Defecit Hypocrisy

[Denny Crane]

Ok, let's say I want to buy a house. Price of the house is $1 million. If I'm a typical homebuyer, I scrape together 20% for a downpayment and pay the rest over time. Now I have to scrape together 20% downpayment and 20% tax. Doubling the upfront cost isn't going to depress sales? I find that rather difficult to believe.

The purchase price would be $1.1M, you have to scrape together 20% of that. You pay 10% the seller pays 10%. Or only the buyer would pay the tax - either way works.

Plus there is now a huge disincentive to move from house to house, as it costs 20% each time - and you don't get that back when you sell. Just as with the stock market, you have to wait until prices go up by 20% just so you can break even. Maybe your answer to that is the same - people should buy a house and stay there instead of moving around?

People are already paying 6% cost each time they sell, in broker fees. It hasn't been such a huge disincentive to move.

I don't necessarily disagree with that sentiment, but "supposed to be" according to who?



Sure. But there are lots of ways to address that. Some of them are better than others. I'd be inclined to start by removing whatever loopholes they are using to avoid paying tax.

barfo

The point of the stock market is to own a small piece of US companies, period.

When you've sold stock in the past, you've paid broker fees and capital gains tax - short term capital gains has been taxed at 39.6% (under Clinton tax rates) or 35% (Bush tax cuts) while long term capital gains tax rates are currently 15% and will be 20% in 2013. Where's this disincentive you keep talking about?

Capital gains applies to sale of homes, too.

 

[barfo]

The purchase price would be $1.1M, you have to scrape together 20% of that. You pay 10% the seller pays 10%. Or only the buyer would pay the tax - either way works.

Sure, what's $100K between friends.

I don't understand your math. Why is the purchase price $1.1 million? Pretty sure I said the purchase price was $1 million. Inflation?
Are you ignoring the downpayment + tax issue? Don't both the downpayment and the tax need to be paid?

People are already paying 6% cost each time they sell, in broker fees. It hasn't been such a huge disincentive to move.

Then, sure, let's quadruple it. If 6% is no barrier, then 26% can't possibly be a barrier, can it?

When you've sold stock in the past, you've paid broker fees and capital gains tax - short term capital gains has been taxed at 39.6% (under Clinton tax rates) or 35% (Bush tax cuts) while long term capital gains tax rates are currently 15% and will be 20% in 2013. Where's this disincentive you keep talking about?

Uhm. That's a tax on profits. If you sell at the same price you got in, you pay no tax. You are proposing a tax on the amount of the transaction. So you pay 20%, instead of 0%, if you sell at the same price you bought at. That's a pretty big difference.

Capital gains applies to sale of homes, too.

Sure, if you make more than half a million profit. Otherwise it's zero.

barfo

 

[Denny Crane]

Sure, what's $100K between friends.

I don't understand your math. Why is the purchase price $1.1 million? Pretty sure I said the purchase price was $1 million. Inflation?
Are you ignoring the downpayment + tax issue? Don't both the downpayment and the tax need to be paid?

Uhm. That's a tax on profits. If you sell at the same price you got in, you pay no tax. You are proposing a tax on the amount of the transaction. So you pay 20%, instead of 0%, if you sell at the same price you bought at. That's a pretty big difference.

Sure, if you make more than half a million profit. Otherwise it's zero.

You'd finance the tax, not have to come up with it like a down payment. The seller pays his half of the tax out of his proceeds.

If you bought Ford stock at the time the government took over GM, you'd have 2x your investment by now. If you bought 100 shares at $1.50 and 100 shares at $3, you currently can sell 100 shares and claim you're selling the $3 shares at no profit, yet you are taking a profit on the $1.50 ones - it's something of a scam.

The $500K exclusion you talk about for real estate is only on your primary residence.

 

[jlprk]

Every stock sale would be taxed, every dollar he borrows against his assets would be taxed. Buying the Blazers, he'd have paid 20% tax on that, too.

That's a sales tax, paid by the purchaser. I thought this was a value-added tax, paid by the seller. Which is it? It can't be both, or the buyer pays 40%, after the seller increases his price to include his 20%.

...which brings up the 20% inflation on all prices that occurs the first year this goes into effect...

 

[Denny Crane]

That's a sales tax, paid by the purchaser. I thought this was a value-added tax, paid by the seller. Which is it? It can't be both, or the buyer pays 40%, after the seller increases his price to include his 20%.

...which brings up the 20% inflation on all prices that occurs the first year this goes into effect...

I wrote, "a 20% flat tax on every transaction."

I didn't write "paid by the seller" or "paid by the buyer."

Taxes paid along the way, from parts to manufacturing to retail are generally passed on to the buyer. However, the buyers will also see $0 taken from their paychecks as withholding, so they will have more to spend. Not to mention the rebate.

And frankly, don't you think that people would lower their prices to reduce the tax paid?

 

[jlprk]

I thought the 20% is income tax. Now you say it's sales tax?



Now it's value-added tax?

That's a sales tax, paid by the purchaser. I thought this was a value-added tax, paid by the seller. Which is it? It can't be both, or the buyer pays 40%, after the seller increases his price to include his 20%.

...which brings up the 20% inflation on all prices that occurs the first year this goes into effect...

Currently a family of 10 with one wage earner making $106K pays 15% in FICA alone.

Now I get it. It replaces social security tax. I thought it was either income tax, sales tax, or VAT. Can we make it medicare tax too? Does this also replace estate tax? How about state and local tax? Property tax? I think you're thinking that this replaces the whole schmeer, right? I don't think it will raise enough money.

 

[jlprk]

Is the world ready to hear the correct answer to the deficit problem? (The problem that the Democrats solved in the late 90s, but then the Republicans took power in 2001.)

I've announced the solution on this board before. I don't want to build the suspense again. But

The solution isn't to cut conservative programs. Conservatives can continue to get their kicks starting wars, spying on Americans, and lengthening prison terms.

The solution isn't to cut liberal programs. Liberals can continue to keep welfare queens fat and pregnant.

In my plan to cut the deficit, NO PROGRAMS ARE CUT. Millions of government employees are not put out of work, which would just cost the government more for unemployment benefits.

Wait for it...


Just cut the pay and benefits of every government employee by a flat percentage. Figure out what percentage it will take to balance the budget and do it. The jobs will still have waiting lists of applicants, because of guaranteed job security and guaranteed pensions. Unlike companies, the government never goes out of business.

 

[Denny Crane]

Yes, it replaces the whole schmeer, but only federal taxes. The states continue to do their taxes however they see fit. This does mean that in California, the sales tax on buying something might be 30%.

As I mentioned earlier, the 20% rate might be too high. For other VAT proposals, the numbers I've seen that raise enough revenue for the government are 10% to 14% range.

Consider that the government taxes about 25% of GDP (state and feds combined). At 20% per transaction, they're probably going to make more than 25% of GDP.

 

[Denny Crane]

Is the world ready to hear the correct answer to the deficit problem? (The problem that the Democrats solved in the late 90s, but then the Republicans took power in 2001.)

I've announced the solution on this board before. I don't want to build the suspense again. But

The solution isn't to cut conservative programs. Conservatives can continue to get their kicks starting wars, spying on Americans, and lengthening prison terms.

The solution isn't to cut liberal programs. Liberals can continue to keep welfare queens fat and pregnant.

In my plan to cut the deficit, NO PROGRAMS ARE CUT. Millions of government employees are not put out of work, which would just cost the government more for unemployment benefits.

Wait for it...


Just cut the pay and benefits of every government employee by a flat percentage. Figure out what percentage it will take to balance the budget and do it. The jobs will still have waiting lists of applicants, because of guaranteed job security and guaranteed pensions. Unlike companies, the government never goes out of business.

I looked at cutting 1/2 the government workforce (equivalent to a 50% flat percentage in your thinking). It saves maybe $200B.

Though $200B here and $200B there and the budget will be balanced.

 

[jlprk]

You claim that every dollar of the $4 trillion Federal budget is paid to nongovernment employees, except $400 billion. So 90% goes back to the taxpayers. Then what are you complaining about?

 

[Denny Crane]

You claim that every dollar of the $4 trillion Federal budget is paid to nongovernment employees, except $400 billion. So 90% goes back to the taxpayers. Then what are you complaining about?

My complaints with the current system are numerous. To name a few:
1) The burden of compliance is expensive. Consider the hours spent by everyone doing their tax returns and planning for taxes.
2) The qualifications for receiving direct payments from the govt. is convoluted. There are hundreds of programs aimed at helping the poor (no beef with helping the poor), but for each one a person has to meet certain parameters. If the idea is to make poor people not poor anymore, just cut them a check for enough money to get them over the poverty line and get rid of those hundreds of programs.
3) Federal Income tax is a violation of our civil liberties. It's no business of the government to monitor our personal finances.
4) I wouldn't wish an IRS audit on anyone.

See this:

http://en.wikipedia.org/wiki/FairTax

They propose a 23% sales tax, which is not the same thing as a VAT. Their rebates are not flat. They seem interested in keeping around those hundreds of govt. programs to accomplish the same objective.

And see this:

http://www.census.gov/newsroom/releases/archives/governments/cb10-131.html

Entitlement programs Medicare, Medicaid and Social Security comprised 45.7 percent of all funding, or $1.5 trillion.

Other direct payments (e.g., housing assistance, unemployment compensation, Medicare) made up 23.6 percent of the federal spending at $762.9 billion.

(that adds up to 69.3% of all spending as direct payments to individuals)

Salaries and wages for federal employees accounted for $299.4 billion (9.2 percent) of all federal spending.

(that would make it 78.5% of all spending as direct payments to individuals)

Total obligations for two major welfare programs — Temporary Assistance for Needy Families and the Supplemental Nutrition Assistance Program (previously known as the food stamp program) — reached $68.4 billion in 2009, a 31.7 percent increase.

(About 81% of all spending...)

&c

 

[jlprk]

I don't really believe that only 10% of Federal government spending goes to government employees. But even if it did, the other 90% of recipients would soon need less, because an economy without interest payments to China would make prices cheaper.

And then there's a leftist solution. The top 2% of Americans could make half of what they make now. You hog over half the money in the country. The method would be more than taxes--it would be to change customs of overpayment in the culture, to bring us to world norms.

Eventually the intelligence agencies will install emergency measures like this, permanently. I think maybe in 50 years.

 

[Denny Crane]

Speaking of debt to china...

http://www.nationalreview.com/corner/256199/obama-not-always-fan-upping-debt-ceiling-katrina-trinko

 

[jlprk]

http://www.nationalreview.com/corner/256199/obama-not-always-fan-upping-debt-ceiling-katrina-trinko

Looking at the comments at the bpttom...Good idea, to require that posters add 7 + 13. You should have a similar IQ check here before anyone can post. We could significantly cut down this board so I'd have time to read it all.

For this board? Better keep it to single digits. Don't go over 9 + 9.

As for the second post calling for tax simplification, that will never happen unless the economy itself is simplified. A tax code must describe its economic system. It must wrap its definition of income around the juggernaut of ways to make and hide that income. If it doesn't tax some particular kind of income, that income is a shelter, and everyone puts their money into that economic activity until the definition is changed.

 

[Denny Crane]

The tax code doesn't describe the economy, it somewhat defines it. A business keeps 3 sets of books! One to show investors (lots of profits!), one to show the IRS (not so much profits!), and one to show the actual state of the business (to make proper decisions from). What a mess.

There are huge organizations selling drugs or other illegal things outside the tax system. A part of the economy (they spend on things). Not taxed. They'd pay taxes if they had to pay the 20% at the cash register.