Wednesday, July 27, 2011

How to raise taxes the easy way

Fix deductions at a constant nominal amount and let inflation reduce their value.

That is all.

If you want to eliminate the distortions that our tax code introduces into the economy, let the standard deduction increase with inflation and fix all other deductions.

2 Comments:

Blogger Yoel Natan said...

Taking From the Poor and Giving to the Rich
Both Parties' Debt Plans Play Robin Hood in Reverse

By J.J. Goldberg
Published July 29, 2011

http://forward.com/articles/140550/#ixzz1TZbx0k8h

What they don’t tell you is that income tax is only part of the story, and a declining part. When Reagan took over in 1981, 47% of all federal revenue came from personal income taxes, 12.5% from corporate tax and 30% from the so-called payroll tax. (That last one is the special Social Security and Medicare tax, which hits everyone, rich or poor, with the same rate on every dollar they earn up to a given ceiling. Anything you earn above the ceiling is payroll-tax-free.) Today the government gets 43% from personal income tax and 7% from corporate tax. The payroll tax, the most regressive federal tax, provides 40% of all revenue.
The result has been a dramatic shift of the tax burden from the rich to the middle class and poor. In 1980, the bottom half of the population, with 17.7% of the nation’s income, paid 0.5% of all federal revenue. Today the bottom half takes home 12.25% of the income and provides 6% of revenues.
At the other end, the top 2% took home about 15% of all income in 1980 and paid about 48% of all revenue. Today, the top 2% takes home about 28% of income and pays 32% of revenue.
Finally, which spending has gone up? When Reagan first entered, he raised military spending. Over time that slowed down. Social Security? It’s stayed around 20% of the budget. Housing? Research? Parks? Minimal. Here’s what’s shot up: Medicare and Medicaid, from less than 7% of budget to about 20%. Recipients don’t visit the doctor more often, but the same visits cost more every year. Anything else going up? Yes: annual interest on the debt.
And there you have it: A monumental shift of income to the very rich from everyone else, and a quiet shift of the tax burden from the richest to everyone else. A gigantic hole in our Treasury. Some very rich job-creators. And jobs? Not so much.

3:58 AM  
Blogger Octavo Dia said...

In that regard, the really big problem is that we allow management fees for investments funds to be counted as capital gains instead of income. The top five hedge fund managers earn more than all the CEOs of the Fortune 500. If those fees were counted as income and taxed accordingly, it would go a long ways towards changing the disparity.

11:52 AM  

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