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A TAX on INTEREST, DIVIDENDS, CAPITAL GAINS, and ESTATE?

Mensch

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As many of you already know, I support a federal flat income tax of approx. 19%, across the board, with certain reasonable exemptions. The point of this thread is not to continue that particular debate, but to ask a question regarding a tax on other forms of income. Let's discuss four: interest, dividends, capital gains, and inheritance.

A TAX ON INTEREST

Out of the four we'll discuss, I'm on the fence most regarding this one. I'm not sure it would be economically beneficial to tax interest, given that it took considerable expense and risk to make that interest (according to different circumstances). Frankly, if I were to agree to such a tax, it would have to be an incredibly small percentage rate.

A TAX ON DIVIDENDS

Frankly, I'll have to be progressive on this one. I do believe there should be a considerable tax on dividends, given that shareholders comprise a microscopic number of individuals with major responsibilities related to the worldwide economy. I believe there should be generous exemptions for this tax if the company pays a certain percentage of their total annual profits on retained earnings (i.e. reinvesting the money back into the business). What I propose doing is encouraging shareholders and CEOs to put at least 70% of their total annual profits back into the company. If they do that, let them pay a zero tax on dividends. If they put less than 70% of their total annual profits, they pay a certain percentage rate on the dividends they pay out to themselves (perhaps in increments that decrease as the percentage of retained earnings goes up).

A TAX ON CAPITAL GAINS

Much like the tax on interest, I would rather not have a capital gains tax at all. I believe we need to put as much incentive on capital gains as we can (genuine growth, not artificial bubbles). I don't believe in taxing these gains because, again, a lot of personal expense and risk was taken to make those gains, and higher gains are always good for the economy (so long as they're grown legitimately and not via fed bubbles). Many of you on the progressive side will no doubt disagree with me on this one.

A TAX ON INHERITANCE

I do not believe there should be a tax on families just because someone has died. There is a lot of expense associated with dying, and all of that wealth was most likely taxed once or twice already. As odd as it might sound, I believe in taxing (modestly) the creation of wealth but I'm pretty stringent about only taxing it once. I vehemently opposed to double, triple-taxation on the same wealth. This is also why I'm strongly opposed to a federal sales tax and high sales tax in general.

A TAX ON WAGES

Just for ****s and giggles, to inform those of you who don't know, and to upset mbig, I'll quickly float you my federal flat income tax idea (for many of you, it's a reiteration). I believe in a federal flat income tax of 19% with basic reasonable exemptions. Single individuals making less than 30K would be exempted. Families of two (single parents with a single child and/or married couples with no kids) making less than 60k would be exempted. Families of three making less than 80k would be exempted. Families of four making less than 150k would be exempted. No further exemptions. I also believe in a flat federal income tax rate of 5% for all businesses (although I'm not sure if that contradicts anything I've said above).

I'm not a tax expert, but I've given it a shot. You can shoot down my ideas or you can agree with them. That's why we're here.
 
there should be no tax on income no matter how it is derived but rather a tax on consumption. Ideally we start rolling back the unconstitutional expansions of the federal government that started with the New Deal and the FDR lapdog court that ignored 130 years of precedent in allowing that abomination to stand

the current system-where the number of tax consumers increases and increases is unsustainable.
 
I think we should only tax turtle people from Ohio.
 
I don't get why people are so against taxing inheritance. If you want to go the moral route, I'd be hard pressed to see how taxing inherited money is worse than taxing people who are actually making it. The whole "double taxation" thing is completely ridiculous, what matters is the amount of money taken in taxes overall. Everyone would rather pay two taxes of 5% rather than a single tax of 10%. More importantly, inheritance taxation doesn't have economic consequences or disincentivize useful behaviors. Dying isn't a market choice. You could always deduct funeral expenses and probate costs if needed.
 

I think it's a kneejerk reaction. The "death" tax just doesn't sound right. Plus most people will eventually inherit something, even if it is very little, so they speak out against the inheritance tax for self serving reasons.

Of course what they don't understand is that taxation is a tradeoff. We either tax this less and that more or the other way around. Every penny in inheritance tax that the gov takes in is a penny in some other tax that we don't have to pay. Apparently many people prefer to pay tax on money that they EARN rather than to pay tax on money that they are given. It's odd.

But you are absolutly right, the inheritance tax is the least harmful tax of all. I'm a small government guy, I would love to see government so small that it could exist solely on a big fat inheritance tax. It would be a really sweet deal, not a penny tax on my income, not a penny tax on purchases or sales that I make, no tax at all until I'm dead, and then I won't care because I can't take it with me.
 
I'm O.K. With a flat tax on all except #4.
 
As far as I am concerned: All taxes is a form of theft. That is - from a producer to a non-producer(however, I'm not against charity(both, public and private))! A true great civilization can only exist; thru: voluntarism(and, even - mutualism!)

This is the problem that still exists between Libertarians: minarchism versus anarchism. Or, better yet - mini-statists versus anarchists.

Libertarian-technocracy is just as deadly as liberals, conservatives, and the neologists(neo-liberals and neo-conservatives)!

Taxation of humanity starts with the individual; than, the community, and continues up the ladder. Not the other way around. The arguments for any kind of synthetic tax-system, diminishes the utility of society as a whole.
 

I'm keeping this short... but Dividends are already taxed before distribution to shareholders. That money is taxed twice which is why many are against taxing of dividends. A company earns x dollars per share. That is corporate earnings. it is taxed. Then distributed to you in a check, and taxed again...
 

Would you meet me halfway? Let us eliminate the corporate tax and compensate it with a tax on dividends. That way, if the shareholders put a considerable percentage back into the company, they can reduce or even eliminate the tax on dividends. If they choose to cash out, tax them a percentage rate according to the difference.
 
If you create special exceptions in the tax code, people will figure out a way to make their income fall into those special exceptions. If you adjust tax rates for the risk of investments, you sure as heck better be able to correctly and accurately calculate risk on every single investment. Otherwise you'll be giving the same risk based tax break to the person who invests in low-risk investments as you are to the individual who invests in high-risk investments. (I believe the free market handles risk perfectly fine, requiring a higher expected rate of return on higher risk investments, thus the tax code doesn't need to bother with risk based adjustments at all.)

As far as reducing tax rates on investment income and eliminating inheritance taxes... Yes, if you want to make it more difficult for someone born without wealth who earns the majority of their income in wages to climb the financial ladder that is a good strategy. Tax their income at higher tax rates than those who earn money from money and you take more from the worker leaving them with less to invest or save.
 
Interest - Don't support it. It just kind of strikes me as a bad idea, and overly complicated.

Dividends - Should be taxed as income

Capital gains - Should be taxed as income

Inheritance - This is the one I'm always on the fence about. On the one hand, this is the most obvious way for an aristocracy to form. On the other hand, it's pretty clearly double taxation. At the moment, I'd say I'm against it, but not particularly strongly.

Income - Progressive income tax, capping at around 60 percent at above a million dollars. Deal with it.

Also, I'm in favor of a business profit tax, which would be about 10-15 percent after expenses have been subtracted (including dividends and wages).
 
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All money COMING IN to a persons pocket or accounts should be taxed as INCOME without regard to its source or origin. Any other scheme is intended to give discriminatory preferential treatment and that is wrong.
 

I would agree with this.
 
haymarket said:
All money COMING IN to a persons pocket or accounts should be taxed as INCOME without regard to its source or origin. Any other scheme is intended to give discriminatory preferential treatment and that is wrong.
Click to expand...

Agree. All money coming into a real live individual person's pocket or account should be considered income.
 
It's interesting to me how this board has changed some of my views in the last couple weeks. I was a big supporter of the flat tax system with capital gains being separated at a lower level. After reading many links and looking back on talks with my mother (a PhD in Economics), I'm falling more in line with a progressive system.

However, I think it's outrageous to hit the rich as hard as some folks want to do. Because someone is successful is no reason to punish them and the government has no right to decide how much money someone should make. Especially when they should be able to get all the money they need from a reasonable percentage.

My thought would be to have a tiered system (with no breaks at all) starting with 0.5-1% (everyone should have some investment) until you hit the poverty line and capping at around 20% when you hit a comfortable living wage. The rich will continue to foot most of the bill under this system, but they don't get punished for being successful. Of course, since I'm also a fan of stripping HUGE amounts of the crazy spending both sides of our government engage in, this would end up being a huge surplus.

I think that if you max out at 20% or so, there is no reward in separating income sources. Capital gains, interest, and dividends could be taxed as regular income. I'm completely opposed to the death tax (even where we have it at like >2mil), but that's due to double taxation and punishment for caring for the next generation.

Possibly the most important factor in this is that the tax code should be completely transparent and fit on a couple sheets of paper. No more devil in the details and confusing tax breaks. No more confusion trying to figure out who is paying what and having it be so bad that you can find 20 articles on the same details that all give different answers. No more gaming the electoral system.
 
haymarket said:
All money COMING IN to a persons pocket or accounts should be taxed as INCOME without regard to its source or origin. Any other scheme is intended to give discriminatory preferential treatment and that is wrong.
Click to expand...

This reminds of something I'm irritated about. Why does a capital investment have to be depreciated? Why not let an expense be an expense and income be income. If a company wants to re-invest in itself, it should be able to take that expense against its income and pay on the net income - and, it should be able to carry the expense forward if it needs to. If an investor/owner gets paid, then he/she should be taxed.
 

what happens if say your grandparents die in January and your parents are killed two months later? when the death tax was contemplated, the tax rates were based on an assessment of how long it took a taxed estate to regenerate. There should be no death tax and if it has to be around to slake the envy of the parasite mentality, then every estate should pay a flat percentage rather than merely using it as a surcharge to screw those who have paid the most taxes in their lifetime as it is now
 
haymarket said:
All money COMING IN to a persons pocket or accounts should be taxed as INCOME without regard to its source or origin. Any other scheme is intended to give discriminatory preferential treatment and that is wrong.
Click to expand...

and all of it should be taxed at the same rate for everyone. any other system is discriminatory and designed to buy the votes of those paying lower rates with the money of those paying higher rates
 

60%? what confiscatory BS. Those of us making more than a million a year have no duty to have more than two thirds of our next dollar (figure in other taxes and a 60% marginal rate is going to be over 75%) taken to satisfy the parasite mentality
 
haymarket said:
All money COMING IN to a persons pocket or accounts should be taxed as INCOME without regard to its source or origin. Any other scheme is intended to give discriminatory preferential treatment and that is wrong.
Click to expand...
Someone who owns a company should pay tax on the earnings, and the collected distributions?

You see nothing wrong with me paying taxes on the income on the corporate side, and again on the personal side when I collect my paycheck? How is that not double taxation? I make 100 dollars on an item, then the government takes 30 percent of 100, then the government takes 15 percent of 70 on the dividend distribution.
 
Here is a question about the fairness of taxes

Example

Situation 1
I pay my niece $20 000 a year to take care of my mother. She works hard and pays taxes on that income.

Situation 2
I die and leave my niece $20 000

In one situation she worked hard to get money, the other she did not have to do anything.

In which of the two is being taxed on the money less fair.
 
My problem with the flat tax system is twofold. First, every flat tax proposal I have seen starts with the idea that everyone would pay the same percentage on their income. The second sentence then lists the proposed exceptions. Your OP does exactly that. Either you have a flat tax or you don't. Further, if you can create the first exception, the second is sure to follow.

Second, if you ask Congress to institute a flat tax, you are asking them to give up their right to buy votes with your money. Ain't gonna happen. So the whole argument becomes mute.
 

The first is not a gift. It is payment for a service rendered. The money is not arbitrarily changing hands. If she was not caring for your mother, she would be doing something else that required payment of taxes (at least hopefully).

The second is a bequest. When it was income for you, it was already taxed. She is instead paying taxes on the work she did for the year. She will also pay taxes when she uses the money.
 

And the money I paid to her to care for my mother would have been taxed as well, (double taxation)


and not only would she have to pay tax on the money directly she will have to pay tax when she uses the money.\
 
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Lord Tammerlain said:
And the money I paid to her to care for my mother would have been taxed as well, and not only would she have to pay tax on the money directly she will have to pay tax when she uses the money.
Click to expand...

My first point was why she would have been taxed on that income
 
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