The United States Tax system

Discussion in 'Stock Market Forum' started by MalorieJX, May 28, 2015.

  1. MalorieJX

    MalorieJX Well-Known Member

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    While I realize that what I propose is likely a pipe dream I wanted to see what people in general thought of it. Currently the US tax system is extremely complicated, far more complicated than it ideally should be. It is also often used by the government to institute class warfare and to buy votes or donations. Given all these problems I believe that a sales tax would be the best way to fund the government.

    My proposal is this, a 25% sales tax on all purchases (possibly higher if that is insufficient to run the government). In this example 10 percent would go to the state and 15 percent to the federal government (again something that could be adjusted). The point would be with a sales tax being the only tax anyone pays it would be a much simpler economic system. No matter where you put your money if you purchased something in the united states you would have to pay 25% of its value to the government. This would also make illegal immigrants a direct part of the tax system as all their purchases would automatically be taxed. This in my opinion (given the numbers might have to be adjusted) seems the fairest forms of taxation. What I want to know is what do the rest of you think, is this a workable (albeit an unlikely) tax system?
     
  2. JR Ewing

    JR Ewing Super Moderator Staff Member

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    The system is far too complicated and does need to be overhauled. I'd like to see the corrupt and incompetent IRS disbanded, but I'm not holing my breath.

    Something like a tax that is more or less flat at 15-20%, or perhaps slightly progressive to where top earners pay no more than 15-20%, and lower earners perhaps pay a little less as they go down the pay scale.

    Some sort of reasonable consumption tax is also something to consider.

    The bottom line is that the government is far too big, spends far too much, and taxes far too much. And you cannot trust politicians with the money.
     
  3. baudwalk

    baudwalk Senior Investor

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    Social engineering through tax code changes and rulings have produced something short of 100,000 pages of IRS regulations now. Tax simplification, pfft. I always thought Steve Forbes had a decent flat tax proposal he espoused in his 1996 and 2000 presidential campaigns. I have no expectations of any movement toward a saner tax methodology. Lobbyists and special interest rule, unfortunately.
     
  4. petesede

    petesede Guest

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    Yeah, I think a national sales tax is the way to go. You really wouldn´t have to have different rates based on income.. you just exclude some basic staple foods and other items that poor people need and it makes it fair. If you are poor, most of the stuff you buy won´t have the sales tax, if you are rich, a small portion of what you buy won´t be taxed.

    But meh.. politicians will still screw it up and be bribed as companies try to get their products tax-exempt.
     
  5. petesede

    petesede Guest

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    The problem with our current tax system is that in many situations it isn´t even about political gains, bribery or anything evil... it is simply too many chefs in the kitchen. Most of the small lines of tax code are reasonable when you look at them on their own merits. A tax break for first time home owners? A tax break for student loan repayments? A tax break for installing solar panels? None of them are inheritedly evil or corrupt, but when you lump them all together you get this huge mess where if you aren´t eeking out those duductions and tax breaks, you are overpaying.
     
  6. baudwalk

    baudwalk Senior Investor

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    Amen. The tweaks in the tax code have huge impacts. But what frosts me is the double taxation on dividends. Business pays taxes, and we pay taxes on dividends received. Businesses can't bring overseas earnings home with additionally paying 35% to the feds. It's a disincentive to grow the US economy and especially impacts those retired persons living off their investments.
     
  7. crimsonghost747

    crimsonghost747 Senior Investor

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    I'm not too familiar with your tax system, but in any case the more simple it is the better. When things get complicated then it takes more administration (=money spent) making it run, harder for people to do their taxes and opens up loopholes that the wealthy (usually) can use in order to pay less.

    Bottom line is, a lot of things need to be taxes. But I think the right way is to move more towards a system where less taxes are gathered from income and more from consumption.
     
  8. petesede

    petesede Guest

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    There is a downside to removing the double-tax on dividends. Right now, most intelligent investors do not pressure companies to increase dividend rates because we know most of it is just eaten in taxes anyway. Companies like Apple and Google with huge cash hoards are not asked by shareholders to increase dividends, we are much happier if they use that money for growth of the company. If you remove the double-tax on dividends, then shareholders are going to constantly be battling against the companies to increase dividend rates and that will impact the growth potential for a lot of companies. Google and Apple are one extreme, but there are thousand of companies in the middle who will have to choose between paying dividends and growing the company like they want to. Right now they err on the side of growth because there isn´t much demand for them to raise dividend rates. Just my opinion, but the moment you see the dividend tax removed, you are going to see thousands of companies without earnings growth.
     
  9. crimsonghost747

    crimsonghost747 Senior Investor

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    Apple is also a good example of the whole "bringing overseas earnings home" thing. They have HUGE amounts of cash but they are refusing to bring it back into the USA so it's just sitting on overseas accounts. They can get debt so cheaply that they are in fact preferring to take debt and use that money instead of bringing their own back into the USA.
     
  10. Rosyrain

    Rosyrain Senior Investor

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    Are you suggesting that the government do away with the income tax system and just increase the sales tax on items we buy? I do like the sounds of that because people can do work "under the table" and never be taxed on it, and yet we all have to buy things to get by in life. I would be for doing away with getting penalized for earning money and only have to pay tax when I purchased something.

    A system like this would make me feel more in control of how much the government gets to take from me, as opposed to it being taken off the top of the pile when I get my wages. We all could make a conscious decision on the purchases that we make and how much money the government would get. It is only fair because we have limited say over what the government gets to spend our money on.
     

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