Yea which is one benefit of simple tax systems. If the tax rate is 10% across the board, then there is a simple "spirit" there to appeal to.
10% of what is what the question reduces to.
What if I have an investment that increases in value? Does the gain count as income? What if I don't sell it?
What if I receive non-monetary compensation? Is that income? How valued?
What if I have a loan forgiven (as in the article)? Do I pay tax on the forgiven amount?
What if I lose money or spend money? Does that affect income, or am I being taxed on my gross income?
What if my company pays for my rent and other living expenses? Is that income?
If you don't close these "loopholes" then the 10% just becomes a penalty for the people who don't have the time or the knowledge to circumvent the rule, but for those that do, they just don't have any "income" so there's no problem. The closure of the loopholes creates more loopholes, that push the problem upstream until only the very wealthiest individuals can afford to not pay taxes.
If you have never filed your own tax return before, go skim the instructions for form 1040[0] (117 pages). It includes a 10 page table for the graduated tax rate so most people don't need to do any arithmetic if they make <100,000. Besides a couple tables like that and some administrative pages, the rest is text and worksheets for figuring the amount to apply the rate to. And this is just the basic form that everyone files! There are additional forms someone might file for complex circumstances, let alone filings for all the kinds of trusts and corporations.
Companies already engage in all sorts of shenanigans to show lower profits when it suits them. [1]
Taxing revenue goes against decades, maybe centuries, of established tax law and tradition, which roughly operates on the principle "The state makes money when you make money."
If you start taxing assets, you're going to need very invasive government bureaucracy that knows everything you own, down to the last paperclip.
Anyone who claims they can make taxes simpler is either lying or doesn't understand the subject.
As are business assets, which includes everything from the desk I'm sitting at; the chair I'm sitting on; to the computer I'm using.
Disposable supplies, such as paperclips, are not taxed but once a year I have to fill out paperwork--roughly a 10 page document--to pass onto my local government declaring said assets.
Also, an alternative is a higher tax rate but use a UBI so poor people always have an effective negative tax rate. Constant offset, multiplicative tax rate. Ensures a floor of income such that people can always survive and that there are always consumers.
Nothing about taxation is fair because it's not intended to be fair. We agree that society as a whole benefits from every child having access to a high quality education. We agree that society as a whole benefits from free and easy travel. I read an economic report a while back (still trying to find it) that posited that a significant contributor to the US's current economic success and high rate of entrepreneurial system was the USPS. The ability for everybody to mail anything anywhere on the cheap allowed for an untold number of companies to exist and be competitive.
To pretend like taxes should be associated with the consumption of government services is a-historical, fallacious, and based on any number of lies that vilify the poor for being poor.
I agree with this 100%, and thank you for stating it so clearly.
> We agree that society as a whole benefits from [...]
Well, not all of us agree, but certainly a large majority.
> To pretend like taxes should be associated with the consumption of government services is a-historical, fallacious, and based on any number of lies that vilify the poor for being poor.
It also sets up a hell of a strawman for the abolition of taxation in general - if the goal is for the individual to pay based on their consumption, then the most effective means of achieving that with the lowest possible overhead would be to allow a competitive marketplace to develop for those things.
For the record, I do support the abolition of all taxation, but find this argument to be very poorly constructed. My justification is that taxation is instituted through the implicit threat of violence.
That said, from a practical standpoint, if we're going to have a government funded through taxation, it's in our best interest to ensure the overhead for collecting it is as low as possible. That means the ruleset should be as simple as possible, and that using taxation powers to modify behavior should be done rarely if ever in order to maintain that simplicity.
To put it another way...
Question: those dollars you have in your pocket, where'd they come from?
Answer: The government issued them and they eventually found their way to me
Question: How'd the government have them to issue them?
Answer: They taxed it from somebody else.
Question: How'd that person get those dollars?
Taxation is a method of controlling inflation and the implicit threat of violence isn't directly related or due to taxation, but rather it's connected to the government's monopoly on a fiat currency.
Our government is funded through being the monopoly issuer of a currency that it requires all transactions be priced in while enforcing that monopoly with the implicit threat of violence. Our government (and all governments that are monopoly issuers of fiat currency) additionally use taxation as methods of economic control, but not funding.
> it's in our best interest to ensure the overhead for collecting it is as low as possible
I'm not sure I agree with this. If the government is going to tax as a method of inflation control it's in our best interest that that taxation does the "least harm" and as a democratic society we have the opportunity to vigorously debate based on evidence and research how we define "least harm".
The simplest ruleset possible could easily be "everybody contributes $30k/year" (more or less what my annual tax burden is) but suddenly we're bankrupting a majority of Americans.
Perhaps "as possible" includes an implicit "without bankrupting a majority of individuals subject to the tax" but at that point "as possible" is just a doorway to say "taxing should be simple [except when it can't be]" and to me that's the same as saying "taxing is complicated" which is, finally, to say that I think it's really a whole lot of nothing interesting to say "I think tax rules should be simple".
Edit: And yes, I understand that State taxes (as opposed to federal taxes) do fund State services (Property Taxes -> Schools in CA, for ex), but the States are not monopoly issuers of a fiat currency... It's complicated and hairy but the reason I bring up the issue of funding via taxes vs. issuing dollars is because almost always in conversations about flat tax rates or "simplifying tax code" it's in reference to federal taxes and not state/local taxes.
That ends up being significantly larger than the currency issued by the government, so the government might actually get more revenue from taxes than from money printing.
No, those who consume more have benefited more. Earning more is just the opposite: it shows that you've provided more benefit to society than someone who earns less. The ones who benefit most from society are the ones who manage to consume more than they earn.
Usually you can consume more if you have earned more i.e. have more buying power. But I know that's not what you mean.
> Earning more is just the opposite: it shows that you've provided more benefit to society than someone who earns less.
They're not very strongly correlated. It's possible to provide value without seeing much in reward (janitors, nurses, schoolteachers), earn plenty without providing much or even negative value (telemarketers, those opioid manufacturers we're hearing about), or both provide value and earn $$$ (Google, StackOverflow).
In any case the taxman doesn't care about "value" provided to society because it's such a nebulous concept. The IRS doesn't let you take deductions for adding value or add extra taxes because you're a telemarketer. Even if you provided a ton of value to society while getting rich, you still got rich. And your society's enforcement of laws and property rights, educated citizenry, and infrastructure were likely crucial to this.
> The ones who benefit most from society are the ones who manage to consume more than they earn.
This is true in the case of those who inherit large fortunes/trust funds and don't work. Tax laws favor them greatly at present (lower estate and capital gains taxes).
It's not true at the other end of the scale though. If not having a job and being on food stamps/medicaid/unemployment was really all that great, you'd have far more people looking to get in on it. It's actually a miserable situation that most people work their hardest to never fall into.
Sure, but you've produced more as well. The key is whether you're a net producer (earner) or a net consumer. As a general rule, high-earners tend to fall into the first group. Past a certain point earnings tend to outstrip spending; the more capital you have the easier it is to produce things other people want, whereas there's only so much one person can consume.
> They're not very strongly correlated. It's possible to provide value without seeing much in reward (janitors, nurses, schoolteachers), earn plenty without providing much or even negative value (telemarketers, those opioid manufacturers we're hearing about), or both provide value and earn $$$ (Google, StackOverflow).
We obviously aren't using the same definition of "value" here. If something is valuable, people will pay for it voluntarily. Providing things that are already in abundant supply does not contribute much value, even if they're things people claim to approve of. Of course, the reverse is also true: anything people willingly pay for has value to them.
> And your society's enforcement of laws and property rights, educated citizenry, and infrastructure were likely crucial to this.
As others have already pointed out, this doesn't hold water. The more wealth you have the more capable you are of providing these things for yourself. The rich already own most of the infrastructure, provide quite a bit of the financing for education, and are perfectly capable of hiring their own security. No, the ones who benefit most from having these things provided to them "for free" are those who would otherwise have a difficult time paying them on their own.
>> The ones who benefit most from society are the ones who manage to consume more than they earn.
> This is true in the case of those who inherit large fortunes/trust funds and don't work.
If someone is rich because of an inheritance, that inheritance was a gift. By taxing the estate you're punishing the one(s) earned that wealth. If they want to spend their earnings on their kids rather than themselves, who are you to judge?
The recipient of the inheritance is benefiting specifically from the work and prudent saving and investment of the ones who left them that inheritance, not from "society".
> If not having a job and being on food stamps/medicaid/unemployment was really all that great, you'd have far more people looking to get in on it.
I never said that being reliant on government handouts was pleasant, but there's really no question that these are the people the system is designed to benefit—at everyone else's expense. If it were purely a question of optimizing the material factors, achieving an acceptable standard of living with minimal effort, I think you'd see a lot more people relying on welfare. The only reason the system doesn't collapse under it own weight is that the more nebulous cost in self-respect of deliberately choosing to live as a parasitic freeloader is simply too high for most people to ignore.
I think you're right, we are not. It appears we hold very different views about everything being discussed here, and I don't think we'll find much common ground. In the interest of saving your time, and mine, I'll say no more. Have a good weekend :-)
It would be more accurate to say that the opportunity for profit indicates that society is not obtaining the maximum benefit from the available resources.
Under theoretical models of market economics you refer to there is no such thing as long-term economic profit. That's because profit is only realized by moving the economy closer to the ideal state, and in those theoretical perfect-information perfect-competition models you're already in the ideal state. In the non-theoretical world, however, things are never that ideal, and opportunities exist to earn a profit by addressing those deficiencies.
> It means you are benefitting from things that are bad for society, like imperfect information and barriers to entry.
I agree with you 100%. If society didn't have problems then there would be no opportunity to profit by offering solutions. That doesn't mean that you're responsible for those problems, however. Imperfect information is a fact of life, and providing better information is one perfectly legitimate way to earn a profit. Where barriers to entry exist, finding ways to break down those barriers is another way to profit.
Now, if you're creating new problems for society, such as spreading misinformation and erecting barriers to entry where none would naturally exist, that's obviously a problem. Negative externalities such as these require restitution to the victims. At this point we've left the economic realm, however, and crossed into the domain of politics.