How would YOU restructure the federal tax code, if you could?

[Ken Burch]

For myself, other than having the rich pay at the 1950's rates, I'm not totally sure.

What ideas do other DU'ers have on that?

[DogPawsBiscuitsNGrav]

1. Flat tax - Everyone should pay, not just the middle class and working poor.

[ancianita]

2. I could live with that.

[RobertEarl]

18. Most could not 'live with' a flat sales tax

It would be so high that everything would rise in price by as much as 20%.

Poor people would be out 20% more for the same goods.

The idea of taxing something; increasing its price, is dumb. Sales tax pushes down on demand. Our economy is a 'fill the demand' economy. No demand? No supply. Crushing demand with 20% inflationary tax rate is crazy.

Profits are where a proper tax is best levied. A company that pays employees well and fills a demand at a cost that is affordable, versus a company that rips people off creating huge profits, shows why taxing profits is the best tax scenario for our demand economy.

Capital gains are profits, too. Today, working poor people pay more in taxes than people who do nothing more than get rich from stocks.

[ancianita]

19. Is your explanation sticking with the federal income tax idea in the OP? Are sales taxes that

tightly tied to income tax? Are sales taxes even in this discussion at all?

To a flat tax I add the ending all loopholes on the income of hedge fund managers, stock exchange transactions, offshore tax evaders and all profits made in other countries no matter what those countries' tax our companies. If those incomes were all flat taxed, the poor wouldn't have to be taxed on their income at all.

[RobertEarl]

30. Never heard of flat tax on income

What we have is a progressive income tax. The more income you have, the more tax you pay.

Sales tax is progressive in that sense; the more you buy the more tax you pay. But it doesn't progress in the sense that the tax percent increases the more you buy. Progressive income tax as a percent does increase with more income.

Think of income as personal profits. In that sense a progressive income tax will take more percent with each increase in profit.

Taxing profits (income) are the opposite of taxing demand (sales). If you rip people off and take more profit, you should pay more taxes. If you supply a demand and keep prices low thereby keeping profits low, you pay less taxes and help keep demand from being crushed. Which keeps the economy alive.

The opposite of that would be taking and keeping profits out of circulation by hoarding that money and starving the economy... like what's going on these days.

[theKed]

31. If the poor don't get taxed at all

nobody gets taxed at all...that's the idea of a "flat tax", that everyone pays the exact same rate.
The appeal of a progressive tax rate is that those more able to pay (at designated points of income level) pay more, and redistributes wealth downward towards those less able to pay. Closing (some) loopholes - yes. Fixing corporate and financial rates - yes. Luxury taxes - yes. Flat tax - hell no.

[ancianita]

36. Okay. But a flat tax that denies all current corporate and financial sector loopholes such that

there would be more of the riches' income to tax would make a lower flat tax for everyone and not hurt the poor so much?

[theKed]

41. Well like I say,

I'm all for closing corporate tax loopholes, diminishing corporate welfare, and such - while maintaining a progressive tax rate. The fact of the matter is that the poor have less "expendable" cash than the rich - as in, money that isn't spend on necessities - as a percentage of their total earnings. If, say, a poor person spends 70% of their income on housing, food, clothes, etc while a rich person spends 10%, with a 20% flat tax you've just taken 2/3 of a poor person's cash, and 2/9 of a rich persons. is that a fair, equitable system?

[ancianita]

45. Nope. I guess I'm a progressive tax person. But we do already have that. So what everyone's really

talking about here is tax reform, not major restructuring. This is a pill that the bought Congress will never force their owners to swallow. These laws won't be written. I doubt they can be changed by executive order, either. So the thread should really be about ways and means.

[theKed]

50. Well, there's things like

Value added taxes (VATs)
Luxury taxes
Various forms of financial transaction taxes

Frankly, the tax code is so mangled and twisted up after centuries of revisions and allowances and tinkering it's probably a good idea to trash the whole thing and start fresh...but that, of course, will never happen.

[Warren Stupidity]

5. That would raise taxes on the working poor to draconian levels.

To match current income tax levels it would have to be at the 30-35% rate. The only people who benefit from a rightwing libertarian flat tax fantasy would, of course, be the rich, who would see their tax rate decline yet again.

[DogPawsBiscuitsNGrav]

7. I'm not following you. If everyone were taxed at the same rate, that would be worse than people like

Romney and all these corporations paying nothing?

And please stop with the right wing crap. I'm not a zombie, I have my own thoughts and opinions. I don't have to march lock step with every talking point of one party agenda. If everyone else could think for themselves, we wouldn't have all the BS gridlock in congress right now and we might have gotten something accomplished.

You can't have an adult debate and solve anything when name calling is what you bring to the table.

[Warren Stupidity]

8. Flat tax proposals are right wing nonsense.

I'm sorry if you don't know that, but I'd suggest google.

I explained why they hurt the working poor. To raise the current tax revenue the rate would have to be around 30-35%. That would double the lowest tax rate. It would hammer the working poor. Of course it would lower the top rate for the rich, again. Do you get yet why rightwingers love it?

[DogPawsBiscuitsNGrav]

11. You really believe that if Apple, Google, Microsoft, big oil, pharma, banks, defense, and

everyone on the exchange all paid the same percent we do, that it wouldn't cover the revenue without us having to be taxed 30 percent?
The math doesn't add up.

[Warpy]

29. Actually, that's the way the math does add up

It's 30%. Can you afford to send nearly a third of your paycheck to the Feds with no deductions?

Steve Forbes sure can. For him, it's a tax break.

[ThomThom]

25. people that pay little income tax because they don't make very much would be

really hard hit and the rich would pay less.
We are under taxing the rich already with low capital gains and corporate rates, they need to pay more.
We don't need to make more billionaires. Once someone makes several hundred million they should retired out of the system so someone else can have a chance.
Fairness would be good.

[Warpy]

26. You're cool with taking food out of the mouths of the poor

but are willing to let the rich pay the same percentage, something they'd likely regard as chump change?

How very odd. How very Forbes. How very Republican.

[burnsei sensei]

3. I'd make it more progressive.

nt

[DogPawsBiscuitsNGrav]

4. examples?

[Warren Stupidity]

6. Treat all income the same. Add more brackets back into the rates.

Capital gains and dividends get taxed the same as wages.
Add two more brackets at the top end for 250K and 400K income levels, with a top rate of 42%.
Cost of living adjust all brackets each year, and do the same for the minimum wage.

As the government would be raising more revenue, expand Medicare to everyone 55 or older, paid for from the increased tax rates, instead of using the funds to buy more useless military crap.

[DogPawsBiscuitsNGrav]

9. I agree with using the revenue to fund medicare rather than useless military crap

but I don't agree with a top rate of 42 percent. I don't fall into this bracket but it's not right to scream that it's not fair they aren't paying the same percent we do and then in the same breath say they should have to pay more than we do.

[Luminous Animal]

12. I haven't problem taxing people at a rate proportionate to the wealth that they control.

Currently, the Walton family hold more wealth than 40% of their fellow citizens. That is decidedly undemocratic.

[okaawhatever]

17. I disagree. their having the wealth isn't what is undemocratic. The gov't and tax system we had in p

place at the time is/was highly undemocratic. There is nothing wrong with having a ton of money. As long as you weren't given favor by the gov't or IRS to create it. Prob w/Waltons is that they possess wealth that was achieved through gross inequality in the system. That is undemocratic. And reprehensible.

[Luminous Animal]

21. The mass accumulation & retention of wealth in the hands of a few creates

a feudal system. All power becomes consolidated and thus wielded by a few not the many. That is undemocratic.

[okaawhatever]

24. Oh, I see your point, I was thinking more of how they got there. There are 2 problems, one with

wealth being so concentrated in the hands of a few, and second that a supposedly democratic system allowed them to get there.

[truebluegreen]

34. They SHOULD pay a higher percentage than we do...

since they benefit disproportionately from those tax dollars.

http://dbp.idebate.org/en/index.php/Argument:_Wealthy_benefit_more_from_system,_so_owe_a_greater_tax_debt

Even if they didn't, they should pay more as the price of living in a civilized society.

And you do understand that the "top rate of 42%" is not paid on ALL of one's income, right? It's only paid on the portion above--in this example--$400,000 a year.

It's not a new or radical idea. Back in the 1950s under a Republican President the top marginal rate was more than 90% on income above the equivalent of about 3 million per year. In those days we believed in paying for our wars.

[DogPawsBiscuitsNGrav]

40. I get what you're saying and you have a really good point but I just can't bring myself to

wanting to tax someone more than I have to pay for the same services. I just don't feel right about it but it burns my ass that they cheat us out of paying at least what the rest of us do.

[truebluegreen]

52. But my point about disproportionate benefits

is that we don't all receive the same services.

Check out that link, it could be an eye opener.

[okaawhatever]

20. I disagree with the funding of medicare, because of where the money is going. Ex: Bush's Part D Medi

care Rx program is an example. what many don't know is that a large part of that is paid for out of the general fund (income taxes). That plan does not allow the gov't to negotiate the price of drugs the way they do with the VA or DOD. I mean c'mon the GOP added a friggin' rule that doesn't allow for free trade? I want to vomit. The GOP wants free enterprise, let's give it to them. Take part of Medicare budget and open a couple of new gov't med schools. Add a few nursing programs where free tuition and support are given in turn for working for said program for about 10 years. Same premise as Military academies. Army also has it's own med school. Let's put a little more competition in the system and see if we can't get more bang for our buck. CVS pharmacy was given 500 work visas for pharmacists last year and about 250 the year before that. Do you think their prices are going down? Heck no. They'll use tYouhe lower wage foreign workers to increase their bottom line. And while we're at it.....have you gotten meds at costco? It's about 1/2 to 1/3 rd the cost of Walgreen's etc. By law, you don't need a membership to get Rx at those places. Why isn't there a stampede? Cuz the ins. companies and drug companies have rigged it so there is no benefit to you. They have rigged it so that if you go save your insurance company $200 on meds, the difference to you is zero, zilch, nada. That is one of the most disgusting abuses of lobbying and law i've ever seen.

[ThomThom]

27. I agree with you

I would add a top bracket where they would pay 99% if not all. Why do we need more billionaires?

[Warpy]

28. That's right, all income is income, even those stock options

the CEOs claim is not. So are capital gains.

All income needs to be taxed progressively so that the only thing that's taxed is disposable income, not subsistence income. The wealthy pay higher rates commensurate with their greater reliance on infrastructure, especially the imperial military infrastructure.

We can't afford low rates on the biggest greedheads. We can't afford high rates on the people who need to spend what they earn to stay alive. We need a return to a progressive tax structure.

All of this stuff was argued out a century ago and it was decided that it was the fairest way to fund the government.

[truebluegreen]

35. This.

[Ilsa]

38. I'd be fine with most of that. nt

[Luminous Animal]

10. I'd make it more deeply progressive.

Starting with a 5% rate on up to 75% rate.

Treat investment income like ordinary income.

Gradually eliminate many deductions starting with 2nd home deductions.

[Freddie]

13. End the SS cap -- kinda

Keep the cap ($113700) for benefits calculations, but once the cap is reached your Medicare tax increases from 1.45% to 7.65%. Thus solving the Medicare funding problem and ending the regressiveness of payroll taxes.
Capital gains taxed as ordinary income.
More "breaks" for parents of young children and for college tuition.

[Luminous Animal]

22. The Medicare idea is a very good one!

[Recursion]

14. My dream tax system

Income is income, period.

A personal exemption up to the national median income (calculated yearly).

A flat tax above that at whatever rate roughly pays for government minus whatever we feel is an acceptable annual deficit.

A surtax on all income above twice the national median income at a rate indexed to the poverty rate; if we get to a point where nobody in the US is in poverty, the rich can have their flat tax. Alternately, index it to the Gini coefficient or perhaps the entropy of income distribution (these are less concrete than the poverty rate, but also can't be meddled with by politicians like the poverty line can).

End all payroll levies: pay for SS and Medicare out of the general fund (separate accounting isn't keeping them safe so I see no need to continue a regressive system that funds it).

This gives people an incentive to raise the national median income (to shield more money from taxes) and to distribute wealth more equally in general (to decrease the surtax).

[safeinOhio]

15. Tax wealth,

Not income. That would be progressive.

[librabear]

47. What a novel idea....

I doubt anyone is paying attention.

[alittlelark]

51. +1,000

[okaawhatever]

16. Flat tax is regressive & overly favors the wealthy. It does capture tax on the underground economy

so a portion of taxes should involve a sales tax, but not all . Here are my recommendations:

1. Completely separate FICA taxes from income taxes in the budget. FICA are insurance programs. The way the current budget and revenue is displayed leads to alot of abuse come election time. The 47% pay no taxes being a prime example. Those 47% do pay SS and FICA only about 16% pay none (except state tax) and many of those are retired. What Romeny did not only misrepresented the situation, but also created the makers and takers debate. Pure freakin' evil.
2. After separating FICA from Income tax, SS and others need to become insurance programs and their revenue and expenditures compared against one another. SS Revenue: 50B, Expenditures 40B is an example. One of the reasons is that right now SS is under attack. What people are not paying attention to is that it's Medicare that is killing us. One huge reason for that is Bush's Part D Medicare Rx plan. It doesn't pay for itself with medicare taxes, it has to be paid from the general fund. Also, that crap legislation does not allow the gov't to negotiate prices for prescriptions the way VA and DOD do. If people realized that our income taxes are signing a blank check to drug companies we'd be fighting the real battle. . Any program that does not pay for itself needs to be evaluated. If the Medicare/Medicaid TRUE cost were known to taxpayers we'd be all over health care reform. Because it's been so convoluted and misrepresented we think we're paying that solely to help the elderly (which I'm all for).

3 Each tax bracket should have a minimum and maximum.Especially for corporations. Deductions are necessary to promote behavior that is beneficial to the nation as a whole, but it is being abused.

4 Business tax deductions should become tax credits and should have an end date on each one passed. Example, a business gets 3000 per worker for health care deduction (currently the #1 tax deduct for biz), or two tiers with 1500 for worker making less that 20k, 3000 worker making 20-100000 something like that. Companies that give no benefits will be punished and companies that over reward high earners will no longer have incentive to do so. Also all other deductions, like the oil subsidies should be credits with an end date. The general public will be able to identify where the credits are going and how much they end up costing in real dollars. Also, by having an end date on each one it will force lawmakers to address them publicly. How many tax deductions does the voting public even know about? Would we not have voted to give those credits to green energy programs last election? Also, by having a guaranteed end date, business who receive them can plan properly.
5 Earned income credit needs to go away, or have the cash given back monthly or through other programs. The EICis designed to help low$working parents w/children offset the cost of SS (supposedly) and encourage entering the work force. Problem is, at tax time these individuals get a $3000 check1 child or about 5k for 2 if they made just a small amount of money. First, many tax preparers do anticipation loans at large interest rates, and people who make very little are given a huge check in January. If you track where that money goes, it is rarely to a place that benefits the families. At a minimum giving that money monthly to offset rent or utilities is more fiscally responsible, or perhaps using part of that money for programs that will also benefit that subset of people. Is the reason low income parents don't work because they don't get a 3k check in January, or is it lack of training, work experience, transportation, etc?

[madrchsod]

23. that`s what i was going to say...50`s rates

tax each bond,stock,and commodity trade.

[Motown_Johnny]

32. The top 10% should be paying about 65% of revenues and Corporations 35%

These are rounded and only federal taxes. Payroll taxes and local taxes should still be paid by people below the top 10%.


We can argue exactly what rates should be but since the top 10% now pays about 70% of the taxes this could be seen as a cut for the wealthy.

The problem is that Corporations are not paying anywhere near what they used to. Also their profits are at or near all time record highs.


I would start with an alternative minimum tax for corporations so that companies like GE can't make Billions and not pay taxes on it.

[SoCalDem]

33. Let me count the ways.....

1...eliminate the "cap" from FICA deductions

2...make ALL income the same, whether earned from labor or from investments

3...make FICA deductions 20% (10 from individual & 10 from employer)

4...eliminate ALL deductions

5...first 50K is untaxed..$100K for couples (income tax).

6...income over 50K/100k taxed at 20% goes up 5% for each 50K until a max of 60% is reached

I know that people love their pet deductions, but realistically, it's not a "fair" system. People who rent may never earn enough to have a shot at a home deduction, and people who CHOOSE to have huge families, should not get "free income" just because they choose to have a huge family.

Once you start picking and choosing which deductions get to stay and which have to go, you automatically corrupt the revision process, so they must all go.

Legitimate business deductions should be an exception, nut there should also be a limit to them, since "pure capitalization" demands that there be loser as well as winners, so tax processes should not prop up losing ventures.

[librabear]

48. you realize that.....

The income tax is currently able to tax at those rates. Much past 150k joint and the loss of deductions combined with the tax rate can push the marginal rate over 50% for middle class families.

Don't forget the AMT is in there too, along with SSI and state taxes.

[Ilsa]

37. One detail: Offer tax credits for consumers buying

Alternative energy products, such as reinstating breaks for hybrid cars, not just plug-ins. Anything to get Americans to use less gasoline so we'll stop fighting wars over it.

[1-Old-Man]

39. The very first thing I'd do is tie the budget to tax revnue, keeping a progressive scale.

I think rates should be varied to meet the needs of the budget but the slope of the progressivity of the rates should remain consistent.

[Fresh_Start]

42. capital gains, dividends have at least as high a tax rate as labor income

deductions are capped for both individuals and businesses
estate tax increases

[doc03]

43. Make everyone pay but me

[Wva 4-20mamp]

44. Tax changes

Change Social security to were no one pays on first 14,500 any SS but everyone pays after that. Have a tariff that if it cost a dollar to make it in the USA and 75 cents to make it in Mexico it will cost the consumer 1.75 for the one in Mexico. Tie the corporate tax rate to the unemployment rate . The higher over 6.5% the unemployment rate the higher corporate taxes are.

[bigapple1963]

46. reading some of the ideas,

1. FICA taxes: if you eliminate the cap, are benefits uncapped as well?
2. taxing unearned income same as earned income: one reason long term capital gains taxes are lower is there's always the chance of losing the capital that you put into a business or a company's stock. Would taxing long term capital gains same as earned income discourage investments?
3. going back to 1950s tax levels. Would we also want to go back to 1950s deductions?
4. taxes on wealth. It's already happening. It's called inflation/financial repression due to the Fed monetizing US debt.

[jmowreader]

49. Flat tax for everyone making $500,000 or more per year

And let's set the rate to...oh, 40 percent sounds nice. Keep the current system for everyone making $499,999.99 or less per year.

[OneTenthofOnePercent]

53. Flat tax for ALL people/companies over 1.5X poverty. NO exemptions. NO loopholes.

Instead of using tax breaks and other loopholes to "incentivize" public benefit spending... just take the flat tax from everyone and use the gov to distribute it directly to the public sectors in need of the money. Don't rely on tax breaks and trickle-down to funnel money where needed. Corporations and the 1% simply exploit all those loopholes (that they paid lobbyists for to have written into law for themselves) and end up underpaying their fair share. A true Flat-Tax with zero exemptions would mean lower actual rates than lower/middle class people currently pay.

[FreeJoe]

54. End Corporate Income Tax

I'd have all corporate earnings taxed as income by their shareholders so that it would be taxed progressively. The implementation details would be tricky, but I much prefer the idea of taxing corporate profits as income to the owners rather than as profits to a corporate entity. The current situation leaves us with an awful mess where companies keep money out of the US to avoid the tax.

I'd eliminate almost all deductions - mortgage interest, charitable contributions, etc.

I'd make the income tax slightly more progressive. I'd replace the EITC with a negative income tax at the lowest bracket. I would increase the number of brackets so that the jumps between them aren't so large.

The one major deduction I'd leave is a modified version of the IRA. Essentially, I'd let everyone have an investment account that is capped at something like 20x the median income. Any money you put in that account grows taxed deferred until you take it out. No maximum contributions (other than the total cap). No required distributions. Just a simple account where, as long as they money is in the account, you don't have to worry about taxes on it. Once you take it out, it is taxed as income.

I would add a progressive consumption tax. Give everyone a healthy exemption and then tax consumption beyond that. I'd use this to substantially reduce the income tax rates.

I would add a bunch of pigovian taxes on things like carbon emissions. In fact, I would replace a significant number of our current regulations with pigovian taxes.

[B Calm]

55. Make the rich pay all the taxes!

[pkz]

56. I have a flat tax plan

First 25K is tax free for everyone, no tax on income....none.

A flat 10% POS (point of sale) a federal sales tax.

Everyone would pay, no more under the table money, hookers, drug dealers and even your kids babysitter would pay when they spend.

Most spend according to their income so I surmise that is the place to start.