Remember when?

[Kevin Spidel]

"President Clinton announced Wednesday that the federal budget surplus for fiscal year 2000 amounted to at least $230 billion, making it the largest in U.S. history and topping last year's record surplus of $122.7 billion. "


ahhh the good ole days!

fast forward to modern day...


"The Treasury Department, in its monthly budget statement, reported a $35.29 billion budget gap last month."

[nothingshocksmeanymore]

1. Banks don't make as much interest money, if you're paying down the debt

What's good for ordinary Americans is bad for bidness.

[48pan]

2. Time to raise the hell out of taxes.

We need at least a 5% national sales tax right now.

[rzemanfl]

3. Bullshit! Let the rich pay more, sales taxes are regressive.

Repeal cuckoo bananas tax cuts including the Estate tax. Then increase the marginal rate for high incomes.

[48pan]

6. Maybe, butt...

Increasing the rate on incomes will hit the middle class the most. The rich don't work and can structure their interest incomes to be non-taxable, most easily by buying tax-free government bonds. The poor don't pay income tax. The middle class receive payroll income and can't easily avoid the higher rates.

At some point, the rich will simply leave the country and the problem will not have been solved. The really rich don't have to live here or pay any taxes here. Monaco seems to be a favorite of rich Europeans.

A national sales tax on items other than food and clothing will raise the money without hurting the poor. Since the rich spend the most money on non-food and clothing items, they will pay the most sales tax.

No system is perfect, but a national sales tax seems to have fewer holes than the progressive income tax.

[rzemanfl]

7. I'm all for the rich leaving the country, especially if they take some

fundie wackos with them. I'm not buying the "the rich have good tax accounts and lawyers so tax the poor and middle class" argument.

[48pan]

8. It has nothing to do with the accountant...

I teach accounting.

Many of the rich don't work. They earn interest income. Some types of interest income aren't taxable, particularly federal and municipal bonds. Those bonds have a lower interest rate and allow communities to borrow money for roads and schools, cheap.

Here's an example.

Let's set the marginal tax rate for rich people at say... 50% (I think it's closer to 33% right now)

Rich guy with 1 billion dollars in investments:

Taxable investments that earn 7%
Rich guy earns 70 million
Rich guy pays 35 million in taxes
Rich guy keeps 35 million

Tax free municipal bonds earn 5%
Rich guy earns 50 million
Rich guy pays no taxes
Rich guy keeps 50 million

So, even with a 50% marginal tax rate, the rich guy will shift his investments to tax free bonds.

As the marginal tax rate goes up, the rich guy is likely to shift more investments and pay less taxes.

If the rich guy pays less taxes, and the poor guy pays no income tax, the full weight of the tax burden falls on the middle class.

On the other hand, if there is a national sales tax on non-essential items, the rich guy, who spends the most money, pays the largest percent of taxes. The poor guy, who spends very little on non-essential items, pays very little tax. The middle class guy, who spends a medium amount on non-essential items pays a medium amount of taxes.

This has nothing to do with accountants. It is simple, common sense behavior. As long as the marginal tax rate is higher than the difference between interest rates on taxable and non-taxable investments, the investor will choose the non-taxable investment.

Don't forget that investments can include opening businesses that employ poor people. Given a choice between starting a business where the income will be taxed at a high rate and not starting that business but putting the money into tax free investments, the tax rate is critical.

Revenues vs. marginal income tax rates is a very complicated business. The result is a multi-thousand page set of tax rules with thousands of exceptions and loopholes.

I submit that a rather simple federal sales tax would be much more effective.

[rzemanfl]

9. Tax free bonds help to pay for things we'd otherwise have to

pay for with taxes. I understand your argument but am against regressive taxes. There is no way to tax Paris Hilton's diamond without also taxing some poor shlub's engagement ring, etc.

[48pan]

11. Absolutely right, but Paris Hilton's Ring...

costs a million bucks. The poor schlub paid $400. The schlub pays $20 and Hilton pays $50,000 in taxes. In addition, the schlub spends very little on anything but necessities. The engagement ring is a once in a lifetime event. Hilton buys jewelery every day.

The tax free bonds do indeed support things we need, thus we can't do away with them and the really rich people will always have a tax shelter as long as we tax income.

We have to lose the income tax. How about a combination of national sales tax and interest income tax? That way, the tax free bonds are still attractive and the conspicuous consumers will shoulder the largest burden of taxation.

I'm trying to come up with a fairer method of taxation. The income tax doesn't work. Hell, I teach accounting and I have no idea what 3/4 of the tax code says. The middle class doesn't stand a chance under the current system.

[Toots]

10. You are kidding right?

You wish for a regressive tax over a progressive tax? Why wouldn't the rich simply buy from overseas? How often do you see Bill Gates in your local Walmart? That is very much a Republican wet dream. National Sales Tax indeed.

[HysteryDiagnosis]

4. Not very conservative conservatives.... not hardly. Smaller

government means laying off state employees and hiring private, well connected private corporations to replace them. These companies by their very nature have a better chance of ripping off the taxpayer. These companies are well known for the large political contributions that the lavish on those who would assume power.

The military industrial complex will keep Americans in a form of financial slavery for as long as it exists in its present form. Remove the profit motive and these parasitic offense contractors will simply wither away and go back to farming in the fields where they belong. In this manner they can continue to consider themselves to be outstanding in their fields. :)

[neoteric lefty]

5. I know it has been done before

but there needs to be an overlay of administrations on top of that figure to see which party is better with our money.