What is income?

The House proposal wants to tax grad school tuition waivers. If you are getting your PhD “for free”, you would actually have to pay tax on it as if they paid you in cash the value of the tuition.

The House proposal wants to eliminate the estate tax. My mother inherited a thousand shares of Exxon at about $20 a share. It’s at $100 now. When she dies, I would inherit those at the $100 value—if I sold them at $105, the only tax would be on the $5 gain, not the $85.

So I ask again—before we get to rates and deductions and what not—what is the income we are even taxing?

A VAT is highly regressive, no?

Anonymous wrote:This thread is sort of proof that people are totally misinformed about taxes and sound policy ideas.

I am one of the PP's. Actually, the issue is there are a large number of taxpayers who don't like the idea of using tax code to incentivize/socialize behavior. I am not one of them. I like the idea that government can help encourage property ownership and reward saving as but two of hundreds of examples.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Eliminate ALL deductions and exemptions. Institute a flat % tax.

Flat tax should have the first 25k or whatever exempted to allow the working poor to have a chance.

Flat tax would need to cover all current taxes: estate, dividends, etc.

I ask about estate tax, because some people think estates shouldn’t have a tax. (Yes usually the ultra rich ha ha.) But it may be a matter of principal, the idea that the money has already been taxed. (Unless it is from a foreign relative!)

I don’t want to get this sidetracked, but what do we all think?

It's not true that estates are double-taxed. Maybe for first-generation wealth, but we have this thing called "stepped up basis" in the tax code, so any money that's come through a couple of generation is being bequeathed with no taxes paid on it by the decedent.

Anonymous wrote:

Anonymous wrote:Eliminate ALL deductions and exemptions. Institute a flat % tax.

No, this would be patently unfair.

If everyone is paying the exact same %, how is that unfair? Seems to me it's the very definition of 'fair'.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Eliminate ALL deductions and exemptions. Institute a flat % tax.

YES - but only if we get rid of capital gains and raise the threshold on estate taxes.

Yep I agree, but also there still needs to be a plan for other forms of income.
So salary is covered. Would it still be flat for:
Dividends
Rental income
Estate/inheritance
Etc

A flat tax is a consumption tax by definition, so, no, these things wouldn't be taxed. The flat tax works as a wage tax on workers (deducted by companies) and a VAT on the business side. See Hall-Rabushka.

Anonymous wrote:Eliminate ALL deductions and exemptions. Institute a flat % tax.

No, this would be patently unfair.

Anonymous wrote:It's seems like the talk about tax reform going on is not about fixing what's really wrong with the tax code so much as redistributing the tax burden. If you had the chance to fix the tax code, what would you fix?

Here's my list:

Treat carried interest as ordinary income.
Treat interest and dividends as ordinary income.
Index capital gains to inflation and treat as ordinary income.
Eliminate the mortgage interest deduction for second homes.

What else?

The corporate tax rate needs to be reduced to 20-22% and the base broadened using OECD recommendations. And a territorial system needs to be adopted.

Ideally, we'd get a VAT and create another revenue stream to take some of the pressure off the other two revenue sources. But that will never happen. I'd love to see a carbon tax as well.

As for your list above, interest is already treated as ordinary income (but who gets interest anymore, anyway?). I'd go with a mark-to-market tax on capital gains and reduce the estate tax allowance to $2 million and set the rate at 60%.

Anonymous wrote:

Anonymous wrote:Eliminate ALL deductions and exemptions. Institute a flat % tax.

Flat tax should have the first 25k or whatever exempted to allow the working poor to have a chance.

Flat tax would need to cover all current taxes: estate, dividends, etc.

see, now you're already starting down the slope of Exemptions before you even start to make your statement.

No exemptions.

Anonymous wrote:I agree with the flat tax (on everything - dividends, rental income, ect) and no deductions. Though if taxing @ 15% I would probably start at 50k or 60k. I'm not sure how reasonable/workable that is, but I'm self employed with fluctuating income and with all of my required expenses taxing @ 15% after 50k\60k seems so much more doable imo. Otherwise, I'd support a flat of 5%-7% on all income starting a $1, that way every single person is paying. Again, I have absolutely no idea how reasonable this is. I just want something easy and simple and fair.

Except 5 - 7% wouldn't come close to what the government is collecting now. I've heard something like 17% would match current revenues! and that allows for an exemption of the first $25k or so.

I agree with the flat tax (on everything - dividends, rental income, ect) and no deductions. Though if taxing @ 15% I would probably start at 50k or 60k. I'm not sure how reasonable/workable that is, but I'm self employed with fluctuating income and with all of my required expenses taxing @ 15% after 50k\60k seems so much more doable imo. Otherwise, I'd support a flat of 5%-7% on all income starting a $1, that way every single person is paying. Again, I have absolutely no idea how reasonable this is. I just want something easy and simple and fair.

This thread is sort of proof that people are totally misinformed about taxes and sound policy ideas.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Eliminate ALL deductions and exemptions. Institute a flat % tax.

Flat tax should have the first 25k or whatever exempted to allow the working poor to have a chance.

Flat tax would need to cover all current taxes: estate, dividends, etc.

I could see that. Is that 25k exempted for all forms of income or just for salary?

If there are any deductions/exemptions, it should be from the bottom up in terms of no one at the top being able to take advantage.

First $25k or whatever, for everyone, so if you are making 750k a year, you pay the tax on 725. It makes it easier than to figure out what threshold the rate kicks in.

No one if government is going to miss the aggregate $7500 per household.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Eliminate ALL deductions and exemptions. Institute a flat % tax.

Flat tax should have the first 25k or whatever exempted to allow the working poor to have a chance.

Flat tax would need to cover all current taxes: estate, dividends, etc.

I ask about estate tax, because some people think estates shouldn’t have a tax. (Yes usually the ultra rich ha ha.) But it may be a matter of principal, the idea that the money has already been taxed. (Unless it is from a foreign relative!)

I don’t want to get this sidetracked, but what do we all think?

Frequently, what is sheltered in estates are capital gains, which have never been taxed. See some estate tax myths here: https://www.cbpp.org/blog/10-myths-about-the-estate-tax

Anonymous wrote:
I ask about estate tax, because some people think estates shouldn’t have a tax. (Yes usually the ultra rich ha ha.) But it may be a matter of principal, the idea that the money has already been taxed. (Unless it is from a foreign relative!)

I don’t want to get this sidetracked, but what do we all think?

Founders had a very strong desire to ensure that the US would not end up with another aristocracy. Accumulated generational wealth is extremely damaging to a democracy.

I think an estate tax is almost a necessity to keep democracy thriving.

-- Some who stands to inherent an estate that will likely somewhat exceed the Estate Tax threshold