Tax hikes - Yay or Nay?

[merithyn]

In my opinion, what needs to be changed is the investment income taxation.  Corporate taxes should be eliminated entirely, but capital gains and dividend income need to be taxed as regular income.

I like that. It's a win for both sides.

[frunk]

In my opinion, what needs to be changed is the investment income taxation.  Corporate taxes should be eliminated entirely, but capital gains and dividend income need to be taxed as regular income.

Doesn't that encourage corporate perks (use of the company jet, expensing vacations) over monetary or investment compensation?

[Sheilbh]

I kind of agree with Meri, but I'd do it by removing a lot of deductions. I think there's a problem with tax being something other people pay (and with some benefits of government being seen as something other people receive).

[crazy canuck]

There's a major branding issue going on. Those opposed see it as "socialism", and that's what's beat into the public eye. But not all socialism is bad, and when broken down and asked as individual questions, most Americans want those systems in place. I can't see having those things without severe cuts and a severe tax hike.

Those who are opposed can also be opposed for the very good reason that without tax reform, increasing the marginal rate for all would be an incredibly regressive tax move as only the middle and lower income tax payors would actually pay more tax.

And by the way.  All socialism is bad unless you are ascribing a different meaning to the word.  I dont think you would ever want the state to control all the means of production.   That was tried.  It doesnt work.  I think what you have in mind are social democratic principles.

[lustindarkness]

Languish. We need a simple, fair and workable tax code. Discuss.

[crazy canuck]

I kind of agree with Meri, but I'd do it by removing a lot of deductions. I think there's a problem with tax being something other people pay (and with some benefits of government being seen as something other people receive).

The problem is that with a lot of entitlement programs that is true.  It isnt an issue with the tax code it is a realization that helping the vulnerable in society helps all society.  Meri's point is more that people need to pay for what they recieve which is in a lot of ways the polar opposite of good public policy.  Those who need government services are the least able to pay for them and making them pay more would have the harmful effect of forcing more to seek those government services.

[Sheilbh]

But I think the problem is if you have a welfare state that's heavily targeted at those most in need it becomes a welfare state that's easy to cut. It's for other people - and I think in many countries rhetoric about it can become racially charged. Obviously lots of welfare is going to go to those who need it and should be targeted: the unemployed, the seriously disabled, the poorest. But I think there's an advantage to some universal welfare provision: pension, healthcare, child benefit and childcare for example. The advantage is that it keeps middle-class and even some rich people involved in the welfare system. It isn't something 'for other people' that you don't have to worry about.

And the reverse works for taxes. If 47% of people aren't paying income tax that's a problem - and it's one that happened in Ireland - initially just because it's a very narrow tax base. Secondly I think there's a mirror image problem if tax rises become something that affects other people.

I mean that's a problem I have with Democrats. I often hear them calling for tax rises on the rich and it doesn't seem to be linked to spending, or to reducing the deficit, or to anything in particular. It just seems like a sort of rootless desire to tax someone else (the rich) more.

[The Minsky Moment]

Meri, think about the simplistic answers you posted.  "Yes, I am in favour of a tax hike because we need more tax revenue".  Your approach is overly simplistic because it ignores the issue of tax avoidance which you say you understand.

So please, square that circle for us.

I suspect that when you posted the poll you really did think that increasing marginal rates would create more tax revenue.  But it isnt so simplistically true.

There is such a thing as being too sophisticated.
Increasing marginal rates will increase tax revenue.  One can question how much but not whether.  However you draw you Laffer curve, the US is very safely on the positively sloped side of it.  And tax avoidance techniques, while legion, are neither complete nor without cost. 

[The Brain]

ROTW- Don't Care. That being said da Feds don't strike me as people who should necessarily be trusted with more money given how they manage what they get; you can't even be sure on any given day if the US is open or not.

[The Brain]

Meri, think about the simplistic answers you posted.  "Yes, I am in favour of a tax hike because we need more tax revenue".  Your approach is overly simplistic because it ignores the issue of tax avoidance which you say you understand.

So please, square that circle for us.

I suspect that when you posted the poll you really did think that increasing marginal rates would create more tax revenue.  But it isnt so simplistically true.

There is such a thing as being too sophisticated.

Yup, that's CC's problem.

[DGuller]

In my opinion, what needs to be changed is the investment income taxation.  Corporate taxes should be eliminated entirely, but capital gains and dividend income need to be taxed as regular income.

Doesn't that encourage corporate perks (use of the company jet, expensing vacations) over monetary or investment compensation?

Yes, this obviously requires tight controls on embezzlement or hidden compensation.

[crazy canuck]

But I think the problem is if you have a welfare state that's heavily targeted at those most in need it becomes a welfare state that's easy to cut. It's for other people - and I think in many countries rhetoric about it can become racially charged. Obviously lots of welfare is going to go to those who need it and should be targeted: the unemployed, the seriously disabled, the poorest. But I think there's an advantage to some universal welfare provision: pension, healthcare, child benefit and childcare for example. The advantage is that it keeps middle-class and even some rich people involved in the welfare system. It isn't something 'for other people' that you don't have to worry about.

And the reverse works for taxes. If 47% of people aren't paying income tax that's a problem - and it's one that happened in Ireland - initially just because it's a very narrow tax base. Secondly I think there's a mirror image problem if tax rises become something that affects other people.

I mean that's a problem I have with Democrats. I often hear them calling for tax rises on the rich and it doesn't seem to be linked to spending, or to reducing the deficit, or to anything in particular. It just seems like a sort of rootless desire to tax someone else (the rich) more.

Agreed.  Calling for tax increases on the rich is silly rhetoric.  That is why I object to simplistic discussions about tax rates.  The issue is tax avoidance not tax rates.  As a very simple example many professionals can and do create corporations from which they pay themselves minimal salaries and take money in the form of dividends and pay for things as corporate expenses so they limit the amount of after tax money they need to spend.

That is why I made the point early on that the problem is that most people dont understand the complexities of tax codes and how they are used and frankly abused to avoid paying tax.  If that is not addressed first then I suspect raising tax rates will cause a bigger backlash than the one you fear.

[mongers]

Languish. We need a simple, fair and workable tax code. Discuss.

Extreme hypothecation, once a year Seigy has to drive over to Mrs Cohens in West Palm Beach to collect $250 to buy his new entrenching tool.

[OttoVonBismarck]

Increasing revenue without a regard to tax incidence is not wise policy. Equating tax rate increases with revenue is also a bit simplistic. We obviously need more revenue as a % of GDP, and we need less spending as a % of GDP. Unless you're a Krugman/imbecile type that believes we just need lots more spending.

[crazy canuck]

Meri, think about the simplistic answers you posted.  "Yes, I am in favour of a tax hike because we need more tax revenue".  Your approach is overly simplistic because it ignores the issue of tax avoidance which you say you understand.

So please, square that circle for us.

I suspect that when you posted the poll you really did think that increasing marginal rates would create more tax revenue.  But it isnt so simplistically true.

There is such a thing as being too sophisticated.
Increasing marginal rates will increase tax revenue.  One can question how much but not whether.  However you draw you Laffer curve, the US is very safely on the positively sloped side of it.  And tax avoidance techniques, while legion, are neither complete nor without cost.

If you are prepared to accept the regressive nature of such a thing then fine.