By The Simplifier, on January 10th, 2010
When do stock trades cease to be capital gains and become ordinary income? Why make the distinction? Why have the bother of carrying over capital losses year to year allowing a mere $3000/year to be applied against ordinary income? Why should the ultra rich pay a mere 15% for long term capital gains while doctors pay 25% for putting in extra hours healing the sick?
The answers aren’t always obvious but they are very important. We can simplify the tax code while making it more progressive by treating capital gains the same as ordinary income, but to do so requires making other changes, else the resulting double-taxation will indeed be too onerous. Details in the posts to come.
By The Simplifier, on January 10th, 2010
How should corporations be taxed? How do we tax corporations without destroying America’s competitiveness in international markets? How do we tax multinationals? Which nation gets to tax the profits of a corporation operating in twenty countries? Should we even tax corporations? Or is this double taxation?
The answers will surprise many. We shall explore reasons why progressives should support cuts in corporate income taxes, and why Republican flat taxers might want to increase corporate income taxes. And we shall show why we need to maintain a corporate income tax at some rate as long as we have a personal income tax.
If these ideas seem not obvious to you, you are not alone. Stay tuned for thorough explanations.
By The Simplifier, on January 10th, 2010
The personal income tax is a maze of twisty passages, all different. Those who navigate the maze successfully get big tax breaks. The rest pay the nominal tax rate. Is this fair? Or is the personal income tax a subsidy for the super rich in disguise?
The answer is mixed; the analysis subtle. Many deductions offset the effects of others. Some cause hidden detriment, visible only to those with economic insight. Read the posts in this category and gain said insight for yourself. Learn the truly destructive nature of some of the most popular tax breaks if you dare. The tax code is more responsible for the current economic crisis than most people realize.
By The Simplifier, on January 3rd, 2010
Want a tax cut? Too bad! The federal government racked up nearly $1.8 trillion in additional public debt in fiscal year 2009! [1] [2] Elect a hundred Ron Paul clones to Congress to hack at least a trillion in core government spending and you can dream of a tax cut. The economy might start growing again. One-time stimuli might end. So it might “only” take a trillion dollar cut in core spending to bring the budget into balance.
But frankly, you should just dream. 100 Ron Paul clones are not likely to win in 2010, and even if they did win and cut the core budget by a trillion, we still should keep taxes high or even raise them. The baby boomer generation is preparing to retire. We should have been paying down the national debt for the past two decades in order to prepare for this actuarial nightmare. Instead, we’ve gotten an optional war in Iraq, new entitlements and tax cuts for the rich. We need huge budgets surpluses now to catch up — unless you like the prospect of financial collapse and Atlas shrugging.
I might have in my callow youth, but as a father I fear for the future and want to prevent a collapse, not neener-dance on the sidelines as America slides into ruin. So, with much regret, after decades of calling for less spending under my real name, I must don the mask of a pseudonym and call for higher taxes.
Now, for the Good News
High taxes are painful, but chronic deficits are more painful in the long run. High deficits mean future debt service payments. High deficits lead to higher real interest rates: higher mortgage payments, higher car payments, and higher minimum corporate profits. High deficits rob from the working class to give to the rich — which defeats the whole purpose of all those “kinder gentler” social programs. High budget deficits result in high trade deficits: the Chinese buy U.S. debt instead of U.S. products because our real rates of return are so high.
So keep these factors in mind when the “pro-growth” crowd at Forbes and elsewhere cite the Laffer Curve and issue dire warnings about the effects of high taxes. Yes, 70% marginal tax rates are bad, and we won’t be advocating a return to those bad old days here at Tax Help USA. But we can plug a lot of loopholes. Many of this country’s richest people are paying 15% marginal tax rates — or less. And by plugging the loopholes we can not only refill the treasury, we can make the tax code less bad:
- While closing tax loopholes, we can make the tax code simpler. The cost of taxation is not just the money raised; it is also the cost of compliance.
- We can remove bad incentives which hurt our economy. Our current tax code encourages excessive outsourcing, merger-mania, and massive leverage which leads to bankruptcy at the first whiff of an economic downturn.
- We can replace burdensome laws and regulations with taxes, reducing the cost to the payers while collect more money for the treasury.
- We can use the IRS to solve the illegal immigration problem.
- We can increase employment by greatly simplifying the payroll tax system.
- We can apply Laffer Curve logic to the working poor, thereby reducing poverty and welfare dependency.
- We can tax our enemies instead of bombing them.
Do these things and we won’t need as much government spending. We might get that trillion dollar budget cut without electing a hundred Ron Paul clones.