Fair Tax, Flat Tax, and... Capital Gains Tax
Senator Obama Chooses the Ox He Wants to Gore
By blackhedd Posted in Economy — Comments (28) / Email this page » / Leave a comment »
Obama comes clean, one-upping Hillary Clinton's economic populism in the process.
This is a sketchy story (as befits the current early stage of the campaign). But it's not too early to clearly discern who it is that Barry wants to carry the load of funding the Federal Government: Investors.
More...
I don't know why I didn't think of it earlier. We have endless debates hereabouts in regard to taxing income in a more economically-efficient way, as opposed to taxing consumption.
Obama, after considerable rhetoric along the standard Democratic line ("more progressivity"), has in essence come up with a third approach: tax the returns to capital.
From the Bloomberg story:
The plan, which Obama will announce in a speech in Washington today, would give a $500 tax credit to 150 million working Americans and create a universal mortgage credit for homeowners. The proposal calls for raising the top rate for capital gains and dividends, eliminating ``corporate loopholes'' and cracking down on overseas tax havens.
And this:
Obama, 46, would extend the mortgage interest deduction to all homeowners, not just those who itemize their taxes... The plan would eliminate taxes on senior citizens who earn less than $50,000 annually, removing the need for them to file tax returns. The plan would also simplify tax filing for many Americans by having the Internal Revenue Service provide them with pre-filled tax forms using financial data it receives from employers and banks.
There's also the now-expected elimination of the Bush tax cuts in 2010, and also the tax increase on carried interest for the general partners of investment firms.
It's a grab-bag of things that point toward higher "progressivity" (more simply, making fewer people pay more taxes), thus increasing the size of the built-in constituency for bigger government. Standard Democratic game plan so far.
What caught my eye, however, was the proposal to eliminate income taxes and tax reporting on senior citizens earning less than $50,000. A brilliant stroke, this seems like a clear shot at those on the Right who espouse various tax reform proposals partly by way of simplifying compliance.
But look at where this is going: how long will it take before Obama proposes the elimination of all Federal taxes on people earning less than $50,000, except for FICA/FUTA, and adding in a negative tax (tax credit) for anyone who holds a mortgage?
What a way to play to the galleries!
Note also the drive to eliminate any kind of distinction between capital gains and ordinary income for tax purposes (except of course for preserving the penalty-taxation on corporate earnings distributed to shareholders as dividends).
I suspect that the underlying philosophy is to undermine the "ownership society," by strongly privileging the lower levels of ordinary income at the expense of returns to capital, and by eliminating the distinctions between high ordinary income and capital gains.
I'm still trying to wrap my mind around the practical implications of transitioning how we fund our government, from taxing income to taxing business profits and capital gains.
And now if you'll all excuse me, the Federal Reserve is about to announce how much they're cutting rates.
« Rethinking the Goals of a National Mortgage Bailout — Comments (45) | The Bottom Line For New Mortgage Regulations — Comments (9) »
Fair Tax, Flat Tax, and... Capital Gains Tax 28 Comments (0 topical, 28 editorial, 0 hidden) Post a comment »
Are you seriously suggesting our economy will shrink to that size, and will get that much less foreign investment? Honestly?
HTML Help Central for Red Staters
Reality: Thompson/Romney Dream: Santorum/Watts.
and/or investments overseas will become more common as folks adjust behavior to avoid taxes. Costa Rico (sorry for the misspell earlier) has been a convenient destination since it's in a similar time zone and is very friendly to foreign investment.
Just check out how many Ivy League colleges have alumni groups in Costa...
====
"Enlightened statesmen will not always be at the helm." -- James Madison
HTML Help Central for Red Staters
Reality: Thompson/Romney Dream: Santorum/Watts.
I can't imagine that happening.
Old Crow, did you know that most newspapers have a business section? Check it out after you're done with the Jumble.
We already tax business profits and capital gains of course. He's not advocating eliminating income taxes either, so I don't see how we are "transitioning how we fund our government, from taxing income to taxing business profits and capital gains."
I agree with the main thrust of your argument entirely. It is a brilliant political move to drop more and more people off of the tax rolls, which will leave a massive constituency of people always in favor of bigger government because they don't have to fund it! The vast majority of seniors make less than $50,000 a year. This proposal could boost the Democratic vote from seniors by 10% in the short run and even more over time. We all know how much seniors vote. It would be electoral disaster for the Republican Party.
If the Democrats did do what you're saying, elminating incomes taxes for those making under $50,000, then over half of working Americans wouldn't pay any taxes. Hello built-in Democratic majority. There is one reason that Democrats haven't already proposed this years ago. They can't give up the money! I'm not sure how much this would reduce federal income tax receipts, but by guess would be something like 25-40%. Sure, they can increase taxes by 1/3rd on everyone else, but why not just increase taxes by 1/3rd on everyone else and still enjoy spending lower and middle income people's money too?
Is that, like local property taxes, they get two cracks at it. They can simply jack up the rate, or they can hold (or even reduce) the rate while inflating the currency and taxing the paper gains.
Don't know how many seniors would trade no tax on 50K for a gains tax on their 50K house they just sold for 500K plus a much lower return on their IRA.
No doubt, the Dem objective is to build a base of voters who get the bennies of taxes, but don't pay any. That is also my (only) objection to the proposed Fair Tax -- they call it a "Prebate."
That is also my (only) objection to the proposed Fair Tax -- they call it a "Prebate."
Everyone pays taxes under the FairTax-- unless they never buy anything, or invest the money in a business. The prebate is what makes it mildly progressive as opposed to directly proportional. Maybe you're misunderstanding the prebate?
---
(Formerly known as bee) / Internet member since 1987
Member of the Surreality-Based Community
"Don't know how many seniors would trade no tax on 50K for a gains tax on their 50K house they just sold for 500K."
400K, 300K, 200K......
If at some point they DID do away with taxes on all people earning less than $50,000.....and by chance I made $52,000.....would it be advantageous for me to ask for a pay cut? This is stupid, and not what a FAIR tax system does. Fine if the RATES are progressive to me...after all, you made your riches here and if you pay a higher rate then it's because you've been successful, but to not tax anyone but the wealthy is just dumb. If you're going to do that, let the wealthy have THE say in what goes on in this country - after all, THEY'RE PAYING FOR IT!
(I realize the wealthy do have THE say - but I mean at least we can be open about it)
they would only tax the amount that was greater than $50k, so you would be taxed on $2000 and not the whole thing.
___________________________________
Two thirds of the world is covered by water,
the other third is covered by Champ Bailey.
that, but seriously, it would be a stroke of genius by the dems if they DID try to go this route (we're SO much for the working folks, we won't even tax you!). Then when you become dependent on their healthcare and other regulatory crap, think of how hard it will be to change the system then! They could create quite a dynasty.....
The rate tables are designed in such a way that you are never better off making less money, but when you factor in things like deduction phaseouts, there are probably some situations where you could be worse off for making a little more money.
---
Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman
No. He didn't forget to mention. Dependence on Government is not better for working people. And no, I'm pretty certainly you don't actually think.
Do try to keep up. Good snark has to have some measure of thought and intelligence to it.
Try harder, please. We like our trolls smart, not dumb. You're embarrassing the rest of us. Why don't you try posting porn spam or something more constructive?
George W. Bush: He's A Folder ... Not A Fighter.
changing behavior due to the tax code. There are plenty of (legal) tools available, deferred compensation etc. that fall short of the complexity of off-shore accounts.
Classic example was last year when Corzine boosted tobacco taxes in NJ to "fill" a $100M hole in the budget. Result after one year - $25M LESS collected than the year prior. Did that many Garden Staters quit smoking? No. They bought their cigs in Delaware, online, or stamp free from some C-store in Newark.
When you're messing with the right hand side of the Laffer curve, beware of the consequences - a small hike in taxes results in a large reduction in taxes collected due to behavior changes to avoid the pain.
====
"Enlightened statesmen will not always be at the helm." -- James Madison
Laffer Curve! Gah!
Sorry, we were discussing this in PoliSci class yesterday and I couldn't remember the name of the curve. I knew it existed, just couldn't remember the name.
Admit it ... you have no idea what this thread is about, do you?
George W. Bush: He's A Folder ... Not A Fighter.
The Fuzzy Puppy of the VRWC. I've been usurped!
The Fuzzy Puppy of the VRWC. I've been usurped!
...or should I say, "Tony?" :Twisting: Here, let's take a walk.
Now, I understand - oh, stop whimpering; it's only a virtual ear-twisting - how a website where the regulars use more than one syllable per word might appeal to you. Appeal to you so greatly, in fact, that you would sneak back on board once you had your sorry tuchis banned the first time. Alas, Tony, you need us; we don't need you.
So I suggest that you take up another hobby. I understand fishing's pretty fun. At least, it's not completely incompatible with beer.
Hey, the door! :Pushing: Off you go, then.
The Fuzzy Puppy of the VRWC. I've been usurped!
His tax proposal is supposed to simplify things.
How old are all of these seniors that won't be taxed? Is it sixty?
What does he want to do with Capital gains?
"The nine most dangerous words in the English language are 'I'm from the government and I'm here to help'"
Ronald Reagan
...as well as to reclassify some capital gains as ordinary income.
That's the essence of my point: the general direction is away from taxing income at all, and toward taxing capital at considerably higher rates.
A logical next step might be a "wealth tax" like France has. France is in the process of reducing their wealth tax because it's caused so many highly-productive people to flee the country.
That wouldn't be a problem here because Congress long ago made it extremely difficult to evade US taxes by changing your domicile or your citizenship. Any person above a certain net worth (not sure what it is) who applies to change citizenship is now presumed to be engaging in tax avoidance. Such a person is subject to a minimum 10-year waiting period, and a final tax assessment that attempts to recover what the government expects to lose by losing that particular citizen.
will move overseas. Death spiral for the American economy. Costa Rico anyone?
====
"Enlightened statesmen will not always be at the helm." -- James Madison