but closing loopholes make it easier to enforce tax laws and will simplify our tax code... both of those are a good thing.

Not to the people who use the loopholes, which are generally the wealthier people, and are some of the bigger Republican supporters.

As SD points out, the loopholes are what gets the wealthy out of paying so much in taxes so closing the loopholes is the equivalent to raising taxes on the wealthy.

No it doesn't, even if it does result in lower taxes, it still makes it easier for others to evade tax and still makes a complicated tax code. Even for those who it benefits, the problems I listed are there...

@Draug: So you think its fair for Warren Buffet to pay 17.4% of his income in tax and have the average american pay more?

We're not talking about fair, here, Fasces. And as a proponent of fascism, I'd assume you don't truly want things to be fair either.

Fair=/=Equal

and I am not fascist

I suppose they figure that closing loopholes means some people going from paying no taxes to some taxes, and that would technically be raising taxes for those people.

I disagree with most of my fellow conservatives on this issue. We need to increase revenue as well as cutting spending. I favor either a flat tax system or the FairTax. Everyone ought to pay the same. We can't suck every penny from the wallets of the wealthy, nor can we suck every penny from the wallets of the poor and middle class. A flat tax system or the FairTax would make the tax code extremely simple and we could save a lot of money by significantly cutting IRS funding.

You've said the rich should and are more wealthy than the poor because they're smarter, and being able to find and exploit loopholes AND being able to keep that as a part of the law is exhibiting their intelligence and thus exemplifies what you feel is the natural role of the intelligent wealthy people, right?

"I disagree with most of my fellow conservatives on this issue. We need to increase revenue as well as cutting spending. I favor either a flat tax system or the FairTax. Everyone ought to pay the same. We can't suck every penny from the wallets of the wealthy, nor can we suck every penny from the wallets of the poor and middle class. A flat tax system or the FairTax would make the tax code extremely simple and we could save a lot of money by significantly cutting IRS funding.'
I 100% agree

"You've said the rich should and are more wealthy than the poor because they're smarter, and being able to find and exploit loopholes AND being able to keep that as a part of the law is exhibiting their intelligence and thus exemplifies what you feel is the natural role of the intelligent wealthy people, right?"
Exploiting loopholes doesn't show the intelligence of the upper class but the failures of congress to make a proper tax code.

It does show the intelligence, it shows that they've created and exploit a system that benefits them at the expense of pretty much everyone else, which is what you say they should be doing.

@Fasces - Did I say ti was fair? Did I say it was against it? I explained someone else's stand on the issue (the Republicans). I'm a conservative leaning moderate and I would (like* to see the loopholes closed. Before you throw aspersions my way and assume *anything* about my views, I suggest you read waht I actually wrote. I did *not* say I agreed with the Republicans in that regard.

Re: Warren Buffett pays such a low effective tax rate... It's not even a loophole. His "income" computed for his effective tax rate is based on Berkshire Hathaway's stock value. If he ever sells that stock, he will have to pay tax on it (15%), but until then he pays no tax. If you recompute his taxes on any actually liquid assets (i.e. cash) he recieves then his percentage goes up to the standard percentage for his salary based income bracket.

I have no problem with this. This is how it should work. You pay the taxes when you cash in the investment. Otherwise, we would all have to pay income tax every year our property increases (both real and personal) in value. Instead, we pay it when we liquidate (sell) the property (car, boat, home, whatever).

And I'm with gunfighter on the Flat Tax or Fair Tax system. I believe in a simpler tax code and more and more conservatives are leaning that way. But don't assume becauseI explained something that I agree with it. I can explain lots of other folk's motivations. It doesn't mean I agree with them, Fasces.

Here's what I don't understand about Republican theory... if you give the Rich more money they will feed the economy. Bollocks. If you give a rich person more money that just goes to savings (they buy what they want anyway).. if you give poor people more money they will spend it (out of necessity). Therefore the best way to stimulate the economy is to lower taxes on the poor. Raising taxes on the rich is necessary to close the deficit and will not damage the economy. Lowering taxes on business is fine as long as you abolish subsidies (farms/oil etc).

Just my 2c

Oh, and a flat tax on consumption is fairer and easier to enforce (many countries do it). But it isn't good economic sense to have a flat income tax, progressive works much better for the reasons stated in previous post.

A flat tax will work fine on income provided it is a true flat tax, but only on what I would call disposable income. I've laid this out numerous times before. But every household should get a fixed deduction for housing, regardless of the cost of housing. Basically, it should be $8000 per year. This gives an allowance of $500 or more rent or mortgage: enough for a decent 1 or 2 bedroom apartment in most parts of the country plus extra to cover utilities like water, electric, gas, etc. Then each individual over 16 would get a $3000 allowance for personal needs ($250 a month for food and clothes) and under 16 would get $1500 per month. Only the owner or leaseholder can claim the household deduction.

These would be locked in. If you are caught cheating by claiming non-existent dependents or by "leasing" your summer home to a family member whose primary residence is actually your regular home, you (and they) go to jail.

It gives a family of four with one preteen and one 16 year old a deduction from their income of $18,500 per year. So if they made only $25,000, only $6500 would be taxable. For my wife and I, however, the numbers would be much different. $14,000 (8K plus 3K x 2) deduction on my gross pay means more than $70,000 taxable income. It allows everyone to pay the same percdentage rate but takes out what it'll cost for them to live while keeping things simple.

Actually @grenv, the most economically efficient form of tax is a lump sum tax. A lump sum tax, for those who dont know, is where the government declares before the year that each person/household/whatever will pay $x at the end of the year, regardless of how much they make.

And also, a flat income tax works better (economically) than a progressive tax. Progressive tax brackets generally result in higher taxes on the rich as compared to a flat tax rate. Any Econ 101 student knows that a higher marginal tax rate leads to deadweight loss (which, if you couldn't tell by the name, is just money that's lost and we will never get back).

Everyone on this thread: please do not say anything along the lines of "this is the best/better economic decision..." unless you have actually taken at least one economics class

I would disagree with children needing a smaller amount of yearly deductible than adults. They grow through clothing much faster (I still wear stuff I had 10 years ago sometimes, my kids are lucky to be able to wear something for 10 months), and have many other additional needs. I'm pretty sure that not having them makes you underestimate the amount spent on them. You could then say that having children is an optional activity, but social factors sometimes make it much less optional than you'd think. Low income parents already have enough stacked against them without more factors exacerbating it.

OK, SD, so set it at 3K per person.

Wealth is being increasingly concentrated into the hands of a few. This isn't sustainable, and a flat tax on income will just exacerbate it.

Here's a good chart showing this disparity - http://bit.ly/pMfhjg

We're not 'soaking the rich' if the top rate is lower than it's been since Eisenhower.

Excellent points on simplifying the tax code Fasces.
Reagan and the Democrats in the House did it effectively.
Reducing the cost business wastes on tax attorneys and accountants allows more capital to flow to productive endeavors that create jobs.

@RecruitFruit (my nickname for you)

The chart represents what has been. But it doesn't say anything about a flat tax and you didn't bother to support your blanket statement that a flat tax will make it worse. Pray tell how providing a flat tax with significant deductions. The deductions I list are such that a lower income household would pay little to no taxes. And that deduction could be increased if it was found that the poor were still being overburdened.

Add to it the fact that I didn't list what I think the flat tax should be (I'm leaning towards 35-40%, the top bracket now) and that I think even long term investments, once liquidated, would be taxed at the same rate, unlike now where capital gains is only 15% of the profit.

I woudl provide no write offs for losses so selling a stock that was low at the end of the year to save a few bucks in taxes, then buying it right back would not work. Taxes on sales of equities/stocks/etc (and even casino winnings) would be taken out of the sale (or cashing in at the casino) before the person received their money. The idea would be that no one would ever owe at the end of the year or quarterly because extraneous side incomes would be taxed with no allowances for deductions. If you can afford to gamble or play the market, you clearly have enough disposable income that any profit should be taxed and any losses are yours to eat, not the government's/people's.

"It does show the intelligence, it shows that they've created and exploit a system that benefits them at the expense of pretty much everyone else, which is what you say they should be doing."
Exactly, but in this case they are not directly exploiting everyone else, they are exploiting the government, which in this case means everyone else. It says something about the government when it allows people to exploit it and refuses to do anything about it. And preventing people from evading taxes due to loopholes is not a tax raise, it just prevents people from legally cheating the law.

"@Fasces - Did I say ti was fair? Did I say it was against it? I explained someone else's stand on the issue (the Republicans). I'm a conservative leaning moderate and I would (like* to see the loopholes closed. Before you throw aspersions my way and assume *anything* about my views, I suggest you read waht I actually wrote. I did *not* say I agreed with the Republicans in that regard."
i don't recall mentioning you buy name, when I was referring to the republicans on this site I was mainly talking about Krellin and TC and the like.

"Re: Warren Buffett pays such a low effective tax rate... It's not even a loophole. His "income" computed for his effective tax rate is based on Berkshire Hathaway's stock value. If he ever sells that stock, he will have to pay tax on it (15%), but until then he pays no tax. If you recompute his taxes on any actually liquid assets (i.e. cash) he recieves then his percentage goes up to the standard percentage for his salary based income bracket."
According to Buffet he payed $6,938,744 in income tax last year. Which is just 17.4% of his taxable income...

"I have no problem with this. This is how it should work. You pay the taxes when you cash in the investment. Otherwise, we would all have to pay income tax every year our property increases (both real and personal) in value. Instead, we pay it when we liquidate (sell) the property (car, boat, home, whatever)."
Agree, and it should still be at a fixed rate, not have it vary depend on what your liquidating and how rich you are.

"Here's what I don't understand about Republican theory... if you give the Rich more money they will feed the economy. Bollocks. If you give a rich person more money that just goes to savings (they buy what they want anyway).. if you give poor people more money they will spend it (out of necessity). Therefore the best way to stimulate the economy is to lower taxes on the poor. Raising taxes on the rich is necessary to close the deficit and will not damage the economy. Lowering taxes on business is fine as long as you abolish subsidies (farms/oil etc).

Just my 2c"
About that, statistics show those who spend the smallest % of their income are the middle class. So should we tax the middle class more?

I support abolishing subsidies. We are still paying for oil and co at a significantly higher price then we are lead to believe, but we are paying through taxes.

"Oh, and a flat tax on consumption is fairer and easier to enforce (many countries do it). But it isn't good economic sense to have a flat income tax, progressive works much better for the reasons stated in previous post."
No, 28% of people don't pay income tax, income tax is the hardest tax to enforce, but if it was flat, then it would be easy to enforce.

"But every household should get a fixed deduction for housing, regardless of the cost of housing."
Your system deteriorates from 2 of the main advantages of flat tax rates:
They're simple and fair...

"Actually @grenv, the most economically efficient form of tax is a lump sum tax. A lump sum tax, for those who dont know, is where the government declares before the year that each person/household/whatever will pay $x at the end of the year, regardless of how much they make.

And also, a flat income tax works better (economically) than a progressive tax. Progressive tax brackets generally result in higher taxes on the rich as compared to a flat tax rate. Any Econ 101 student knows that a higher marginal tax rate leads to deadweight loss (which, if you couldn't tell by the name, is just money that's lost and we will never get back).

Everyone on this thread: please do not say anything along the lines of "this is the best/better economic decision..." unless you have actually taken at least one economics class"
I have taken economics courses and read the economist every day...
I don't recall ever saying best economic decision just best economic policies. I completely agree with you about dead weight loss and is the main reason why I am against government subsidies and floor/ceiling prices.

"Wealth is being increasingly concentrated into the hands of a few. This isn't sustainable, and a flat tax on income will just exacerbate it.

Here's a good chart showing this disparity - http://bit.ly/pMfhjg

We're not 'soaking the rich' if the top rate is lower than it's been since Eisenhower."
Interesting graph, and it furthers our point that money today is just as fairly distributed as back in 1917, when we have lower taxes on both the middle class and upper class and higher taxes on the lower class.

However it should be noted that the average income of the top 5% has gone from 100k to 400k, or quadrupled in size while the middle class bar has gone from 10k in 1917 to 6k in 2008, so actually that graph shows that income distribution is more fair now then back in world war 1.

"Excellent points on simplifying the tax code Fasces.
Reagan and the Democrats in the House did it effectively.
Reducing the cost business wastes on tax attorneys and accountants allows more capital to flow to productive endeavors that create jobs."
Reagan was not an advocate of flat tax, and I do not support Reagan.

@Fasces - Really? You want to play that game? You *did* mention me by name!

"@Draug: So you think its fair for Warren Buffet to pay 17.4% of his income in tax and have the average american pay more?"

IS that not pointed at me? Does that not ask *me* if I thought it was fair and all the implications that go with it? You don't get to imply what you did then lie and claim you never made the statement directed at me. That's fucking bullshit and I'm calling you on it.

"@Fasces - Really? You want to play that game? You *did* mention me by name!"
I stand corrected, my bad, sorry I pretty tired, having difficulties managing the 12 hour time change between Toronto and Beijing.
I know its no excuse but yeah. That was my bad.
I appologize.

Apology accepted.

So what do you think of my proposed flat tax with a upfront deduction per household and individual?

"So what do you think of my proposed flat tax with a upfront deduction per household and individual?"
I am strongly against deductions. I believe I talked about it here:
"Your system deteriorates from 2 of the main advantages of flat tax rates:
They're simple and fair..."

I don't like how its complexity. I support a tax that is run exactly like sales tax.

Each time your employer pays you your wage your money is taken off for you and given to the government.

So say you get a pay check once a month and your salary is $120,000 a year and the tax rate is 20%. Your monthly pay checks would be for $8,000 and the corporation would have to account for the income tax payable ($2000). The accountants for whatever company you work for would file your taxes for you free of charge just like the GST.

However re-reading it I came to notice something about your numbers:
1. I hope your joking about that 35-40%. WAYYYY TO HIGH! We need to cut taxes and spending... 20-25% is realistic but 10-12% is ideal.
2. Your $8000 deductible is above the average GDP per Capita of the world. I think you would find that most people, even in America, would become exempt from income tax simply because they make so little money.

However the more that I think about it the more that I think deductibles can be a good idea to encourage growth especially in a recession, but I don't think the deductibles should be on income tax. But on taxes related to the issue at hand. I am not sure an effective way to introduce deductibles, but I think yours makes income tax law to complex. However I grant you that it is simpler then our current tax code.

Income tax is the simplest and cleanest place to put the deductibles. If you add them to a variety of other taxes instead, you're succeeded in making it more complex. There's already deductibles on income tax as is.

I'd advocate a cap on how many deductions you can take, but I've seen how that sort of system worked in China. One is best ended up with a crazy gender disparity as people tried to ensure the one kid they could afford was a male.

We have to be very careful with deductibles. You start off with one or two, and pretty soon you have thousands of pages of deductibles. Deductibles create loopholes. Deductibles are the reason that half of Americans didn't pay any taxes this year.

I'm all for giving the poor tax cuts, but that doesn't mean that they get to be citizens for free. They have to pay up just like everyone else.