Frayed Ends: Business, Economics, and Tax Policy 3.0

[St. Clown]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

What, you don't think that's already happening today? What's your point?

I don't know if it's joe's point or not, but adding taxes to business transactions has been shown to push more businesses into taking part in the black and grey markets. (Tossing out fake figures now just to explain the point.) At a 15% tax rate, a shop owner might report 100% of its sales and thus be completely within the law. meanwhile, that same owner might find a tax rate, say 25%, where now the shop is running 80% within the law and the remaining 20% of business being off the books, or hiring on a new employee who only comes in once per week might get paid from petty cash rather than through the payroll, thus evading taxes for both the employee and employer. We move on to different rates of taxing and we'll see different levels of black market participation. There must be labor economists out there who've studied the subject, but I've never read into the subject in any sort of depth.

 

[joecct]

What, you don't think that's already happening today? What's your point?

Do you tax it or don't you tax it? A fair tax taxes it (via consumption), every other tax plan that I've seen continues to ignore it.

 

[ScoobyDoo]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Do you tax it or don't you tax it? A fair tax taxes it (via consumption), every other tax plan that I've seen continues to ignore it.

I'm willing to add consumption to the formula but it has to be a very very low number. Consumption taxes may be the most regressive of all, sans Social Security.

 

[Rover]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

What are you getting taxed at now? Effective & marginal.

And you forgot the Clintons and Steyer in the above. In case you missed it, they're filthy rich, too.

With a mortgage, two kids, a 401K, state taxes, and property taxes, I easily exceed your deductible threshold. Furthmore, the first 18K of taxable income is taxed at 10%. So, you're asking me to pay more taxes before we even get into how the locals/state will sock me in higher property and income taxes once the draconian federal budget cuts kick in....all to give the Kochs, Clintons, Steyers, Romneys, Pauls, Forbes, etc etc a massive tax cut? Joe, what planet do you live on? How is that possibly fair, even in the miracle of miracles you could do this and still make it deficit neutral?

Depending on your income level, family status and place of residence, how much you get to write off before your income becomes taxable is critical. Given that the people of high cost states are the same ones who are net donors to the federal treasury while conservative states not named "Texas" are ALL leetches from a what they pay vs what the get back standpoint, I'm not sure turning around and asking these people to share and even larger burden makes sense. If you can write off call it 50K and the next 18K is @ 10%, really to break even on this tax scheme you're looking at making north of 150K a year gross if married filing jointly. Even over that amount your benefit would be marginal until you got to the next highest tax bracket.

In the meantime, the people in the 35%-39% tax brackets make out like bandits. No. Thanks.

 

[FreshFish]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Furthmore, the first 18K of taxable income is taxed at 10%

wrong, the first $18K after deductions and exemptions is taxed to you at 17.65% AND to your employer at 7.65% as well. The proposal eliminates the distinction between income tax, FICA tax, and Medicare tax.

 

[FreshFish]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

The actual term is "cost plus fixed fee" (CPFF), where "fixed fee" means that the number of dollars of profit is fixed - the government pays the contractor for their (variable) expenses, plus a fixed amount of profit. So, if a company wins a $1M contract with a fixed fee of 80,000%, their profit will be 8%. However, if the contractor overruns the expenses and the effort ends up costing $2M, the government pays them the $2M cost plus the $80k fixed fee, so the company's profit is now only 4%. From the investors' point of view, therefore, it's actually better if the company *doesn't* overrun the cost - the profit (dollars) is the same in either case, but the profitability (percentage) is lower as the costs go up. Additionally, contracts that overrun generally either do so because they take longer than planned or require more labor than planned - both of those cause the company to invest more capital (for office space, etc) than was planned, and those expenses cannot be charged to the contract. So the overall financial position of the company is most definitely worse if they overrun, not better.

The actual causes of cost overruns in my mind are:

1) Government caused requirements creep. The military being what it is, program managers tend to rotate in and out every couple of years, and each one allows his pet "bells and whistles" to be added to the contract - but nobody ever removes the last guy's "desirements."
2) Government tacit collusion in underbidding. Even if the military thinks it will cost a billion, they let the contractor get away with bidding 500M, because they know Congress won't give them the billion up front.

In New York state, at least, there is another built-in cost, which is kickbacks to the government officials who awarded you the contract in the first place.

 

[FreshFish]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

I don't know if it's joe's point or not, but adding taxes to business transactions has been shown to push more businesses into taking part in the black and grey markets. (Tossing out fake figures now just to explain the point.) At a 15% tax rate, a shop owner might report 100% of its sales and thus be completely within the law. meanwhile, that same owner might find a tax rate, say 25%, where now the shop is running 80% within the law and the remaining 20% of business being off the books, or hiring on a new employee who only comes in once per week might get paid from petty cash rather than through the payroll, thus evading taxes for both the employee and employer. We move on to different rates of taxing and we'll see different levels of black market participation. There must be labor economists out there who've studied the subject, but I've never read into the subject in any sort of depth.

There is also the barter economy which is larger in some areas than others. Technically one is supposed to report the value of goods/services received in lieu of cash, though that rarely happens.

The two biggest spending problems I see in the federal government have nothing to do with transfer payments to the poor. One is the outsize ratio of administrators to service providers. Payroll costs relative to services provided are way out of line. Another is redundancy. We now have 49 (!) different jobs training programs at the federal level, that is more than three for each Cabinet department. Absurd.

 

[Rover]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

wrong, the first $18K after deductions and exemptions is taxed to you at 17.65% AND to your employer at 7.65% as well. The proposal eliminates the distinction between income tax, FICA tax, and Medicare tax.

So in short it has zero prayer of ever paying for itself as the reductions that would entail would pretty much cause both entitlements and national defense to cease to exist.

 

[FlagDUDE08]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

So in short it has zero prayer of ever paying for itself as the reductions that would entail would pretty much cause both entitlements and national defense to cease to exist.

If the country can transition into a totalitarian globalist empire, it can transition in the other direction.

 

[Rover]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Its all about priorities....

http://www.cnbc.com/id/102773728?trknav=homestack:topnews:9

 

[dxmnkd316]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

In the meantime, the people in the 35%-39% tax brackets make out like bandits. No. Thanks.

Precisely. I will never understand how so many liberals are hoodwinked by this flat tax garbage. When it comes to income tax, I'm fairly liberal. A progressive tax is necessary for the wealthy to pay their fair share. A flat tax does nothing but hurt the lower wage earners. Say you exempt some set amount, it still farks the middle class. I don't understand why this is such a difficult concept for so many to understand.

 

[dxmnkd316]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

I'm willing to add consumption to the formula but it has to be a very very low number. Consumption taxes may be the most regressive of all, sans Social Security.

How can you be so against consumption taxes and for a flat tax?

 

[ScoobyDoo]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

How can you be so against consumption taxes and for a flat tax?

Consumption taxes are inherently regressive. The poor spends all the money they have. A flat tax as I've outlined it exempts enough income from taxes that they pay zero.

 

[dxmnkd316]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Consumption taxes are inherently regressive. The poor spends all the money they have. A flat tax as I've outlined it exempts enough income from taxes that they pay zero.

Except it's still regressive and puts more of the burden on the middle class.

 

[ScoobyDoo]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Except it's still regressive and puts more of the burden on the middle class.

No it doesn't. I outlined tiering it and I also said the exemption number would have to be the right number. There's a number there that works. I'm considered middle class or rich depending on how you cut it and my plan gives me a significant tax break.

 

[dxmnkd316]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

No it doesn't. I outlined tiering it and I also said the exemption number would have to be the right number. There's a number there that works. I'm considered middle class or rich depending on how you cut it and my plan gives me a significant tax break.

So how is that ANY different from what we have now? All it does it do what the Republicans are paid to do, reduce the burden on the wealthy.

 

[ScoobyDoo]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

So how is that ANY different from what we have now? All it does it do what the Republicans are paid to do, reduce the burden on the wealthy.

You realize that 0 is less than the 15% payroll tax everyone who has a job pays, right? Or no?

 

[FlagDUDE08]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

You realize that 0 is less than the 15% payroll tax everyone who has a job pays, right? Or no?

Is it safe to assume you're an entrepreneur, and you're referring to the back-door tax breaks that exist to try to encourage people to create businesses, and in turn, the potential for creating small business jobs? I get the feeling you're trying to say that the current system is placing the burden on the "working class", i.e. those who are employed by someone else.

 

[ScoobyDoo]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Is it safe to assume you're an entrepreneur, and you're referring to the back-door tax breaks that exist to try to encourage people to create businesses, and in turn, the potential for creating small business jobs? I get the feeling you're trying to say that the current system is placing the burden on the "working class", i.e. those who are employed by someone else.

Not sure. All I know is the burden on the wealthy is greater under my plan as I'm sure that the flat tax number would be around 33% like Kepler suggested. That would make Romney pay 15% more in taxes than he normally does.

 

[Kepler]

Re: Frayed Ends: Business, Economics, and Tax Policy 3.0

Is it safe to assume you're an entrepreneur, and you're referring to the back-door tax breaks that exist to try to encourage people to create businesses, and in turn, the potential for creating small business jobs? I get the feeling you're trying to say that the current system is placing the burden on the "working class", i.e. those who are employed by someone else.

I think the point is that the current system has sheltered so much of the wealthy's income from funding government, that two things happen:

1. Revenue shortfall drives deficits.
2. As deficits eat into expenditures, government programs that benefit the poor and middle class are cut.

The rejoinder is that the wealthy pay the lion's share of the tax burden. The rebuttal to that is that they do because inequality is out of control and what's been happening is the wealthy have been paying a smaller percentage of an income so much higher that its relative share of total revenue has gone up. Basically, we're driving so many people into poverty that eventually the rich will be taxed $1 but it will be the only dollar of revenue, so they will pay "100%" of the burden.