The tax code

[sunspot]

If we look at the tax code, it is extremely complicated for the average person, with very little of it geared toward the middle class. The complexity is useful in the sense that it create a wide range of jobs, tax middlemen to help people make sense of it. Besides providing jobs for all the tax expert middlemen, the tax code is so large for two reasons. First, special provisions are made to stimulate the economy by giving special tax considerations to certain areas of the economy. The other reasons are kickbacks to lobbyist for their legal and illegal donations to our elected officials. It is not always easy to decern which is which, so simpliciation runs the risks of throwing out the baby with the bathwater.

 

A two or three tier flat tax or a national sales tax could be used to raise the same amount of tax revenue and would spread the tax burden to eveyone more uniformly. But such solutions may affect the ecomony and the ability of our elected officials to distribute kickbacks.

 

Maybe a precursor solution is to take a national poll to determine which tax breaks, currently offered, are considered most important. We then trim off the bottom end from 10-50%.

[ecoli]

and tack them on to the top percent? Or risk loosing precious gov't funding?

[bascule]

I'd like to see tax brackets replaced with a continuous system (i.e. percentage of tax levied as a function of income)

[ecoli]

I'd like to see tax brackets replaced with a continuous system (i.e. percentage of tax levied as a function of income)

 

that's called graduated income tax, right?

[sunspot]

The question how can one do the same thing as the tax code while only requiring something one can fit in their pocket.

[Sisyphus]

that's called graduated income tax, right?

 

Graduated income tax just means you pay a different percentage depending on what the total is (as opposed to the same percentage for all, or "flat tax"), which is what we have now. If you make above a certain amount, the percentage you pay jumps to a higher percentage. What bascule is suggesting is turning this into a continuous function, which is a good idea, as it would never be to your disadvantage to make more money, as is sometimes the case now.

[insane_alien]

the continuous tax idea does sounds good to me. it means that people at the bottom of a tax bracket wouldn't be at a disadvantage. i can see why it wouldn't be done in the past though, no one wanted to do the calculations. now with the huge computational power we have we could do it easily.

[budullewraagh]

well, there's more to it than that.

 

i'd like to see the alternative minimum tax burn and go to hell. as of now, bush has tax cuts for the rich and the alternative minimum tax now screws the middle class, in some cases more than doubling taxes.

[sunspot]

How we should share the taxt burden is up for debate, but whatever it happens to be, if each tax payer could have a say as to where their dollars go, at least one would feel some type of satisfaction. The current tax code should come with a jar of vasoline. If one could have a say as to how they are going to take it, it may not be a painful.

[ecoli]

that could prove to be a bereaucratic nightmare, though sunspot. Just think of all the paper work.

[john5746]

If we look at the tax code, it is extremely complicated for the average person,...

 

It shouldn't be very complicated for the average person, unless they itemize, which 70% do not. The only reason a flat tax would be more simple is the elimination of deductions.

 

I'd like to see tax brackets replaced with a continuous system (i.e. percentage of tax levied as a function of income)

 

The current tax rate is a piecewise continuous function. Fitting a curve to it would be Ok assuming an automated calculation method, but many with poor math skills would not know how to solve a 2nd order quadratic equation.

 

Graduated income tax just means you pay a different percentage depending on what the total is (as opposed to the same percentage for all, or "flat tax"), which is what we have now. If you make above a certain amount, the percentage you pay jumps to a higher percentage. What bascule is suggesting is turning this into a continuous function, which is a good idea, as it would never be to your disadvantage to make more money, as is sometimes the case now.

 

You never are at a disadvantage making more money! You only pay the higher rate on the money within the tax bracket, so while there may be less of an incentive to making more money as you go up the ladder, you still are taking home more money.

 

A two or three tier flat tax or a national sales tax could be used to raise the same amount of tax revenue and would spread the tax burden to eveyone more uniformly. But such solutions may affect the ecomony and the ability of our elected officials to distribute kickbacks.

 

Maybe a precursor solution is to take a national poll to determine which tax breaks' date=' currently offered, are considered most important. We then trim off the bottom end from 10-50%.[/quote']

 

Piecewise Linear Functions, Tax Rate

 

scroll towards the bottom. You can see how the middle class will be impacted by a flat tax. Getting rid of the deductions would be a good thing. They should be able to take the money from your paycheck and that's it. You would think they could even keep track of the children and handle that deduction automatically as well.

[bascule]

The current tax rate is a piecewise continuous function. Fitting a curve to it would be Ok assuming an automated calculation method, but many with poor math skills would not know how to solve a 2nd order quadratic equation.

 

Yeah, I just have a moral opposition to discontinuity/magic numbers

[Apeofman]

If we look at the tax code, it is extremely complicated for the average person, with very little of it geared toward the middle class. The complexity is useful in the sense that it create a wide range of jobs, tax middlemen to help people make sense of it. ..

 

Hi sunspot, and USA taxpayers,

I don't know much about your tax system over there. However, i recently heard an American on the BBC, promoting a variation of "negative tax" for the USA.

 

Below is a proposal, that was put to the UK government, at the beginning of their first term. The figures are somewhat out of date. I would be interested in your opinions on this approach, to remove the poverty trap, and to promote wealth and job creation.

 

I am a citizen who has been, unemployed, employed, self employed, a worker, and an employer. I wish you to know and consider my opinions on the matter of welfare reform.

 

Citizens within a democratic society submit themselves to society's laws and regulations, for the benefit of the majority. Observance of society's laws and regulations, restricts the citizens options to manage their own welfare.

 

Some citizens may find themselves excluded from lawfully providing for themselves, on account of their age, health, or other circumstances. An ideal state takes responsibility for the welfare of all it's citizens. Those who are excluded from providing for their own welfare, are in some way provided for, out of the national bounty. The state simply takes on the responsibility of it's citizens, in return for their observance of society's laws and regulations.

 

Within the British Isles, the state provides for it's citizens welfare, by means of a patchwork of benefits. However, the system was developed to fulfil the needs of a society with different work and life expectations, than to days society. It does not satisfy the needs of a society faced with today's occupational circumstances. An alternative is now required.

 

The proposed integrated tax benefit system, call it Xat, requires that the majority of welfare benefits be integrated into the tax system, by way of tax code credits. Under Xat, the state pays each citizen a basic living amount, determined by their individual tax code, and the states ability to pay. All other income that a citizen receives, is taxable.

 

Under Xat, each citizen would have a basic wage which is unaffected by additional income, consequently citizens would always improve their income by working. This fact would help to offset the negative effects of a strong pound; thereby creating additional employment opportunities and encouraging new industry. As all citizens would be in receipt of a tangible stake in the national bounty, without systemic impediment to occupation, factors causing the poverty trap would be removed, allowing acceptance of modern occupational choices and opportunities.

 

The concept of an integrated tax system can be implemented in a variety of ways. The following, is an hypothetic, illustration as to how an integrated tax system could effect the disposable income of a range of citizen's.

 

In this illustration, a typical citizen's total disposable income, will comprise of tax credits plus other income, less income tax. Naturally all that Caesar gives, must be returned to him; in due course. Let's say that all of the tax credit monies paid out, are to be recovered purely by means of a 50% income tax rate, upon the first £16,000 of each citizen's yearly earned income. Let us also say that the tax rates upon earnings above £16,000 per year remain as they are now. Under these circumstances, citizens earning £16,000 per year and above would find no change in their total disposable income. Citizens earning less than £16,000 per year would, without taking into account any loss of earnings related benefits, generally gain. Unoccupied citizens would find their total disposable income unchanged.

 

If deemed politically desirable, part of a citizens allowance could be provided for, by way of non negotiable vouchers, covering imposed bills such as, Council rates, water, energy and communication costs. This should reduce the burden currently placed upon the courts to recover such monies.

 

It would be possible within an integrated system to introduce new classes of tax allowance. For example, an occupational allowance could be introduced to cover such items as travel, meals, and clothing, for those citizens that undertake any occupation or venture, paid or unpaid.

 

The benefit to the state of the integrated tax system, is that it will enable citizens to engage in occupations which are currently inappropriate to their circumstances. An integrated tax system, would benefit the health, wealth and lawfulness of society as a whole.

 

The benefit to the citizen, would be, less stress, greater wealth and security, plus greater scope for personal welfare control. The benefit to business, is that low paid jobs, and part time working, would become more affordable. Farming, fishing, manufacturing, the list of what we cannot afford to do, gets longer by the day.

 

Would this approach work in the US. What do you think:confused:

[john5746]

In this illustration' date=' a typical citizen's total disposable income, will comprise of tax credits plus other income, less income tax. Naturally all that Caesar gives, must be returned to him; in due course. Let's say that all of the tax credit monies paid out, are to be recovered purely by means of a 50% income tax rate, upon the first £16,000 of each citizen's yearly earned income. Let us also say that the tax rates upon earnings above £16,000 per year remain as they are now. Under these circumstances, citizens earning £16,000 per year and above would find no change in their total disposable income. Citizens earning less than £16,000 per year would, without taking into account any loss of earnings related benefits, generally gain. Unoccupied citizens would find their total disposable income unchanged.

[/quote']

 

I don't quite follow this part, but it sounds like a something for nothing scam to me. Maybe you need to try some numbers and see what happens?

[Pangloss]

Under Xat, each citizen would have a basic wage which is unaffected by additional income, consequently citizens would always improve their income by working.

 

Just another form of welfare. What's the point? All you're doing is elevating the level of "what we pay people who don't work", whatever you happen to want to call it this week.

 

What you ought to focus on instead is pointing out that while helping people get out of poverty is a good thing, it's not the onus of society to enable you to keep up with the Joneses.

[Apeofman]

Just another form of welfare. What's the point? All you're doing is elevating the level of "what we pay people who don't work"' date=' whatever you happen to want to call it this week.

[/quote']

I don't think you noticed..

 

[center']Unoccupied citizens would find their total disposable income unchanged. [/center]

 

What you ought to focus on instead is pointing out that while helping people get out of poverty is a good thing' date=' it's not the onus of society to enable you to keep up with the Joneses.[/quote']

 

The only way someone can keep up with the "Joneses" under Xat is by working.

 

In the UK we have an existing benefit system. Since the Labour Party took office 1997, increases in benefit payments have been below inflation, and well below average wage increases. The proposal only affects those who enter employment, and those existing workers who would be better off on benefits.

 

It seem's wrong to me that someone who works in low paid employment should be worse off than someone on benefits. The government has introduced a system of tax credits to overcome the poverty trap we have in the UK. However it creates a dis incentive to low paid workers to increase their income. (Why do overtime if you will loose more in benefits.) At present the Tax credits are only available to certain categories of people. There have also been some administrative problems with it's implementation.

 

Our system is quite complicated and i do not like generalising. However, I personally know of a case, where the husband has become an invalid, and receives invalidity payments (which are not as punitive as unemployment, or incapacity benefits). Finding that they had difficulty in supporting themselves on this alone, his wife took on a part time job raising £60 per week. This resulted in a reduction of benefits which left them £15 per week worse off than when she did not work. She no longer works.

[Pangloss]

I don't mean to deride you personally, but I guess what I'm saying is that I don't trust it. Or perhaps more to the point, I don't trust the government to implement it or the politicians not to exploit it. And even if it worked as you say, it doesn't stop the problem of politicians promising wealths of riches to the underpriviledged without them having to work.

 

In fairness, though, I don't really understand your proposal fully, and I really don't know anything about your current system, so maybe I'm just lacking the proper perspective here.

[Apeofman]

I don't mean to deride you personally' date=' but I guess what I'm saying is that I don't trust it. Or perhaps more to the point, I don't trust the government to implement it or the politicians not to exploit it. And even if it worked as you say, it doesn't stop the problem of politicians promising wealths of riches to the underpriviledged without them having to work.

 

In fairness, though, I don't really understand your proposal fully, and I really don't know anything about your current system, so maybe I'm just lacking the proper perspective here.[/quote']

Hi Pangloss,

Nothing wrong in being suspicious of an apparent panacea. The point you raised is a valid one, but it doesn't really apply to the scheme as proposed.

 

I totally agree with your distrust of politicians, and their promises of riches to the underprivileged. I should add in my case,.. or anything else either. I'm a most irreverent ape.

 

I do not know a lot about the US tax system, and only posted the Xat proposal, as i had recently heard the American guy's proposal for the USA. I guess it is not well publicised over there.

 

There is a potential cost to implement the scheme, but also a potential profit.

 

In my limited experience, people generally want to make more money than they do, and without institutional hinderance they will, whenever they can.