways that hurt economic growth. That is, we could raise the same amount of revenue in different ways and increase economic growth in the process.

Most economists would say a low single tax rate on consumption is probably best for growth. A rate of around 20 percent would be enough to fund all of what the federal government pays for from the corporate and individual income taxes.

For years, tax reformers have pushed for a flat rate tax system that would achieve this goal. However, getting from here to there without excessively hurting those who made investment and career decisions based on the current system has proven impossible.

The prospect of throwing out the current tax system altogether and replacing it with something entirely new frightens even those who would pay less under the new regime. The solution, therefore, is to move incrementally toward a new system. That, I think, is the Bush administration strategy.

We have already seen two major moves in this direction. Marginal tax rates were cut last year and earlier this year businesses were given a 30 percent "bonus" on depreciation for new investments in machinery and equipment. Since, in theory, firms should be allowed an immediate deduction for such investments, the effect is to move in the direction of fundamental tax reform.

The next step is to liberalize incentives for saving and investment. Elimination of taxes on these would give us a de facto consumption tax, as Edward McCaffery explains in his new book, "Fair Not Flat." Therefore, reducing taxes on saving, dividends and capital gains, as President Bush wants, can be seen as further steps toward fundamental tax reform.

Although the Bush administration sometimes appears to be fumbling around with tax policy, there may be a strategy at work.

Just as it as done with Iraq, the administration may be laying a foundation upon which it will build a justification for action later. It is too soon to say when the end games will emerge, either on Iraq or tax reform, but at least it appears we are moving in the right direction.

 

[SINthysist]

My dyslexic mistake. I read Texas and I had some things to say about Bush and read my lips...

"NO REPEAL OF THE TAX CUT!"

 

[LovetoGiveRoses]

My dyslexic mistake. I read Texas and I had some things to say about Bush and read my lips...

"NO REPEAL OF THE TAX CUT!"

Of course you agree with that. Where are all the loud people from the Nanny party who want to add all sorts of new regulations, expand current programs and add new programs? Don't they realize that tax increases will be needed to fund those programs? If they want the programs, then they'll have to support an increase in taxes and further turn-down of the economy. Where are they? Do they think that we can continue to add programs and keep taxes at the same level?

Now that the economy has turned down, shouldn't we be reducing spending?

 

[SINthysist]

I want taxes to be Point of Sale taxes. No taxes on wages or unprocessed foods. I especially hate property taxes because they deny the right of Franchise by putting a permanent governmental lien on all property of significance. Inheritance Taxes! Give me, give my family a break. You stole from me all those years and now you want to steal from my children too! Put the taxes on foreign businesses who want to do business here. Not our people. Make the illegals pay their share. Won't get that in a flat tax. Make the drug dealers pay. POS! Make the poor pay! Right now, they do all the whining, get all the say, and contribute fawking nothing but gimme Socialists votes! When they had to fork over their share too, they'd be a lot less willing to vote more out of THEIR pockets...

whew,

And I'm just warming up!

 

[LovetoGiveRoses]

I want taxes to be Point of Sale taxes. No taxes on wages or unprocessed foods. I especially hate property taxes because they deny the right of Franchise by putting a permanent governmental lien on all property of significance. Inheritance Taxes! Give me, give my family a break. You stole from me all those years and now you want to steal from my children too! Put the taxes on foreign businesses who want to do business here. Not our people. Make the illegals pay their share. Won't get that in a flat tax. Make the drug dealers pay. POS! Make the poor pay! Right now, they do all the whining, get all the say, and contribute fawking nothing but gimme Socialists votes! When they had to fork over their share too, they'd be a lot less willing to vote more out of THEIR pockets...

whew,

And I'm just warming up!

That would be good to collect taxes from all parts of our society, but how would you find the drug money?

 

[SINthysist]

You SPEND your way through good times.
You SPEND your way out of bad times.
You SPEND your way out of indecisive times.

We don't have a Republic or a Democracy.

We have either a Egopublic or a Egomocracy.

SPENDING is good for the EGO of our leaders!

 

[SINthysist]

Drug dealers at all levels spend money and hence pay sales taxes. I don't want to find anyone's money. How much you have, earn, save is none of Uncle Sam's damn business. Turn the IRS loose on evil American business and leave it's people the fuck alone and stop turning them into criminals for what comes naturally. Trying to keep every dollar you can for the survival of YOUR family...