Rand Paul's Flat Tax Plan

Originally posted by sh76
The details (i.e., the numbers Paul chose) are just a footnote. It's mainly a philosophical issue: should the tax code be used to engineer social policy?

Paul obviously doesn't think so. I say it's okay. For example, tax credits or deductions for people insulating their homes or installing solar panels would be eliminated under Paul's proposal. Is it a bad t ...[text shortened]... ou want to cut deductions and exemptions, a progressive system makes more sense than a flat tax.

We all know the game. The tax code is a means of government controlling behavior.

This can be seen as "good" and "bad". As you say, you can try to influence people giving money to the poor by making it a tax deduction, or even insulating your home. It is "bad" because it is also used by the wealthy to evade paying taxes, especially corporations like GE who get out of paying taxes through various loopholes. In return, political figures like Obama are compensated by corporations like GE.

As with most Progressive policy, they provide just enough "good" in it to defend it, while using the rest for their own political power and corruption. Hell, even Al Capone created charities and gave to the poor.

We all know that Jeb will win the nomination anyway. Paul is just like his father, a voice for those who oppose the government/corporate structure, nothing more.

The entire system is rigged, so much so, that we already know who will win nominations before they even start.

Originally posted by KazetNagorra
Simplifying the tax code good.
Low top marginal tax rate bad.

Why, on both counts?

Originally posted by KazetNagorra
So what Rand is really proposing is a different progressive tax, but he calls it a "flat tax" to appeal to libertarians. Nice.

Okay, if it is really a different progressive tax, then that might work, if it is made simpler and eliminates all the complicated wording loopholes. But any big change is going to get a lot of push back so it is probably going to have to be done in bits and pieces in the same way it got so massively complicated that makes very few people today willing to do their own taxes without at least tax software programs.

Originally posted by KazetNagorra
So what Rand is really proposing is a different progressive tax, but he calls it a "flat tax" to appeal to libertarians. Nice.

Technically, it's not a flat tax as it retains exemptions and some deductions.

Originally posted by RJHinds
A loophole is a provision written in the tax law that allows people, corporations, etc. to reduce their taxes in an unfair way. It may be wriiten that way intentionally for those lobbying for the loophole or unintentionally by legislators. It is up to the legislators in congress to rewrite the tax law that allows a loophole if they wish to remove a loophole.

Got an example?

Originally posted by normbenign
Why, on both counts?

A simpler tax code generally requires less bureaucracy and thus less overhead to administer.

A low top marginal income tax rate leads to inefficient allocation of resources as the marginal utility at high incomes is usually negligible.

Originally posted by KazetNagorra
A simpler tax code generally requires less bureaucracy and thus less overhead to administer.

A low top marginal income tax rate leads to inefficient allocation of resources as the marginal utility at high incomes is usually negligible.

I'll grant that a more progressive system would be more efficient as regards allocation of marginal utility but the present system by taxing passive income at lower levels than work is even worse. In fact, those at the top levels don't pay much more than 14.5% of their total income in taxes now due to this and generous loopholes.

Originally posted by no1marauder
I'll grant that a more progressive system would be more efficient as regards allocation of marginal utility but the present system by taxing passive income at lower levels than work is even worse. In fact, those at the top levels don't pay much more than 14.5% of their total income in taxes now due to this and generous loopholes.

The best way to have a strong economy, is to set a tax code that rewards real work and encourages the development of a growing and well educated middle class. The United States has a shrinking middle class with the highest level of income disparity in the nation's history. The quality of education from the early years through university is in decline mostly because the quality is based on your zip code with the wealthiest districts spending the most on their schools plus the rising cost of college is limiting that opportunity to those with rich parents. We are squandering any nations number one resource, its youth.

Originally posted by Phranny
The best way to have a strong economy, is to set a tax code that rewards real work and encourages the development of a growing and well educated middle class. The United States has a shrinking middle class with the highest level of income disparity in the nation's history. The quality of education from the early years through university is in decline mostl ...[text shortened]... nity to those with rich parents. We are squandering any nations number one resource, its youth.

And what changes to the TAX CODE will solve that?

Originally posted by no1marauder
And what changes to the TAX CODE will solve that?

How about not taxing work based income at all? How about shifting all tax on investment based income? You know, like they used to do before the super rich duped ordinary people into allowing income tax.

Originally posted by no1marauder
Republican U.S. presidential candidate Rand Paul is proposing that businesses and individual Americans pay a federal flat tax of 14.5 percent in a plan that would cut the government's tax revenue by more than $2 trillion over 10 years.

The Kentucky senator's plan, which he describes in a Wall Street Journal's opinion piece being published on Thursday, ...[text shortened]... ated. But I think the proposal itself is not a bad starting point for discussion.

So discuss.

The flat tax idea has been around for a long time in one form or other, and frankly I think it's a good one. It will never happen though! Lawyers and accountants have a need for keeping the tax code as complicated as possible, they generate a lot of billable hours helping the average person through the tax maze every year.

Originally posted by AThousandYoung
Got an example?

8 Ridiculous Tax Loopholes: How Companies Are Avoiding the Tax Man

On paper, the U.S. has one of the highest corporate tax rates in the world. But in practice, corporations pay far less. The Government Accountability Office estimated the average tax burden at 25.2 percent, and some of the largest corporations, such as General Electric and Wells Fargo, pay no taxes at all. This is possible because the tax code is riddled with exceptions and loopholes, created at the behest of lobbyists and exploited by teams of tax experts, many of whom used to work for the IRS and the Treasury. With the help of Citizens for Tax Justice, The Daily Beast rounded up some of the most egregious corporate tax loopholes.

Deferral of Overseas Income

Multinational companies don’t have to pay U.S. income taxes on overseas profits until they transfer them back home. But in reality, companies just leave their profits in overseas tax havens, deferring taxes indefinitely. Not only that, an accounting scheme known as “transfer pricing” allows companies to move profits from the U.S. to offshore havens so they’re counted as overseas earnings. For example a pharmaceutical company could sell a drug patent to a subsidiary in the Cayman Islands for a nominal fee, then have the subsidiary charge the parent company huge licensing fees. The company can then deduct the licensing fees from its taxable income in the U.S. and send the profits to its foreign subsidiary, where taxes can be indefinitely deferred. Some 83 percent of top 100 publicly traded companies had tax-haven units in 2009, according to the GAO. General Electric, Google, Pfizer, and many other companies use this technique. The federal government loses an estimated $100 billion a year through offshore tax abuses.

Deductions for Shipping Jobs Overseas

At first glance it doesn’t seem particularly egregious that corporations can deduct moving expenses, but that changes when the break is applied to companies moving operations overseas. President Obama proposed ending this exemption for companies moving overseas while giving a credit to companies moving back to the U.S.

The Domestic Production Deduction

This deduction was meant to encourage companies to keep manufacturing operations in the U.S. by allowing them to deduct profits from “qualified production activities.” But by the time the law was enacted, those activities had expanded to include not just manufacturing but everything from oil drilling to filmmaking to real estate. (Obama proposed barring oil and gas companies from using the deduction.) The Center on Budget and Policy Priorities estimated that the deduction cost states $500 million in 2011, and the Congressional Budget Office estimates it will cost the federal government $163 billion over the next decade.

Last-In, First-Out Accounting

Normally when you buy something for $30 and sell it for $50, you have to pay taxes on a $20 profit. But corporations—especially oil companies—manage their accounts differently. They might buy oil for $30 a barrel, and then buy some more for $45 a barrel later in the year. Then when they sell a barrel of oil for $50, they get to assume that they sold the last barrel they bought, the one that cost $45, allowing them to report a profit of $5 instead of $20. Citizens for Tax Justice estimates that the loophole is worth $97 billion over the next 10 years.

Punitive Damages Deduction

When corporations are hit with punitive damages, they’re able to write them off as an “ordinary and necessary” business expense (PDF). Consequently, Exxon’s $1.1 billion Alaska oil spill settlement actually cost the company $524 million after taxes. Obama’s budget proposes to eliminate the deductibility.

Accelerated Depreciation Deduction

This allows companies to deduct for the depreciation of a piece of equipment at a faster rate than it actually takes the equipment to depreciate. Because interest expenses are also deductible, a company can borrow money to buy equipment, deduct both the interest on the debt and the “accelerated” depreciation of the equipment, and claim deductions greater than the profits generated by the investment. It’s one of the loopholes that allow corporations to pay no taxes during profitable years.

Corporate Jet Deduction

The corporate jet deduction became a hot-button issue during the debt-ceiling debate when President Obama used it as leverage against the Republicans. Under the current law, corporations can claim deductions for the depreciation of their jets at a faster rate than commercial airlines can. Closing the loophole wouldn’t save much money—about $4 billion over 10 years—but as a political symbol, it’s invaluable. (For what it’s worth, yacht owners get an accelerated depreciation deduction plus a few more.)

NASCAR

The 71,000-page tax code is full of accelerated-depreciation loopholes for various industries. Along with corporate jets, NASCAR racetrack owners get a special exemption. They can deduct for the depreciation of their tracks over a seven-year period instead of the 39 years the government estimates it actually takes them to depreciate. The break was put in place in 2004 but was renewed in the 2008 financial-system bailout known as TARP. It costs the government $40 million a year.

http://www.thedailybeast.com/articles/2012/02/25/8-ridiculous-tax-loopholes-how-companies-are-avoiding-the-tax-man.html#

Originally posted by RJHinds
[b]8 Ridiculous Tax Loopholes: How Companies Are Avoiding the Tax Man

On paper, the U.S. has one of the highest corporate tax rates in the world. But in practice, corporations pay far less. The Government Accountability Office estimated the average tax burden at 25.2 percent, and some of the largest corporations, such as General Electric and Wells Fa ...[text shortened]... .com/articles/2012/02/25/8-ridiculous-tax-loopholes-how-companies-are-avoiding-the-tax-man.html#[/b]

The complexity, and duplicity of the tax code is intentional, and it is politicians way of bending the will of the people, and making constituency groups act in prescribed manners.