You're the new Tax-Man.

[Fly320s]

Dear APS Forum Member _______________,

Congratulations!!  You've been selected by unanimous decree of the President, Senate, House, and Supreme Court of the United States of America to become Supreme Ruler of the new and improved I.R.S.

Your job, whether you want it or not, is to update the US tax code as you deem appropriate.  You, Mr/Mrs/Ms ______________, are solely responsible for, and the final authority on, the tax code that will generate revenue to fund the federal budget.

Please get to work immediately.  Your proposal is due by 9:00am E.S.T. Monday, February 18.

Thank you for your continued citizenship.

Yours truly,
U.S. Federal Government.

The tax season is upon us.  I'm getting my papers in order to do my taxes next week.  This yearly review of how much money I've sent to the Federales, and how large a PITA it is to file taxes, has inspired me to fix the tax system.  Coincidentally, President Bush released his budget proposal for FY 2009 last week.  Luckily for you, you get to help run the country.

Rules:

1.  Your plan must fund the US federal budget for 2009.  FY2009 budget is $3.1 trillion. 
2.  To keep this simple, assume all revenue is derived from individuals.  No corporate taxes, tariffs, or other sources.
3.  You can't make Fistful pay for it all.  Yes, it is his fault, but you still can't do it.
4.  Don't get too picky, this is just for fun.


So, what will it be?  Keep the staus quo?  Flat tax rate?  National sales tax, ala the Fair Tax?  User fees for everything?  Taxes only on capital gains? 

To me, one of the jobs of the federal government, by way of the Constitution, is to treat each person the same in the eyes of the law.  That says to me that the most equitable way to divide the tax burden is to take the federal budget of $3.1 trillion and divide it evenly by the number of residents of the US.  Since we each get a equal piece (at least in theory) of the benefits provided by our taxes, we should each pay an equal piece of the burden.  So, 3.1 trillion, divided by 300 million equals..... $10,333 per person.  Yeah, it's a simple-minded idea, but it sounds reasonable to me.

Now, I know that there is no possible way for our very large and extremly complicated tax system to bill each individual for $10,333.  So, as a back-up plan, I like the Fair Tax.  At least most of it.  Essentially, it's a national sales tax, a consumer tax, if you will.  You only pay tax when you buy goods and services. 

I'd change it so that there are no deductions, "prebates," loopholes, or other means of avoiding taxes.  Now, I'm not trying to push the Fair Tax; it is just the one tax plan that I've heard that I like. 

Since you've been selected to be Head Bean Counter, what's your plan?

[Standing Wolf]

Since we each get a equal piece (at least in theory) of the benefits provided by our taxes, we should each pay an equal piece of the burden.  So, 3.1 trillion, divided by 300 million equals..... $10,333 per person.  Yeah, it's a simple-minded idea, but it sounds reasonable to me.

If we were to apportion taxes fairly and squarely, we'd see government cut by at least 75% in six months.

Government would never stand for it.

[SomeKid]

First, only registered voters pay. To register, you have to pay whatever your tax bill would have been, the previous year.

With that in mind, you take the Federal budget, divide it by the number of voters, add $100, and send it out. Don't pay, you lose registration and have to re-register by paying whatever the previous years tax burden was, but you are not allowed to register for 4 years. As a note, this budget is NOT for the military, but it could be sent there.

All citizens over 18 would also pay a flat fee of $5000. This fee would be dedicated 95% to military/border enforcement. (5% towards congressional pay/Presidents pay/electric bills water bills etc in the Fed buildings). Don't pay for two straight years, lose citizenship. If you fail to pay your annual citizenship fees, you cannot register or continue voting. If you pay every other year, your citizenship is revoked after 5 non-consecutive unpaid years. Citizenship could be regained by paying whatever the amount you SHOULD have paid, x2. (If you don't pay till you are 28 for example, that is 10 years x 5000 = 50000 x 2 you could regain citizenship by paying 100k fee.)

What do you guys think?

[trapperready]

What do you guys think?

What are you trying to accomplish with this innovative tax plan? What other ramifications do you suffer if you lose citizenship? Frankly, I think you'd have a lot of non-voters who would end up paying $5000 a year in taxes... or not.

[De Selby]

Fly320's:

Why is it that we don't consider taxing corporations in this hypothetical? It seems to me that, given the legal rights and protections afforded to corporations, there're very good reasons to impose taxes on them.

I like this idea:

So, as a back-up plan, I like the Fair Tax.  At least most of it.  Essentially, it's a national sales tax, a consumer tax, if you will.  You only pay tax when you buy goods and services.  

that cuts out the deductions, and lets people who want to save their money save it...encouraging people to put money to good use, rather than to spend it on consumables.

Tax policy is so complicated that you can shoot holes through any version though; IMO, it's better to spend time coming up with ways to force the government to wisely use the funds it has available, than to try and come up with a decent overhaul of the tax code.

[De Selby]

What do you guys think?

How do you plan to deal with the millinos of embittered non-citizens that this policy will produce within a few years' time?

"Tough-they should have been responsible" is great for making us feel good about imposing consequences on others, but it is proven ineffective against angry masses.  And you will have angry masses in unparalleled numbers if you implement something like what you described.  It's more important to have a working society than to be able to shout "But what we did was fair!" to the hordes that tear your government apart because of its draconian tax and citizenship policies.

[SomeKid]

trapper,

In the first part, I am making voters pay for whatever they let the government do. Vote for more government, PAY for more government. If you do not vote, the extra budget (SocSec, Medicare, WIC, etc) does not fall on you. Just national defense, and basic running of the FedGov.

No additional financial ramifications if you lose citizenship. You can live work and play, but you are not a citizen. You can't hold office though for example, and if you get attacked in some other country, the Gov would openly not care as you are NOT an American. Stuff like that you get to deal with.

SS, your first post where you state the Gov should be more efficient I agree with, the second I do not. I would NOT impose sanctions on non-citizens, so these would largely be the class of "I do not care" types. They are too apathetic to do anything, so they won't revolt. Since they are not even being made to pay any taxes at all, I would expect them to be quite content.

[De Selby]

SS, your first post where you state the Gov should be more efficient I agree with, the second I do not. I would NOT impose sanctions on non-citizens, so these would largely be the class of "I do not care" types. They are too apathetic to do anything, so they won't revolt. Since they are not even being made to pay any taxes at all, I would expect them to be quite content.

If they aren't voting, no one will even bother to pay lip service to their interests, and they will quickly feel the effects.  It's dangerous to have a country full of unrepresented types that will have the mentality that the country is theirs.  You might think they have no right to vote and control America because they don't pay, but you can't expect any of those people to agree with you...and that fact makes for a highly volatile scenario.

[SomeKid]

It won't matter if they don't agree. They don't vote under the current system, and under my idea they would not be taxed. They would LIKE my system.

[cassandra and sara's daddy]

so in your system the less than 1/2 of the folks who vote will carry the others?  that'll be a big hit

[SomeKid]

CD,

They could always tell their elected people to cut down the size of the government. Think about it. Most of the leeches would not be able to afford this system, so the producers would finally have the votes to end the welfare.

[Warren]

I have misgivings about direct taxation of individuals and businesses by the feds. The Feds should hit up each state/other for a payment. That way they only have 50+ entities to worry about rather than millions.

That said , I'll play based on how it is now.

 

Everyone would get an itemized bill. People could see exactly what they are funding. Yes, it would be huge, but people do have the right to know. In addition online would be a history of each tax, who voted for and against and an analysis of who benefits or suffers the most from the tax.

No withholding. People would have to write the check each year.

People could opt out of paying "their" share of subsides, welfare, or foreign aid. Consider it another way to vote on what you think is important.

No more pork. If your area gets a Federal disbursements in excess of what you paid in you have to pay directly and in full for the excess.

Anytime an elected official or high ranking bureaucrat gets caught in a scandal you get to deduct X% from your bill.

Every time Congress votes to raise their salaries you get to deduct X% from your tax bill.

For every percentage point over 10% that the government spends, in aggregate, that is considered waste you get to deduct 1/2% from your tax bill.

Whatever percent of total funds the government gets as a result of asset forfeiture can be deducted 1 for 1 from your tax bill.


All purchases of firearms, ammo or accessories are tax deductible. 

[Scout26]

Step 1.  No Withholding.  What you owe is due and payable in one lump sum on 15 April.
Step 2.  Once the fires are out,  pass Consititutional Amendment installing the flat tax at say 12% with a ceiling or max limit of say 15% on everybody and everything (corporations, imports and individuals).  You make a buck you owe Unka Sugar 12 cents.
Step 3.  .Gov must balance budget or .Gov shuts down until balance is achieved.
Step 4.  Sober up, as steps 1-3 will never happen.        

[HankB]

Since under the rules of this game, I apparently do NOT have budget authority, but only TAXING authority . . . here are my first decrees:

Every employee of every Federal agency that I determine is NOT explicitly allowed for in the Constitution has his salary taxed at 100%, with no deductions, credits, or allowances.

Every employee of every Federal agency that, during FY 2007, has or had the word "Diversity" as any part of his title or job description has his Federal salary taxed at 100%, with no deductions, credits, or allowances.

Every legislator exempt from Social Security has that portion of his retirement benefits that would exceed the maximum Social Security benefit taxed at a rate of 100%, with no deductions, credits, or allowances. His remaining benefits will be taxed at whatever the prevailing rate is for taxable Social Security benefits.

Except in times of declared war against a nation state, the President and every member of both houses of Congress that signs or votes for a budget that is not balanced shall have all salary, per diem, and investment income taxed at a rate of 100% until the budget deficit is made up. Exemptions shall exist for natural disasters on a case-by-case basis.

Every military leader ordering military lawyers to a combat zone shall have his pay taxed at 100% with no deductions, credits, or allowances.

[AmbulanceDriver]

Scout, your idea is almost identical to mine.  I like the idea of a flat tax across the board for every single individual over 18 years old.  You know, that whole taxation/representation link...     And corporations will have that same flat tax.  No deductions, no loopholes, make a buck, pay 10 cents (or whatever the flat percentage is).  No hiding by making your company an "offshore company.  If you want to do business in the US, pay the tax. 

[brer]

I would just distribute the tax across every citizen equally, whatever it takes to make the budget work.  I would also point out that firearms, ammo,  rope, tar, and feathers are tax free for the next year.

[Fly320s]

Fly320's:Why is it that we don't consider taxing corporations in this hypothetical?

1.  Just to make this exercise a little more simple.

2.  Corporations don't really pay taxes so much as they redistribute money from their customers to the IRS by calling it corporate income tax.

[Regolith]

Damn, I was going to take an axe to the budget until it could be supported based solely on Corporate taxes and various import duties, etc, and no longer needed to be propped up by individual income taxes (Corporations I see as fair game, as they are creations of the state).

Hmm....going by your standards, I'd institute a national flat tax.  Everyone pays the same.  Something like 15-25%.  Either that or implement a sales tax on non-basic items.  Food and other basic necessities would be exempt, but everything else would have a sales tax.  That way the amount of taxes you pay depends on the choices you make.  Works well in Nevada. 

[Paddy]

Divide $3.1 trillion by total retail sales in the U.S. last year.  That's the national sales tax rate.

[Fly320s]

Divide $3.1 trillion by total retail sales in the U.S. last year.  That's the national sales tax rate.

Individual sales?  I like that idea. 

Damn, Riley, I'm starting to worry about myself; I seem to agree with you more often. 

[doczinn]

HankB:

You get my vote.

[ilbob]

get rid of the corporate income tax and all the associated corporate freebies.

eliminate the death tax. treat inheritances and other gifts as normal income. allow each person a $2 million lifetime inheritance exemption.

get rid of the separate taxes on SS and Medicare. combine them with the existing federal income tax. no use pretending anymore that they are something other than just additional income taxes.

every adult gets a $10,000 exemption. every dependent is worth a $10000 exemption. that way a family of four making $40,000 pays nothing.

an extra exemption of $10000 for each person who is either 50% or more disabled, blind, or over 65.

eliminate all other deductions, credits, and exemptions, except:
allow retirement accounts to defer taxes until they are cashed in, and
allow medical savings accounts payments to be non-taxed (solves the mostly non-existent health insurance crisis all by itself).

no new non-taxable dividends (e.g-new municipal bonds).

set a single flat income tax rate at whatever it takes to pay the bills.

life insurance benefits would be treated as normal income. disability insurance benefits would be treated as they are today - if paid out of taxable funds by the beneficiary, they are not taxed.

social security benefits are taxed as normal income.

[Ben]

Step 1.  No Withholding.  What you owe is due and payable in one lump sum on 15 April.

That right there would be the most profound wakeup call for tax changes. All those people who have their taxes taken out a little at a time with every paycheck, and think that they're getting a "refund" at the end of the year, would have a VERY different view on taxes if they had to cut a big check every April 15th.

I don't expect it would ever happen, because the gov knows how difficult it would be to get the dough without withholding it.
 

[ilbob]

Step 1.  No Withholding.  What you owe is due and payable in one lump sum on 15 April.

That right there would be the most profound wakeup call for tax changes. All those people who have their taxes taken out a little at a time with every paycheck, and think that they're getting a "refund" at the end of the year, would have a VERY different view on taxes if they had to cut a big check every April 15th.

I don't expect it would ever happen, because the gov knows how difficult it would be to get the dough without withholding it.
 

make withholding optional. and the employee pays the cost to the employer for the withholding.

[beatnik]

Does anyone think that it's possible under those rules?

First of all, individual income taxes come about as close to $3.1 trillion as you can get to the moon by jumping.  If you cut out corporate and tariffs, that's 60% of tax revenues gone.

Second of all, nobody has factored in that only 90% of income taxes actually gets put into the system: the Fed creams 10% for themselves, right off the top.  2006 personal income taxes were about $1 trillion, which means that $100 billion dollars goes straight into someone's pocket.

Third of all, the only way Bush is able to maintain what's going on is skyrocketing deficit spending: he's upping it to $400 billion, right?  Add $400 billion per year onto an $9 trillion debt, and basically our $900 billion in "voluntary contributions" gets eaten up paying interest on that national debt.  It's like having a $24,000 a year job, a credit card with 26% APR, and $60,000 of debt on it.  It can't be done, at least not if you like to eat.

If we had to hang on to the Keynesian rape machine, the only way to do it strictly by personal income taxes would be to utterly destroy the federal government in its current incarnation.  Examples:

Iraq: gone. 
Afghanistan: gone.
DHS: gone.
Dept. of Education: gone.
FDA: gone. 
Farm Bill: gone.
HUD: gone.
NASA: gone.
EPA: gone. 
BATF: gone. 
DEA: gone. 
FBI: gone. 
CIA: gone.
NSA: gone.
Military: slashed, if not gone.

Seriously, people, you can't do it with the current numbers under the proposed rules.  But maybe that was the OP's point?

Suggested reading:
http://www.devvy.com/notax.html

(edited: sorry, the debt is only 9 trillion, not 11 trillion.  Only a couple trillion off.)