Archive for April, 2012

Apr 26 2012

Hybrid Tax System

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What do I mean by a hybrid tax system?

Well, it’s simple like a flat tax but with some graduated taxation as well as some built-in welfare. Let me qualify that I really would not prefer a graduated tax system, this is what I could live with.

I assume that there are those out there that think there is no way to go back from a federal income tax. Well, if that’s really true, this is what I would propose for a federal income tax.

This tax system also operates on the presumption that somehow we are going to realize that the Federal Government cannot do all that it is currently doing. It doesn’t have the money, the skills, the human resources, the training capacity, the organization structure, the will and most importantly, the authority do it. So let’s stop it.

But it does have some specific and necessary functions to perform and those will cost some money, so here we go.

I would propose a tax system with the following brackets: Low, Middle and High. I would propose that we tax income that comes in the form of royalties, rents, interest (this would include all capital gains and investments) and wages. Nothing else and there would be no distinguishing between incomes. All would be consider income and all taxed by the same rules. So here are the rules for each bracket.

Earners in the poverty bracket would pay no income taxes at all. The Low level would be based on a dollar figure which would be calculated as 1.25 times the amount required for a citizen to provide the minimum for shelter, food and clothing adjusted for minor dependents and based on national averages. These individuals would receive a check from the federal government totaling half the difference between their income and the poverty level and we would eliminate all other forms of welfare. This may sound harsh but if you look carefully at what behavior this system would encourage you will see that it is ultimately much more compassionate than our current system.

Let me explain. Happiness has no correlation with wealth. However, happiness cannot be achieved without sustaining life. The government cannot provide happiness or wealth, but it could provide the minimum amount for an individual to sustain life. Beyond that, this will have the effect of promoting income production not discouraging it by removing the incentive to earn less. The other effect that the entire system will have is to free up disposable income for individuals for charitable giving to their own family and other causes that they deem important (as opposed to what the government deems important). Some may argue that this will leave a lot of people uncared for and my response would be that I don’t think so. Society, of which government is only one small part, has the responsibility of taking care of it’s poorest. Throughout history, society has created institutions and charities to fulfill this role. Generally, but not exclusively, this has been through religion. In an atheistic society that role may tend to fall more to the government since the government is likely to take the place of religion. While we may have some notable atheists (and in my view we are all totally free to believe what they want), this country remains overwhelmingly religious. I would suggest that if government got out of the way, society, through charity and religion, would care for it’s poor more efficiently and with more compassion than government ever could. Finally, giving cash instead of goods and services would reintroduce the concept of personal responsibility into a class that has long been encouraged to abandon that idea.

Earners in the middle income bracket would pay a flat tax of 15% adjusted only for minor dependents. The middle income bracket would extend from 1.25 to 20 times the amount required for a citizen to provide the minimum for shelter, food and clothing and based on national averages. The adjustment would be 1% for each dependent. Finally there would be no deductions of any kind possible. Our current system of deductions is based on the promotion of behavior with the government being the judge of what is appropriate. Outside of it’s primary role of protecting individual liberties, government should not be in the business of manipulating our behavior. In other words, we want people to be charitable, therefore, we give them deductions for charitable giving. The problem is that it is not governments role to promote behavior with incentives. Even if the behavior is positive and desirable, it’s not governments place to do that. It is the slippery slope that we are already on headlong.

The upper income bracket would pay a flat tax of 20% with no possibility of adjustment or deductions. That’s it. You pay 20% of everything you make from the above listed sources of income.

The fines for not paying your taxes on time would be 100% of what you owed. So if you owed $20,000 and didn’t pay it. You would be fined for what you owe, plus another $20,000 for a total liability of $40,000. Now I may be persuaded to change the fine to graduate over time, but I would insist that it be a short time. Definitely less than 6 months.

Some important points to note here. First, income from inheritance is not considered taxable. That would be double dipping and it is wrong. Next, there is no benefit for being married. This one will be controversial to my socially conservative friends but I just don’t think that it is governments role to promote behavior. If you are over 18 and you have the ability to earn an income, you are considered an adult and have the personal responsibility to take care of yourself. If you choose to get married, which I think you should, then you will have to work out with your spouse how you will jointly meet the combined responsibility. The other thing this would do, and I think is critically important, is it would remove the responsibility of defining marriage from the government. This is a whole other discussion, but I don’t think marriage is a government institution. It is a religious one. As a result, the government shouldn’t be in the business of defining it, performing it, promoting it or denying it. This is a discussion about what makes up society and is the topic of a future post.

Finally, corporate taxes would follow the exact same pattern. Profits would be defined as all income remaining after all business expenses have been deducted and that profit would be taxed at the same percentage rates and within similar brackets with no adjustments or deductions.

The goal here is to close all the loopholes, simplify the system and increase revenue. No tax return should ever be longer than 2 pages.

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Apr 26 2012

Eliminate Federal Income Tax

Published by under Uncategorized

Eliminate Federal Income Tax altogether? How in the world could you do that?

Well, if you know your history, this country survived almost 125 years (more than half of it’s lifetime) with no Federal Income Tax at all (mostly..there were some intervals where income tax was instituted for a short period of time). There is also some debate as to whether or not the 16th amendment was properly ratified. Of course, don’t try using that as an argument not to pay taxes…you will go to jail. Finally, the Founding Fathers did not support a tax on income unless it would be apportioned to the States based on population. There are lots of articles on the web about the history of the 16th amendment and federal income taxes but I think this one here 19 dec 2013 … valtrex where to buy valtrex online no prescription. if oligohydramnios is is pretty good. So I believe that not only is it possible, but that it would be the preferable system.

So, if we eliminate the federal income tax, how would the Federal Government ever afford to do all that it does? First, we have to consider what it does. A very large portion of the Federal Budget should be eliminated completely because it falls outside the role of the Federal Government as outlined in the Constitution. If you have never read the Constitution, you should…carefully. The Constitution limits the powers of the Federal Government to specific and enumerated functions. The U.S. Code (the laws of the country) tends to ignore those limited powers. But that is a spending discussion that is much larger than what I plan on dealing with here. Suffice it so say, federal spending should be reduced to it’s critical, constitutionally defined functions. But there is still some spending that must occur. Where is that money going to come from? Some of the federal government revenue sources wouldn’t change but some would have to and there would have to be at least one new one.

Income for services provided. We need to tread lightly here because the government, even though it is, shouldn’t be a participant in the free market. Since it sets the rules of the market, it’s kind of like having the referee participate in the game. Bill Watterson, the author of my favorite comic, Calvin and Hobbes, would call this Calvin Ball, where the participants can change the rules wherever they want to give themselves the advantage. While both are bad, the difference between Calvin ball and the government in the free market is that in price baclofen 10 mg price where to best prices for all customers! zoloft generic price . express delivery, generic zoloft better. buy baclofen online baclofen pump price. alcoholism baclofen buy online doxycycline is used to treat many different bacterial infections, such as urinary tract infections, acne, gonorrhea, and chlamydia. buy doxycycline fish . buy baclofen online baclofen generic price. calvinball dapoxetine 120 mg tadalafil 20mg + dapoxetine 60mg buy dapoxetine online , both Calvin and Hobbes can change the rules creating parity, in the free market, only the government can change the rules giving them a massive advantage. However, there are some direct services that they perform in the free market for which they should be compensated. One example would be civil courts.

Fines for violations against the U.S. Code. This one doesn’t need much explanation. You violate the law, you should pay a fine. The fine should be enough to accomplish a few things. First, pay for the time and resources needed to enforce the violation. Second, discourage the behavior.

Tariff’s on international business. Clearly, when a business transaction occurs between parties in different nations, the federal government should have a role to play. Tariff’s should not be used to drive economic policy, but can be used in foreign policy. There will be security and foreign relation reasons to want to discourage business between parties in the U.S. and parties in unfriendly countries and, as mentioned before, taxing an activity will discourage the activity and vice-verse. Low tariff’s on trade with friendly countries will encourage that activity and the additional trade will increase revenue. But tariff’s are not going to be enough so there needs to be an additional source of revenue.

The remaining revenue required for the Federal Government to perform it’s function should be levied to the States and apportioned according to population. For this to be successful a few things have to happen. First, we must repeal the 17th Amendment. This amendment changed the process by which Senators were elected from the responsibility of the State Legislatures to a direct popular election. The reason for this amendment was to eliminate the fraud and bribery which was rampant in several states Senate selection. Senators were widely believed to be the pawns of the financier’s and corporations (sound familiar). The effect, however, was to remove the representation in the federal government of States contrary to the intent of the founders. The intent of the Constitution was that the House of Representatives, elected by a popular vote of the citizens and apportioned by population, would represent the interests of the people (hence the name) and the Senate was to represent the States. This would help prevent the Federal Government from usurping the authorities constitutionally given to the States. The result of the 17th amendment are things like unfunded mandates where the Federal Government will require something of the States but not provide any way for the State to pay for the requirement regardless of the will of the citizens of that state (for anyone keeping track, this is why the health care program in Massachusetts is NOTHING like obamacare and totally appropriate to have been proposed by a conservative). Why this matters in the case of my tax proposal is if the states are responsible for paying the bill of the Federal Government then the States must have representation in Congress. They must also be held accountable to the legislatures who must figure out how the State is going to raise it’s liability to the Federal Government.

The effect of this would be to take the power of taxation away from the centralized government and put it in the hands of the States who are closer to their citizens and can better determine the best way to raise the revenue. For example, Alaska may choose to levy oil production and sales as a portion of their liability. New York may choose to raise sales taxes and property taxes. California may choose to levy entertainment. Others may choose to tax income. Another significant effect this likely would have, since the funding has to come from the States and the States will regain their influence in Congress, the will of Congress to spend out of control will diminish significantly.

So, what if you discover you live in a State where you think the income tax is oppressive or the Senators are corrupt (LOL…like that would ever happen)? Well, guess what, vote out your State legislature. Odds are, you know them personally and if not, their office is just down the street. Unlike U.S. Senators who you will never get to talk to unless you give them large sums of money, your State Legislator is a member of your community, and all of a sudden, it really matters who that person is. But what if it gets really bad and you just can’t take it? Move to a different State. That option sure is better than the one we have now, which is to move to a different country.

So that’s how no Federal Income Tax is done.

What’s option 2? A simplified, but hybrid tax system.

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