A New Tax Proposal

[The Lone Liberal]

A New Tax Proposal. It would work something like this:

All income, rents or revenue under $40,000 would be tax free

Everything above $40,000 that is not saved or invested would be taxed at 45%

All luxury goods would be taxed at 35%

Purchased Luxury goods would be defined as things such as:

Houses 15% above the median price of houses in any given area
Cars above $30,000
All boats
All second homes would be taxed at 40%
Etc, etc.

Any comments?

[dorktv]

1. hmmm...I personally want Captial gains above a certain amount

say 10,000 dollars to be taxed at 50%.

[gristy]

2. Good start, but...

Are you talking about a sales tax on luxury goods? A 40% sales tax on 2nd homes? That would have a huge impact on the housing markets and economies of many parts of the country. Ditto for 35% (sales?) tax on houses 15% above the median price of homes. What about boats for business/fishing? What about sport fishermen who catch fish and eat them? What about trucks above $30K? Etc, etc.

[The Lone Liberal]

3. I am talking about the elimination of the income tax

Reliance on consumption tax.

Boat for business would be an investment.

Trucks for business would be an investment.

Tax on 1st homes would be on that amount above the median price for that area.

etc, etc. The focus would be on eliminating income tax and reliance upon consumption tax.

In thinking about it maybe the income tax could be maintained at between 5 and 20 percent.

Oh yes, inheritance tax of 75%, no one born of 3rd base.

[HawkerHurricane]

4. Problem with a consumption tax

Is that it is easy to dodge.

There is a consumption tax on cigarettes. So people buy them on Indian Reservations, where there is no tax.

There is (or was) a tax on yachts. But if you can afford to buy a yacht, you can afford to buy it in another country.

I'd rather tax income... and make all income earned in the US taxed, AND make it a crime to avoid it.

[The Lone Liberal]

11. You had better live where you buy then, because if you live in the US

You would need to prove you had saved or invested here.

[gristy]

5. You'd have to figure out how much of a house is "consumed"

as time goes by and how to tax that consumption. I don't think you can tax the transaction every time a house changes owners. You need to avoid making it difficult or impossible for people to move.

[muffin_man]

6. It would kill us.

Why put forth the effort to succeed if your not going to be rewarded? I mean I want to help mt fellow man and all but I want to help myself and my kids first.If I can do that by just doing "pretty good" then forget taking risks like opening my own business or spending 4-10 years of my life in school. Whats the point in earning 60k a year if I have to pay 15k in a luxury tax if I wanna buy a boat to take my kids fishing or sking? Before I go further your saying if I make 50k a year and do not invest any of it I would be left with 22500?




Everything above $40,000 that is not saved or invested would be taxed at 45%

[The Lone Liberal]

8. No, the first $40,000 would be tax free

the next $10k would be subject to tax if consumed, rather than invested or saved.

[welshTerrier2]

7. a political loser

first, let me thank you for raising the tax issue ... it really should be a central theme for the democrats ... for too long, we've let the republicans label us as tax and spend ... we've seen a massive erosion of tax fairness under republican administrations since 1980 ... corporate welfare, aided by the tax code, is alive and well ...

now, having said that, i think your tax plan creates all kinds of problems ...

first, i think the rates are way too high ... i'm concerned about my retirement ... social security is in big trouble ... i, along with millions of others, have lost a significant percentage of my retirement savings when the stock market crapped out ...

i need every penny i can save ... your 45% rate on income over $40K would kill me ... you need to understand that my property taxes are approaching 8% of my income and state taxes account for another 5% ... so, not including sales tax and other taxes, i could end up paying almost 60% of my income to taxes ... trust me, i'm not a wealthy person ... this would kill me ...

the other problem i see is one of fairness ... let's say my house is worth $1 million dollars ... i assume from your plan i would pay no income tax on this because i already own the house ... now, someone buying a house nearby pays $300K for a house that's 15% above the median price in this area ... under your plan, this person would be subject to your luxury tax even though my house had a value more than 3 times higher ... not to mention the fact that you could be hurting builders and others whose income is dependent on the housing industry ... the luxury tax they imposed on expensive boats several years ago really did have a negative impact on jobs in the boatbuilding industry ... and, i think this tax would kill the democrats politically ...

as for your "no taxes on income under $40K", count me in ... i have no problem with a progressive tax structure that benefits those at the bottom of the income scale ...

here are a couple of my tax proposals that i posted on kerry's website about a month ago ... no one liked them very much ... that's too bad ... perhaps they need some work but i think the basic idea is sound ...

1. gain on stock sales of any company not headquartered in the U.S. will not be eligible for lower capital gains rates and will be taxed as ordinary income ... if companies want to move offshore to reduce their corporate tax liability, they are really going to piss off their shareholders ... the shareholders would have no incentive to allow them to do relocate ...

2. companies would be required to report to the federal government the percentage of their workforce that resides in the U.S. (or are U.S. citizens) ... stockbrokers would be required to report this percentage of domestic labor to their customers when a stock is sold ... proceeds from the sale would be allocated, based on this percentage, between those proceeds eligible for lower capital gain rates (the domestic labor percentage) and ordinary income rates (the non-domestic percentage) ...

so, for example, let's say you made a $1000 profit on the sale of a stock in a company headquartered in the U.S. ... but let's say that only 20% of that company's employees are in the U.S. (or are U.S. citizens) and the rest are in India ... $200 of your gain would be eligible for lower capital gain rates and the remaining $800 would be taxed as ordinary income ... companies would be free to outsource if they chose to, but they would have a much harder time attracting capital and satisfying their investors ...

[welshTerrier2]

9. oops ... i missed part of your plan ...

sorry ... i missed the point you made about any money not invested or saved ... that makes a big difference ...

but it raises the following question ... if i make $100 million a year, and save all of it, what is my tax rate ?? does this mean i would only pay tax if i spent the money? it sounds like you're trading in a progressive tax system (above $40K of income) for a flat 45% sales tax system ...

this doesn't seem like a progressive tax system once you pass $40K ... am i missing something here ??

[The Lone Liberal]

10. It is not a flat tax because it is focused on consumption.

If you consume you pay, if you invest or save you do not, that would have a great bearing upon capital formation and interest rates, which would help all of us.

[welshTerrier2]

12. the plan seems very regressive !!

but if a billionaire buys an SUV for $40K and I buy one too, we pay the exact same amount of tax ... that sounds like a flat tax to me ...

does it sound progressive to you?

and you still need to explain the following inequity with your plan ...

take a family of 4 with a total income of $100K and a billionaire with an annual income of $1 million ... the family of 4 spends 80% of their income on daily necessities like food, clothing, shelter, medicine, school costs, etc ... the billionaire saves a much higher percentage of his income ... let's say he spends $300K ... so you tax the family of 4 $36K ($100K * 80% * 45%) which represents 36% of their income ...

now, the billionaire gets taxed $135K ($1 million * 30% * 45%) or a pathetic 13.5% of his income ...

your tax plan under this very typical example seems to be highly regressive because people with higher incomes typically are able to save a much higher percentage of their income than people with lower incomes ... in the example above, you've taxed my $100K family of 4 at 36% and you've taxed mr. billionaire at only 13.5% ...

do you think this would help democrats win the next election ??

[The Lone Liberal]

13. Hmmm Since the median income in the US is less than $20k

I thought $40k for necessities was okay, maybe you have a point, maybe all under $50k, then a progressive tax starting at 4% and going up to say 15% for all rents, income and revenue not saved or invested.

[welshTerrier2]

15. much better, but ...

ok, you're heading in the right direction ...

now how would you handle the following:

mr. billionaire receives most of his income from investments ... he buys and sells real estate ... these are mega deals that are often negotiated over very long periods of time ... mr. billionaire is able to exert significant influence over exactly when these deals are finalized ...

in year one, he sells all sorts of investment properties ... he makes billions ... his financial planner encourages him to hold his spending way down because whatever he spends this year would be subject to a tax that could range from 4% to 15% ... so, mr. billionaire defers any significant purchases ... he spends on the normal things we all buy but defers most of his spending until the next year ...

in year two, he spends the year researching and buying properties for future sale ... and he spends and spends and spends on all sorts of products ... he has zero income in year two and pays ZERO tax on anything he spends ...

in year three, guess what?? tons of income from real estate sales ... and very little spending again ...

how will your plan handle spending by the wealthy who often can exert significant control over the timing of the income they receive ??? the situation above has mr. billionaire paying almost no income tax at all ...

i have no problem looking at alternatives to the current tax system, but i think it's essential to have an income tax if we are to at least attempt to achieve some kind of tax fairness ... your objective to promote more savings and investment is a good one !! but we can't do it at the expense of tax fairness ... perhaps some type of combination plan between an income tax and a consumption tax would help ...

[The Lone Liberal]

16. Income, rents and REVENUE

I would assume that Mr. Billionaire would be paying for his goods and services from REVENUE. A stream of cash that would be look on as constructive receipt for Mr. B.

[welshTerrier2]

17. a question

you've got to be an accountant ... real people don't know what the term "constructive receipt" means ... but i do ...

Ok ... now i'm confused about your plan ... i agree that the purchases mr. b made in year 2 came from income or revenue he earned in year one ... but i thought when you defined your plan as follows that it referred to ANNUAL income, rents or revenues ... if the consumption tax applies to all purchases, whether or not you had income in any given year, why make reference to a cut-off income amount ?

i guess i don't understand how this would work ... in the example i gave, constructive receipt notwithstanding, mr. b had zero income in year 2 ... your plan indicates that he would owe no tax if he had no income ... constructive receipt would really not apply ... i wasn't suggesting he was merely deferring the receipt of his proceeds from the sale ... i was suggesting that he could control when the sale itself, not the proceeds, would be completed ... i think you would have a hard time enforcing constructive receipt if the terms of the sale were still being negotiated ...

from your original plan:

All income, rents or revenue under $40,000 would be tax free

Everything above $40,000 that is not saved or invested would be taxed at 45%

[The Lone Liberal]

19. If I bought and paid for $100k of goods and services

It could be assumed that I had a $100k stream of revenue for that year.

[welshTerrier2]

21. so, spending = revenue ?

so if i spend $40K but had no income that year, it seems like i would pay no tax .. i'm assuming the idea of your last post is that the amount your spend could be viewed as a "stream of revenue" ... as long as my "stream of revenue" is under $40K, I would pay no tax ...

Everything above $40,000 that is not saved or invested would be taxed at 45%

the problem i have with the plan is that we already have a situation where far too many people don't save anything ... many people are in debt up to their eyeballs ... i think your goal of increasing savings rates is admirable ... in fact, we're in big trouble because americans do not save enough ...

i'm worried that your plan is not revenue neutral ... in fact, i'm afraid it would result in even larger deficits ... but, not to worry ... no one every likes my tax ideas ...

for example, how about taxing 100% of non-business, non-farm estates over $1 million ... how about a 100% tax on all income (AGI) over $1 million ... i'm sick about the continued abuses big money allows in this country ... i hate to see our democracy sold to the highest bidder ... i'm not "anti-rich" ... a million bucks a year is enough ... and i don't care about the argument that it's the wealthy who create jobs ... how many jobs have been lost now that CEO pay averages 500 times the average worker's pay compared to something like 15 times only 20 or 30 years ago ... it's outrageous ... unrestrained capitalism leads to too many abuses ... it cannot co-exist with democracy ... this is not about "soaking the rich" ... for a million bucks a year, there's plenty of incentive left in the system ... above that, i put a greater emphasis on our democracy than i do on the rights of the super rich to earn even more ...

[The Lone Liberal]

24. I would be for that also if I thought it would sell.

I am simply casting around for some way to generate the taxes needed and to make the system fair. The whole economic system.

[welshTerrier2]

25. my plan is DOA ...

i think it's where we need to get to but it's a long way from where we are ... we need to take baby steps to change the tax code ...

the best place to start is on some of the "corporate welfare" items ... i don't think it will be that tough when voters understand that many mega-corps don't pay any taxes at all ...

i wish there was more support for the capital gain changes that i mentioned earlier ... we should be able to sell the pro-american jobs agenda ...

[AP]

27. Best place to start: tax unearned income at higher rates than earned inc.

and to tax it at progressively higher rates depending on wealth (gross income).

[welshTerrier2]

28. works for me !!

the only issue i have with this is that when i proposed "tinkering" with the capital gains rates (See below) on Kerry's website, some people complained that "85% of americans" own stock and that my plan would be very unpopular ... i have no idea if the 85% figure is true ... actually, it sounds pretty high, doesn't it ...

here's were my proposals (repeated from above):

here are a couple of my tax proposals that i posted on kerry's website about a month ago ... no one liked them very much ... that's too bad ... perhaps they need some work but i think the basic idea is sound ...

1. gain on stock sales of any company not headquartered in the U.S. will not be eligible for lower capital gains rates and will be taxed as ordinary income ... if companies want to move offshore to reduce their corporate tax liability, they are really going to piss off their shareholders ... the shareholders would have no incentive to allow them to do relocate ...

2. companies would be required to report to the federal government the percentage of their workforce that resides in the U.S. (or are U.S. citizens) ... stockbrokers would be required to report this percentage of domestic labor to their customers when a stock is sold ... proceeds from the sale would be allocated, based on this percentage, between those proceeds eligible for lower capital gain rates (the domestic labor percentage) and ordinary income rates (the non-domestic percentage) ...

so, for example, let's say you made a $1000 profit on the sale of a stock in a company headquartered in the U.S. ... but let's say that only 20% of that company's employees are in the U.S. (or are U.S. citizens) and the rest are in India ... $200 of your gain would be eligible for lower capital gain rates and the remaining $800 would be taxed as ordinary income ... companies would be free to outsource if they chose to, but they would have a much harder time attracting capital and satisfying their investors ...

comments ??

[AP]

29. I think less than 1% of Americans own over 70% of all equity in the US.

And, to boot, it's the way they deliver wealth to themselves often taxed at less than half the rate they'd pay if it were earned income (dividend and long term cap gains tax rates are 15% regardless of how wealthy you are).

[AP]

23. flat taxes tax people the same regardless of their wealth.

However, how wealthy you are is a function of how many dollars you already have, not on the next dollar you get.

It's regressive to tax people on income without regard to how much they have.

That's why we have income tax brackets that get progressively higher.

That's why flat income tax and sales tax is so unfair.

Think of consumption tax this way: the bottom fifth of Americans is worth NEGATIVE 9K dollars. When you tax them based on consumption you're taxing them on money they don't even have. That's outrageous. You're forcing them to finance their tax bill. Which means that, in all likelihood, some credit card company is making about 15% on every dollar you pay in taxes on top of the 1.5% they got on the transaction that sent the taxpayer into debt in the first place.

[Deja Q]

14. Try $50,000 as the dividing point or go upward via a gentle incline

The more you make means the more you give back to society. It's not fair to those making $40,000/yr to pay the same 45% tax rate as those making $100,000.

Otherwise I dig your proposal!

[Fescue4u]

18. Good God no.

I don't own any of the "luxury" items you mentioned, but such a horrendous tax rate would nearly 4xs what I pay now.

Such a tax plan would be the death of America.

(although for a short time, the treasury would be flush)

[AP]

20. Right wingers would love it (flat income tax starting at 45K)

They'd figure out a different way to circulate wealth and they'd love the total absence of progressivity.

[arewethereyet]

22. 45%... no thanks

[kiahzero]

26. 40,000 is almost nothing in New England

California, too.

So no, I don't support your plan.