PRI Flat Tax Study Released
I realize purists will object to any advocacy of taxation besides absolute zero, but even so I encourage people to read at least the first few chapters of my new study (.pdf) on California tax reform. I know I was surprised at some of the charts, even though I already believed in marginal tax rate reductions for moral reasons.
Comments (9)
My question is why not a flat tax for federal as well? Say a flat 10%. I bet you I would wind up paying more but would probably be more than happy to do so. Last year I spent $1000 doing my taxes and over 5 hours with my accountant. I would have paid the gov $500 bucks for a 3 min tax filing process.
More importantly, a flat tax would be a dis-incentive (if that's a word) for me to even try to come up with ways to cheat the government. I agree that compliance would be up, less cheaters, smaller IRS staff etc etc etc,,, It's a win win for all except for accountants. The money saved by taxpayers could go towards eliminating debt or consumption. The additional tax revenue earned by the government through higher receipts and cost reductions could go towards eliminating external debt and infrastructure projects.
But then again this might just be utopia. Why make things simpler when they can be complicated.
Published: May 13, 2008 10:29 PM
That's one of my two problems. The other is fiscal irresponsibility: spending more of my money than required, on services I don't really want.
I'd like to do away with exemptions as well.
Fewer types of taxes. One really low rate, no exceptions. It would reduce the cost of maintaining the system signifigantly (back to my original point: spending more money than required)
Published: May 14, 2008 8:47 AM
Something as simple as a flat tax will never work because it is fair and people like to think that they are getting a better deal then others.
Published: May 14, 2008 12:21 PM
I'm ready for the flat tax utopia.....Let's roll..........To do nothing but complain for the next 30 years will put us in the same category as the tree huggers and our (30 year old) present energy issues......of course your mpg may vary.......
Published: May 14, 2008 3:02 PM
Laurence Vance-style tax-reform critique:
-Something other than the 3% flat tax is bad.
-It'll get butchered in committe.
-It's a tax, and taxes are bad.
-It'll lead to worse taxes later because they'll want to make up the revenue.
-Bob Murphy is bad.
Hey, that's what he said about the FairTax, and I can't think of an argument you made against it, Bob, that wouldn't apply here.
I just hope you get as much garbage flung at you as I did when I said, "Hey, the FairTax might be better than the existing regime."
But I think expecting consistency like that is too much here.
Published: May 14, 2008 5:12 PM
Laurence Vance-style tax-reform critique:
-Something other than the 3% flat tax is bad.
-It'll get butchered in committe.
-It's a tax, and taxes are bad.
-It'll lead to worse taxes later because they'll want to make up the revenue.
-Bob Murphy is bad.
Hey, that's what he said about the FairTax, and I can't think of an argument you made against it, Bob, that wouldn't apply here.
I just hope you get as much garbage flung at you as I did when I said, "Hey, the FairTax might be better than the existing regime."
But I think expecting consistency like that is too much here.
Published: May 14, 2008 5:13 PM
With a Flat Tax we would still need for all kinds of record keeping. We would also have thousands of pages of tax law to boot. We would still be subject to jail time if we did not pay. Just ask Wesley Snipes. So why keep a modified IRS tax system that will place you in jail? Remember the IRS is our friend as well as the Flat Tax that supports it.
Published: May 14, 2008 5:17 PM
There is no reason most people need to file tax returns. In Australia and New Zealand most people don't need to file a tax return: I haven't filed one since the mid '90s.
Most of the complexity of the US income tax (both state and federal) is totally unnecessary -- many other countries with income taxes don't have the level and kinds of complexity the Americans have.
How can it work without individuals filing tax returns? Employers, issuers of securities and some other payers administer withholding and/or disclosure, and the revenue authority checks the right amounts have been deducted and/or paid, and if not issues a demand for payment or processes a refund direct credit to the taxpayer's bank account.
To minimise complexity, some other points are:
1. Have the income tax on factor incomes, not on individuals'/companies' total incomes.
2. Have the tax on specific sources of income from within the jurisdiction, particularly: salaries (and other compensation of employees), property and profits.
3. Don't try to tax other sources or types of income such as foreign source income, interest, dividends, rents, capital gains etc.
4. Tax salaries (and other compensation of employees) via employer deduction. The best way is a flat rate with no exemptions.
5. Tax income sourced from property in the jurisdiction by way of appraised rental values. This avoids the need to track actual rental incomes and depreciation and other expenses.
6. Tax profits at the company or business level, and don't tax distribution of incomes by way of drawings or dividends. Don't tax capital gains.
7. Don't tax interest income, and don't allow deductions for interest expense. Interest is not a source of income or expense, it is a distribution of profits or income derived from other sources.
The best models for tax reform are Hong Kong, Singapore, Panama, Costa Rica, in that approximate order. These tax systems are territorial and therefore avoid the need to tax foreign source incomes, and generally do not discriminate between residents and non-residents. In the case of Hong Kong and Singapore (not sure about the others), interest, dividends and capital gains are not taxable, which saves a lot of complexity. The United States is probably one of the worst: little revenue is raised, complexity and cost are massive, the intrusiveness is very high, and the enforcement is brutal.
The US should introduce a parallel tax system that is a simple low flat tax, and then use the revenue to give everyone a large deductible so most people have no liability under the other system, and then you can exempt them from the requirements to file.
Published: May 15, 2008 3:37 AM
david hillary says:
"There is no reason most people need to file tax returns. In Australia and New Zealand most people don't need to file a tax return: I haven't filed one since the mid '90s.
the flip side of the coin is that for those who do have to battle with the australian tax office, it's a kafkaesque nightmare. don't quote me on the exact numbers, but the tax act has over 13 000 pages. no one person can possibly have a comprehensive understanding of it.
don't look downunder for inspiration. high marginal rates that hit very low salary brackets, and which aren't inflation indexed.
one thing i do agree is superior is the fact that you can, in fact, flee. hundreds of thousands of australians choose saudi arabia, hong kong, uae etc to work, pay minimal tax and build up capital. this is contingent on genuine non-residency in australia.
the overall tax burden, and complexity of the act, gets worse, year after year. conservative or progressive government, the direction is still the same. would that we even had one ron paul here!
Published: May 15, 2008 11:01 AM