The perfect tax plan (Income, buisness, and LVT together?)

[Hope springs eternal]

Could it be the most perfect tax plan?

-My income tax
-Profit tax
-Land Values tax (state tax)

1) My income tax is listed in the income tax thread. In order to aviod loopholes, any investment made overseas is not considered capital, but income. And strict guidelines for what is a capital expense are created with no loopholes

2) My profit tax is based off of what comes to the shareholders. The profit tax is flat, otherwise it would be regressive (taxing low profits more creates bankruptcy while taxing higher profits diminsihes incentive). I'm thinking something along the lines of 10% for any profit above $100,000. The profit tax is good becasue if a company gets outragously high profits (ie: Wal-Mart, Exxon-Mobil), then the Federal Government gets more funding.

3) The states themselves should get the LVT tax. The reason why is that high-cost but high-quailty of life states (ie: Blue states) can maintain their high level of infastrcture while rural states (ie: red states) get their fair share while not stealing from the pot.




Do you think these three things coming together create a good plan? Should one be dropped? Should some be added? Will this boost or lower the economy?

[MrTriumph]

1. Whatever happened to TARIFFS?

Back in the good ol' days the nat'l gov't derived funds from tariffs. Bush stated recently he could foresee the day of no tariffs. Naturally, the MSM largely ignored the statement. And nobody in Congress blew a fuse over it. Seems like the fix is in for abolishing tariffs without debate.

[Hope springs eternal]

2. The Billion man army of China is what happened

...But yes, greed plays a factor too.....

[dcfirefighter]

4. Tariffs are actually quite harmful to the average working american

Here's a link to an essay written a century ago by a progressive labor leader:
http://www.econlib.org/library/YPDBooks/George/grgPFT.html

I would, however, allow for assessing environmental penalties against polluting countries - to even the playing field and discourage pollution in the one world we all live in.

I would also, from a social standpoint more so than a strictly economical one, allow for a progressively steeper tarriff against countries with a worse GINI (or similar) Index of income distribution. I feel that this would encourage a more equitable distribution of wealth in the countries we trade with, and hence, rising wages.

[MrTriumph]

7. How about using tariffs to compensate for currency differences?

This idea has been around a while. Seems reasonable that labor should compete on a level playing field.

[dcfirefighter]

8. Explain....

I would like to hear some background on that, really.

I would say there are two things that make American labor relatively expensive: quality/cost of life and Real Estate.

Part of the huge wage gap btw US and them is due to productivity - American workers are generally several times more productive than workers in developing countries, especially in jobs that require thinking and initiative.

Secondly, depending on the country in question, the 'acceptible' quality of life is in developing nations is far below ours in real as well as dollar value. e.g. An American worker generally owns a car; lives in a home with several bedrooms, indoor plumbing, and heat; and his small children attend school. Conversely, in some countries, a worker might live in a 1 or 2 room block building with a dirt floor, no plumbing, and no heat; he owns little; and his children work to pay the rent.

Thirdly, regardless of minimum wage laws, employers must pay their employees enough to live and survive. Part of this payment must cover some level of housing, and housing is ultra-expensive in the US compared to overseas.

I would not want to change the first case: American productivity, in fact, we should always seek to improve productivity through education and improvements in infrastructure. We must accept that certain jobs are better performed by low skill, low wage workers. They key is to maintain a social safety net which allows for for not just survival, but also for career retraining for those who are displaced as their jobs become obsolete. Unfortunately, because American labor is taxed at 50-100%, labor demand in this country is SEVERELY depressed, which also suppresses wages and employment. In fact, I personally believe that if we eliminated taxes on wages (both direct and indirect) we would achieve full employment, and the case for 'protecting' labor from competition would be moot: everyone would clearly benefit from reduced consumer prices driven by greater competition.

Similarly, I would not want to reduce the American standard of living, though I would not mind seeing the costs reduced: public transit would reduce the need for automobile ownership, lowering the cost of housing and taxation is quite feasible and would perhaps allow the working hours per family to be reduced, strenghtening families and reducing the social effects of forcing families to worke multiple jobs.

Finally, and this is the keystone of the solution, I believe, is the relationship between taxation and real estate. As mentioned, most of our employment problems would be eliminated by removing the direct and indirect taxes against labor. Removing all taxes, as certain right wingers advocated, would not have this benefit: without taxes, the cost of real estate would swallow all the wages and productivity it could. We cannot avoid paying for real estate, the landlord or the seller will always get as much as the market will bear. What we can do is change who gets paid: a private body or the public purse. If the public purse is paid, the speculative value of land dissappears, reducing costs by 20-50%. Furthermore, if the public purse is paid periodically, the interest charge associated with mortgages dissappears, reducing the cost further. This public revenue could and should replace the taxes on labor - in fact it is a more robust source of revenue and could raise more public revenue that current taxes.

The gist of such a tax shift would be to remove other taxes while raising the property tax - with one key caveat: the property tax against building value (Vs. land value) must be eliminated. All of the harmful effects of a property tax are associated with the building tax - high housing costs, speculative idleness, etc. There are other 'taxes' or user fees behave similarly, implementing them increases egalitarianism, and reduces monopoly and oligopoly privilege.

[dcfirefighter]

3. It would be a good plan

Now work the numbers. You've got to raise $2.2T to be revenue neutral. We spend $2.6T.

I support a steeply progressive (as yours is) income tax for federal taxes - i believe yours exempts the first $100,000, and has several increasing tax brackets above that. It's tough to calculate revenue, even just a static analysis, without a good idea of what income distributions are. The numbers are probably out there, but I've never found them, and I haven't looked too hard because any change in income taxes is going to change incomes. I generally believe that exempting wages by exempting the first $100,000 of earnings would create more realizable demand by giving more folks spending money. I don't believe that your rates would raise quite as much revenue as the current scheme, though it's hard to tell with the loophole removal. Initially, you may not be able to exempt $100,000.

Why not just leave your profit tax as a corporate income tax (which is already pretty much a tax on profits)? Merely taxing dividends has a tendency to influence companies to reinvest their profits internally, which, while not sounding terrible has a couple of negative side-effects. Giving preferential treatment to internal investments rather than passing on profits to shareholders will tend to cause companies to overinvest - which come with a price to employees and shareholders alike when production capacity needs to be adjusted back to reality.

While this goes beyond the scope of mere tax reform, i'd rather abolish the fiction of corporate personhood, and pass through all income to the individual owners, to be taxed at there generally higher rates. Another option would be to assess the value of corporate personhood (and the associated liability shield for corporate governors) and charge them a market rate fee for that service.

I agree with a LVT being a good state & local tax (of course), but would go further - I think that many 'local' functions of the federal government should be funded by state and local taxes. This isn't generally a popular view at DU, but I imagine the last 5 years have given *some* people here reason to doubt the wisdom in entrusting all of your government eggs in one basket.

Even limiting land value taxation to state governments, there are many other forms of "land" that can be taxed by the federal government: 1st, and obviously, Federal Lands can be rented out for timbering, grazing, drilling, mining, etc. at market rates rather than for the sub-market rate political favors they are now. 2nd, broadcast rights could be auctioned (profits due to ownership of broadcast licenses are enjoyed as a windfall now - this would not be an economic hardship for anyone, but would actually break up the oligopoly in broadcasting - a good thing for journalism). 3rd, the FAA can auction off airspace slots - currently 'old' carriers have an advantage over new carriers due to their 'ownership' of high volume routes. The Constitution obligates us to issue patents for inventions, it does not obligate us to honor them for 20 years. I would suggest that after 5 years, the patent protection could be auctioned off in 5 year blocks. There are quite a few nifty alternative energy patents owned by oil & automotive companies who bought them in order to stifle competition. Charging market rates for all of these government granted priveleges would raise 1 or 200 billion.

A final source of federal revenue can be found with an examination of the manner in which we create money. Currenlty, the vast majority of our money is created by private banks when they use fractional-reserve banking to lend money that they do not have into existence. If we outlaw that ability, the US Treasury can directly issue currency. This would have to be limited to $300B or so to avoid inflation. A nice side effect is that, in order to avoid a massive collapse of the money supply when all of that bank-created money dissappears, $8T in new currency would have to be printed all at once. This could, and should be used to pay off the existing federal debt. This would reduce our annual spending by almost $300B.

[Hope springs eternal]

5. Thanks...

The thing to keep in mind is that there is a good chance people would be better able to pay for healthcare with the extra income, that shaves a lot off the government paylist. Pensions would be better funded and states could take care of their buisness better. So our needed income might not need to be as much (Reganomics wins). But, the saftey nets are still there and full employment comes.


I figure a small profit tax compensates for if too much capital investment steals money away from the income tax.


And as for the LVT, it should be strictly a local affair, or your gonna have politics galore.....

[dcfirefighter]

6. I don't believe that the Fed. Gov't has the ability to tax property

without a Constitutional Amendment. However, we (the Federal Gov't) do have the right to charge for the licenses and permits we provide: FCC, FAA, BLM, USPO, etc.