For the record, I spent 40 years working as an IRS lawyer. What follows is heavily influenced by my political belief that we should have a strong but limited federal government, and need to re-invigorate the Republic which remains to us after the long march of the progressives toward a national government where the states are instruments of federal government power.
1. While I agree that there should be a flat rate (10% - good enough for God, good enough for government), it’s mainly because a progressive rate gives the erroneous impression that that people subject to that rate actually pay at that rate, which in turn provides political cover for the giveaways to corporate & other interests. But once you take into account the loopholes, tax breaks, incentives & credits the Congress builds into the Internal Revenue Code, the effective tax rate flattens out, & even appears to me to become regressive at higher income levels. And I don’t see how that can be stopped from happening in any system based on taxing income. In 2012, Mitt Romney and I paid taxes at the same overall percentage of income. And Mitt seems an honest man, despite certain political defects. It’s my gut feeling that with a 10% flat rate, the incentive to game the system via deductions, credits etc is significantly reduced.
2. On the business side, you cannot just declare all income to be taxable. You have to adjust for the costs of doing business, which vary radically across industries. So basically, deductions for such things as inventory & expenses can’t be eliminated - they are built into any fair system of tax based on income. My personal conclusion: however you prune the deduction/credits bush, it grows back.
3. You cannot abolish a tax collection agency, unless you don’t want to collect taxes. Someone has to keep the system honest.
4. Ultimately, any kind of tax system makes no difference when the government has an unlimited power to borrow or print money. Much of our current tax system amounts to a Potemkin Village. We could do just as well to have the government simply print/borrow all the money it wants to spend, but we need the illusion that the existence of a tax system provides.
5. The income tax, and a short-sighted Supreme Court, have given the federal government the ability to end-around the limits to federal power under the Constitution, by allowing the feds to bribe the state governments with money that has strings attached. The federal government has no Constitutional grant of authority to run schools, but run them they do, by threatening to withhold money from any state that does not obey federal guidelines based on progressive social objectives. Hence, boys in the girls bathrooms, or no more free lunches.
6. I try to always tip in cash, for reasons which you might be able to deduce.
Another thought-provoking post, Bill. I was listening to The Remnant podcast with Jonah Goldberg a few weeks back, and economist Brian Riedl said that in 2019(?) that the bottom 50% of income earners collectively paid $9 billion in income taxes.
Don’t get me wrong, I dislike taxes. But I also recognize that inflation (caused by the federal gov’t printing more money to fund increasingly-large budgets) is a tax on the poor. If a flat-rate 15% income tax were levied on everyone (regardless of what tax bracket you fall under), and then all write offs, tax credits, etc. were done away with, then *maybe* that could help the country’s financial situation.
The power to tax is the power to destroy. We left NY and NJ because the real estate taxes were exhorbitant. I now have no close relatives there. Everyone moved to Nevada, Arizona, North Carolina and Florida. We live in California where the tax situation is not ideal but thanks to Prop 13 our real estate tax is reasonable and under control which is important now that we are retired. Still gradually our real estate taxes, trash and insurance go up every year. We should be OK but If Prop 13 were rescinded we would sell and take all our savings and property out of state.
I knew a semi-retired doctor in NYC who owned his home free and clear and owed almost $50,000 in real estate tax. He sold his house invested in CD's and moved away. He was cashing in $20,000 a year in CD's just to pay his taxes. He said if he stayed in New York five more years he would be flat broke. That is wrong. Now he lives out of state in an apartment and pays zero real estate tax. Previously he paid NEW JERSEY STATE INCOME TAX, NEW YORK CITY INCOME TAX and NEW YORK STATE INCOME TAX as well as FEDERAL INCOME TAX. And he was a man who saved his money his whole life, paid off his home and made a very good salary at his medical profession. But he could not afford to be retired in NYC. Public housing is now the largest single landlord in NYC (about 8%). NYC is becoming a city of the few who are ultra rich and the poor. But taxes and crime are also driving younger New Yorkers and retired New Yorkers out of the region. A recent poll stated : “My family would have a better future if we left New York City permanently.”
The poll found 59% of respondents strongly or somewhat agreed with the statement, while 41% somewhat or strongly disagreed.
Chicago and New York are losing so many people and businesses due to oppressive almost confiscatory taxes AND declining public safety and services. I haven't been back to either city since the 1990s and I have no intention of living there or even visiting there again. Almost everyone I knew in school has moved out of state.
So back to my first point. The power to tax is a necessary power of the state, city and federal government. But when the state confiscates the savings and property of the retired middle class it is going too far and people will vote with their feet and pocketbooks.
Some points, somewhat overlapping…
For the record, I spent 40 years working as an IRS lawyer. What follows is heavily influenced by my political belief that we should have a strong but limited federal government, and need to re-invigorate the Republic which remains to us after the long march of the progressives toward a national government where the states are instruments of federal government power.
1. While I agree that there should be a flat rate (10% - good enough for God, good enough for government), it’s mainly because a progressive rate gives the erroneous impression that that people subject to that rate actually pay at that rate, which in turn provides political cover for the giveaways to corporate & other interests. But once you take into account the loopholes, tax breaks, incentives & credits the Congress builds into the Internal Revenue Code, the effective tax rate flattens out, & even appears to me to become regressive at higher income levels. And I don’t see how that can be stopped from happening in any system based on taxing income. In 2012, Mitt Romney and I paid taxes at the same overall percentage of income. And Mitt seems an honest man, despite certain political defects. It’s my gut feeling that with a 10% flat rate, the incentive to game the system via deductions, credits etc is significantly reduced.
2. On the business side, you cannot just declare all income to be taxable. You have to adjust for the costs of doing business, which vary radically across industries. So basically, deductions for such things as inventory & expenses can’t be eliminated - they are built into any fair system of tax based on income. My personal conclusion: however you prune the deduction/credits bush, it grows back.
3. You cannot abolish a tax collection agency, unless you don’t want to collect taxes. Someone has to keep the system honest.
4. Ultimately, any kind of tax system makes no difference when the government has an unlimited power to borrow or print money. Much of our current tax system amounts to a Potemkin Village. We could do just as well to have the government simply print/borrow all the money it wants to spend, but we need the illusion that the existence of a tax system provides.
5. The income tax, and a short-sighted Supreme Court, have given the federal government the ability to end-around the limits to federal power under the Constitution, by allowing the feds to bribe the state governments with money that has strings attached. The federal government has no Constitutional grant of authority to run schools, but run them they do, by threatening to withhold money from any state that does not obey federal guidelines based on progressive social objectives. Hence, boys in the girls bathrooms, or no more free lunches.
6. I try to always tip in cash, for reasons which you might be able to deduce.
Another thought-provoking post, Bill. I was listening to The Remnant podcast with Jonah Goldberg a few weeks back, and economist Brian Riedl said that in 2019(?) that the bottom 50% of income earners collectively paid $9 billion in income taxes.
https://www.cnbc.com/2022/03/25/57percent-of-us-households-paid-no-federal-income-tax-in-2021-study.html
Don’t get me wrong, I dislike taxes. But I also recognize that inflation (caused by the federal gov’t printing more money to fund increasingly-large budgets) is a tax on the poor. If a flat-rate 15% income tax were levied on everyone (regardless of what tax bracket you fall under), and then all write offs, tax credits, etc. were done away with, then *maybe* that could help the country’s financial situation.
The power to tax is the power to destroy. We left NY and NJ because the real estate taxes were exhorbitant. I now have no close relatives there. Everyone moved to Nevada, Arizona, North Carolina and Florida. We live in California where the tax situation is not ideal but thanks to Prop 13 our real estate tax is reasonable and under control which is important now that we are retired. Still gradually our real estate taxes, trash and insurance go up every year. We should be OK but If Prop 13 were rescinded we would sell and take all our savings and property out of state.
I knew a semi-retired doctor in NYC who owned his home free and clear and owed almost $50,000 in real estate tax. He sold his house invested in CD's and moved away. He was cashing in $20,000 a year in CD's just to pay his taxes. He said if he stayed in New York five more years he would be flat broke. That is wrong. Now he lives out of state in an apartment and pays zero real estate tax. Previously he paid NEW JERSEY STATE INCOME TAX, NEW YORK CITY INCOME TAX and NEW YORK STATE INCOME TAX as well as FEDERAL INCOME TAX. And he was a man who saved his money his whole life, paid off his home and made a very good salary at his medical profession. But he could not afford to be retired in NYC. Public housing is now the largest single landlord in NYC (about 8%). NYC is becoming a city of the few who are ultra rich and the poor. But taxes and crime are also driving younger New Yorkers and retired New Yorkers out of the region. A recent poll stated : “My family would have a better future if we left New York City permanently.”
The poll found 59% of respondents strongly or somewhat agreed with the statement, while 41% somewhat or strongly disagreed.
https://nypost.com/2022/04/06/why-majority-of-new-yorkers-would-rather-be-anywhere-else-poll/
Chicago and New York are losing so many people and businesses due to oppressive almost confiscatory taxes AND declining public safety and services. I haven't been back to either city since the 1990s and I have no intention of living there or even visiting there again. Almost everyone I knew in school has moved out of state.
So back to my first point. The power to tax is a necessary power of the state, city and federal government. But when the state confiscates the savings and property of the retired middle class it is going too far and people will vote with their feet and pocketbooks.