The Bobcat Nation

Make sure your clients don't miss out on this:

http://seattlepi.nwsource.com/local/199 ... ate10.html

Mslacat probably needs a boat?

Exactly why a straight tax would be great--no loopholes, everyone is taxed the same amount. Think how easy the tax form would be!

Interesting that the article places blame on the change in depreciation schedule instead if the boat is a business expense - If this is a business expense now it was a business expense then, and he would have been able to write it off, granted over more years than now, but changing the depreciation schedule doesn't change the amount of taxes paid (in general), just the timing of paying taxes.

I actually don't have any clients -- I work in the Tax and Treasury group for a software company. It looks like grizbeer took care of the technical response. It is things like this that keep our tax courts busy -- there are a lot of aggressive things that people try to do within the vaguely worded (as it must be, or else the code would be even more voluminous) tax code that aren't settled until the IRS pushes back and the courts establish the precedent.

'93HonoluluCat wrote:Exactly why a straight tax would be great--no loopholes, everyone is taxed the same amount. Think how easy the tax form would be!

That would be interesting. We could then have one relatively low flat tax rate and still be revenue neutral. Poor people would pay a higher % of their income in tax than rich people (assuming we didn't scrap FICA tax and local sales taxes). We could get rid of tax subsidies for married people (which would basically end marriage as we know it, at least according to people who claim that tax benefits were the prime motivation for gays to get married). We could get rid of the homeowner subsidies (real estate taxes and interest expense deductions). This would probably tank the real estate market and would shift many people back to renting as opposed to buying. We would remove the deduction for donating to charities, which would essentially end charitable deductions. We would also remove the tax subsidies we give to people who have kids and finally close that loophole once and for all.

If we removed all of the social engineering from the tax code, it would be simple. The best part is, as a single, childless renter, I would benefit greatly from a nice flat system of taxation. Let's do it!

To solve Bay Area Cat concern that the little guy gets hit the hardest, we could modify a flat tax. For the first $50k income, there would be not tax. So the little guy gets a tax cut.

BobCatFan wrote:To solve Bay Area Cat concern that the little guy gets hit the hardest, we could modify a flat tax. For the first $50k income, there would be not tax. So the little guy gets a tax cut.

Then it's no longer a flat tax. Then some other group will want their freebie back, and it will be politically expedient for lawmakers to give it to them. Then the snowball effect hits, and we end up with a 50,000 page tax code.

Everybody wants their little freebie, so the tax code will never be simple. It's just the nature of a democracy.

BAC wrote:
Poor people would pay a higher % of their income in tax than rich people (assuming we didn't scrap FICA tax and local sales taxes).

How do you figure the little guys/gals get hit hardest? 10% is 10%, regardless of wether you make $100M per year, or $1 per year. The less you make, the less tax you pay. Isn't that what the Democrats have been trying to do?

Oh, wait...I see. They want the rich to pay for the rich AND the poor...yeah, that's fair.

'93HonoluluCat wrote:

BAC wrote:
Poor people would pay a higher % of their income in tax than rich people (assuming we didn't scrap FICA tax and local sales taxes).

How do you figure the little guys/gals get hit hardest? 10% is 10%, regardless of wether you make $100M per year, or $1 per year. The less you make, the less tax you pay. Isn't that what the Democrats have been trying to do?

Oh, wait...I see. They want the rich to pay for the rich AND the poor...yeah, that's fair.

Not exactly. The poor spend a much higher percentage of their overall income on items that are taxed via sales taxes than do rich people (who generally invest more of their money). Also, our income is not taxed for FICA (social security) above a certain level -- I think it is somewhere in the high 80's right now.

Therefore, if we had a flat tax income tax system, but had the current local sales tax and FICA tax regimes in place, poor people would pay a higher % of their income in taxes than rich people.

I am a big proponent of the sales tax, especially for states like Montana that don't take advantage of all of the tourist dollars that are spent in the state by plucking a few points off of the top, but without a progressive (higher marginal tax rates for higher income levels) income tax structure to even it out, it really is unfair to poorer people.

If you scrapped the sales taxes as well as the FICA tax, then we could say that it was truly a flat tax system as a function of income.

But then, unless a person's only income is a paycheck each month, the complicated part of tax policy isn't the tax rate, it's defining "income." That's a whole other topic, and one that will never be dramatically simplified.

BAC wrote:
If you scrapped the sales taxes as well as the FICA tax, then we could say that it was truly a flat tax system as a function of income.

Revamping all taxes--including FICA--is something I advocate.

BAC wrote:
But then, unless a person's only income is a paycheck each month, the complicated part of tax policy isn't the tax rate, it's defining "income." That's a whole other topic, and one that will never be dramatically simplified.

This is true. And this is a point at which I will say I'm glad it's not my job to formulate/create/enforce tax code.

I'd be for a progressive tax with no deductions. Lower the rates. But that would end corporate payoffs, and put a lot of accountants and lawyers out of business, so it isn't realistic.

velochat wrote:I'd be for a progressive tax with no deductions. Lower the rates. But that would end corporate payoffs, and put a lot of accountants and lawyers out of business, so it isn't realistic.

Everybody wants their freebee -- not just the corporations. The only difference between corporate freebees and individual freebees is that corporations (and other business entities) create jobs, while individual freebees only increase the wealth of the individual.

I actually believe that the corporate tax rate should be zero, and that it should all be taxed exclusively at the shareholder level, but that, too, will never happen. That would actually be stimulative. Instead, we are going the other direction and making the dividends to the shareholders virtually tax-free, which is not stimulative at all -- it just makes shareholders (who are generally wealthy people who already spend what they want to spend or retirement plans that won't be spent for years) richer. If we want to create jobs, giving corporation incentives to invest and grow are the way to go -- not giving a better return on capital to investors.