Tax System: Something to argue about

[ThomWV]

I think this statement is worthy of an argument. The problem with out tax system isn't the rates, its the exemptions.

In the extreme if we were to do away with all exemptions it would be easy enough to craft a tax rates across the entire income spectrum as progressive, neutral, or regressive as we chose. Our complicated tax code could be eliminated, it being no more than layer after layer of situation-specific exemptions crafted by special interests over decades, to the betterment of us all.

[napi21]

1. I've proposed that for YEARS, but every time I say it, I get beat up

by EVERYBODY! People don't want to give up their mtg. int. deduction, or real estate tax. Charities claim they'd die bcause without the charitable deduction, nobody would give them anything. BUT those same people get crazy when they hear about all the deductions they don't use but all those RICH PEOPLE do!

[hfojvt]

9. the response here was not very positive

http://journals.democraticunderground.com/hfojvt/25

but that's not all of the exemptions. It would, however, be a first step and it primarily benefits people with higher incomes. Lower income people or middle income people would see a net gain or break even if the standard deduction was increased at the same time. It's kinda typical it seems to me, to create something that gives a nickel or $5 or $500 to middle class people while at the same time it gives $10-50,000 to much wealthier people. Just like the dividend tax cuts. 70% of the benefits goto people making over $500,000, but the people making less than $80,000 would howl if they lost their $100 tax break.

[Grey]

2. I've been saying for years,

You don't have to raise taxes. Close loop holes, remove caps etc.

[Still Sensible]

3. The problem is that the tax code

has historically been used to encourage behavior. It is a key took used by "policy wonks" to manage. Examples would be giving a tax deduction for behaviors that move to a more "green" situation (which encourages investment in green technologies), or lowering the capital gains tax to encourage long-term investment, or increasing the deduction for dependents to ease the tax burden on families.

While many of the items in the tax code can be considered "bad" things that are the result of certain special interest groups trying to benefit, many are not.

[ThomWV]

4. Taxation should be based on more than the state of our glands

I would segregate the determination of good and bad*, isolating that purpose and practice (the law) to legislation that determined the course of events and keeping it clear of that portion of purpose and practice (taxation) that serves only to raise revenue in a manner respective of a taxpayer's income. In other words let the Congress decide how we spend our money but let the tax system raise funds equitably and independently unfettered by exemptions for some and not for others.

*in the end this is just a matter of what I like or dislike, what pleasures me and what does not, what is the state of my glands?

[Johonny]

5. I disagree

The federal system is complicated because the country is very large and the cost of living varies greatly from state to state. A person making 40 K in NYC is in a vastly different financial class than a person making 40 K in Ozona, Texas. A simple system would create a vastly unfair tax system.

[ThomWV]

6. How do you see that our current tax policy corrects for the situation you describe

I agree, it is very much more expensive to live in some places than others. However I don't know of anything in the current tax policy that corrects for that and I don't see how a tax system in which there were no deductions would change that. Remember, if everything everyone makes is taxed the rates will be vastly lower than they are today.

[Johonny]

8. Well

You buy a house. House prices vary depending on the area you live in. You can deduct part of that difference in expense from your taxes. Ditto for state and local taxes (even sales tax although the implement of this is currently very stupid).

[hfojvt]

10. yet if you pay rent, you are paying property taxes for the landlord

but get no deduction and places with higher home prices have higher rent prices, do they not? The itemized deduction primarily help people with higher incomes and thus enough expenses to make the deductions more than the standard deduction.

[napi21]

12. Yes regions of the country differ vastly, but so does the wage rates!

I seriously doubt the average job in Ozona, Tx. pays the same as the same job in MYC! I know that was the case in the various states where we lived. I remember my boss telkling me how happy he was to get a PR clerk in Tc. for $9.50/hr because he just move from Calif. where you couldn't get a file clerk just out of HS to work for less than $10.50!

[TahitiNut]

7. While I agree to a large extent, I do NOT believe that money paid in taxes should be taxable.

Thus, I'm rather adamant that all taxes should be income tax exempt.

But this also brings up the HUGE disparity between the taxation of individual income vs. corporate income. For a corporation, virtually EVERY expense is exempt. If individuals were treated on par with corporations, then housing, food, clothing, utilities, health care and ALL the expenses of living and raising a family would be deductible.

So ... perhaps we'd be better off if individuals received the favored treatment that corporations receive???

[ThomWV]

11. That is, in essence, my argument but on the other end of the stick

It seems to me to be the same thing to say we will give individuals the same exemptions as corporations as to say we will deny any exemptions to either of them. Either way it is equity that is the goal.