5. A Fair Tax Code

A Fair Tax CodeA complete reformation and simplification of the United States Tax Code to require ALL individuals and corporations to pay a fair share of a progressive, graduated income tax by eliminating loopholes, unfair tax breaks, exemptions and unfair deductions, subsidies and ending all other methods of evading income taxes. 

The current system of taxation unjustly favors the wealthiest Americans and corporations, many of who pay fewer taxes to the United States Treasury than citizens who earn much less and pay a much higher percentage of their incomes in taxes. Any corporation or entity that does business in the United States and generates income from that business in the United States shall be fully taxed on that income regardless of corporate domicile or they will be barred from earning their profits in the United States.

This will allow honest companies and individuals who pay their fair share in income taxes to take over those markets in the United States economy formerly held by income tax cheats.

Businesses and individuals that pay taxes in other countries will no longer be permitted to use that excuse to justify their failure to pay federal income tax in the United States if they obtain benefits from doing business in the United States.

Corporations that create jobs in the United States will be rewarded by the tax code and corporations that remove jobs from the United States will be penalized by the tax code. The substitution of lower capital gains tax rates for graduated income tax rates shall be eliminated. This $4 billion a year “hedge fund loophole” which permits certain individuals engaged in financial transactions to evade graduated income tax rates by treating their income as long-term capital gains which are taxed at a much lower rate (approximately 15%) than income tax.

“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”  -Benjamin Franklin, 1789.

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Showing 114 reactions


Rodger Malcolm Mitchell commented 2012-03-13 14:11:10 -0400 · Flag
After a series of generalized claims supported by zero evidence, Dorothy says, “I’d be interested in seeing any studies you have that promote MS as a wise or desirable practice and means of ensuring long term fiscal stability.”

Translation: “I say that, but don’t really mean it. No matter what you show me, I won’t read it. I’ll continue to buy the thoroughly discredited Cato Institute’s nonsense.”

But Dorothy, in case I’m wrong, you can begin at http://rodgermmitchell.wordpress.com/2009/09/07/introduction/ and work your way forward through the 600+ articles.

Then you can read the works of Randall Wray, Warren Mosler, James Galbraith and William Mitchell (no relation).

Rodger Malcolm Mitchell
Dorthy Toto commented 2012-03-13 13:18:58 -0400 · Flag
Roger,
Monetary Sovereignty is not the panacea you seem bent on promoting, nor is it viewed as sustainable, as I noted earlier. Simply put, governments, even the US will be unable to print money and expand their money supply beyond the bounds of the created wealth without penalty.

Check the conclusion from the Cato study on Monetary Sovereignty and Globalization,

It was well understood before the Bretton Woods era that monetary nationalism would fundamentally change the way capital flows
naturally operate, making of a benign economic force one which
would necessarily wreak havoc with flexible exchange rates. But that
understanding has been all but lost. The global monetary order that
has emerged since the 1970s is now globalization’s greatest source of
vulnerability. Capital flows have come to be seen as inherently destabilizing, and the anti-market animus this perception encourages will only grow more potent as currency crises recur, or governments resort to ever-more draconian interventions in the working of the price system in order to forestall them.

What is to be done? An effective cooperative solution is difficult to
imagine. The genie of fiat money cannot be put back into the bottle.
Realistically, therefore, “sauve qui peut” is the message for nations
whose currencies are not wanted by foreigners. Dollarization—
abandonment of parochial currencies in favor of the dollar, euro, or
other internationally accepted money—is, in a world of fiat currencies, the only way to globalize safely. Of course, the status of global
money is not heaven-bestowed, and there is no way effectively to
insure against the unwinding of “global imbalances” should China,
with more than a trillion dollars of reserves, and other asset-rich
central banks come to fear the unbearable lightness of their fiat holdings. Digitized commodity money may then be in store for us. As
radical and implausible as that may sound, digitizing the earth’s 2,500-
year experiment with commodity money may ultimately prove far
more sustainable than our recent 35-year experiment with monetary
sovereignty.

http://www.cato.org/pubs/journal/cj27n2/cj27n2-10.pdf

I’d be interested in seeing any studies you have that promote MS as a wise or desirable practice and means of ensuring long term fiscal stability.
Dorthy Toto commented 2012-03-13 13:06:35 -0400 · Flag
John,
You are doing what so many try, namely, conflating top marginal rates with effective tax rates. It doesn’t matter what the marginal rate is if I have so many deductions that I pay little or nothing in taxes.

If you look at effective tax rates from 1979 to 2007, you’ll see that the effective rate for the bottom quintile was cut by 50%, from 8% to 4%. In the mean time, the effective rate for the top quintile when from 27.5% to 25.1%, less than a 10% drop. During the same time, the marginal rate when from 14% to 10% (but was 15% for much of the intervening years), and from 70% to 35%. In other words, while the marginal rate appeared to drop substantially for the rich and little for the poor, due to the effects of deductions and exemptions, the effective rate dropped substantially for the poor, but only slightly for the rich.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456
http://ntu.org/tax-basics/history-of-federal-individual-1.html

But just as importantly, you are missing the role of income mobility. Studies show that, over a 10 year period, less than half of those in the top 1% at the start of the period were still in that group at the end. So we don’t have “fixed class” of people, we have a flux that allows the more successful to move up, and the less successful to move down. The issue of how much the “top” have shouldn’t really matter since more than half of them will drop out within 10 years, making room for others to take their place.

http://www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf
Rodger Malcolm Mitchell commented 2012-03-13 08:58:10 -0400 · Flag
John, you said, “. . . how government raises money to pay its bills.”

The point is, the federal government (unlike state and local governments) does NOT raise money to pay its bills. The federal government creates money BY paying its bills.

That is the basis of Monetary Sovereignty.

Those who do not understand Monetary Sovereignty, do not understand economics.

Rodger Malcolm Mitchell
chuck gregory commented 2012-03-13 06:36:32 -0400 · Flag
John, Fox News’ appeal to its viewers is that it gives them permission to vent their anger. For Dorothy, it doesn’t matter whether it gives her the facts or not, but that it tells her it’s okay to vent.

In "For Your Own Good: The Hidden Cruelty of Child-Rearing,: psychiatrist Alice Miller explained the Germans’ persecution and murder of Jews as the result of three centuries of abusive child-rearing practices creating a culture in which the whole populace, rather than working through the issues created by parental deceit, manipulation, oppression and emotional and physical cruelty, found a “therapeutic” venting possible by a regime that gave them permission. I think the shoe fits here in some way, which is why Dorothy doesn’t pay much attention to accuracy.
John Lockette commented 2012-03-13 02:56:18 -0400 · Flag
Dorthy — You may want to check your statistics. Currently, the top 1% hold in excess of 30% of the nation’s wealth, and through leverage, they probably control another 20 – 25% or more! This only suggests the need for a more progressive, graduated tax structure. Keep in mind that 20 years ago or so, the top tax bracket was above 50%. Now it’s down to 35%.

As for you statement that a progressive tax structure favors the wealthy, I just don’t follow the logic of that.
Dorthy Toto commented 2012-03-13 01:26:07 -0400 · Flag
John
We have been laboring under the Progressive income tax system for more than 100 years. A casual review of the effects of the progressive income tax are enlightening (check wiki). What they show is that, for the 30 years or so after the income tax was passed, the top 1% held about 15% to 20% of total pre-tax income. During the period right after WWII, when America was the most industrialized power, the top 1% held about 5% to 10% of the pre-tax income. Then, it rose again to the 15% to 20% level through the late 80s and 90s.

In other words, the progressive income tax does not substantively reduce income disparity because…… the rich change their behaviors to maximize their incomes. What the progressive income tax does do ossify income mobility, leaving those with money entrenched in the upper strata, and making it more difficult for those in the middle and lower tiers to move up.

The Progressive income tax is a tool used to protect the ruling class, not a tool used by government to “equalize”. From Plato to Marx, the State has used the idea of a progressive tax (taking more from those with more) as a means of control through the impoverishment of the greater mass of people, while leaving the ruling elites with both the money and power.

Before you advocate for a progressive tax, you should ask yourself whether you are made richer, but making someone else poorer?
chuck gregory commented 2012-03-12 20:52:01 -0400 · Flag
John, if you, Tony and Mary Beth aren’t in Philadelphia this summer, I will be greatly disappointed! This also goes for some others, like Nathan and Rodger on this page.
John Lockette commented 2012-03-12 20:43:15 -0400 · Flag
I have been following this discussion with great interest. My thoughts on this topic start with the realization that tax policy is more than just an issue of how government raises money to pay its bills. That narrow focus has led to the current raging and stagnating debate about whether we should raise taxes or cut spending. This completely overlooks the fact that, in a democratic society that is pledged to “promote the general welfare,” tax policy (and public policy in general) also play a significant role in terms of regulating our economy and society so as to maintain the stability of that society over time.

For this reason, I favor progressive taxes and recommend the elimination of all regressive forms of taxation, such as sales taxes and value added taxes. In an economy such as ours, where wealth continues to become concentrated in the hands of an increasingly smaller percentage of people, it is essential that our government should institute policies that counteract this tendency. Societies that allow wealth to become overly concentrated are inherently unstable, and historically these societies have become fertile ground for civil unrest and have imploded. (For proof of this, we need only look 90 miles south of the Florida to Cuba, pre-Castro, during Batista’s rule.)

Let’s not be fooled by some of the talking points that we hear in the corporate media. In reality, people have been able to make lots of money during times when the progressive tax rates were much higher than they are today. Also, I don’t know any entrepreneurs who thought about consulting the tax code before deciding to launch the business that they’re passionate about building.

Perhaps to avoid confusion, we should simply focus on specific proposals for changes to our current tax code and avoid using subjective terms like “fair tax,” especially when that terminolgy is so entertwined with a movement that espouses a regressive flat tax.
Rodger Malcolm Mitchell commented 2012-03-12 18:27:51 -0400 · Flag
Nathan, in 2009, I wrote an article titled, “Ten Reasons to Eliminate FICA.” http://rodgermmitchell.wordpress.com/2009/09/08/ten-reasons-to-eliminate-fica/

We’ve taken that small, incremental step you described, the only question being, are we smart enough to continue. Perhaps, within your lifetime, federal taxes no longer will exist.

Keep your fingers crossed.

As for a fair tax, here is a task for you. Describe a fair tax, and I’ll tell you why it’s not fair. You can find some hints at http://rodgermmitchell.wordpress.com/2010/12/16/which-taxes-are-fairest-which-taxes-are-least-fair/

Rodger Malcolm Mitchell
Nathan Dunn commented 2012-03-12 15:05:41 -0400 · Flag
Of course people accept the dollar because they think that it represents something tangible. Of course no one attempts to calculate just what that is, beyond, “I have a dollar, I could get a burger at McDonalds, an Arizona iced tea, or a small pack of gum.” It is conceptually based on actual wealth, while actually being based on confidence in that wealth.

Regardless, we’re well off the original point. Whether or not you think that the federal government should collect taxes, the reality is that they will. You’ll never get sweeping reform that does away with federal taxes. What you might be successful with is incremental change that eventually ends up there.

We need to define “fair” (ie: Everyone shares the burden of government, while no one is overburdened to the point of maintaining a basic standard of living). We need to urge Congress to begin to implement small reforms (possibly starting with the closing of loopholes) and adjust as necessary. Anything beyond that should be outside of our scope for right now.
Rodger Malcolm Mitchell commented 2012-03-12 13:26:32 -0400 · Flag
Nathan,

You’re just making this stuff up. Absolutely no one — including you — accepts the dollar because you believe it represents some fraction of something you call “sum wealth.”

But if I’m wrong, please tell me how much “sum wealth” there is, and what fraction of it each dollar represents.

There are several reasons for the acceptance of the dollar, but “fraction of sum wealth” is not one of them.

I continue to wonder why not having a knowledge of economics seems to be a criterion for opining on economics. I told Dorothy the same thing: At least learn a bit, first. There are many sources, and just one is: http://rodgermmitchell.wordpress.com/2009/09/07/introduction/

Rodger Malcolm Mitchell
Rodger Malcolm Mitchell commented 2012-03-12 13:04:22 -0400 · Flag
Dorothy, I’m afraid you are out of your element — at least with regard to economics. You said, “The MS (Monetarily Sovereign) nation does not exist as a successful model of governance.”

Canada, the U.S., Australia, the UK, Japan, China, India, Switzerland, Sweden, Brazil, Israel, Argentina and dozens of other nations are Monetarily Sovereign. Compare them with nations that are monetarily non-sovereign: Greece, France, Italy, Ireland, Portugal.

I see you do an awful lot of posting on this site, yet clearly you have no knowledge of economics. You would do yourself and others a service, by first taking the time to understand at least the basics of economics, before you pontificate further.

You might begin at: http://rodgermmitchell.wordpress.com/2009/09/07/introduction/ It’s an easy introduction.

Rodger Malcolm Mitchell
Dorthy Toto commented 2012-03-12 11:56:13 -0400 · Flag
Nathan, while I know your heart may be in the right place, we have, for too long, labored under the mistaken notion that “all ideas are equal”. All ideas, agendas, policies, and programs are not equal. Some, like multiculturalism, have a multitude of culturally destructive effects and should have been stamped out at the beginning. Unfortunately, too many folks adopted a non-judgmental approach to such ideas until it was too late and the fabric of society was ripped.

But adding to that, we have another issue. Right now, Progressives use approbation as a means of modulating the behaviors of those with whom they disagree. Just look at the treatment of Conservative women by the media, comedians, politicians, and the Progressive public in general.

But anyone dealing with Progressives or Progressive ideas in a similar manner is immediately excoriated as "rude’, “nasty”, or “uncivil”. Don’t believe it. If the behavior was truly uncivil, you’d hear cries from the Progressives when Progressives are the perpetrators. Instead, the techniques are both just tools to be used to silence dissent and impose their agenda upon the greater public.

So, to answer your request, I think not. I’ll use the weapons laid upon the field by the Progressives, and have no intention of “disarming” myself just to make it easier for them.
Dorthy Toto commented 2012-03-12 11:45:01 -0400 · Flag
The question on why a Monetarily Sovereign nation needs taxes has the same answer as why Unicorns don’t wear saddles…. both are constructs of the imagination and, as such, the dreamer can put whatever they wish, or don’t wish, into their dream.

The MS nation does not exist as a successful model of governance. Every where it has been tried, from the USSR (remember the old “they pretend to pay us, and we pretend to work” line) to Africa, and through South America, when governments start printing money in excess of private wealth creation. the slide into collapse begins.
Nathan Dunn commented 2012-03-12 11:06:04 -0400 · Flag
Rodger: It’s not really about FOOLING anyone. It’s just that we all need to agree (implicitly or otherwise) that this little slip of paper has value. As we (or other nations) lose confidence that that’s the case, the value of that slip of paper drops. We need the illusion of a finite resource for a confidence-based currency to work.

Now, if we have a real-goods based currency (whatever the goods are), that’s when we start talking about traditional ideas about what money is. That’s what Dorthy has been saying about each dollar representing some percentage of our nation’s sum wealth. If we were on a full commodity standard, she would be absolutely correct.

As it stands right now, it’s more like each dollar represents a perceived fraction of sum wealth.
Rodger Malcolm Mitchell commented 2012-03-12 09:38:18 -0400 · Flag
Nathan,

So in your philosophy, it is necessary to fool the people forever, so that money will have value. Wow!

I had better stop writing my blog, which explains Monetary Sovereignty and the facts about our economy.

Rodger Malcolm Mitchell
Nathan Dunn commented 2012-03-12 01:03:41 -0400 · Flag
Dorthy: Can we please keep this civil? We can discuss this without insulting each other. We should all keep in mind one word: respect.

Rodger: I was the one who suggested taxing the states instead of the individuals. It was mostly a lark. Maybe it has merit, maybe it deserves discussion, maybe it doesn’t.
I know what you’re saying about Monetarily Sovereign nations. The basic idea is that because our currency is not based on any physical object (ie: gold, which, in and of itself, has no intrinsic value anyway… or at least didn’t when it was chosen as a standard) the dollar holds as much value as we and others give it. In essence, we are on the confidence standard. That is, the more confidence we and other nations have that they can trade American currency for goods and services, the more value the dollar has. No one (outside of the government) is cataloging the number of bills out there, so if the government were to introduce another trillion dollars into circulation, probably no one is going to notice. The confidence in the dollar is unchanged.

The problem with that idea is that you can’t keep doing it forever. If the federal government suddenly stopped taxing the people (effectively cutting off their income stream), but always had cash on hand to pay for anything that it wanted, whenever it wanted, people would question it. Where is all of this money coming from? It would soon become apparent that the government is just printing money or manipulating accounts, and confidence in the dollar would be shaken, leading to inflation (probably massive inflation).

So, for me, the idea of being a Monetarily Sovereign nation is nice, it’s a good theory to have in a textbook and helps you understand why our currency is worth what it is, but it really has no practical application. So what if money is just a slip of paper that has no value but that given by our perception? We still need it, and we still need it to at least appear limited. If we knew for a fact that money was unlimited, it would break the entire system.
Rodger Malcolm Mitchell commented 2012-03-11 19:51:07 -0400 · Flag
Dorothy, re. tax fairness, here is a list of taxes. http://rodgermmitchell.wordpress.com/2010/12/16/which-taxes-are-fairest-which-taxes-are-least-fair/ You pick out the fair one. Then be prepared to defend it.

And while you’re defending, tell me why a Monetarily Sovereign nation, with the unlimited ability to create its sovereign money, needs taxes.

Rodger Malcolm Mitchell
Dorthy Toto commented 2012-03-11 17:32:30 -0400 · Flag
Sorry about the repeats.

Nathan. You have the right idea on the creation of wealth, and have hit upon one of the major problems we face as a result of nearly one hundred years of Progressivism. The federal government now lays claim to a majority of the land in the US, and restricts its use to a favored few.

One of the big tasks facing our Nation, if we are to re-energize the economy, is to reduce, not increase, the role played by the federal government, and, among other things, this means returning ownership of our natural resources to individual citizens.

Progressives, statists, socialists, all hate the idea of individual ownership of property, but for more than a hundred years, it was the foundation upon which the greatest economic engine of all time was built. We need to get back to what works, and put the Progressives and their collectivist friends back on the ash heap of history where they belong.
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