Tax Reform Panel

Off Topic Politics and World Issues
1

The Executive Summary can be found here:

http://www.taxreformpanel.gov/final-report/TaxPanel_1_11-1.pdf

Some entertaining reading so far, it will be interesting to see what, if any, makes it into law.

"If you were to start from scratch, the current tax code would provide a guide on what to avoid in designing an income tax system. Instead of a sleek and simple system designed to raise revenue for our national defense, social programs, and other vital public services, we have a system so complex that almost $150 billion is spent each year by U.S. households, businesses, and the federal government, just to make sure taxes are tallied and paid correctly.

This is more than the sum spent each year on televisions, household electricity, or cereal. Instead of a system that ensures that all pay their fair share, we have a system so confusing that two million taxpayers collectively paid over $1 billion more in taxes by making a wrong decision about the basic choice of itemizing or taking the standard deduction, according to a recent study. Instead of a tax system that draws revenue efficiently from the base of the nation?s considerable economy, we have a tax code that distorts basic economic decisions, sets up incentives for unwise or unproductive investments, and induces people to work less, save less, and borrow more. By some estimates, this economic waste may be as much as $1 trillion dollars each year.

The father of modern economics, Adam Smith, said the free market is the ?invisible hand? guiding every economic event. In today?s U.S. economy, the tax code is the true force. The tax code penalizes savings, contributes to the ever-increasing cost of health insurance, and undermines our global competitiveness. The tax code touches all of life?s major events: It tells us the best time to be born, the best time to marry, and the best time to retire."

2

[quote]mark57 wrote:
The Executive Summary can be found here:

http://www.taxreformpanel.gov/final-report/TaxPanel_1_11-1.pdf

Some entertaining reading so far, it will be interesting to see what, if any, makes it into law.

"If you were to start from scratch, the current tax code would provide a guide on what to avoid in designing an income tax system. Instead of a sleek and simple system designed to raise revenue for our national defense, social programs, and other vital public services, we have a system so complex that almost $150 billion is spent each year by U.S. households, businesses, and the federal government, just to make sure taxes are tallied and paid correctly.

This is more than the sum spent each year on televisions, household electricity, or cereal. Instead of a system that ensures that all pay their fair share, we have a system so confusing that two million taxpayers collectively paid over $1 billion more in taxes by making a wrong decision about the basic choice of itemizing or taking the standard deduction, according to a recent study. Instead of a tax system that draws revenue efficiently from the base of the nation?s considerable economy, we have a tax code that distorts basic economic decisions, sets up incentives for unwise or unproductive investments, and induces people to work less, save less, and borrow more. By some estimates, this economic waste may be as much as $1 trillion dollars each year.

The father of modern economics, Adam Smith, said the free market is the ?invisible hand? guiding every economic event. In today?s U.S. economy, the tax code is the true force. The tax code penalizes savings, contributes to the ever-increasing cost of health insurance, and undermines our global competitiveness. The tax code touches all of life?s major events: It tells us the best time to be born, the best time to marry, and the best time to retire."[/quote]

Anytime politicans change the tax code it gets jacked up.

Drastically reducing the ability to deduct state and property taxes is a swipe at blue states.

I guess the GOP forgot where their election campaign fund ATMs are located.

3

[quote]Marmadogg wrote:
Anytime politicans change the tax code it gets jacked up.

Drastically reducing the ability to deduct state and property taxes is a swipe at blue states.

I guess the GOP forgot where their election campaign fund ATMs are located.[/quote]

I’d agree with you in most cases, and who knows once Congress gets their greasy pork-stained hands on this. But I read up through Chapter 4 so far and I think it has promise. And while I don’t like the thought of losing my mortgage interest and property tax deductions I think the credits and other changes will result in a net gain for my family.

4

I would like to see the tax code re-written as well. I make my living (part of the 150 billion - a very small part) by supposedly knowing the tax code. There is no one that ‘knows the tax code’. I might have a better idea of where to look than the average hump, but my knowledge of the code is microscopic when compared to its ennormous size.

I would galdly give up my business, and get a job washing dishes somewhere, if the tax code were simplified to a simple flat tax, abolish the AMT, stop punishing real personal savings, and make SocSec/Medicare taxes subject to the same deductions that the income tax is.

Or -

If we just went to a consumption tax (National Sales Tax).

But if you leave it up to the politicians, they will find a way to screw us without having to give us so much as a thank you kiss.

5

Flat tax with no social security tax (lump it in) or a tax on consumption would make me happy.

6

[quote]rainjack wrote:
I would like to see the tax code re-written as well. I make my living (part of the 150 billion - a very small part) by supposedly knowing the tax code. There is no one that ‘knows the tax code’. I might have a better idea of where to look than the average hump, but my knowledge of the code is microscopic when compared to its ennormous size.

I would galdly give up my business, and get a job washing dishes somewhere, if the tax code were simplified to a simple flat tax, abolish the AMT, stop punishing real personal savings, and make SocSec/Medicare taxes subject to the same deductions that the income tax is.

Or -

If we just went to a consumption tax (National Sales Tax).

But if you leave it up to the politicians, they will find a way to screw us without having to give us so much as a thank you kiss. [/quote]

I’ve had this same dilemma as well. I learned late in life that I’m more of a math guy so I actually enjoy tax law because of its complexity and the fact that it’s number based. I thought about getting an advanced degree in tax law and practicing in that area. I haven’t done that because, on principle, there’s no reason for the tax code to be as complicated as it is. However, my company will pay for the schooling so I’m re-thinking my decision. Honestly, I don’t think anything will come of tax reform. As soon as start up companies realize that they’ll lose their net loss carryforwards, not to mention that various deductions and credits that businesses and individuals get, any talk of reform will end there. Most companies, and some individuals, will end up saving more in taxes with the right planning and advice than they pay their tax attorneys or tax accountants.

7

I’m holding out hope for a flat tax, but it looks better than what we’ve got now:

http://corner.nationalreview.com/05_10_30_corner-archive.asp#081542

TAX REFORM [Larry Kudlow]
The new tax-reform package ( http://www.taxreformpanel.gov/final-report/ ) from Connie Mack and John Breaux is a classic Washington compromise between Democrats and Republicans. You can see that in the static scoring and progressivity of the plan, as well as in the way that it double-taxes interest. However, there are many pro-growth aspects to the plan, in particular in that it reduces the top income-tax rate for corporations and individuals. The plan also offers cash expensing for business investments and profit calculations on a territorial basis; slowly phases out the housing deduction; puts family health care insurance purchases on a pre-tax basis; and reduces capital costs overall.

While there is no pure flat tax, or consumption tax, in the package, the good should not be the enemy of the perfect. Washington economist Kevin Hasset estimates that GDP would be 3 to 4 percent stronger under this plan, though it perhaps would be 10 percent higher under a single-rate flat tax.

Interest groups are planning a tax-reform initiative to spur White House efforts to put a tax-reform plan in the next State of the Union. It is rumored that House Ways and Means chair Bill Thomas wants a big-bang package that includes comprehensive tax and Social Security reform.

8

[quote]MikeTheBear wrote:

I’ve had this same dilemma as well. I learned late in life that I’m more of a math guy so I actually enjoy tax law because of its complexity and the fact that it’s number based. I thought about getting an advanced degree in tax law and practicing in that area. I haven’t done that because, on principle, there’s no reason for the tax code to be as complicated as it is. However, my company will pay for the schooling so I’m re-thinking my decision. Honestly, I don’t think anything will come of tax reform. As soon as start up companies realize that they’ll lose their net loss carryforwards, not to mention that various deductions and credits that businesses and individuals get, any talk of reform will end there. Most companies, and some individuals, will end up saving more in taxes with the right planning and advice than they pay their tax attorneys or tax accountants.[/quote]

I would be willing to bet real money that, if the tax code is scrapped for a fairer tax, there will be plenty of incentives for new businesses to continue to sprout up.

It’s like I tell my clients all the time - If you are doing something for the tax benefit only, instead of to make money, then you probably want to rethink whatever it is you are planning to do.

9

I agree. And if a company or individual sets up a transaction that’s solely tax motivated, it will be considered a sham and will be totally disregarded by the IRS.

From what I hear, a value added tax would still require accountants to account for all of the value that is added. I don’t know if a VAT is part of what this panel is considering but I know the idea has been batted around.

10

Be careful what you wish for as D.C. does not have our best interests in mind.

This will get screwed up.

11

Just do anything that greatly simplifies taxation… please!

That way we can point to it and bitch at our government and they’ll feel compelled to simplify our lives too.

[Eyes closed, fingers crossed, chanting… consumption tax, consumption tax, please, consumption tax]

12

[quote]vroom wrote:
Just do anything that greatly simplifies taxation… please!

That way we can point to it and bitch at our government and they’ll feel compelled to simplify our lives too.

[Eyes closed, fingers crossed, chanting… consumption tax, consumption tax, please, consumption tax][/quote]

Vroom - you’re looking over the fence and pretending that you live in the neighbor’s yard.

You are Canadian. The Internal Revenue Code has nothing to do with you.

Now quit staring into the neighbor’s yard, or I will be forced to turn the hose on you.

13

Yeah, Vroom, quit being such a hoser, eh!

14

[quote]vroom wrote:
Just do anything that greatly simplifies taxation… please!

That way we can point to it and bitch at our government and they’ll feel compelled to simplify our lives too.

[Eyes closed, fingers crossed, chanting… consumption tax, consumption tax, please, consumption tax][/quote]

From what I read it seemed like a consumption tax wasn’t going to be on the table. A flat tax maybe, but the panel seemed to frown on any kind of VAT or consumption tax. Maybe that was just the way I read it, though.

15

Just create a flat tax where there are no write offs for the “rich.” And zero taxes paid for anyone making under 30-K per year. The flat tax could be 20%.

How could anyone hate that?

16

[quote]ZEB wrote:
Just create a flat tax where there are no write offs for the “rich.” And zero taxes paid for anyone making under 30-K per year. The flat tax could be 20%.

How could anyone hate that?[/quote]

Because it would suck to pay 20% of $ 30,000 while someone else pays nothing and makes $ 29,999.

17

[quote]Zap Branigan wrote:
Because it would suck to pay 20% of $ 30,000 while someone else pays nothing and makes $ 29,999.[/quote]

The way it would work - at least under the Forbes plan would be that everyone is exempted for the first $30K. So if I made $29,999 - and you made $30,001, you would only pay $0.20 in tax - not $6,000.20

18

[quote]Zap Branigan wrote:
ZEB wrote:
Just create a flat tax where there are no write offs for the “rich.” And zero taxes paid for anyone making under 30-K per year. The flat tax could be 20%.

How could anyone hate that?

Because it would suck to pay 20% of $ 30,000 while someone else pays nothing and makes $ 29,999.[/quote]

I’m assuming that he meant an across the board exclusion of the first $30k, because otherwise would be extrodinarily stupid.

19

[quote]ZEB wrote:
Just create a flat tax where there are no write offs for the “rich.” And zero taxes paid for anyone making under 30-K per year. The flat tax could be 20%.

How could anyone hate that?[/quote]

that doesn’t answer how would you tax a business?

20

Rainjack, because the media we watch and read is so dominated by the US, the issues of the day, and the thinking of the day, has a lot of due with influencing thoughts north of the border.

So, I don’t see why you have to take potshots when I’m actually agreeing with you on something, but you’ve missed the mark.

Canada pays attention to events that happen in the global community, so if a successful consumption tax was ever put in place in the US, combined with our good revenue experiences with the GST, there’s a good chance it would be seriously considered.

P.S. Unless the rules change in a serious way, I will be eligible for social security when I get older, so the rules do/will certainly apply.