Abolish the personal income tax?

I'm not necessarily in favor of doing it (and I don't want to get flamed) but I'm wondering what DUers would think of abolishing it? If we did, were would we get our revenue from? Would it be from tariffs like before 1913? Or something else?

I just today started a thread on this. It would most definitely make the rich richer and the poor poorer. Globalization is keeping us from setting tariffs at a reasonable rate.



http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x1254962

The bills have to be paid. If the income tax was abolished, the tax rates on every day things (sales tax, gasoline taxes, etc) would skyrocket.

The middle class gets pushed into the working class, the working class gets pushed into the lower class, and the lower class starves to death.

Of course, the top 9% would be just THRILLED. They might even save enough for a new Jaguar.

Way to go.

Any economist knows you can't tax consumption too high, or the economy comes to a grinding halt.

Nobody would buy an asset for more than $10. You pay $10 for the care, and 19,990 bucks for the service of having someone show you the car.

Nobody would inherit anything. The Bush twins would get $10,000,000 to mow grandpa's lawn the week before he dies.

Nobody would get dividens. All shareholders would have the option of showing up and corporate HQ and getting paid 50,000 bucks to serve tea and cookies to the board.

Get the picture?

Food for thought.

sure they pay into the system (in taxation) an amount that is appropriate for the benefits they have received from the system.

Like jury duty?

*chew chew*

mass produces a solar powered car BETTER become a billionaire, if there's any justice in this world.

Same goes for the person who cures cancer, and the people who make the movies and write the books that not only open peoples' eyes to social justice, but millions of people go see.

and still be capped, no? The problem now is it is utterly limitless...one could theoretically gain, say 87 billion dollars. These huge sums can cause some unsavory monetary gravitational rifts, if catch my drift.

limit the size of the carrot that gets people to work hard and strive for better things.

If it costs 1 billion dollars in work to cure cancer, there better be 1.1 billion dollar carrot at the end of the stick.

Know what I mean?

You start capping things, you start making things (ideally) worth reaching for no longer economically rewarding, so peope will stop reaching for them.

People strive for reasons other than pure economic gain. Your mother surely wasn't expecting to get rich off the unpaid work she put into you.

As for the folks who will someday cure cancer, it isn't just one person, it's hundreds. And the overwhelming majority of them work long hours not for the pay but for the love of research and the dedication to doing something both interesting and wonderful. The people who will end up obscenely rich from a cancer cure, if anyone does, will not be the researchers. No, it will be the Big Pharma major stockholders and CEOs. And the researchers will keep on researching something else, whether in company labs or university hospitals for much the same pay they were receiving the year before.

Even for business people who really are in it just for the money, or mostly for the money, they would still be attracted to making as much money as the system allows them to make. They could still be the richest people around; they just wouldn't be able to buy and sell nations.

I'd never tell anyone who only has their labor to sell to be satisfied in rewards other than monetary compensation.

My argument about curing cancer is just as true for one person as it is for 100 or 1000 working togethter. All their labors should be rewarded fairly.

As I said elsewhere, I believe in progressive taxation, but I don't believe in arbitrarily limiting the size of the carrot that gets people to strive. And people really don't do things if they think they're going to starve if they do them.

to insinuate that people *only* work for monetary gain, which is what you are doing. We all need money to live in this world, but we aren't all driven by it. And seriously, if all you were allowed to make (if there was some sort of punitive cap) was $100 million, would you not bother to make it?

BTW, I am not suggesting that there be a cap to incomes, but I also don't see where anyone who has made that suggestion is proposing that it be at starvation wages. And that is quite unlike the reality that a lot of people I know do face, people who work hard and do have to trade off between food, shelter, and health care. And yet they get their butts out there and work without any hope of ever making a mint.If you were to propose that those people be rewarded more handsomely by their employers, I'd agree.

Of course, there are jobs that people will only do because they are paid to do them. No one voluntarily crawls into a sewage lift station without the hope of being paid. And yet, no one who crawls into a sewage lift station is looking at getting more than a middling income.The guys I have known who do that for a living do it for the money, but they also do it for the pride they have in maintaining a working system and for their concern for their community.

Money is a motivator, but it's not the only motivator. And when it is allowed to become too big a motivator, when it is built up to being so much more important that community or family or even self-pride, then society is in danger, and even the economy is in danger. Lots of things make lots of money but don't add substantially to the general welfare, and may even detract from it. And that's hardly an insult to working people.

gets people to do worthwile things.

I wouldn't want anyone telling me to do things for their gain, but not mine, and I wouldn't be holding my breath for people to do productive things in a society which didnt' reasonably reward people for their investments and their efforts.

We tried a different system once before. It was called slavery.

I think my post below addresses the rest of this. It's a gift for management at the cost of employees, and for the self employed, it tells the most productive to stop being producitive for the rest of the year if they reach the limit. It's never good for society to tell people to stop working when they've proved that they are very capable and very productive.

Say you're a great plaintiff's lawyer and you do class action suits. Say, by March you've reached your earned income level. You wouldn't keep working for free. You'd go on vacation for the rest of the year.

Who benefits when talented plaintiffs lawyer only work three months a year? Negligent corporations.

An income cap, therefore, is one of the most conservative proposals I've heard put forth at DU.

Slavery is a system in which the workers receive no rewards--not wealth, not money, not independence, nothing but basic food and shelter--in exchange for their labor while the owners have no limits on their maximum wealth. It is a system of extreme wealth inequality. You are trying for drama, but appropriating an inappropriate analogy.

As for your hypothetical plaintiff's lawyer, if she makes enough to reach some cap set at some hypothetical level by March, either she will be unlike even most very successful lawyers or you have in mind a ridiculously low cap. Over the top hypotheticals don't make a good basis for argument. And I say this as someone who isn't arguing for a cap but for steep graduation.

There may be good reasons to oppose caps, but the notion that people won't work if they can't become rich flies in the face of reality. Most people can't become rich and yet most people work. Many people work even though it costs them out of pocket to do so. And not just volunteers, either. I know disabled people who take it on the chin and lose health benefits more valuable than their take-home pay because they prefer to work. The vast majority of the self-employed spend years either just breaking even or going in the hole, and even if they start to do well, most are not bringing in even $100K. So your whole notion that *only* monetary reward gets people to work is fallacious.

To get back to your hypothetical lawyer example, she might indeed take a long vacation after meeting the cap. But she can't afford to stay on vacation the entire rest of the year if she wishes to return to her trade after the vacation and continue to be successful. She will have to pick up cases and begin the long process of bringing a case to trial or negotiation. And instead of doing all the work herself, since she can't keep all the money that she may earn, she hires several assistants. Now she won't be as overworked and there are more people earning money. The team will likely be more productive as a whole than Wonder Woman was by herself, so that's a net gain for society. Maybe she'll incorporate, pay herself a salary out of the company earnings, and leave the rest in investment--untaxed until it's removed--again a net gain for society. So, I can see where the cap people are coming from. Now, what's the real economic argument against this? Not the gubmints-gonna-git-my-money-I-haven't-made-yet argument? I can see where having too much money tied up in investments could create shortages in money availability. So that's one. What are some others?

- Regardless of how I feel PERSONALLY about work and rewards, I want other people to have an effective carrot for working. I want society to move forward and I really think being rewarded for your labor is a great way to keep society moving forward. I want there to be a great carrot for others to pursue.

- My hypo is perfect: it shows that you punish the best with a cap. Those are exactly the people you don't want to punish.

People simply do not work without a reasonable reward (and I wouldn't expect them to). You think my hypo is wrong because you'd have a cap that didn't reach that low. But, no matter where you put your cap, if it affects ANYONE, what's going to keep that person from stopping work once they hit the cap? No society moves forward by telling people to STOP working. WORK is what moves things forward.

Furthermore, please address my other point. Say you're an employee. No employer is going to pay anyone above the cap. They'll tell their employee, sorry, why pay you above the cap. It just goes to the gov't. We'll keep that money.

In other words, caps are just guarnateed profits for employers, and guarnteed limits on the ability of people who work hard to realize the full value of their labor.

mass produce anything?

earn that will be guaranteed not to influence peoples' decisions to work hard?

Either you pick a level so high that the entire endeavor is a meaningless waste of time since nobody would ever make that much, or you pick a level that's low enough to actually limit some people's earned income, and then you start screwing up people's incentives to work.

And you know who makes the most from their labor these days? Artists and athletes.

Do you have a problem with them getting what they're worth? If you limit their earnings, who benefits? Corporations which won't pay them above the cap.

You'd just be screwing labor so that management could get bigger profits. That's real democratic.

I agree with you AP. To a point. You can't place a hard cap on earnings that has any meaning, it would simply remove incentive.

So instead of a hard cap you have a soft cap. Which is of course what we have in a progressive income tax system. The trouble is that the tax rate does not increase enough at the high end and it only taxes income.

...differnt thing than a hard ceiling on income, and I'm all for way more progressivity.

If we had real progressive income tax on all avenues in which money passes from one person to another, we probably wouldn't have to tax half of Americans more than an overall effective rate of 5%, and our top rates on corporate income and cap gains could be as low as 40-50% (with effective rates as low as 25%, even on the biggest corporations), and we could still have a ton of money to do thousands of great things, while ensuring that there wasn't a huge concentration of wealth, and while guarantying that wealth alone didn't create a competitve advantage for the super-rich.

:evilgrin:

Steeply graduate taxes on income, including interest from assets and from inheritance, over $50,000. That is, let everyone keep $50,000 federal income tax free, and then tax what's made over that. Each bracket of income could be taxed differently, so that the 1st 50K is tax-free, the next 50K has a 20% tax, the next a 30% tax, and so forth. So, if you made $150K, you keep all first 50K, 30% of the next 50K and 20% of the 3rd. If my math is right, that would be a 17% average tax on 150K. The upper levels would be confiscatory so that there would be diminishing returns for extreme levels of income inequality.

I'm just putting out those percents and brackets as examples--I'm sure that they would need a lot of tweaking. But something like that should be done. The people who came up with the income tax didn't intend for it to apply to the working poor and the moderate middle class. We need to adjust the bottom rates to reflect their intentions and to preserve the middle class.

It was also Wes Clark's plan, so naturally, as a former Clark supporter, I'd support it anyway.
Besides that, cutting payroll and sales taxs makes sense. Unfortunately, many of our local taxes are going up (not to mention the potential for future federal tax increases because of the defecit) because of the * tax "cuts".

Conservatives want to replace it with a sales tax.

sales tax are NOT progressive.

Income taxes should stay. Many people think income is their wages but it's untrue. Income comes from many sources and usually the affluent benefit from income like from rents, interest, business revenue etc. etc.. These people have all kinds of loopholes though not to pay. If I were the Internal Revenue goddess, I would allow the lowest half of wage earners to be tax free.

For the upper half, and there wouldn't be many, I think they should pay at least 25%. Of course the real income should be taxed without loopholes and at about 5 to 10 percent on gross income.

I really know economists are going to flame me for these remarks. Yes, I have oversimplified because it is a forum and not a seminar, but I think it is fair and also allows the lower working classes the breaks they need to get ahead.

a tax sense) at a specific level, people who earn just under that level might decide not to work hard to make 1,000 more bucks because the cost of that extra 1000 bucks is so much more compared to the 1,000 bucks just under the threshold.

Today, with computers, there's no reason not to have a constantly variable rate of taxation.

We need gentle slops that reflect the reality of decreasing marginal valuations of an additional dollar, rather than sharp cut-offs which discourage some people to work.

The tax code shold be totally neutral in terms of creating incentives to work. It should treat everyone the same.

Also, is it a bad thing to keep people earning less if it's enough for them to be happy? We all know those nuts who like to make money because it's fun to them. They get no satisfaction from it except to make it. They probably would anyway, just to stay in the game. Also, I know I wasn't clear about the cutoff cause I had to put my husband to bed so I cut my post short before explaining what I meant.

My point was to have that cut off point for everyone, so that if you earn a thousand over that point you pay tax on that extra, not what came before it. This is why I said there wouldn't be too many wage earners above that for the reasons you stated. However, we all know the real money is in the income, not wages, for individuals and it's time for them to start paying for the privilege. I think also that this would cut outrageous compensations to high level executives back to where they belong.

Now I know there are people like myself who live off of income because we are retired and I think we need some sort of break that states that we are on a fixed income that is not wages for retirees whose total income is less that an certain amount stated. To tell the truth I haven't really figured this much out yet and it would affect me very much too.

But I think ordinary wages should not be taxed.

progressive. When Bush says he wants to go down to three, that's conservative.

A single tax band is basically a flat tax with a exemption, and anyone paying attention know that that's a boon for rich people the farther they get above the cut-off.

The wider a tax band, the more inequitable it treats people at the bottom compared to people at the top. (Because you're charging two people the same amount for a dollar despite the fact that they have radically different valuations of that dollar).

Furthermore, you can't NOT tax ordinary income, because then everyone would get paid for everythign in ordinary income. You'd buy a house for half its value, but the seller would provide a service to the buyer for the other half of the value.

You have to tax money a little everywhere it changes hands. You leave any avenue untaxed, all money would flow through that one avenue.

Isn't it like sales tax except that you aren't passing it on to the consumer? I mean if you earned $50,000 a year in wages that you weren't taxed on, but you did pay 25% on your investments like savings account's interest capital gains investments, and other types of profits that are income, wouldn't this make sense? Now the ordinary person wouldn't be paying much, but isn't this where we nail the the guys with so much money they don't know what they own and would they really miss it?

On edit: Gotta leave now. If you answer, I can't until morning.

I'll just repeat what I've been saying. If you didn't tax "ordinary" (I presume you mean earned) income, so much wealth would pass as "ordinary" income, it wouldn't be funny. So much money would pass untaxed, tax revenues whould shrink.

We already dropped taxes on unearned income down to 15%, which has meant tons of money passes as cap gains and dividend income rather than as earned income. If you stop taxing earned income, all that money paid in dividends would be paid out as earned incomes to insiders and friends of insiders who provided consultant services, or where hired as temporary employees.

Yes, with the creative bookkeeping changes in tax law in the past fifty years that would happen. I am talking about income as defined in your Acctg. 101 textbook other than wages and salaries. We would definitely have to scrap a lot of laws that benefit those who can afford to pay taxes and start from the bottom up.

I guess in the long run, what I am saying is the gob who graduates from high school or college and enters the job market at an entry level position with nothing but his knowledge, really shouldn't pay taxes on his wages up to a certain level. I used the lower half of the income scale as an example because I really don't like using actual figures like let's say $50,000 a year because it's inflexible. I guess that's why I prefer to talk in percentages rather than actual figures.

But we really need to get the money from those who won't miss it, the rich. We also have to close the treasury candy store that enables corporations to rob it. The taxes should be used for the benefit of the people, for public works, food distribution, health care, education and research, defense and other things that people can't provide for themselves alone, but it shouldn't be traded on the stock exchange for profit.

On another note I just heard there are companies who are trying to privatize water. That means a private company that trades on the stock exchange will privatize municipal water works for profit and you will pay. I really don't think we should allow this. There are certain facets of life that shouldn't be privitized for profit because they are a human need and should be a human right. Water and air are certainly up there on top.

If this happens I think profits should be taxed at 75% to help out the poor who can't afford to buy overpriced water. I'm hoping it will take the profit out of this mean enterprise so the entrepreneurs move on to making profits on something else like champagne.

Social Security? Medicare? Education? Social services? Health Care for the poor?

Soup lines? Homless shelters?

is lost by removing the income tax as a political hammer.

For your question, I think the answer would be, something else. More than likely a sales tax.

Now that the question is answered, and I'm free to dream, I have to ask, why bother abolishing the personal income tax?

I think a way to gain a bit more control is to abolish withholding. People would still receive their pay stub showing what they made, and what they owe in taxes, but would receive their entire check. It would be up to the tax payer to cut a check (quarterly) and mail it in.

Perhaps when they see it as "real money", the tax payer will start demanding some accountability about where all that money is going.

Hey, I did say I was free to dream, didn't I? :shrug:

Since we already use the payroll tax for everything else, why not? We could lift the caps, make four brackets with the lowest being at 3.5% or so and the highest at around 13% and have corporations' matching portion make up the rest of the funding gap. That would provide very close to the amount of revenue we have now.