Types of Taxes

[mordorbund]

I got to thinking about the different taxes states have, and they tend to have 2 of the 3:

• Income tax - you're taxed on incoming money
• Sales tax - you're taxed on outgoing money
• Property tax - you're taxed on assets still possessed (usually land and real estate)

I'm wondering what the best form of taxation is while taking into consideration fairness, what behaviors are being encouraged/discouraged, and how it maps to the spending (funds for fire stations, roads, etc can be raised via a property tax, since anyone with property there is taking advantage of it, but if there's liquor laws regulating the sale of liquor, does that make more sense has a sales tax - things like that).

So I guess the question is, which tax (or combination of taxes) would you prefer for your state (or even ideal society*, if it will make it easier) to have?

* I'm assuming there is a government structure in place providing services, so there needs to be some form of revenue for said services.

[Vort]

I believe a tax on income is a disincentive to earning money, and is simply A Bad Thing®. The other two types of taxes seem reasonable to me, at least in principle (no pun intended).

[JudoMinja]

Well, it looks like I'm following Vort's lead on this one. An income tax just never really made sense to me.. It's like your paying money for the simple fact that you have a job. Why?

Sales tax and property tax make more sense for the reasons you pointed out, and I really have no problem with either.

[Guest gopecon]

Not that I enjoy paying it, but I think an income tax should be a part of modern taxation. The other two are probably needed as well, but should be limited. Sales taxes are inherently regressive. Those with higher incomes will pay a lower percentage of their income than those with lower incomes who must spend most or all of their income to survive. Without proper limitations in place, property taxes can get out of hand quickly and can be used to deprive people of their property that they have had for years (a retired person who bought a house for $25,000 may not be able to afford taxes on a house now valued at $200,000).

Isn't tithing essentially an income tax? Income taxes should not be exorbitant (the government taking over 50% of anyone's income is just ridiculous), but they do ensure that "the rich" are paying "their fair share". (With the progressive tax structure currently in place in America they are paying plenty, the top 5% of earners are paying something like 80-90% of income taxes).

[MarginOfError]

In Ohio, I pay federal income tax, state income tax, income taxes to two municipalities (where I live and where I'm employed), property tax, and the county sales tax (currently at 7.75% with food items excluded). Is it any wonder why Ohio has the worst economy in the country.

I'm a fan of a graduated flat tax (where each increase takes a higher marginal percentage) with no deductions for mortgages, charity, student loan interest, or anything else. I wouldn't object to this being extended to state and munincipal levels provided sales and property taxes were abolished. I could also tolerate if states were allowed to choose one and only one of the three forms.

I'd also be very pleased if corporations were taxed at the same rate as individuals (since, afterall, corporations are people too).

[Guest]

I'm actively working to get support for the Fair Tax.

It's a consumer tax (sales tax) at the end-consumer.

Sales taxes are inherently regressive. Those with higher incomes will pay a lower percentage of their income than those with lower incomes who must spend most or all of their income to survive.

Not true. Sales Tax is essentially a voluntary-type tax. You pay as much tax as you decide to buy. And there's no point in making a lot of money if you have no intention of spending it.

Here's a simplified example. I'm smack dab in middle class. My husband wears Tommy Bahama shirts - most of which are over $100 EACH. At 7% sales tax, he is paying upwards of $7 tax per shirt. Someone who can't afford Tommy Bahama shirts will go and buy a shirt from Wal-mart and even wait for it to go on sale at $10 a piece. At 7% sales tax, he is paying a piddly tax of 70 cents.

The problem is when poor people believe they are entitled to wear Tommy Bahama shirts like the rich guy but balk that they have to pay $7 sales tax for it.

In the Fair Tax, there is an additional prebate feature that virtually eliminates taxes for those living under the poverty line. Basically, everybody do not pay taxes on the first X dollars of purchases per month. The concept is that the first X dollars of purchases would be survival purchases, any purchase beyond that are supplementary to basic survival. In addition, FICA payroll tax is eliminated (this is a highly regressive tax for those earning an income that is going on today).

Isn't tithing essentially an income tax?

No. Tithing is not an income tax. It is tithe on your "increase". If you don't earn an income but you make money from investing in the stock market, you don't pay income tax on that money but you still tithe on it. If you are living off the land - that is, you don't earn any money, instead, you grow your own crops and hunt your own meat for your sustenance, you are still required to pay tithes on your harvest as it is your increase. Who determines your increase? Not the Church. You.

Income taxes should not be exorbitant (the government taking over 50% of anyone's income is just ridiculous), but they do ensure that "the rich" are paying "their fair share". (With the progressive tax structure currently in place in America they are paying plenty, the top 5% of earners are paying something like 80-90% of income taxes).

The problem is most people who are rich don't make an income. They get rich by making other people's money work for them - either through investments or through enterpreneurship - because climbing the corporate ladder is punitive by virtue of the current progressive income tax. The progressive income tax only affects those who are employed by somebody else - usually those who are "on their way" to getting rich. Therefore, on that sense, the progressive income tax is an extremely punitive tax that discourages people from availing of the essential freedom unique to a democratic society to move freely between wealth classes. In other words, it makes it harder for a poor person to climb up the ladder and become rich.

Capital gains tax is just as punitive. It discourages poor people from doing what the rich does - invest their money.

So, the funny thing about this is - progressive taxes, although really amazing at pitting the poor against the rich, is in its essential concept the very tool that keeps poor people poor! Because to climb up the ladder, you have to go through the very first rung of the next progressive tax bracket - the one where your pay raise makes your gross income big but keeps your net income the exact same! So, who wants to add more work responsibilities for the same net pay? Nobody.

Edited December 2, 2011 by anatess

[Guest]

I'd also be very pleased if corporations were taxed at the same rate as individuals (since, afterall, corporations are people too).

The fact of the matter is corporations are NOT people. It is not capable of "charity". A corporation is essentially a balance sheet - Revenue minus Expenses. Taxing a corporation simply increases the Expenses. A corporation will cease to exist if it does not meet its target profit margin. Therefore, increasing Expenses will require an increase in Revenue to maintain the target profit margin. And how does a corporation increase its revenue? Two ways:

1.) By increasing the price of their products.

So, who ended up paying the tax? The consumer, not the corporation.

So, corporate taxes are simply an increase in tax on the consumers. There's no difference between that and just slapping a higher sales tax on everything you buy.

2.) By reducing other expenses.

The most adjustible expense of a corporation is the payroll. Everybody knows this: When a corporation has to trim the fat, there will always be lay-offs. Or, they lower the salary band...

So, who ended up paying the tax? Yep... the employees. There's no difference between that and just slapping a higher income tax on everybody working for a corporation.

Edited December 2, 2011 by anatess

[Guest gopecon]

Tithing may have different (much less complicated) rules than income taxes, but the principle is that you pay a fixed percentage of your income (whatever the source). Income taxes may treat capital gains different from wages, and some other forms of income may be exempted from taxation, but the basic idea is a tax on earning - same as tithing.

The "fair tax" is a specific national sales tax proposal that is out there. For one, it is not represenative of all sales taxes. Two, the prebate may exempt some people from the costs of the tax, but above the poverty line it is a regressive tax. You are correct that people can adjust their behavior to avoid some of the effects, but the fact is that someone making $5,000,000 will probably pay less (percentage wise) of their income in taxes than someone making $200,000. The $200,000 earner will also likely pay less as a percentage than the person making $60,000. Basically, anyone who can save income can avoid the effects of the tax. The higher % that you can save, the less of your income will spent in taxes. It's got a lot going for it, but pretending that it is something it isn't doesn't work.

You are right that some rich folks pay little in income taxes, although you are mistaken if you think entrepreneurs don't pay income taxes. In my work in the commercial lending industry I've seen many personal tax returns of entrepreneurs. If they are successful, they are paying income taxes. Most small businesses are pass-through entities, where business profit is taxed as personal income for the owners. It is true that an overly progressive tax structure provides a disincentive to earn (or an incentive to hide income).

[MarginOfError]

The fact of the matter is corporations are NOT people. It is not capable of "charity". A corporation is essentially a balance sheet -

By all means, pass that on the SCOTUS, cause I happen to agree with you.

[annewandering]

Why do I keep reading this thread title as Types of Texas? ugh taxes are not potentially as fun!

[AGStacker]

Income tax is totally evil. The politicians passed the 16th Amendment when most politicians were home with their families in 1913 on Christmas eve I believe. Our Founders never intended for the government to take our productivity. We bloody had war with the British mainly over taxation among other things! We survived from 1776 to roughly the 1940s before paying income taxes at large and we were fine! If you want to police the world and be a war mongering nation than you must tax more which makes the people more poor.

It is tyrannical to take from another man unless that man agrees to it such as tithing. Only the Lord and a virtuous people can consecrate their lives and possession yo benefit each other. Satan will always try to copy the Lord's plan but in his own way.

[MarginOfError]

Income tax is totally evil. The politicians passed the 16th Amendment when most politicians were home with their families in 1913 on Christmas eve I believe. Our Founders never intended for the government to take our productivity. We bloody had war with the British mainly over taxation among other things! We survived from 1776 to roughly the 1940s before paying income taxes at large and we were fine! If you want to police the world and be a war mongering nation than you must tax more which makes the people more poor.

It is tyrannical to take from another man unless that man agrees to it such as tithing. Only the Lord and a virtuous people can consecrate their lives and possession yo benefit each other. Satan will always try to copy the Lord's plan but in his own way.

So what form of taxation do you propose?

[AGStacker]

So what form of taxation do you propose?

I propose less government spending and smaller government. The Founders never intended for government to grow so large. Yes I know the population has grown but government has grown far greater as a percentage when compared to our country's birth.

The government could do its duty, as advised by the Constitution, without income taxes. They couldn't now, when they've assumed so many responsibilities not authorized in the Constitution, because our debt is so large and becoming unmanageable. That's why debt is so bad because it doesn't only destroy, or temporarily burden, families and individuals but it can destroy governments too. The United States is not immune to this and in fact we are headed for some serious trouble soon.

The Constitution does authorize either direct or non direct taxes. Please excuse my forgetfulness on this manner. I think non direct taxes. Either way, they can tax items that aren't necessary for people to live. They also have tariffs.

[MarginOfError]

I propose less government spending and smaller government. The Founders never intended for government to grow so large. Yes I know the population has grown but government has grown far greater as a percentage when compared to our country's birth.

The government could do its duty, as advised by the Constitution, without income taxes. They couldn't now, when they've assumed so many responsibilities not authorized in the Constitution, because our debt is so large and becoming unmanageable. That's why debt is so bad because it doesn't only destroy, or temporarily burden, families and individuals but it can destroy governments too. The United States is not immune to this and in fact we are headed for some serious trouble soon.

The Constitution does authorize either direct or non direct taxes. Please excuse my forgetfulness on this manner. I think non direct taxes. Either way, they can tax items that aren't necessary for people to live. They also have tariffs.

So you're suggesting that a tax system envisioned within an agrarian society where the vast majority of business was conducted locally (or at least within state boundaries throughout the life of a product) and where international trade wasn't anywhere near as fast or easy (or necessary) as it is now would be sufficient for the United States in the present industrial economy?

[AGStacker]

So you're suggesting that a tax system envisioned within an agrarian society where the vast majority of business was conducted locally (or at least within state boundaries throughout the life of a product) and where international trade wasn't anywhere near as fast or easy (or necessary) as it is now would be sufficient for the United States in the present industrial economy?

Yes. How do you envision Zion? While your scenario sounds ideal in the long term it is dangerous and we will see the danger shortly. It is far better for a family to be self sufficient therefore it would likewise be far better for cities and states to be self sufficient. When we add other countries into the equation we also add many unwanted variables.

For example, China produces much of what we consume. The United States, who has become a warmonger, acts as if they'd love to attack Iran. China and Russia have both announced that they will attack the US if we attack Iran. This could greatly hurt or disrupt supply chains like one wouldn't believe.

It is always best for smaller communities to become self sufficient. These self sufficient communities combine to build something like a hospital. Moses led the children in mini tribes or groups. I think 70 or 100 families would exist together. Cleon Skousen elaborates on this greatly in his book "The Cleansing of America".

[MarginOfError]

Yes. How do you envision Zion? While your scenario sounds ideal in the long term it is dangerous and we will see the danger shortly. It is far better for a family to be self sufficient therefore it would likewise be far better for cities and states to be self sufficient. When we add other countries into the equation we also add many unwanted variables.

For example, China produces much of what we consume. The United States, who has become a warmonger, acts as if they'd love to attack Iran. China and Russia have both announced that they will attack the US if we attack Iran. This could greatly hurt or disrupt supply chains like one wouldn't believe.

It is always best for smaller communities to become self sufficient. These self sufficient communities combine to build something like a hospital. Moses led the children in mini tribes or groups. I think 70 or 100 families would exist together. Cleon Skousen elaborates on this greatly in his book "The Cleansing of America".

So back to the agrarian society it is! Thanks for your input.

[annewandering]

Y China and Russia have both announced that they will attack the US if we attack Iran.

Where exactly did you hear that China and Russian announced they would attack us if we attack Iran?

[AGStacker]

So back to the agrarian society it is! Thanks for your input.

I shouldn't have said yes necessarily. I am not all too familiar with the agrarian society. I believe Thomas Jefferson or Andrew Jackson studied them thoroughly. I believe in the free market. I believe the free market will provide services far better than any government service ever. I believe in living a Constitutional law and free markets and not Keynesianism.

Income taxes and most taxes are tyrannical. The Book of Mormon people, the righteous ones at the time, said they were taxed 50% under a king and it was burdensome and hard.

I don't know why people would think that taking from a individual to give to another without consent is OK. Boggles my mind.

[AGStacker]

Where exactly did you hear that China and Russian announced they would attack us if we attack Iran?

"China will not hesitate to protect Iran even with a third World War" (subtitles) - YouTube

Russia, China Warn US Against Attacking Iran -- News from Antiwar.com

Edited December 2, 2011 by AGStacker

[annewandering]

I guess I am underimpressed with a single youtube video that is subtitled from, apparently, the Chinese language. Not understanding Chinese I would have no idea of what the people are actually saying.

Edited December 2, 2011 by annewandering

[Vort]

I shouldn't have said yes necessarily. I am not all too familiar with the agrarian society. I believe Thomas Jefferson or Andrew Jackson studied them thoroughly. I believe in the free market. I believe the free market will provide services far better than any government service ever. I believe in living a Constitutional law and free markets and not Keynesianism.

Income taxes and most taxes are tyrannical. The Book of Mormon people, the righteous ones at the time, said they were taxed 50% under a king and it was burdensome and hard.

I don't know why people would think that taking from a individual to give to another without consent is OK. Boggles my mind.

Though I'm a proponent of the so-called "Fair Tax" and am generally in agreement with you, I think it should be pointed out that the taxes mentioned among the Nephites in the Book of Mormon are far different from ours. They were not taxes on earnings; they were taxes on possessions. Nothing prevented the government from taxing the same property every year, as for example the Lamanite kings did with the Nephites in subjection to them when they required half of all they had yearly. And, of course, it was tribute money, used by the overlords for themselves and (maybe) their own people, with no thought of it being used for public works among the taxed people. It was purely a form of slavery. However much you dislike the US tax system, I think you would be engaging in hyperbole to claim that it amounts to slavery. It does not.

[AGStacker]

Though I'm a proponent of the so-called "Fair Tax" and am generally in agreement with you, I think it should be pointed out that the taxes mentioned among the Nephites in the Book of Mormon are far different from ours. They were not taxes on earnings; they were taxes on possessions. Nothing prevented the government from taxing the same property every year, as for example the Lamanite kings did with the Nephites in subjection to them when they required half of all they had yearly. And, of course, it was tribute money, used by the overlords for themselves and (maybe) their own people, with no thought of it being used for public works among the taxed people. It was purely a form of slavery. However much you dislike the US tax system, I think you would be engaging in hyperbole to claim that it amounts to slavery. It does not.

So how is 50% of our earnings per year, money, and 50% of the Nephites farm yields any different? It is 50% of your time and production. The fact is that you are better with your money than the government is. I never said slavery; you did.

We haven't even mentioned property tax which is totally against the Constitution. You are never a true property owner with property tax because even if your mortgage is paid off and you don't pay the tax, your house will get auctioned off. This was never what the Founder's envisioned. I think we all would agree here that they are rolling over in their graves.

[Guest]

Tithing may have different (much less complicated) rules than income taxes, but the principle is that you pay a fixed percentage of your income (whatever the source). Income taxes may treat capital gains different from wages, and some other forms of income may be exempted from taxation, but the basic idea is a tax on earning - same as tithing.

Okay, I think I'm misunderstanding your use of the term "income" in this sense. I was thinking you meant that tithing and income tax is the same in a sense that it is a tax on income (which is not the same as increase).

So, yes, if I take your meaning of income to be equal to increase, then yes, the only difference between tithes and taxes is that the amount of tithe is determined by the individual, whereas the amount of tax is determined by a government.

The "fair tax" is a specific national sales tax proposal that is out there. For one, it is not represenative of all sales taxes. Two, the prebate may exempt some people from the costs of the tax, but above the poverty line it is a regressive tax. You are correct that people can adjust their behavior to avoid some of the effects, but the fact is that someone making $5,000,000 will probably pay less (percentage wise) of their income in taxes than someone making $200,000. The $200,000 earner will also likely pay less as a percentage than the person making $60,000. Basically, anyone who can save income can avoid the effects of the tax. The higher % that you can save, the less of your income will spent in taxes. It's got a lot going for it, but pretending that it is something it isn't doesn't work.

You are right that some rich folks pay little in income taxes, although you are mistaken if you think entrepreneurs don't pay income taxes. In my work in the commercial lending industry I've seen many personal tax returns of entrepreneurs. If they are successful, they are paying income taxes. Most small businesses are pass-through entities, where business profit is taxed as personal income for the owners. It is true that an overly progressive tax structure provides a disincentive to earn (or an incentive to hide income).

I'm not sure what you mean about pretending it is something that it isn't... Are you saying about me stating that it is not a regressive tax?

Okay, let me put this in a nutshell. FICO, SS, payroll tax... poster children of regressive tax. It is completely dependent on income and you only pay it on the first x-dollars of income. So, if your personal income tax is gigantic, you're paying lesser payroll taxes as a percentage of your income than those making a piddly amount.

Sales tax, by virtue of its fixed percentage is inherently regressive because it is wealth-neutral. That's a given. The rich person and the poor person pays the same percentage of tax for the exact same purchase. So, if you're saying that the Fair Tax is regressive because it is a sales tax, then okay. Sure. But what you're not accounting for is that, as opposed to income tax, a sales tax is VOLUNTARY. Why do I say that? Because, rich or poor, you don't have to buy anything. So, the inherent regressive property of a sales tax is by choice and completely independent of your wealth.

So, today... if you're a rich guy like Warren Buffet, the bulk of your money is not in your income. The bulk of your money is in your equities. Whether you gain more money through capital gains or dividends, you pay a much lower tax on it (15% last I checked) as opposed to personal income. The principal of such equities are not taxed. And, you don't get as rich as Warren Buffet without knowing or having a team of accountants who knows where to put the assets to pay the least amount of tax on it.

So that, the Warren Buffet comment that he is paying less taxes than his secretary is true not because of a flaw in the progressive income tax but because his assets are not in the form of taxable income whereas his secretary's assets relies solely on his taxable income. Making income more progressive by "taxing the rich" will not change this. Make sense?

In the Fair Tax, Warren Buffet will pay 23% of his purchases just like his secretary will pay 23% of his purchases. As a percentage of income, Warrent Buffet will probably end up paying more taxes than he is paying now if he continues to buy gold cuff links...

But, it doesn't matter if he does or not. If he's a billionaire miser, then yes, he'll pay a lot less taxes than the 50-thousandaire who is up to his neck in consumer debt. But, the fact of the matter is, Warren Buffet will now be unable to juggle his assets to avoid paying taxes on it.

So, is it a regressive tax? Well, it's completely up to you and your spending habits. It's not up to some government entity to make it so.

Edited December 2, 2011 by anatess

[annewandering]

I do not remember taxes being mentioned in the constitution. If its not then how can it be against the constitution?

[MarginOfError]

I shouldn't have said yes necessarily. I am not all too familiar with the agrarian society. I believe Thomas Jefferson or Andrew Jackson studied them thoroughly. I believe in the free market. I believe the free market will provide services far better than any government service ever. I believe in living a Constitutional law and free markets and not Keynesianism.

Income taxes and most taxes are tyrannical. The Book of Mormon people, the righteous ones at the time, said they were taxed 50% under a king and it was burdensome and hard.

I don't know why people would think that taking from a individual to give to another without consent is OK. Boggles my mind.

Well, because in a lot of situations, it makes sense.

For example, in 1800, if people were crossing over a bridge in Kansas, they probably weren't going very far, and so it made some sense that the people in Kansas paid to build and maintain that bridge.

300 years later, that same bridge is used by hundreds of trucks each day that are traveling from the west coast to the east coast (or vice versa). The people on the coasts are benefitting from that bridge, so it would make sense that the bridge be paid for and maintained, at least in part, by the people on the coasts.

Now you can argue that if Maine were self sufficient, they would need shipments from San Diego. But The weather in Maine isn't really friendly toward growing oranges and lemons. So should the residents of Maine go without citrus fruit in the name of self sufficiency? Or is there value in concentrating the growth of citrus fruit to California and Florida while concentrating the growth of potatoes to Idaho and Maine.

Or would you prefer each state pass a tariff on each truck passing through it's borders?