So… What Is the Ideal Tax Structure

 

Hey, Ricochetti.

As a life-long conservative, I have adopted a general disdain for pretty much all taxes. I cringe at the Progressives’ reflexive call for “taxing the rich” and “making the rich pay their fair share.” I experience a reasonable amount of irritation and anger at the seemingly endless list of taxes we encounter throughout modern American society.

But… I’m no dummy. I understand that we need to have taxes… right? We need to have some form of public funding for public activity.

Is there any kind of consensus in the Conservative ranks about an “ideal tax structure?”

It seems the only thing we Conservatives do is shout, “cut taxes”. But, there’s no coherence. No Plan that can be rallied around and put up as a real antidote to the Progressives’ constant-encroachment strategy.

I know a little bit about the Fair Tax — seems reasonable, but it’s so different as to be (IMHO) entirely impractical. The Flat Tax is pretty straightforward. But… what about all the minutiae? Taxing gas, property, inheritance, gifts, lottery windfalls, luxury goods, hotels, telephone service, mobile service, capital gains, child-tax credits, homestead credits, etc, etc, ad nauseam.

Or, can anyone recommend a good book that lays out some logical structure. I don’t really want to say, “tell me what to think”… but, at the same time, I do not know what to think about the utility or wisdom of any of these taxes. And, it would seem, if we (Conservatives) don’t develop some vocabulary… and massage that vocabulary into clear action… we will forever be relegated to the outskirts of the conversation, shouting “cut taxes!”

Any input would be much appreciated.

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  1. James Salerno Inactive
    James Salerno
    @JamesSalerno

    Cut all federal income taxes. Let the states decide if they want to tax income, then let the marketplace of ideas play out.

    If it were up to me, you just have a sales tax. This way there is budget transparency. You can have all of the entitlements that your heart desires. You want free college? Ok, that means we’re going from 8% to 15%. Don’t like it? Too bad, that’s what it costs. An electric car in every garage and a chicken and a heroin needle in every homeless man’s pot? Same deal. Things would work themselves out from there.

    • #1
  2. Victor Tango Kilo Member
    Victor Tango Kilo
    @VtheK

    I like the idea of a flat tax + a consumption tax and elimination of all tax breaks and carve outs except for home mortgages, dependent children, and charity. Also, tax college endowments and a stiff tariff regime; because a tariff is nothing more than a tax on offshore production. 

    They say that there will never be enough revenue if we do that to fund the Government. I also favor cutting Government expenditures by at least 50% across the board. 

    • #2
  3. Flicker Coolidge
    Flicker
    @Flicker

    Fund every governmental department or agency only from taxing the salaries of those employees that work there.

    • #3
  4. MWD B612 "Dawg" Member
    MWD B612 "Dawg"
    @danok1

    Flicker (View Comment):

    Fund every governmental department or agency only from taxing the salaries of those employees that work there.

    I find your ideas intriguing and would like to subscribe to your newsletter.

    • #4
  5. MWD B612 "Dawg" Member
    MWD B612 "Dawg"
    @danok1

    Repeal the 16th Amendment.

    Fund the Federal government from customs duties and excise taxes. Cut the Federal budget to align with said duties and taxes.

    What, a man can dream, can’t he?

    • #5
  6. BDB Inactive
    BDB
    @BDB

    I read somewhere that no government anywhere, at any time, successfully collects more than 19% GDP in taxes.

    Seeing as 19% would be a tax break for most people who pay taxes *at all*, I’m in favor of a one-page federal income tax code — if we must have an income tax, which I do not want.  Let it stipulate that realized cap gains are covered, and losses don’t get you credits — they’re just losses.  Or if that chills entrepreneurs too hard, cap the credit for losses.  Leave inheritances alone, as that money was all taxed on the way in, and the barrier to entry (death) is not likely to be gamed too often.

    Below the federal level, I don’t care.  Property taxes (for assets which “consume” infrastructure services) make sense to the extent that government contracts on our behalf (heh) to provide services as public goods, and if you don’t like sales taxes, go somewhere they don’t have them.  Most states (and presumably smaller localities) fall along a line that shows a balanced trade-off between property and sales taxes.

    If the feds need to fund a war, let them sell bonds.  Rates and ratings will settle this stuff down.  Let Defense PO&M other than current hostilities be taken from the regular haul, but specific activites have to make it good through bond sales.

    Apply a Gingrich-style welfare reform (which worked like GANGBUSTERS when it was tried) to reduce the size of “entitlement” and other dependency programs.  Get Soc Sec solvent by SLASHING its expenditures, with phase-out options for the majority of people.

    When I was TWENTY ONE I thought that everybody below (say) age thirty, so including myself, should just commit to paying into SS knowing that we wouldn’t get any.  It would be cheaper in the long run to just age the system out like that than to pick up the pieces of what is now a near-inevitable disaster just from SS.

    So for the feds, a hard 19% flat tax, with fund-raising options that are not coercive.  I’d rather not have an income tax at all.

    • #6
  7. Bunsen Coolidge
    Bunsen
    @Bunsen

    Years ago one of my clients was head of tax for a major healthcare firm.  He said 2-3% sales tax would produce more money than the government would know what to do with.  I don’t think we could go that low but a sales tax and nothing else, no carve outs, no tax deferred retirement savings, no nothing.  The only exception I could possibly see are charities but I still have to think about that.

    That and getting rid of Departments of Energy, Education, IRS, and Congress (well we can keep AOC simply cause she wants to date Republicans and MTG as an offset to AOC) would be a good start to fiscal sanity.

     

    • #7
  8. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    EVERYBODY pays something.  Even if it’s only a minimal amount.

     

    • #8
  9. Jim McConnell Member
    Jim McConnell
    @JimMcConnell

    Flicker (View Comment):

    Fund every governmental department or agency only from taxing the salaries of those employees that work there.

    That’ll work!

    • #9
  10. Matt Bartle Member
    Matt Bartle
    @MattBartle

    I like an idea I heard somewhere that instead of a federal income tax Washington just bills each State for their share, and the States raise the money however they choose. Of course, “fair share” would be a sticking point.

    How about we just divide the federal budget by 320,000,000 and send everyone a bill?

    • #10
  11. BDB Inactive
    BDB
    @BDB

    Flicker (View Comment):

    Fund every governmental department or agency only from taxing the salaries of those employees that work there.

    That way, each of them will be above average.

    • #11
  12. Bob Thompson Member
    Bob Thompson
    @BobThompson

    I don’t like anything about an income tax. 

    I like a use tax for those public things that are less than common to every person, roads and airports for example.

    There could be a transaction tax for marketplace transactions but these can be hidden in black markets just like we have unreported income in the income tax approach.

    Private ownership of real property is really property held jointly with the state so the concept of a use tax could be applied where that tax is based on the economic use of the property.

    Almost any form of taxation would beat the income tax we have now.

    • #12
  13. BDB Inactive
    BDB
    @BDB

    Matt Bartle (View Comment):

    I like an idea I heard somewhere that instead of a federal income tax Washington just bills each State for their share, and the States raise the money however they choose. Of course, “fair share” would be a sticking point.

    How about we just divide the federal budget by 320,000,000 and send everyone a bill?

    Almost $19K per man, woman, or child.

    The average US family consists of 3.15 persons.  Making some ROUGH assumptions, including paternity just to make the math go, that’s just over $60K per man.  Every year.

    US total personal income in 2020 was nearly $20T.  That’s $62K or so per man, woman, or child.  Lumping those incomes on the head of the same man from the previous appalling assumption, that’s $197K per man.  Every year.

    60/197 is 30% ish.  Assuming that my previous remark abou no government ever *actually* collecting better than 19% of GDP (and let us assume that GDP can be expressed as total US personal income), that means that one third of government expenditures are simply printed up.

    Holy cow, this might even work out.  The math, that is, not the existing Ponzi scheme.

    • #13
  14. Ekosj Member
    Ekosj
    @Ekosj

    Ask most anyone – liberal or conservative – about taxes and the core of their optimal tax strategy is to have government “tax someone other than me”

    And once you go down that road it just turns the whole apparatus of government into something grotesque … the whole purpose of politics becomes a struggle over who’ll get fleeced and who won’t.   Everything else is ornamental.

    Thats why I favor a national sales tax.   Don’t want to pay taxes?   Grow your own food and make your own clothes,   Otherwise, everybody is going to pay something.   And in most states, the mechanism for collection and enforcement already exists, so you could do away with most of the IRS.  

    Laws would be simpler.  Most of the dense thickets of legislative legalese is designed to obscure who really benefits and who gets stuck with the tab.

     

    • #14
  15. Matt Bartle Member
    Matt Bartle
    @MattBartle

    BDB (View Comment):
    I read somewhere that no government anywhere, at any time, successfully collects more than 19% GDP in taxes.

    I read that, too, many years ago. Must have been National Review or Reason. There was a graph showing the top income tax rate, which went to 90% or something like that at times, and the actual amount of income tax collected. That might have gotten a little over 20% now and then, but averaged out at about 19%, like you said. I think that was to argue for a flat tax of 19%.

    By the way, is anyone advocating for the Fair Tax any more, or has that gone away?

     

    • #15
  16. BDB Inactive
    BDB
    @BDB

    Matt Bartle (View Comment):

    BDB (View Comment):
    I read somewhere that no government anywhere, at any time, successfully collects more than 19% GDP in taxes.

    I read that, too, many years ago. Must have been National Review or Reason. There was a graph showing the top income tax rate, which went to 90% or something like that at times, and the actual amount of income tax collected. That might have gotten a little over 20% now and then, but averaged out at about 19%, like you said. I think that was to argue for a flat tax of 19%.

    By the way, is anyone advocating for the Fair Tax any more, or has that gone away?

     

    I think FisCons threw in the towel halfway through Obama’s second term.  Stop trying to fix the hopeless boat and just get your lifejacket on.  The Democrats kick holes in it faster than we can patch the hull.

    • #16
  17. Full Size Tabby Member
    Full Size Tabby
    @FullSizeTabby

    There are so many factors and considerations that I doubt there is an ideal. I can’t even decide for myself among broad categories: Income taxes, wealth taxes, consumption taxes, per person taxes?

    Income taxes and wealth taxes (such as property taxes) have the logic that people with more at stake in the economic and political system pay more to maintain the systems that protect their stake (money and property). But that doesn’t necessarily justify that higher income or wealthier people should pay a higher percentage of their income or wealth. Defining “income” or “wealth” in order to apply income and wealth taxes becomes a challenge, including valuation of income and wealth that is not readily convertible into cash. There are also the administrative challenges and invasion of privacy issues associated with identifying income and wealth in order to apply the taxes. Property (and other wealth-based) taxes are perceived by some as unreasonable because their existence prevents a person from really owning the property being taxed. And the existence of income or wealth taxes may discourage people from creating value that might benefit not only themselves but others.

    Consumption taxes (sales taxes, value-added-taxes, import duties and tariffs) provide the taxpayer with more control over the amount of taxes the person pays than do income and wealth taxes. But many are bothered that people with less at stake in the political and economic system (poor people) tend to pay proportionally more in consumption taxes than do wealthy people with more at stake in the political and economic system for which the taxes pay, since less wealthy people tend to consume a higher percentage of their income or wealth than do wealthier people.

    I do agree with @miffedwhitemale ‘s assertion (comment #8) that everyone should pay something. A straight “per person” tax is fair in the “one person, one vote” sense that everyone has the same opportunity so they should all pay for the system that protects that opportunity (see comment #10 by @mattbartle ) . But others say it is not fair since not everyone has the same stake in the economic and political system for which the tax is to pay.

    So I can’t even decide on a reasonable category for a tax structure, let alone the implementation details :) . 

    • #17
  18. DonG (CAGW is a hoax) Coolidge
    DonG (CAGW is a hoax)
    @DonG

    The trick is to make a tax system that cannot be corrupted by Congress.

    • #18
  19. Dr. Bastiat Member
    Dr. Bastiat
    @drbastiat

    Ekosj (View Comment):
    Thats why I favor a national sales tax.

    I agree.

    An income tax is a horrible ideas in many different ways.  We should dump it.

    Everyone should pay at least some tax – I suspect many would vote differently.

    Taxes should be obvious and clear, not hidden and cryptic.  If the government wants to raise taxes, they should raise taxes on everybody, in an obvious manner, like raising everyone’s sales tax by 1% or whatever.

    I think it’s more important to cut government spending than taxes.

    But getting rid of nearly all taxes, then starting a national sales tax, probably makes the most sense, in my view.

    Which will never, ever happen.

    • #19
  20. Ed G. Member
    Ed G.
    @EdG

    Federal:

    • replace payroll tax with tariffs
    • replace income tax with broad and shallow sales tax
    • eliminate estate and gift tax

    State:

    • Only income tax and fees. All income to residents taxable by the state regardless of source.
    • Eliminate sales/use tax to eliminate insane Nexus claims and interstate encroachment

    Local:

    • property tax and fees
    • Maybe limited sales/use tax and fees
    • #20
  21. Bryan G. Stephens Thatcher
    Bryan G. Stephens
    @BryanGStephens

    CJinMadison: I know a little bit about the Fair Tax — seems reasonable, but it’s so different as to be (IMHO) entirely impractical. The Flat Tax is pretty straightforward. But… what about all the minutiae? Taxing gas, property, inheritance, gifts, lottery windfalls, luxury goods, hotels, telephone service, mobile service, capital gains, child-tax credits, homestead credits, etc, etc, ad nauseum.


    The Fair Tax takes care of all the little issues because it is only on what you spend. That is it. Windfalls homestead etc. all mean nothing. They are income.

    The FairTax is a national sales tax that treats every person equally and allows American businesses to thrive, while generating the same tax revenue as the current four-million-word-plus tax code. Under the FairTax, every person living in the United States pays a sales tax on purchases of new goods and services, excluding necessities due to the prebate. The FairTax rate after necessities is 23% compared to combining the 15% income tax bracket with the 7.65% of employee payroll taxes under the current system — both of which will be eliminated!

    It is all on spending, nothing on income. There is no tax on any income on anyone for anything. The government no longer needs to track your income and know everything about you. All it cares about is money that is spent on new goods and services. Retailers will collect the FairTax just as they do now with state sales taxes. There is no need for the IRS and all its mess.

    The FairTax provides a progressive program called a prebate. This gives every legal resident household an “advance refund” at the beginning of each month so that purchases made up to the poverty level are tax-free. The prebate prevents an unfair burden on low-income families

     

    https://fairtax.org/

    • #21
  22. Flicker Coolidge
    Flicker
    @Flicker

    Matt Bartle (View Comment):

    I like an idea I heard somewhere that instead of a federal income tax Washington just bills each State for their share, and the States raise the money however they choose. Of course, “fair share” would be a sticking point.

    How about we just divide the federal budget by 320,000,000 and send everyone a bill?

    The fair share would be based on individual States’ requests.  And this would include ending mandates on the state, whether funded or unfunded.

    But if States are only getting their own money back, why should their citizens pay those amounts to the federal government in taxes?  They should just fund the States’ spending and cut out the expensive middle man.

    • #22
  23. The Reticulator Member
    The Reticulator
    @TheReticulator

    There is no ideal tax structure. Taxes are necessary, but all tax systems are inherently unfair.

    Some tax systems have advantages over others, though.

    Edit: I should add that I’m not in favor of a Flat Tax, but I’m in favor of a national income tax that’s flatter than the one we have now, i.e. without many of the deductions and exemptions that we have now.

    I’m definitely opposed to a Fair Tax.

    • #23
  24. Bob Thompson Member
    Bob Thompson
    @BobThompson

    It seems that, just as in other aspects of life, things that can be handled by local taxation work best.

    • #24
  25. Doug Kimball Thatcher
    Doug Kimball
    @DougKimball

    You can’t consider taxation before you deal with borrowing.  Taxes place no constraint on spending if the government feels it can and must borrow to fill funding gaps.  Worse yet, we must consider currency degradation.  We must have a monetary policy designed to control inflation.  This is all pretty difficult stuff to understand and with a legislature concerned only with the present (and intentionally attempting to design legislature to obscure most likely costs), we face an uphill battle.  So a few thoughts:

    1. Score the cost of legislation based upon a most likely cost.  Programs with sunset provisions and accelerated initial funding set arbitrarily to minimize scored net cost issues, programs that would most likely persist with increased cost, would be scored based upon consistent funding and likely entrenched spending beyond sunset.
    2. Score funding provisions not upon current economics, but also in consideration of the market’s likely reaction to new taxes and tax avoidance.
    3. Simplify taxes and brackets  Eliminate all corporate taxes.  Tax dividends and interest net of a factor for inflation.  Calculate long-term capital gains after eliminating implicit inflation.  The inflation rate would be based upon the prior year’s actual inflation rate.
    4. Eliminate all payroll taxes and estate taxes; limit the inherited step-up in basis for assets transferred via trust or in probate but upon disposition, allow the inflation factor from the year the assets were initially acquired by the trust or donor.
    5. Set the current tax rates based upon a tax yield equal to the previous year’s spending less all non-income-tax revenue (imposts, tariffs, fees, etc.)  (net spending.)
    6. Set the tax rates based upon a minimal number of brackets.  The first bracket would be based upon 2X the national poverty rate.  Taxable income would be calculated based upon capital gains, dividends, interest, salary and wages, the value of state and federal subsidies for food, housing, telecommunications, fuel, etc.  People under this threshold would pay some minimal tax.  The next bracket would be for folks making up to 3-7X the national poverty rate.  They would pay tax based upon covering 1/6th of the prior year’s net spending.   The next bracket would be those making 8-12 times the national poverty rate.  They would pay tax equal to 1/4 of the prior year’s net spending.  The final bracket would cover the remaining funding gap.
    7. We can keep a limited mortgage interest deduction and the charitable deduction.
    8. Charge the Federal Reserve with control of inflation and eliminate their consideration of employment.  Set an inflation goal and force the Fed to take steps to meet that goal.  Force the Treasury to sell bonds in the market and not to the Fed so long as inflation is above the target.
    9. Privatize Fannie, Freddie and Sallie.  Prohibit the Fed’s purchase of Fannie, Freddie or Sallie’s paper.
    • #25
  26. Steve Fast Member
    Steve Fast
    @SteveFast

    Here’s an overview (well-regarded, I think) of optimal tax theory by Gregory Mankiw, et. al. of Harvard:

    https://scholar.harvard.edu/files/mankiw/files/optimal_taxation_in_theory.pdf

    • #26
  27. Bryan G. Stephens Thatcher
    Bryan G. Stephens
    @BryanGStephens

    The Reticulator (View Comment):
    I’m definitely opposed to a Fair Tax.

    Why?

    • #27
  28. The Reticulator Member
    The Reticulator
    @TheReticulator

    Bryan G. Stephens (View Comment):

    The Reticulator (View Comment):
    I’m definitely opposed to a Fair Tax.

    Why?

    Because you can’t have a tax without unfairness.

    • #28
  29. Bryan G. Stephens Thatcher
    Bryan G. Stephens
    @BryanGStephens

    The Reticulator (View Comment):

    Bryan G. Stephens (View Comment):

    The Reticulator (View Comment):
    I’m definitely opposed to a Fair Tax.

    Why?

    Because you can’t have a tax without unfairness.

    You are opposed to it based on its name? 

     

    • #29
  30. The Reticulator Member
    The Reticulator
    @TheReticulator

    My favorite tax reform is one that has no possibility of public support, which absolves me of any responsibility to take it seriously. 

    • #30
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