Congressman calls for new U.S. tax code

Source: AJC

Congressman calls for new U.S. tax code

By MARILYN GEEWAX
The Atlanta Journal-Constitution

Published on: 09/07/07

Washington — The powerful chairman of the House Ways and Means Committee on Thursday launched a push to rewrite the U.S. tax code from top to bottom.

Presiding over a marathon hearing at which 20 experts with widely varying views offered suggestions, Rep. Charles Rangel (D-N.Y.) said he has two goals.

First, he asked, "How can we improve the economy of the United States of America?" Second, he wants to "make sure there is a sense of fairness" to the tax code.

The key, Rangel made clear, is that any tax reform proposal should assume that Congress will eliminate the alternative minimum tax.

That tax is hitting harder at middle-income families and must be abolished, he said. "We have a responsibility to address the problem presented by the AMT," he said. But eliminating the unpopular AMT would cost federal coffers $872 billion over 11 years, leaving Congress with no choice but to offset the loss. "We have to look at the entire tax code," Rangel said.

Read more: http://www.ajc.com/business/content/business/stories/2007/09/06/tax_0907.html

the IRS will only have to look at the hundreds of thousands of corporations, rather than hundreds of millions of Americans. Also, the right-wing have been arguing for years that all corporate taxes are passed on to the consumer anyway. This is my simple solution. Plus, it will make the Dems look like gold when we say we'll be getting rid of your income tax! Comments?

or just move offshore to beat the tax man ?

should pay as he then will be interested in what his govt. is doing and with his money. Plus he gets stuff from his govt. I think corp. should not be a 'person. and if every one who worked for a corp. paid tax the corp. would not need to pay but some of those profits should seep down to the workers that make the corp. go. We pay the corp. taxes when we buy from them any how as they just tack the cost on the goods sold. I think it should be a flat tax on every ones income. Say you pay 1 percent on every dollar you make. No house or stuff to write off and let the towns and states do the rest for the local stuff. Oh well who cares what I think.

First, eliminating the AMT would allow the ultra-rich avoid paying any taxes at all by hiding their income in creative tax shelters. Rangel should simply adjust it rather than abolish it. It was originally enacted because billionaires were getting a free ride.

Second, the idea that "corporations don't pay taxes, they just pass it along in their products" is an old tired right-wing plutocrat talking point. It's easy to refute by simply showing the obscene salaries the CEO's make. That money comes from somewhere, you know. Raising the tax rate on corporations won't have any effect on the price of its goods or services -- that's driven solely by the market.

Third, the "flat tax" idea has already been thoroughly deconstructed. It's code for "eliminate taxes on the wealthy" (along with another related scheme -- the "national sales tax.") Plus, our own history shows that the period during which the country had its strongest manufacturing sector and thriving middle class was before Reagan, when the graduated income tax had the top marginal rate at 70% or even higher. ("Top marginal rate" means the tax you pay on the last dollar you earn, not the first, which is taxed at a very low rate.)

I say no tax shelters for any thing. The CEO or corp. workers would pay the 1 percent (just a percent I am using) on all their income. The corp. has to get its money from some place so my guess is it comes from the profits from what it sells or gives in service so that is where the CEO gets his pay, and the workers and stock holders. All should pay on this. If some of those profits had to seep into the works on a more fair base that would change. If we shut out buying from some of these corp. that would be pretty easy. Even the auto co. are starting to build what the people want after the lose to over seas co. If every one paid the same percent the rich would be taxed and not get away with what they do to day. I am not even sure I like a flat rate in a percent for all and I some times think a set amount for every one would be even more fair. That is most likely to far out to even think about. It is like the draft. I have changed my mind on it as I think we should not have a standing army but one that comes from the people and more care would be used in the making of war. I was for the draft to be gone but over the years I see the smarts of our founders more.

If the corporation has to pay more taxes and is going to keep the price of its goods and services the same, they are going to lower employee salaries across the board to make up the difference.

I just took GE as an example that I could find some data on easily.
CEO compensation (2006) - $8,300,000
Number of employees - 307,000

If they have to pay an extra $8,300,000 in taxes do you think that the CEO is going to take a massive pay cut or do you think that the employees are all going to lose about $27 a year?

If they have to pay an extra $800,000,000 (roughly 100 times the CEO salary) do you think that the CEO is going to take a pay cut or do you think that the employees are all going to lose about $2,600 a year?

Who has a bigger voice? Hundreds of thousands of employees losing a few thousand dollars or one CEO losing a few million dollars while still making several million a year? It would be nice to believe that it is the workers, but I would not bet on it.



http://investing.businessweek.com/research/stocks/people/people.asp?symbol=GE
http://money.cnn.com/magazines/fortune/fortune500_archive/snapshots/2005/561.html

I am sorry to disagree with you but flat taxes are extremely regressive. Sales taxes are flat taxes, telephone taxes are flat taxes and who would think them fair when it comes to buying necessities or having communication? The idea of progressive taxes is that the more you have the more you can afford not to have. What I am saying is that for example someone with $100 to spend but with a 10% flat tax will really only have $90 in goods they can purchase. Someone with $100,000 to spend will still have $90,000 in purchasing power. That is a whopping difference. I agree that taxes are one way to have a social cohesion but I will always favor some sort of sliding scale.
Would you favor a flat real estate tax where the million dollar home owner pays $100,000 but you pay $10,000 on your $100,000 home?

From a coupla years ago:



And a flat tax, which is sometimes called a "fair tax" in proponent propagandese, would create even more disparity if particlularly regressive payroll taxes are left unchanged.

"Flat Tax" is a single-rate income tax. Most of its proponents call for a "floor"--an amount of income exempt from taxation--and no deductions, credits or other tax-lowering devices on income above that figure.

"Fair Tax" replaces income and payroll taxes with a federal sales tax on the purchase of services and unused goods.

It's possible to make the Flat Tax revenue-neutral. That probably wouldn't ever happen, since the intent is to lower taxes on the rich and making a flat tax revenue neutral would cause taxes on the rich to go up, but it could be done.

The "Fair" tax can never be revenue-neutral, and it's not intended to be. Its intent is to eliminate social spending by reducing revenues to the point there's no money for social spending.

and I'll sign on!

With a heavily progressive tax rate. I'd like to see the marginal rate on multi-millionaires raised to 90% again as well as a 110% tax rate on incomes greater than 10 million per year...

"How can we improve the economy of the United States of America?"

-end the war. stop outsourcing jobs, which would put more money in Americans pockets. And fine the corps that do outsource.

-cut all the bush* tax breaks given to the rich. Give tax breaks to the poor and middle class and institute a profit tax on corps.

"make sure there is a sense of fairness" to the tax code.

-make sure there is over site. Period.

We have lived so long in the country with out of control rampant raping of the poor and middle class by the neocons that any oversight would be welcomed.

After that, put in long term tax incentives to generate income to deflate our gigantic-ass deficit.

but frankly, given the fact that moron* and his room full of dopes barrow to the tune of 200 billion a month just to pay the interest on our ballooning 9 trillion dollar deficit, we are so totally fucked for the next several generations. And to think moron* was handed a budget in 2001 that could have been balanced and was looking at a surplus, but like everything he* touches or tries to "fix", he* fucked that up.

to recap. we are fucked.

All the special tax breaks for corporations and specific but unnamed entities should go.

They should be paying more in taxes and deserve no tax cuts

75% of everything over $75,000 adjusted gross.

Double it for married people.

A single guy making $150,000 AGI would be paying 37.5% of their taxable income. That's after deductions for kids, morgages, retirement savings, and medical insurance.

The CEOs would take it up the ass. Oh well, my heart bleeds because the CEO of Pfizer would "only" be taking home a little over $2 million a year of his salary.

Help the poor and lower-to-middle middle income. Tighten the screws on the wealthy. Too many rich people owning too many assets are a clear and present danger to democracy.

And keep that estate tax.

Not taxing capital gains means you penalize people who work, and reward people who don't. CEOs get most of their compensation in stock options, which are taxed as capital gains. It's one more way to screw the rest of us. Besides, much of the money I pay in taxes is in payroll taxes, sales taxes, gas taxes, state fees, any number of ways to make the middle class and poor pay a higher percentage of their income than the rich.

Bill

Tax'em. No difference.

I figure this: once we've caught up with the national debt at the expense of the rich (who profit from the national debt to the tune of $200 billion a year, by the way) we next eliminate the gas tax and pay for infrastructure right from the general fund.

With increasing CAFE standards, hybrids, all-electrics, etc., all on the way, they will be under-paying taxes anyway.

Medicare for all cuts your medical costs by half, so that'll help, too. At least your payroll taxes will pay for ALL of your health care.

The state income taxes should also resemble my federal proposal, but that's up to the states.

And scrap the Bush tax cuts for the richest 2% to pay for it.

It's about time! This country has been going downward in a fascist spiral ever since the Reagan tax code re-write to favor the rich.

Bring back the Progressive Tax!

It gives the poor people that can barely afford to live, a chance to maybe eat, have a place to live or maybe a car or save some money if possible. The government can keep these taxes here plus the taxes from what we purchase. I mean how much do they need? No matter what we pay they will always borrow paper money from the reserve so that we are always in debt.

Federal Income Tax
Federal Unemployment Tax
Workers Compensation Tax
Social Security Tax
Medicare Tax
State Income Tax
State Unemployment Tax
School Tax

Sales Taxes (State and Local)

Real Estate Tax
Property Tax
Building Permit Tax
Well Permit Tax
Septic Permit Tax
Utility Taxes
Severence Tax

Corporate Income Tax
Accounts Receivable Tax
Privilege Tax
Inventory Tax
Food License Tax
Fuel permit tax

Inheritance Tax
Interest Expense
Capital Gains Tax
IRS Penalties
IRS Interest Charges

Liquor Tax
Luxury Taxes

Marriage License Tax
Service Charge Taxes

Telephone federal excise tax
Telephone federal universal service fee tax
Telephone federal, state and local surcharge taxes
Telephone minimum usage surcharge tax
Telephone recurring and non-recurring charges tax
Telephone state and local tax
Telephone usage charge tax

Vehicle Sales Tax
Vehicle License Registration Tax
Recreational Vehicle Tax
Trailer registration tax
Road Toll Booth Taxes
Toll Bridge Taxes
Toll Tunnel Taxes
Watercraft registration Tax

Gasoline Tax

Road Usage Taxes (Truckers)

Dog License Tax
Fishing License Tax
Hunting License Tax
Cigarette Tax

"tax us on what you purchase" is the most regressive of all the taxes we pay...

It hits the lowest income persons the hardest since they have to spend EVERYTHING they make on highly taxed consumer goods.

The rich "invest" their money and live off the dividends which are VERY lightly taxed only when cashed in...

Most of those you mention are designed to fund the activities or services being taxed.

Income taxes are the most PROGRESSIVE taxes we pay.

I would suggest a guaranteed annual income that equals a living wage and taxing incomes in a much more progressive manner -- bring back 90% for the highest paid (I'd vote for 110% for incomes greater than 10 million per year) and NO loopholes...

Totally unrealistic.

The tariffs will eliminate the incentive to ship our jobs overseas. No taxes on wages, only on unearned income (above a reasonable amount).

and making the FICA taxes apply to EVERY dollar earned or unearned..with NO CAP?

For most two-wage earners, a $50K per person exemption would do away with the need to itemize..no need for the mortgage deduction..or any deduction.. FICA & state taxes would be all that's necessary:)

Most families would do very well with the first $100K not subject to federal taxes..

The economy would boom too, if people had access to that extra money.

Corporate taxes need to be boosted too..they were just fine back in the 60's when our country was actually doing quite well, union wages and all:)

Corporations who have more than 25% of their production/payroll outside the US, should also have to pay double taxes .

Eliminate all federal taxes (and the IRS) and replace it with a single sales tax. Provide a rebate to all Americans equal to the sales tax on a basic package of necessities to eliminate the regressive aspects of a sales tax. Anyone who consumes above the basic package pays tax. Consume a lot - pay a lot of tax. Save, be moderate in consumption - lower your tax bill. Money made by illegal means (drugs, theft, whatever) will now be taxed as soon as the criminal tries to spend some of the ill-gotten gains. Right now those folks don't pay any taxes.

What the hell are are all the "Fair Tax"/flat tax loonies doing in DU? This is a board for PROGESSIVES, not economic royalists.

My view is that poor people, who consume relatively little, should pay no tax. People who consume a lot, regardless of income, should pay a lot of tax. What is your view?

I find it revealing that you chose to use words like "Right-wing", "loonies", and "economic royalists" rather than argue the merits of a position (any position). From the point of view of a reasoned argument you have lost already. Don't feel bad. I find lots of people at the DU who are unthinking, unable to support an argument, and who react in a way that is more instinctual than conscious, let alone truly reflective. Fortunately, I also find many folks here who present reasoned arguments with which I may not always agree, but at least I respect.

By the way, what is your definition for "PROGRESSIVES"? Perhaps it should be prominently posted so that those who might have different ideas can be forewarned of the wrath of the orthodox.

that is the primary reason Sales Taxes are typically regressive at worst, and at best still unfair.

http://www.daviddfriedman.com/Academic/Price_Theory/PThy_Chapter_4/PThy_Chapter_4.html

Please feel free to peruse the link, but i will try to explain how this principle relates to Sales Tax vs. Progressive Income Tax.

As it relates to taxation and disposable income, this principle states what many would consider to be common sense and not worth codifying, which is that people who have a monthly "nut" to pay, and that nut remains relatively static and tied to needs (we are not condiering luxury items for the purpose of this conversation, as they would be disposable income), it takes up x% of total income.

Now, to a person making $20K/year, a tax increase is much more devastating than an equivalent tax increase, even percentage-wise, than a person making $200K/yr or $2M/yr.

Because, once that perosn making the higher level of money has satisfied their basic needs, they have so much disposable income left over in terms of necessities that said tax increase doesn't hurt them badly because of the Declining Marginal Utility of their remaining currency.

The person making $20K/yr is crushed by the same increase because they already have no disposable income. The principle doesn't even apply to them because they have no disposable income that would decline in utility.

Therefore, shifting the burden from income to sales tax falls more heavily not on the rich (who may pay more in real dollars) but on the poor because unless a rich person is crazily free with their money, the ratio of (amount of goods purchased/total income) for a rich person could nbever be as high ofr a poor or middle class person because those two groups use huge percentages oftheir income just to meet basic needs of food, rent/mortgage, electricity, etc.

So a sales tax, ultimately would redistribute the burden of Imperial Amerikan taxation EVEN further on the back of the poor and middle class.

I am no ecomomist, so I hope I have related that correctly. But that is my understanding of why Sales Tax is actually quite a regressive tax, rather than the opposite which I believe your post asserts.

The converse of this Principle, and yes it is bascally common sense, explains why a given tax increase fals much harder on the poor than the rich.

... that a flat sale tax is regressive. However a sales tax that also has a sales tax rebate up to a certain value is not regressive.

Consider the case of a sales tax that only hits when you have spent over $40,000. If you make $40,000 or less, you pay no tax. Only those spending of 40K pay tax.

We have version of this with state sales taxes. Every state where I have lived exempts food from sales tax, the idea being that food is something everyone needs and to tax it is regressive. So someone who buys $10,000 in lobsters for a fancy party is exempt from sales tax. Meanwhile, everywhere cell phones plans are taxed. I consider cell phones to be rapidly evolving into a basic necessity, just as electricity (a luxury 100 years ago) is now seen as a basic need for everyone. Why are not cell phones exempt from taxation?

My basic point is that how much "income" a person has is not relevant. What is relevant is how much a person spends on themselves. I aee little difference between the old lady who spends $800 a month on all expenses and has $1000 in the bank and the other lady who spends $800 a month on all expenses and has $100,000,000 in a bank - generating $5,000,000 a year. As soon as she, or her heirs, try to spend a single dollar of that fat account it should be taxed. If the money never is spent to benefit the old lady, why should she pay tax?

By the way, thanks for being willing to debate the issue reasonably.

would stumble on by. I would love to have the opinion of someone with formal economics training to assess our various points and remind us of thing which we laypersons may not know.

Unfortunately, what are the odds of that happening?

I very much like the idea of the "first $40,000 exemption", but I still stand by the Declining Marginal Utility of Currency principal, in that from the revenue side, you are correct that the amount of income a person makes is irrelevant.

I still believe that, given the economic and moral issues, the amount of income a person makes is relevant.

But your $40,000 exemption idea largely fixes that.

We will have to agree to disagree on some things, but one thing I think we can both agree on is that any major changes and wholesale overhaul of the tax system will likely, like any other big v1.0, have a tremendous amount of "bugs" in the new system that will have to be fixed.

ANY major overhaul will have to be revisited every year, getting feedback from the Treasury and the citizenry (this presupposes that Amerika will one day again be America, and pay heed to the wishes of it's citizens and our well-being), until the bugs are worked out, the revenue stream is stabilized, and the fairness of the new system is assured (or as close to fair and progressive as it can be made).

But, as I have said a lot inthe past, "With the Bushies now playing the "kinder and gentler" Nazi Role and the Democrats playing the German Social Democratic Role, I would be terrified of any major overhaul to any law, let alone taxation.

For with the Bushies in Hitlerian dominance, and the Democrats being exposed as unwilling to stand against him in any significant way (we'd be smart to expect that, if the first Hitler rapidly accelerated his plans after the same became true, the New Kinder and Gentler Hitler will do the same),it is almost a guarantee that EVERY piece of legislation passed is corrupt, odious, and nearly treasonous to the cause of Old America.

So hopefully, until we can get rid of the New Nazis (let's hope we have more success with our Bushies than the Germans had stopping their Bushies in 1933-39), we must pray that as few new Bushian "laws" are written.

For every Bushie lawless law that is passed is another nail in the coffin of the Old American Republic.

And perhaps we will have to agree to disagree on that, too.

...I don't see any major overhaul to the tax code coming. Too many entrenched interests for any siginficant change, I'm afraid.

But that still leaves room for intellectual masturbation, doesn't it!

A poor person spends their entire paycheck in order to get by. A rich person has the luxury of saving and investing a big chunk of their income. Hence a flat sales tax taxes poor people at a higher rate than rich people.

Attempts to inject progressivity into the tax by excluding certain items or taxing only consumption over a certain amount are just as complicated as and only serve to mimic an income tax with increasing marginal rates for higher brackets.

Moreover, even with a national sales tax, a revenue collection agency on the scale of the IRS is still required.

and a national sales tax as the means of taxation should not been seen as a tax increase or decrease, but as a tax replacement strategy.

Setting a floor to "minimum comsuption" and providing all persons with the sales tax equivalent of that value is not more complicated thant out current system. However, it would remove distortions in all kinds of decisions that are made on the basis of our byzantine tax code.

somebody kick me now. :spank:

...the taxes paid on anything above the monthly needs are only paid on NEW items. Buy a used car - no tax. New car - 22% tax.

sales taxes on the face of it are HEAVILY regressive...

They hit the poor the hardest and the rich don't even feel them -- they don't purchase goods in any quantity compared to their incomes.


This sounds like Gravel's idea, is it???


I would stipulate that as you've detailed it here it might be better than what we have...


I suspect it would be greatly deformed in Congress to be just as regressive at what we've got though...

--------------------

As for "drug gains", end the phony "war on drugs"!!!! Decriminalize and regulate (and tax - ooops)...

After I got a much better paying job and got married, we are not more than a couple of years from having to pay AMT (I have a union job where I actually get yearly raises). We are not buying much, forego cable TV, are making our house payments and paying our bills, but not saving much for a catastrophe. Yet we are facing AMT which is going to hit us hard. My husband is looking for a better paying job, and I think he should wait it out for now.

While I understand why they did this way back when, it really doesn't make much sense anymore, particularly in light of the economy.

And yes, I think the first thing to go is the tax cuts for the rich and big corps. It hasn't helped keep jobs here anyway, just made more money for their CEOs. That would pay for a lot of the breaks for the working poor and the increasingly squeezed middle class.

Oh yeah, ending the war and all that spending to help Halliburton fill its coffers would go a long way towards keeping our money at home for projects that benefit average Americans.

ON edit: Crap! I just read the whole article and got to the last bit where they talk about how the only reason we haven't been paying it up to now is because of the patches! Jeez, guess we better not plan any big expenses based on a tax return next year (were planning a new furnace).

with any "change"

Committee after the reign of terror we had under former head, Bill Thomas. Maybe some things will get done, in spite of Bush, to undo the damage the Republicans have done to this country.