Why do we need taxes?

sferguson524 said:
What about a flat 18% sales tax across the board. Eliminate state sales taxes. This way the wealthy are paying their fair share on their high ticket purchases, and the less fortunate are paying less on taxes.. right now we are double and triple dipped on taxes. Fed Income tax, state income tax(if you live somewhere that has it), sales/use tax, and property taxes
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Basically what you're alluding to is the FairTax system, which I'm all for. Get rid of the income taxes altogether at federal and state level (since income has varying definitions to different people). You want to pay lower taxes? Consume less. The wealthy buying yachts and Ferraris? They pay a bunch of tax on it. There's a prebate system for those at the bottom of the income levels to offset the sales taxes spent on basic necessities, everyone else just goes on with their lives. The downside is, it might cause a lot of people to stop financing those expensive things like new cars and houses, but I'm sure Capitalism will always prevail.
 
SoonerAviator said:
Basically what you're alluding to is the FairTax system, which I'm all for. Get rid of the income taxes altogether at federal and state level (since income has varying definitions to different people). You want to pay lower taxes? Consume less. The wealthy buying yachts and Ferraris? They pay a bunch of tax on it. There's a prebate system for those at the bottom of the income levels to offset the sales taxes spent on basic necessities, everyone else just goes on with their lives. The downside is, it might cause a lot of people to stop financing those expensive things like new cars and houses, but I'm sure Capitalism will always prevail.
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Works for me. The multiple dipping by multiple tax men is ridiculous.
 
coloradobluesky said:
Government is always a big mess. But its an even bigger mess if its pure socialist or pure capitalist. The system the US has is near the best there is. Doesnt mean its good, just means its better than anything else.

Politics is all about compromise. NO ONE gets everything they want. If you elect a politician, make sure he can compromise. Its a requirement. Look at the stalemate the Republicans are in right now. Freedom caucus refuses to compromise one iota until they get EVERYTHING they want. Ergo, nothing getting done. If you want to be effective, you have to build consensus, allies and majorities. Not just stand there and preach "NO"! Goes for both parties, all politicians.
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Let's avoid the political talk.
 
deonb said:
Not arguing against funding the government here at all. I was questioning why it needs to be funded by taxes instead of using a combination of inflation and growth as the instrument for generating funds.

It will still cost the citizens the same amount of money - some more, some less of course. And it will still generate to the government the same amount of funds (yes, literally everybody disagrees on what exactly that number should be, but that's irrelevant here).

But inflation is significantly simpler to implement than taxes.
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You're right, sorry. I agree with those who already said government just printing the money (inflation) won't work. Someone else also said money requires two things: real productivity and faith. This is true, because money has no intrinsic value, it is only a symbol. It symbolizes the products and services, and the faith is the agreement between all parties that it is the symbol that will be used. Inflation erodes that symbolic meaning and is therefore not sustainable.
 
One problem I think we have in the US is that we debate these things on a national scale yet conditions are vastly different between areas. I can find apartments in my area for $400/mo, maybe even less and decent middle class homes in the 50-100k range. On the other hand, 40k is a good wage around here. I know in some other areas you'd need to at least double those numbers and there's the problem. We tax people and enforce a minimum wage on people in vastly different situations the same. It's really no wonder people fight bitterly over what's fair, when we do things this way we're always going to be unfair to someone.

To OP's solution I really think that it will be even worse in this regard. It might help out people in debt quite a bit but what about retirees who are dependent on their savings? What about owned assets? Inflation probably won't work evenly across the board.

Really when you get down to it we can't have any national monetary policy that hits everyone fairly and at some point you just have to go with what is best for the most people. I think we'd do well to move more of these policies down to the state/local level, that might not be the most efficient way and may disadvantage poorer areas more but at least we'd have a little more say in how things are run in our own communities vs this constant national tug of war.
 
I don't agree that the Government should just print money to do anything the people in the office want to do at anytime. That would allow them to impose their politics on others by funding what they want and essentially running their competitors out of business. I do think that corporations don't pay taxes, they just collect taxes from their customers and pass the tax to the government so corporate taxes should be eliminated. As for personal taxes, I believe everyone should have skin in the game so to speak and favor a national sales tax like the Fair Tax (which is progressive) instead of the income tax which has been manipulated by politicians and their supporters.
 
deonb said:
Describing the exact problem with FairTax there.

Consuming less is good from a micro-economic perspective, but bad from a macro-economic perspective.
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The other thing is that rich folks often don't spend the same percentage of their income as poor folks.

When you're poor, 100% of what you spend probably has to go to living expenses.

When you're middle class, you get to the point of more discretionary income which you could choose to spend or not to spend, and choose what to spend on. You're probably also saving some for retirement, which is money you aren't spending.

When you're rich, you can get away with spending a small percentage on living and have a much larger percentage for discretionary income, and probably have a lot of money that becomes investments.

In the end, the poor get the highest tax rate and the rich get the lowest.

The big problem with today's system is how complicated it is. Simplifying it I think would help everyone.
 
It's been a little while, but the topic pops up once in a while. States that rely on gasoline taxes take in less revenue when fuel economy or electric vehicles cut into fuel sales. The idea of mileage taxes instead keeps being brought up.
 
Every April I also get discouraged that, as a decent citizen who tries to pay his income taxes, I have to pay to do it. I can either pay an accountant, pay some other preparer, or buy tax software. But without doing that, I'm having to rely on filling out paper forms or finding someone to do it for free. With the complications involved, the threat of fines, and the dollar amounts, it's become harder and harder to DIY.
 
citizen5000 said:
Currency only has intrinsic value. It requires a combination of real wealth (productivity or GDP) and faith to function properly. Just printing money with no productivity or faith to back it up produces a currency collapse.
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I agree there needs to be productivity, but keep in mind the government doesn't just burn up the money, it spends the money back into the citizenry.

Example:

Taxation system:
  • Bob deposits $100 at Bank
  • Bank loans $10 from Bob's money to Mary
  • Mary pays Bob $10 for 1 hour of service
  • Bob pays $3 in taxes to Sam
  • Sam pays Mary $3 for 1 hour of service
  • Mary pays $3 back to bank
End result:
  • Total money in system: $100
  • Bob: $107
  • Mary: $-7, received 1 hour of service from Bob
  • Sam: received 1 hour of service from Mary

Inflation system:
  • Bob deposits $100 at Bank
  • Bank loans $10 from Bob's money to Mary
  • Mary pays Bob $10 for 1 hour of service
  • Sam prints $3 of new money
  • Sam pays Mary $3 for 1 hour of service
  • Mary pays $3 back to bank
End result:
  • Total money in system: $103
  • Bob: $110 (devalued by 3% = $106.80 equivalent)
  • Mary: $-7 (devalued by 3% = -$6.80 equivalent), received 1 hour of service from Bob
  • Sam: received 1 hour of service from Mary

Apart from the slight redistribution of wealth there from Bob to Mary, the end effect is the same.

What the government is really relying on in this whole process, is the 1 hour of service from Mary. And both ways achieve that.
 
It's very simple why your idea won't work, GOVERNMENT DOES NOT CREATE WEALTH!!!!!!!! Sorry for the caps, but that is the basic truth. The politicians with the line "you didn't build that" are clueless, absolutely clueless. Any public works project, any social program, anything the government does, is paid for by taxpayers, or unfortunately the case more and more today, a promise to pay, backed by the taxpayers by notes signed for them by the government. When government prints money faster than wealth is created it just makes the currency less valuable.

There are hundreds of countries with worthless currency, that they continue to print to pay for stuff, making the currency more worthless.

Wealth is created by people, working jobs, creating stuff, performing services, transforming things into desirable items, or growing useful things. The government is a parasite, sucking off that wealth. Now some is for noble causes, such as infrastructure, national defense and social programs, at least the part that is not exploited by freeloaders. But there is waste and graft too and that is very harmful. In our representative republic, it is important for we, the people, to watch these solons, and root out the scoundrels, we have done a very poor job of this.
 
The premise is that inflation is only a "tax on savings". It's not, it only seems that way because more more dollars there are in the money supply means the ones you own are worth less. In inflationary times, all prices go up. To fight that, the Fed takes dollars out of the money supply by raising interest rates. If we relied on "printed money" to fund services, that would be impossible, runaway inflation would ensue.

You want a recent example? Look at Venezuela.
 
cgrab said:
I don't agree that the Government should just print money to do anything the people in the office want to do at anytime. That would allow them to impose their politics on others by funding what they want and essentially running their competitors out of business.
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I agree it would require a different level of accountability than what we're used to.
 
Currency is the medium of exchange it is has no value in and of itself. Value and wealth come from productivity. Taxing the private sector is essentially tapping and transferring productive energy to fund the government.

The real debate should be what government do we want to buy.

(inflation is a dilution of value (purchasing power) and is never a positive thing).
 
Chip Sylverne said:
The premise is that inflation is only a "tax on savings". It's not, it only seems that way because more more dollars there are in the money supply means the ones you own are worth less.
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Right, but you kept more of it to start off with.

Let's say for simplicity you earn $100'000 per year and pay $30'000 in taxes each year. Also for simplication you have no expenses.

After 20 years you would have: $1.4m


Repeat that at $100'000 per year and paying no taxes, but getting it devalued by 4% per year.

After 20 years you would have $2m, which would be worth... mmm... carry the one...: $1.395m
 
Matthew said:
It's been a little while, but the topic pops up once in a while. States that rely on gasoline taxes take in less revenue when fuel economy or electric vehicles cut into fuel sales. The idea of mileage taxes instead keeps being brought up.
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I've always had to laugh at that. I've heard of some states proposing a tax on EVs for this reason. Meanwhile these are the same states that have incentives for buying EVs. Wait, so which is it?

That said, the gas tax works well overall. EVs have a limited market.
 
Ted DuPuis said:
I've always had to laugh at that. I've heard of some states proposing a tax on EVs for this reason. Meanwhile these are the same states that have incentives for buying EVs. Wait, so which is it?

That said, the gas tax works well overall. EVs have a limited market.
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The idea of having to track mileage on my enthusiast fleet and report.... nm the paying... but the reporting of it fills me with dread. I agree with you that the gas tax works well though, but if(probably when) someone gets a better EV battery to market things might change drastically.
 
Actually starting to look at either an EV or hybrid, a little bit. My folks are at a point in their lives where a 20mile/day drive is about the most they ever do, and that's not even every day. Something that just needs to be topped of from an outlet every night might be just the thing for them.
 
cowman said:
The idea of having to track mileage on my enthusiast fleet and report.... nm the paying... but the reporting of it fills me with dread. I agree with you that the gas tax works well though, but if(probably when) someone gets a better EV battery to market things might change drastically.
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Right. At some point in time, I fully agree that as a society we may need to revisit how we pay for roads, and that is a genuine question. But for now the number of EVs (or even hybrids) I see driving to work is somewhere between 0 and -5. I say -5 because there are some vehicles that guzzle so much gas that they offset an EV or hybrid.

What's funny to me is that certain places put in incentives to get people to buy EVs/hybrids/propane powered cars, and then get shocked when those vehicles stop producing revenue in the form of gas taxes.

Matthew said:
Actually starting to look at either an EV or hybrid, a little bit. My folks are at a point in their lives where a 20mile/day drive is about the most they ever do, and that's not even every day. Something that just needs to be topped of from an outlet every night might be just the thing for them.
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I would actually be all for an EV for my normal commute. I typically drive under 50 miles a day, which is perfectly doable with most EVs. I'd love to be able to just plug in at night and not have to mess around with stopping at the gas station. It'd be less doable for my wife who often drives more.

Probably the bigger issue for me is that I don't (and won't) buy new cars. So for one, EVs need to depreciate. And I doubt that EVs will age as well as their gasoline-powered equivalents for a while given current battery technology.
 
With multiple vehicles, I welcome paying both road taxes and also insurance on a per mile basis... when they sit parked... $0. :)
(But I know that's not how politicians will set any of that up, once it starts to happen. Nor insurance companies.)
I actually drive quite a few miles, so the net effect probably isn't as high as I would like, but it would "feel" saner than paying the 20+ "fees" on the back of the Colorado vehicle registration four times. The TAX on those is based on the sale price, and drops off with depreciation and age (also good for me... yay beaters!) but the fees, some are are not pro-rated. "Road and Bridge Fee", etc...
The two vehicles sitting parked at any one time, and the two trailers sitting parked, certainly aren't causing any damage to roads and bridges that needs repair.
 
deonb said:
Describing the exact problem with FairTax there.

Consuming less is good from a micro-economic perspective, but bad from a macro-economic perspective.
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The thing is, there's only so much you can "cut" out of purchases. People will still have to buy cars, and houses, and cell phones/tvs/etc. You may get some people who resort to growing their own food, but it'll still be a small portion of the overall population. I honestly don't think that it would make much difference in the overall economy. Your paycheck just got bigger by the amount of the previous withholdings, but the cost of your purchased goods went up by the same. In the end, nothing changed other than the method of collection. The best part is, you get to save on not having 90% of the IRS department existing, as well as eliminating options for fraud and enlarging the tax base by including everyone, even the undocumented workers. If they could simultaneously strip 20% out of the spending-side of the government through privatization of certain things and decreased military spend, we'd actually have a shot at not running a deficit!
 
Ted DuPuis said:
The other thing is that rich folks often don't spend the same percentage of their income as poor folks.

When you're poor, 100% of what you spend probably has to go to living expenses.

When you're middle class, you get to the point of more discretionary income which you could choose to spend or not to spend, and choose what to spend on. You're probably also saving some for retirement, which is money you aren't spending.

When you're rich, you can get away with spending a small percentage on living and have a much larger percentage for discretionary income, and probably have a lot of money that becomes investments.

In the end, the poor get the highest tax rate and the rich get the lowest.

The big problem with today's system is how complicated it is. Simplifying it I think would help everyone.
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Sure, but that's what the "prebate" portion of the FairTax is supposed to help equalize. Those at the bottom get a bit of help each month to offset sales taxes on basic items, as you are higher in income, the prebate diminishes. It's not about having everyone pay an equal percentage, it's about having a larger tax base. I don't expect those who are wealthy to have to pay out more simply because they make more, they generally have more expensive tastes and will be pay more in taxes to sustain that lifestyle.
 
deonb said:
Right, but you kept more of it to start off with.

Let's say for simplicity you earn $100'000 per year and pay $30'000 in taxes each year. Also for simplication you have no expenses.

After 20 years you would have: $1.4m


Repeat that at $100'000 per year and paying no taxes, but getting it devalued by 4% per year.

After 20 years you would have $2m, which would be worth... mmm... carry the one...: $1.395m
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Without the ability to control interest rates, how are you going to maintain inflation at a constant rate? I mentioned Venezuela that subscribes to your theory for the most part, is projected to have an inflation rate of 1,600 % in 2017. Until just a few years ago it averaged 32% increase annually. Up 800% last year.
 
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Hyper inflation would solve some problems. Get it way up there and then pay off China and everyone else we have the country mortgaged to. If this a repeat, sorry. I aint read the whole thread
 
luvflyin said:
Hyper inflation would solve some problems. Get it way up there and then pay off China and everyone else we have the country mortgaged to. If this a repeat, sorry. I aint read the whole thread
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I've kinda wondered if that's the actual plan for a while now with devaluing the currency. "Oh sure, here's your loan payoff... $10M. No problem. You're only able to buy a loaf of bread with that."

Obviously not via hyper inflation or monetary purposeful devaluing, but too much for what the economy is actually doing. Makes all those loans cheaper in an odd sort of way.

And if there's one thing bankers know how to do, it's manipulate numbers to get what they want.
 
Chip Sylverne said:
Without the ability to control interest rates, how are you going to maintain inflation at a constant rate? I mentioned Venezuela that subscribes to your theory for the most part, is projected to have an inflation rate of 1,600 % in 2017. Until just a few years ago it averaged 32% increase annually. Up 800% last year.
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Venezuela is a terrible example though. They tied their entire economy to a single commodity and structured their long-term fiscal policy on oil prices remaining about $100 a barrel. When OPEC decided to screw Iran by tanking the price of oil by flooding the market Venezuela went belly up. That is the main inflationary factor for Venezuela and it's a fairly unique situation.
 
paflyer said:
Say what?
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Per capita, absolutely. The poor may have a nominal income tax rate but depending on where you live, sales and property taxes are a much larger chunk of their spendable income. Many of our tax structures in terms of sheltering assets (IRAs, Generational Trusts, Mortgage credit, etc) don't apply to the poor. In 2015 I paid and adjusted tax rate of 5% despite making pretty decent money because I was able to take advantage of the deductions made available to a middle income homeowner with a family.

Poor folks don't make enough to invest in retirement, can't afford childcare, are renting a home, etc so they can't take anything but a standard deduction and a child tax credit which is a pittance compared to what it used to be. So they pay the full rate for their bracket plus whatever sales/use taxes that the rest of us take for granted.
 
labbadabba said:
Per capita, absolutely. The poor may have a nominal income tax rate but depending on where you live, sales and property taxes are a much larger chunk of their spendable income. Many of our tax structures in terms of sheltering assets (IRAs, Generational Trusts, Mortgage credit, etc) don't apply to the poor. In 2015 I paid and adjusted tax rate of 5% despite making pretty decent money because I was able to take advantage of the deductions made available to a middle income homeowner with a family.

Poor folks don't make enough to invest in retirement, can't afford childcare, are renting a home, etc so they can't take anything but a standard deduction and a child tax credit which is a pittance compared to what it used to be. So they pay the full rate for their bracket plus whatever sales/use taxes that the rest of us take for granted.
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Which is why I'm fine with doing away with income taxes and pretty much every exemption/deduction/credit/loophole in favor of ad valorem. I am generally between 9-11% on my effective rate, mostly due to mortgage interest. I don't have much complaint about the level of taxation on my total income, but I certainly don't agree that mortgage owners should get preferential treatment over renters.
 
labbadabba said:
Per capita, absolutely. The poor may have a nominal income tax rate but depending on where you live, sales and property taxes are a much larger chunk of their spendable income. Many of our tax structures in terms of sheltering assets (IRAs, Generational Trusts, Mortgage credit, etc) don't apply to the poor. In 2015 I paid and adjusted tax rate of 5% despite making pretty decent money because I was able to take advantage of the deductions made available to a middle income homeowner with a family.

Poor folks don't make enough to invest in retirement, can't afford childcare, are renting a home, etc so they can't take anything but a standard deduction and a child tax credit which is a pittance compared to what it used to be. So they pay the full rate for their bracket plus whatever sales/use taxes that the rest of us take for granted.
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Tax payers get tax breaks. People with higher incomes pay more $. Many people who now earn high incomes were once low income owners. So called poor people get back more than they ever pay in. Don't mix federal income taxes with consumption or use taxes.
 
SoonerAviator said:
I am generally between 9-11% on my effective rate, mostly due to mortgage interest. I don't have much complaint about the level of taxation on my total income, but I certainly don't agree that mortgage owners should get preferential treatment over renters.
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You are free to not enter the interest onto your schedule A.
 
paflyer said:
You are free to not enter the interest onto your schedule A.
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Sure I am, but that isn't my point. My point is that I don't think the deduction should be allowed in tax law at all, and I wouldn't balk if it were stripped out. However, as long as it (and any other deduction I'm eligible for) remains in effect, I will happily use it to my own benefit. My problem with the current tax laws, is that it allows certain people more benefits than others for arbitrary reasons. People don't need tax incentives to purchase homes versus renting. I don't need a tax incentive to purchase more energy efficient windows/doors. Using the tax system to incentivize consumer purchases is poor policy, and intertwines the idea of gov't picking winners/losers in the market.
 
ircphoenix said:
Not the way that works bud.

Sent from my SM-G935T using Tapatalk
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No one makes you take a deduction you don't agree with. I'd like to see people put their money where their mouth is.
 
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SoonerAviator said:
Sure I am, but that isn't my point. My point is that I don't think the deduction should be allowed in tax law at all, and I wouldn't balk if it were stripped out. However, as long as it (and any other deduction I'm eligible for) remains in effect, I will happily use it to my own benefit. My problem with the current tax laws, is that it allows certain people more benefits than others for arbitrary reasons. People don't need tax incentives to purchase homes versus renting. I don't need a tax incentive to purchase more energy efficient windows/doors. Using the tax system to incentivize consumer purchases is poor policy, and intertwines the idea of gov't picking winners/losers in the market.
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Cool. So let's make everyone pay 10% above some standard subsistence number. No exemptions no deductions. Postcard tax filing. EZ.
 
deonb said:
I agree there needs to be productivity, but keep in mind the government doesn't just burn up the money, it spends the money back into the citizenry.

Example:

Taxation system:
  • Bob deposits $100 at Bank
  • Bank loans $10 from Bob's money to Mary
  • Mary pays Bob $10 for 1 hour of service
  • Bob pays $3 in taxes to Sam
  • Sam pays Mary $3 for 1 hour of service
  • Mary pays $3 back to bank
End result:
  • Total money in system: $100
  • Bob: $107
  • Mary: $-7, received 1 hour of service from Bob
  • Sam: received 1 hour of service from Mary

Inflation system:
  • Bob deposits $100 at Bank
  • Bank loans $10 from Bob's money to Mary
  • Mary pays Bob $10 for 1 hour of service
  • Sam prints $3 of new money
  • Sam pays Mary $3 for 1 hour of service
  • Mary pays $3 back to bank
End result:
  • Total money in system: $103
  • Bob: $110 (devalued by 3% = $106.80 equivalent)
  • Mary: $-7 (devalued by 3% = -$6.80 equivalent), received 1 hour of service from Bob
  • Sam: received 1 hour of service from Mary

Apart from the slight redistribution of wealth there from Bob to Mary, the end effect is the same.

What the government is really relying on in this whole process, is the 1 hour of service from Mary. And both ways achieve that.
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No that won't work because here is what will happen under your inflation system:
  • Bob deposits $100 at Bank
  • Bank loans $10 from Bob's money to Mary
  • Mary pays Bob $10 for 1 hour of service
  • Sam prints $3 of new money
  • Sam pays Mary $3 for 1 hour of service
  • Mary pays $3 back to bank
  • Bob realizes the value of money is going down so he increases his rate to $12 for 1 hour of service
  • Mary realizes the same and increases her rate to $4 for 1 hour of service
  • Sam must now print $4 to pay Mary
  • Now Bob realizes money has devalued even farther and raises his rate to $13
  • Mary cannot pay $13 unless she too raises her rate, so raises it to $5
  • Sam now must print $5 of new money
  • Bob sees the value declining further and raises his rate to $14
  • Now Mary raises her rate to $6
  • Sam must now print $6 for that 1 hour of Mary's service
  • Bob raises his rate again........
And so on. That is runaway inflation and that is what happens when government prints extra money.
 
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