I gotcha. I think free markets can work in most situations...they just sometimes need some help to put the motivations in the proper place. Very similar to government in my mind. Checks/balances with motivations properly aligned.

Another problem with moving to a flat tax and arguing about how other countries how lower tax rates is also that most other countries in the world have a national VAT, where we don't (and the public would never go for a 20% VAT like the UK has for example). So they offset the lower income tax rates with that high VAT. We do the opposite.

An opinion on how it could play out.

Palestinian bid at U.N. distracts from the real crisis - CNN.com

I prefer a progressive tax system, but I might be able to live with flat total taxation(which we're pretty damn close to now). The problem with making the income tax flat is that it's the only tax that isn't regressive. Solving any "inequities" there will only mean the total tax burden is heavily waited towards the middle class.

The Palestinians need a Gandhi. Peaceful non-compliance met by Israeli violence would turn the tide far faster than any violence.

I think Abbas is that Gandhi? He has delivered peace from the West Bank and that economy is growing. Can't really blame him for Gaza.

Abbas is more of a technocrat. The Palestinians need a leader that can march at the front of a thousand peaceful demonstrators as they disobey the checkpoints. The images from those kinds of protests could change American opinion.

As long as the Palestinians react with violence, even stone throwing, the opinion in the US won't change, and until the opinion in the US changes the Palestinians won't have a real country.

I think it depends on the situation.

My father was a structural ironworker (until he fell - non-lethal). Hard, dangerous work that had to be done in 0 degree weather or 110 degree weather. He'd sometimes have to leave for work at 5am, he'd come home tired and dirty. I remember him having a book of stamps that he'd turn in for vacation time, typically one week a year. My dad was (and I assume still is) very pro-union, and I can understand why - somebody had his back for concerns with issues of safety, wages, etc.

One summer I worked construction for my aunt's husband. Most of the time I'd make $8/hr, which I thought was pretty good (it beat BK, that was for sure). One job though was at a school in Jersey, basically cleaning up the site. Lots of sweeping. From what I understood, because the contract was with the gov't (school system) it was a union job. For hours on this job I was paid something like $23/hr. Even though I wasn't in a union, and even though I was really only sweeping up dust and collecting trash.

There's a union where I work now, covering folks who work in the call center. Not a bad idea to limit/monitor volume of calls, ensure breaks, etc. However, the union also makes sure those workers get 8x8 cubes. Contractors? They may not get 8x8 cubes, they get the 6x6 cubes (building with ample space and many vacant offices, even). There is a big line painted in the parking lot. Employees can park on the side of the line closer to the building. Contractors (and some of us have been there over a decade) park BEHIND the line, even though the employee section of the parking lot is often half-empty.*


* This eventually DID get better, as contractors were given two spaces below the line. Cheaper to change the rule than paint a new line.

Something non-political.

Obama Signs Dramatic U.S. Patent Reform Into Law

I don't think we're very far apart on this at all...and I meant to add corporate welfare in my list of things to fix (though I lump it in with general loopholes as a matter of convenience).

I agree in principle that if I have $100, you have $1, and we're both taxed at 10% (for instance); that I have a much better capability to use my $90 to increase my wealth vs you with $0.90 have. But my only point is that we shouldn't (or maybe wouldn't) have this level of income disparity to begin with if we didn't have a tax code & oligarchy where I can use my $90 to bribe people with (or at least...it would take a good majority of my $90 to bribe "many" people and so would not be as worthwhile for me to engage in that). That's what I'm more focused on than anything else...changing the system so that it properly motivates its participants.

While I also agree on leaving the higher income tax rates alone until we get the deficit/debt under control (whatever that means, really), that we need to accept that some people have gotten rich based on playing a fixed game where the rules weren't clear to people on the outside. And unless we want to start witch hunts up again, and start asking people to prove their innocence in creating wealth or we start raiding their bank accounts, we just aren't going to get it back. I don't think we are terribly far from this being a populist opinion btw...but that's another complex topic itself.

But what we can do is fix the system that enables such behavior and stop improperly motivating people of ALL income brackets. This is the key to ANY system and should be fundamental in the discussion to answer regarding any regulation. So I would reword JP's earlier question of "how does this policy benefit people of a particular income class"...to something like "how does this policy ensure proper motivation of participants". Because that is why I believe our country has been so successful for the past 200+ years...enabling the "pursuit" of happiness, not the "guarantee" of it.

I'm just a dumb farmer, but what would happen to government revenues if the corporate tax was reduced to 25% but all loopholes were closed?

I've seen the effective corporate rate at @27%, but that figure is a few years old. With the recession and tax cuts I'd expect it is lower currently.

I'd love to see the gap between effective rates and statutory rates narrow, I just don't think it will happen because the money folks are quite happy with the complicated system we have. The last thing they want is a system that clearly says how much they have to pay with no room for interpretation.

Yeah, as JP said...it would simplify things greatly.

In short...I believe it would benefit small businesses greatly to reduce the rate to 25% and close the loopholes that most aren't using anyway (whether that be because they don't qualify for them or don't have an army of accountants/lawyers to help find them all). There are likely many deductions that small businesses can & do write off already which doesn't equate them to a 35% effective rate but on the whole, my understanding is they pay higher effective rates than the largest corporations.

I'd also be curious about that 27% figure. Was that calculated as an average across companies effective rates, or as a sum of all corp revenues vs. sum of all taxes paid? Those would probably lead to very different numbers.

A couple things.

The 27% effective rate is the average rate paid by corporations that qualify for corporate taxation.

Most small businesses don't pay the corporate rate. Different businesses use different tax structures, but for most small businesses the corporate rate doesn't matter.

If I'm reading this right, then that means it takes an awful lot of small companies paying greater than 27% to get that rate and compensate for the Googles & GEs.


Well, I'm talking more like small(ish) startups...LLCs, SCorps, etc. Even they can have variance but I'm thinking more along the lines of small startups that have investor funding and require a handful or more people to operate. Not a lemonade stand small business (as an example).

Actually this could piss me off quite a bit as a smaller inventor... but overall it makes sense as long as they don't have silly provisions that act as another barrier to entry to small timers. I need to go read this soon, if its laced with pro-corp poison I'll be sure to post an epic rant.

Having first to file can avoid some complexity with determining when patents are effective, and in theory only hurts lazy inventors that don't get a move on with filing. On the other hand you need to be that more paranoid about publishing anything before you have the patent as I'm sure there will inevitably be a court case where a professor tries to get back control of the invention they made an early paper about and some hack corporation plaigarizes it, translates to legal speak, and claims a patent on the basic field of the idea before the original publisher can turn it into a practical invention. Professional patent trolls could make this ugly.

The biggest losers from closing loopholes are big banks and multinationals, they have the most loopholes available to turn actual profit into low tax liability. Another set of loopholes revolve around capital gains and dividend taxes, also certain rules dealing with stocks (not only do they give away too much as compensation to incompetents, but they get tax advantages for doing so). Also certain time delays of tax burdens and cash flows can allow companies to report profit numbers in the news but post losses for tax purposes. Theoretically these are supposed to even out (you are just time shifting the money) but by moving the money around it often gets ate up by other loopholes or needs of the company so that the tax for that particular year never really does come to fruition.

To get more people closer to the flat effective rate you need to get rid of special privileges from making your money by sitting it in a hedge fund rather than 'earning it'. Simplification of the accounting codes would also make sense, they will always make a case that they need that loophole because otherwise they will get a black eye in a quarter three years from now, but I think similar benefits (as far as public policy is concerned) can be achieved by lower overall rates and straightforward mechanisms for spreading investments, losses, and gains over time.

The end result of no loopholes is some companies that are highly profitable end up paying in a lot more, and most of the companies that were doing what they were supposed to all along end up with a slight deduction (if the rate is reduced somewhat with the loophole closing).

Note companies should not have to pay any taxes if they do not make a profit, so you may see some companies rev up investment rather than pay the tax. As long as it doesn't all go into executive compensation (goes towards million dollar gold spittoons, little circulation effect) this would be a good thing for the economy, either increasing wages (and cash circulation) or aggregate demand for some sort of supplies or equipment investments (and cash circulation).

Sounds good to me.

Republicans Accuse Obama Of Waging 'Class Warfare' With Millionaire Tax Plan | Fox News

Lol. I guess they haven't yet that tax changes also bring changes in behaviors, esp. those that are smart enough to hire tax attorneys and accountants to find alternative means to reduce the tax burdens. The ignorant things that keep coming out of Washington would be comical if it wasn't so pathetic.

+1

I like that he has a plan for $4T in reduction but wasn't this the plan/compromise that failed ... that ultimately led to the current committee to find $1.5T in reductions.

Not sure I get why he is doing this other than playing politics?

Obama's debt reduction plan: A field guide - Sep. 16, 2011

So just because there are smart accountants and tax attorneys to find the loopholes, we should not try?

I don't really have any objections with the general premise of what he wants to do but I find his timing to always "appear" to be partisan. But the sad thing to me is that I don't think he actually is doing it that way...I think he's allowing himself to follow bad advice isn't seeing the partisanship of said bad advice.

Why wasn't this his agenda in 2010? Oh, that's right...can't make ambitious moves when there are elections coming up (despite the fact that they could pass an extension to the Bush tax cuts...just shouts incompetence to me). Why wasn't the jobs bill his plan in 2009? Oh that's right...we needed to pay for additional unemployment and couldn't be bothered with a thoughtful approach to getting people back to work.

I know he's had a lot of issues to step into and all. But I'm tired of hearing that as an excuse for why he hasn't been able to lead & make the system better. I really think he's a good man with good intentions but his presidency has just come off as being 2+ years of him being outgamed by his own party's corrupt sector which doesn't fully appreciate the economic turmoil average people feel. or in other words...Obama needs better judgment of people and their ulterior motives.

So is there no way to raise revenue through tax increases? I may be reading this wrong, but it sounds like you're saying there is no way to increase revenue due to lawyers and changes in incentives.

Simplifying the tax code would make it much easier to raise revenue through increasing taxes.

This, in specifically talking about "taxing the rich".

Addendum: That's why I mentioned that after the deficit deal, the next step must be rehauling/simplifying the tax code. What the WH does instead is to propose the same, tired tactics of increasing taxations on the rich, as if the Constitution allows the federal govt. to specifically target an entity.

I'd be all for narrowing the gap between marginal and effective rates, but I think that's even more difficult to get through Congress than Obama's plan. As long as the people benefiting from the loopholes are funding the politicians things won't change. The wealthy like their loopholes, thank you very much.

:lol:

By that logic, then it is impossible to actually raise taxes on the rich in anything but a "feel good" way since they (to Bucc's point) will continue to find ways to avoid said taxes (perhaps in different ways than today).

You can't on 1 hand say raise taxes on the rich, and on the other hand say they won't allow loopholes to be closed since they own the politicians already...without that same contradiction/dynamic making it equally implausible to pass the President's plan.

I think it's easier to raise rates than complete significant tax reform. Then it will take a significant period for enough loopholes to be built in to come close to neutralizing the rate increase.

But as to the general point that the rich run things, yeah. That's why there won't be significant tax reform and the rates won't go up (unless there is no deal and they return to the Clinton rates as already set by law). Because it's politically impossible to balance the budget on cuts alone, at some point the rich are going to have to decide if the debt/deficit is ever more important than their historically low tax rates.

The real gist is, there should not BE loopholes. Then there is no need for ridiculous time and money wasted on dealing with taxation in and of itself. With no loopholes the excessive moneys saved are not there to be poured into lobbyists pockets in an effort to create even more loopholes.

There should be a scale increasing bit by bit as total income/revenue increases so that those that need their incomes the most (the poor) keep more of it while those that need it less (the rich, corps and conglomerates) pay more.

Now how much more is based on percentages, not raw numbers. No loopholes. You reach a tax bracket, you pay that brackets tax level. No deductions, no cuts, no special offshore savings. Count the beans, tax the beans.

A Utopian vision of taxation?
Imagine a simplified tax code. It's easy if you try. /end John Lennon side bar

I could get behind this. Imagine the savings in cutting back on the IRS work force to deal with a minimized return. They'd probably move a bunch of folks over to the enforcement side of things, and reap pretty good dividends from that effort.

That said...Historically what has happened, and would happen again, is that someone would get a deduction. Say parents with disabled children or some other sympathetic group. Then the slippery slope engages, and dozens of other groups will get their exemptions. Then everyone. Home owners are a pretty sympathetic and deserving group...right? Yeah lots of people could support those decisions, and the folks making those well supported decisions will get reelected by those they benefit. We end up right back where we are today.

And there's the fundamental philosophical difference that prevents meaningful reform (and the support for various loopholes).

I don't think you can get rid of everything right away. A lot of these tax breaks have distorted the market in ways that would be initially very painful to correct. Imagine the effect on home sales if the mortgage deduction vanished instantly.

Lord knows I don't want it to happen mind you but if there's ever a time this might be it. After all a 50% reduction in zero isn't a big number.

Given that home sales are already in the tank, this might be the perfect time to get rid of the mortgage deduction--hardly anyone is buying anyway. If we wait until home sales pick up again, everyone will say "we can't get rid of the deduction now, sales will drop and we'll kill the recovery."

Even with bad home sales numbers there are still a ton of home purchases in the U.S. Looking at 2010 numbers, over four million existing and new homes were purchased. At an average price of 220,000 that's nearly 900 billion in sales.

Which would bury those who are underwater and can't refinance to a lower rate, resulting in a huge increase in foreclosures. Ummmmm, no.

How exactly does the home interest deduction even work? I have never actually claimed it. It could be that my house is considerably cheaper than what anyone else has bought, but I think the amount of interest was something like ~2500 and the combined marital deduction is 11000.

It's the basis for me itemizing deductions, but alone it doesn't beat the standard. After I take all the other deductions I qualify for I save a little.

It's simply one of the itemized deductions- and a pretty big one for a lot of people.

I was able to itemize last year, and the year before because of it (that and state taxes are about my only itemized deductions)- I will most likely lose it soon when I get married, and even if I didn't I'd lose it soon as the amount of my interest is dropping pretty quick while I pay a little extra.

Edit to add: I'm poor right now and don't make too much, but if I was going with the standard deduction last year instead of itemized it would have cost me about an extra $175 in taxes.

Still...you're talking about total sales, not people who finance. I realize a lot of people finance but there are a lot of cash buyers as well these days scooping up inventory & renting it out.

As much as it is REALLY not in my financial interest to do it...I could go along with it if we are in a "lets reform everything while we're at it" state of things.

But I do agree that if its literally the only thing we want to eliminate...then that will not help anybody...and just add further pressure on housing that will lead to other problems (drastic increase in defaults being one of them).

I'd like to get the marginal and effective rates much closer together. Within that goal I'm willing to be pretty flexible. However, I do think that kind of tax reform has to happen over time or at least with temporary offsetting credits because different markets have been so drastically distorted. It's still a good idea to remove a lot of those distortions, but the cure shouldn't be more painful than the disease.

Well, I think enacting a tax reform bill that eliminates every deduction doesn't haven't to be misconstrued as a bill that IMMEDIATELY eliminates every deduction. You can set dates for when certain deductions will be phased out and make it as painless as possible for people.

A good way to get around this is to allow those that are underwater at a higher rate to be bumped down to a lower rate despite the underwater situation. If that happened, the move to lower deduction levels would be more than offset by the decrease in monthly payments. You're essentially taking from the rich (big banks) to pay more taxes while allowing individuals to remain net even or perhaps even a slight decrease in overall cash outlay (home payment + taxes).

I know that I am racist and elitist for getting pissed about welfare handouts while I go to work to support my family... so what am I if I get pissed that I understood mathematics and didn't go out and buy a house that was 100K over my head? I guess somehow I am racist again right? :confused:

I don't see where it would be so bad to let people who are underwater on their mortgage refinance for the same amount under a current interest rate. If it keeps people in their homes and frees up a little cash, that seems like a good thing.

I don't think its racist/elitist to take that stance - but I do personally try and show compassion to people in a worse situation than myself, your statement tends to take the presumption that everyone on welfare is intentionally not working and everyone having problems with mortgage payments took out high mortgages.

In the current economic climate I'd argue that many people might have worked hard and been sensible - but found themselves on the wrong side of a lay-off and thus in trouble for no real fault of their own ....

I'm not talking about people who were in 'over their head'. I'm talking about people who continue to make their payments on their underwater house at 6-6.5% rates. If you drop those rates down to 4-4.5% without changing the principal that they owe, you're going to put them in position to have a lower payment while not paying a dime of the actual house principal off.

If you, as you say, bought a house within your means and still have a positive principal, then you should be able to refinance without any issues and receive that same benefit. This isn't a giveaway in any way. There's just a problem in that the old underwater/no refinance trigger doesn't work well in a recession.

I'm sure my thought isn't the only way to do it, but there's got to be a way to allow all of the mortgages to be refinanced to the current lower rates in this market as long as they aren't late on any payments.

First off, I think the mortgage deduction should be eliminated. It's one of those things in place that artificially inflates an industry. It puts an industry at an advantage over others. I'm not totally opposed to credits on certain things. I do think there are areas where it's a benefit to society as a whole.

With that said, I don't think you can eliminate it tomorrow. People have purchased under the belief that they would have it. I would recommend a gradual reduction of it over the next 10 years. Maybe 10% each year.