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


Dorthy Toto commented 2012-03-11 17:27:27 -0400 · Flag
I did not suggest that the federal government tax the states. That is another canard. Simply put, neither businesses, nor local governments, pay taxes in the absolute sense. They simply collect them from individuals, who create wealth through their work, and pass them along to the taxing authority.

Unless the local government provides a good or service (such as trash disposal), they create no wealth, and any taxes imposed on them are simply added onto the tax burden already paid by the citizens of that local government.
Dorthy Toto commented 2012-03-11 17:27:12 -0400 · Flag
I did not suggest that the federal government tax the states. That is another canard. Simply put, neither businesses, nor local governments, pay taxes in the absolute sense. They simply collect them from individuals, who create wealth through their work, and pass them along to the taxing authority.

Unless the local government provides a good or service (such as trash disposal), they create no wealth, and any taxes imposed on them are simply added onto the tax burden already paid by the citizens of that local government.
Dorthy Toto commented 2012-03-11 17:26:32 -0400 · Flag
I did not suggest that the federal government tax the states. That is another canard. Simply put, neither businesses, nor local governments, pay taxes in the absolute sense. They simply collect them from individuals, who create wealth through their work, and pass them along to the taxing authority.

Unless the local government provides a good or service (such as trash disposal), they create no wealth, and any taxes imposed on them are simply added onto the tax burden already paid by the citizens of that local government.
Dorthy Toto commented 2012-03-11 17:23:13 -0400 · Flag
“Fair” is something that can be defined, but not necessarily something that everyone will agree with. For instance, I might consider it “fair” if we all pay the same % of what we spend in taxes. Someone else might consider it “fair” only if we all pay the same % of what is earned.

Still others will demand that everyone pay the same amount in absolute dollars, while some may want us all to pay the same amount, or %, after some arbitrary exemptions are granted.

Just because you don’t like a particular definition doesn’t mean that others find it worthless.

But the greater issue with your sophomoric argument is that, by demanding that “nothing can be fair”, you absolve yourself, and others, of the hard work of finding a fair, or at least, more fair, system. This was very popular in the 60s and 70s, where so-called learned professors used verbal sleight of hand to construct patterns of thought and behavior under which no one, particularly themselves, could be held accountable. By declaring this or that “unknowable”, they created an entire generation that considered the mentally demanding work absolutism valueless, laying the groundwork for the decadence we now have to live with.
Rodger Malcolm Mitchell commented 2012-03-11 16:43:41 -0400 · Flag
Dorothy,

As I said in a previous comment, it functionally is impossible for any tax to be considered “fair.” You said, “Why not do away entirely with individual federal taxes, and instead have the federal government tax the states?”

I agree that we should do away with federal taxes, but why tax the states? The federal government has the unlimited ability to pay its bills, without taxes.

If you had the unlimited ability to create dollars, would you need to receive dollars from your neighbors?

Because of this unlimited ability to create dollars, there never should be a time when the federal government takes dollars from the economy. Eliminate all federal taxes, and the federal government could create fewer dollars, to stimulate the economy.

Rodger Malcolm Mitchell
Rodger Malcolm Mitchell commented 2012-03-11 16:37:07 -0400 · Flag
Nathan, the need for taxes to create dollars, is part of an economic theory called MMT (Modern Monetary Theory), most of which I agree to. However, in my discussions with Warren Mosler and Randy Wray, I suggested, and they now agree, that there are plenty of state and local taxes to fulfill that function. Federal taxes are not necessary.

There is zero need for taxes to fund the government or for money ever to flow to the government. As I said to another writer, if all federal taxes disappeared, the need for federal money creation would diminish (though not disappear).

This is discussed at: http://rodgermmitchell.wordpress.com/2011/06/22/debt-hawks-nose-cutters-and-suicide-bombers-%E2%80%93-how-deficit-cutting-assaults-the-middle-and-the-poor/

Rodger Malcolm Mitchell
Nathan Duncanson commented 2012-03-11 16:25:30 -0400 · Flag
Back to the point of a “fair” tax and the reason I believe income and sales taxes harm the economy.

Wealth is created by labor, acting on natural resources. If you or I were left stranded on a deserted, tropical island. The only way we would have food is if we put forth the labor to find edible plants, harvest those plants, and prepare them for eating – or if we put for the effort to create tools for catching fish or hunting various animals. Our food (or our wealth) would only exist if we applied our labor to the natural resources around us (the flora and fauna on the island.) Likewise, if we wanted shelter or bed, we’d have to apply our labor to those resources, clear some land and claim it for our home.

The problem with how we currently practice capitalism in the U.S., is that we’ve handed over to a few, the natural resources upon which all of us depend. That grants them an enormous economic advantage. In order to apply our labor to create food, clothing, shelter, or anything else we must first ask those who own the natural resources for permission to use those resources. Permission they only grant if we agree to give them some portion of our labor. The point is that the owners did not do any labor, did not create any wealth, yet they demand from us, the wealth we create through our labor.

Our nation’s founders recognized this fact and only taxed landowners, not laborers. It required a constitutional amendment for the situation to change.
Nathan Duncanson commented 2012-03-11 16:16:59 -0400 · Flag
A monetarily sovereign nation can put money into the economy by simply “printing” it (or the electronic equivalent) whenever it needs to pay its bills. Whether they are paying employee salaries, elected official salaries, suppliers, contractors or others.

The other side of the equation is how the money is forced to circulate through the economy. The monetarily sovereign nation has to tax the populace and require that those taxes be paid with the currency it created. This creates a demand for the money so people actually want it – if for no other reason than to pay their taxes. That need for money will affect the whole economy eventually reaching those initially paid in that currency for the goods and services they provided to the government.

This process of adding money to the economy and taking it out provides a constant flow of currency from the government to the general economy and back to the government. At no point does the government have to borrow anything or pay interest on the money it created to pay its debts. To prevent inflation and deflation it just has to adjust it expenditures and taxes to maintain a proper amount of currency in circulation.
Dorthy Toto commented 2012-03-11 16:10:58 -0400 · Flag
Chuck, wealth envy is rather repulsive, and really shouldn’t be displayed in public. If you don’t like the fact that others have more than you, then get busy and earn more. The path is clear… education, hard work, and self-sacrifice equals more wealth. True, there may be some luck, but, as Edison said, the harder I work, the luckier I get.
Dorthy Toto commented 2012-03-11 16:07:45 -0400 · Flag
Roger, you simply aren’t seeing the whole picture. As I made quite clear, money is a representation of wealth. If more is printed in ratio with the creation of wealth, then the value stays constant, ie. no inflation. If, as is happening now, money is printed in excess of creation, then inflation begins and value is eroded.

In essence, you are looking at the leaf of the tree, and assuming you know everything there is about “trees”. In fact, you are missing the most critical parts of the monetary system.
Rodger Malcolm Mitchell commented 2012-03-11 15:44:04 -0400 · Flag
Dorothy, thanks for the “due respect,” but in essence you are saying that federal money creation is inflationary. There are two problems with this popular, though intuitional, belief:

1. Historically is it incorrect. Since 1971, when the government became Monetarily Sovereign, there has been zero relationship between federal money creation and inflation. See: http://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/ This, despite massive money creation in the past 40 years.

2. Your comment has nothing to do with tax “fairness,” or the need for taxes. In fact, if all federal taxes were eliminated, the need for the federal government to create money would be reduced.

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

Rodger Malcolm Mitchell
Rodger Malcolm Mitchell commented 2012-03-11 15:36:26 -0400 · Flag
Dorothy wrote angrily about Chuck’s answer, but the fact is, all discussions of the federal tax lead nowhere. There is no, and never can be, a “fair” tax, partly because a Monetarily Sovereign government does not use tax money to pay its bills.

Arguing about a “fair” tax is akin to arguing about the fairest way to destroy money.

Monetary Sovereignty is a part of economics that explains this. Those who do not understand Monetary Sovereignty do not understand economics.

Rodger Malcolm Mitchell
Rodger Malcolm Mitchell commented 2012-03-11 15:28:52 -0400 · Flag
Chuck asked, “If the government can print all the money it wants, why have any taxes at all?”

Prior to August 15, 1971, the U.S. government was monetarily non-sovereign, so relied on taxes to pay its bills. On that date, the government became Monetarily Sovereign; it had the unlimited ability to pay all bills of any size at any time. Taxes no longer funded federal spending.

Unfortunately, the media, the politicians and the old-line politicians have not yet caught up with the reality of the branch of economics called Monetary Sovereignty. They don’t understand the differences between federal Monetarily Sovereign financing vs. the financing of the states, counties, cities, businesses, you and me, which are monetarily non-sovereign.

In answer to Chuck’s question, there is no financial need for federal taxes (though state and local taxes remain needed). For many years, I have recommended the elimination of FICA. ( http://rodgermmitchell.wordpress.com/2009/09/08/ten-reasons-to-eliminate-fica/ )

Rodger Malcolm Mitchell
Nathan Dunn commented 2012-03-11 14:23:40 -0400 · Flag
OK, you guys are kind of proving my point. “Fair” is a subjective term. How do we get something that we can all look at and say “yeah, OK, that’s fair”? The only way to do it is to incrementally make changes, and eventually arrive at something that works and we’re comfortable with. None of us can say with certainty that any of the proposed ideas would meet both of those criteria.

Let’s throw another idea into the mix, just for fun. Why not do away entirely with individual federal taxes, and instead have the federal government tax the states? Obviously the states would tax the individuals (as they do now). You could weight a state’s share of the tax burden based on a rolling 10-year consumption percentage. That is, if a state has received an average of 5% of the annual federal budget over the last ten years, they owe 5% of this year’s budget back in taxes. Maybe 10 years ago there was a natural disaster and that state received lots of aid. Next year that drops off, and they maybe only owe 2%.
Again, no clue if this would work, just throwing out an idea.

Really, I think that we need to keep this simple. What do we mean by fair? I don’t mean a specific plan, just what would the result of a successful plan be? Once we know that, we just need congress to start reforming little bits until we arrive at something that works.
Anything more than that is beyond our scope, I think.
chuck gregory commented 2012-03-11 14:04:49 -0400 · Flag
If the government can print all the money it wants, why have any taxes at all?

And as I pointed out, a household that makes $17 million a year pays a far lower portion of its income on taxes. To make my tax load equal to the Cheney’s tax load, a prebate for my household would have to be in the vicinity of $3 or $4 million. I don’t think you’d like that very much.

You really ought to look into what greedy millionaires do with their excess money. Bob Johnson bought himself a Texas Supreme Court decision, a law and a state office (which hired his lawyer) to rule on complaints made against him by people who bought his crappy houses. You really ought to give a rat’s ass about people who have too much money because their taxes are too low. Life is not as simple as you would like it to be, Dorothy.
Dorthy Toto commented 2012-03-11 12:09:59 -0400 · Flag
@Chuck
You really should learn before you expound!!!
The FairTax is a sales tax, true. But the prebate makes it both progressive and fair to everyone since no one, rich or poor, pays taxes on their purchases of essentials as defined by the HHS poverty line.

Second, please try and control your drooling wealth envy. But to expand your example, using Warren Buffet instead of the Cheney’s. Under the FairTax, Buffet would pay the same 23% on his purchases as his secretary. Under the current system, because of how he manipulates the system, he pays a substantially lower rate than his secretary. Under the FairTax, Buffet would spend, and pay, much more than his secretary in absolute terms as well, not just on a % basis.

Under the FairTax, nobody gives a rat’s rear end where or how the money is earned. Taxes are paid on purchases. So, wages, capital gains, or lemonade stands…. its all the same. Your income is your’s, and taxes are only paid on purchases.

If you actually bothered to do research, you’d know, from government sources, that the Personal Consumption Index (PCI) upon which the FairTax is based, is a much more stable source than the Adjusted Gross Income Index (AGI) upon which the income tax is based. Even a truly dim witted consideration would note that, while people may cut from steak to hamburger, they still have to eat. As recent times have shown us, many folks have gone from pretty high incomes to nothing in 24 hours.

As far as investing in schools, road, and other infrastructure, maybe you haven’t noticed, but we’ve had the income tax in place for more than a hundred years, and it has been a bloody failure. We now have 90,000 pages of moronic manipulations, and it still doesn’t work!!!

And just to get it out in the open. The income tax, particularly for folks like you, isn’t about collecting money to run the essential functions of government. It is about controlling the lives of the citizens, and using the oppressive power of the State to force individuals to act in the manner you deem appropriate. Get your manipulative hands out of our pockets, and we can build our schools, repair our roads, care for our sick and elderly, and do all the other functions of a sane and civil society much, much, better than you ever have. Take your Euro-socialism and stick up your Greece!!!
Dorthy Toto commented 2012-03-11 11:50:15 -0400 · Flag
@Roger
With all due respect, your reasoning is specious, and your logic faulty. Let us take the issue of the federal government not needing taxes, but instead being able to print money ad nauseum. First, you must understand that money, intrinsic to itself, is nothing more than paper. Good for starting fires and in personal hygiene.

It is only as a representation of goods and services that it has economic value. And that value is fixed by the sum total of the goods and services for which it may be redeemed.

To illustrate in micro. If the sum total of the goods and services of the US was a single loaf of bread, it wouldn’t matter how many dollars printed by the federal government. They would be valued at $1/n where n is the total dollars in circulation, and taken together, all they could be traded for was one loaf of bread.

Those who argue that the federal government can “save” or “stimulate” the economy by printing money miss the simple fact that it is not money, but the created wealth it represents, that is critical. Print all the money you like, but if people are not working, creating wealth in some form or other, then the only thing that rises is inflation. By the same token, keep the monetary supply the same, but get people back to work, producing goods and services, and you find the cost of those goods decreases with increasing supply.

Let me put it simply…. there is no free lunch!!! And as much as the Progressives/Socialists/Statists/Communists/ and other nut jobs have tried to argue otherwise, each and every time it is tried, attempts to create wealth by printing money have failed. In Europe, Africa, South and Central America, the Far East, you name it, it simply doesn’t work.
chuck gregory commented 2012-03-11 10:56:37 -0400 · Flag
Jim, that’s like arguing because some drunk drive who has the same insurance company I do caused a crash that resulted in my premiums being used to pay the victim’s expenses, I shouldn’t have to buy car insurance.

The amount of resources America makes available to its families and their children determines to a large extent how well the country will continue to survive. We benefit if those children are raised well, educated well and get satisfying jobs when they are adults. “One size fits all” is disastrous policy outside the machine tool industry.

Furthermore, the “handouts” any family gets are minuscule compared to the handouts the $250,000+ crowd get (about 5.4% of the population). Someone has distracted you from the highway robbery performed for the best-off.

I once asked NH senatorial candidate John Sununu whether he preferred the tax refund income from the “Marriage Penalty Act” to go to families or to public schools. He accused me of class warfare, as well he should know. He and his wife, making only 4 times as much as I, got back 30 times more than I did under that giveaway.

If instead of being given to the rich that tax money had gone to public schools, it would have meant $1.5 million annually for a decade for every single school. Instead, it went to Sununu and his ilk. (He got elected that year.) How are your town’s schools doing?
chuck gregory commented 2012-03-11 10:45:35 -0400 · Flag
Rodger~~ Elucidating link! Thanks. The currently reigning deficit hawks probably hate you….
Jim Britt commented 2012-03-11 10:41:46 -0400 · Flag
An example of an UNFAIR tax code are child deductions and credits. A person with 5 kids uses five times the resources (teachers, etc) as a person with one kids yet pays less taxes!

WHY should they get a deduction for each child PLUS a $1,000 credit (handout) PLUS the “Earned Income Credit” (which results in most getting back more in refunds then they paid it (called “welfare handouts”)?

We need a FLAT 15% income tax with a $20,000 deduction for EVERY PERSON, married or single, zero kids or 15 kids.
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