Flat Tax - please to esplain?

[Martinus]

I try to be nice to you but you are a retarded idiot. I never claimed any connection to maritime law.

Okay, fine.  I'll go with "not a lawyer at all".

I'm a M&A lawyer. Gups is a maritime lawyer.

[Razgovory]

I didn't know Texas A&M gave out law degrees.

[Martinus]

I didn't know Texas A&M gave out law degrees.

[Slargos]

Meri's gone full Mexican!

You never go full mexican. 

[DGuller]

Bloomberg claims that the Buffett tax is theatrics, and says that if his income wasn't from capital gains, he would be paying a much higher rate than his secretary.  Um, Mike, that's precisely the point.

If there is a valid attack on the Buffett tax, is that it's a band-aid on the broken tax code, much like AMT.  Much like AMT, it can potentially lead to all kinds of weird shit that wasn't foreseen at the time of enactment, or maybe could have even been foreseen.  The correct thing to do is to cut the crap, and not favor capital income over wage income, or at least not letting what is essentially a salary be passed off as some kind of investment gain.

[Admiral Yi]

Um, Mike, that's precisely the point.

That's not the point Obama has been trying to make.

[alfred russel]

Not really. There is a host of reasons/things at work here.

You could spend company money of your 100% owned company for personal stuff (e.g. companies can buy houses, cars, food etc.) and noone can do a shit.

Self-employed people need to be as competitive as companies, and thus cannot be taxed more. So you just go into self-employment and sell services to your former employer, as opposed to be an employee - voila, you pay a corporate income tax rate!

Both of those workarounds seem like not workarounds at all, at least if my vague understanding of US corporate laws is correct.  AFAIK, you can't use corporate assets for personal use, in any guise.

I'm not a lawyer in any country, but know that in the US if you comingle personal and corporate assets you are just asking for the liability protections of the corporations to be disregarded, and that if you try to deduct personal expenses through a corporation you will end up in big trouble with the IRS if you get caught. So when Marty says "noone can do shit", noone is excluding the judicial system, the IRS, and law enforcement. But beyond those groups, I think Marty is basically correct. For example, a baker can't do anything about tax evasion or fraud without them.

Also, in the US (and I'm guessing this might be different in Poland), if you are a contractor to a company you will pay at a personal tax rate in almost every circumstance.

I am a Pole responding to a German. Why the fuck would you think my post has anything to do with US tax laws???

Because your posts are very general, and contradict the basic structure of the US tax code, which is almost certainly replicated elsewhere. And subsequent posts show that. Developed first world countries are going to be about the same. Poland is still developing, so its code may lack some sophistication.

[alfred russel]

Well, in Poland you cannot be "pseudo-self employed" either but this is decided not by your income structure, but rather the nature of your work. If you have to work from 9 to 5 and are supervised, this technically makes you ineligible for self-employment, but if you have a more independent position, you can.

An example in Poland is lawyers - most of my colleagues (including myself) are self employed and only have consultancy agreements with bigger lawfirms. We conduct our own accounting, formally hire secretaries, sub-lease our office space and whatnot. We also lack protections of an employment contract (for example, women who plan to have children, often stay on employment, as this gives them maternity leave rights). In return, we pay a flat 19% income tax rate (as opposed to the progressive tax rate employed people pay) and can deduct VAT, as well as consider tax-deductible costs any purchases which can be shown to relate to our work (e.g. a laptop, or a mobile phone, or a car).

So yeah, I guess all your comments about me being a shitty lawyer can be understood as whines that you cannot pay a 19% flat tax on your income in your silly jurisdictions. 

While it is great that you can take advantage of that situation, your jurisdiction's policy as you describe it is terrible tax policy.

[Ideologue]

Yeah, that shit is insane.  A car?  Really?  Can you deduct your fucking house because "Lol how am I gonna do my job if I don't haves nowheres to live?"

[Martinus]

Yeah, that shit is insane.  A car?  Really?  Can you deduct your fucking house because "Lol how am I gonna do my job if I don't haves nowheres to live?"

My friend has deducted the furnishing of the entire room in his house since it is where he intends to receive clients, if he has to meet with them at his house. But that's probably pushing it a bit.

[The Minsky Moment]

Like Malthus said a couple of times, a flat tax doesn't have very significant simplicty advantages.  A graduated rate requires an ability to read a simple table or multiply by percentages, that's it.

The bigger issue, alluded to here in multiple posts, is the idea of neutrality -- that the tax system should treat all gains equally regardless of type of source.  Perhaps an unobtainable ideal but in the US we don't even try; tax policy incorporates an explicit preferential treatment for gains on capital.

[fhdz]

Like Malthus said a couple of times, a flat tax doesn't have very significant simplicty advantages.  A graduated rate requires an ability to read a simple table or multiply by percentages, that's it.

[engineer voice] "There's your problem!" [/engineer voice]

The bigger issue, alluded to here in multiple posts, is the idea of neutrality -- that the tax system should treat all gains equally regardless of type of source.  Perhaps an unobtainable ideal but in the US we don't even try; tax policy incorporates an explicit preferential treatment for gains on capital.

Do you have ideas toward potentially bipartisan solutions for this particular issue?

[Sheilbh]

Like Malthus said a couple of times, a flat tax doesn't have very significant simplicty advantages.  A graduated rate requires an ability to read a simple table or multiply by percentages, that's it.

I think this depends on the context though.  The US and Canada are countries with a tradition of obeying the law and voluntarily paying taxes.  I think the relative simplicity and ease of the flat tax in post-Soviet countries without that tradition (esecially as most do PAYE only on employment income) could make the rate of overall tax evasion lower.  That's not an issue in the US or Canada.


Fahdiz, Bowles-Simpson and Rivlin-Domenici plans both address them I think.  They won't pass.

[The Minsky Moment]

Do you have ideas toward potentially bipartisan solutions for this particular issue?

Right now, I don't think there are any bipartisan solutions for counting to 3 or filling a glass with water.
Anything with the word "tax" in it is out as far a likely bipartisan resolution.

[alfred russel]

Like Malthus said a couple of times, a flat tax doesn't have very significant simplicty advantages.  A graduated rate requires an ability to read a simple table or multiply by percentages, that's it.

The bigger issue, alluded to here in multiple posts, is the idea of neutrality -- that the tax system should treat all gains equally regardless of type of source.  Perhaps an unobtainable ideal but in the US we don't even try; tax policy incorporates an explicit preferential treatment for gains on capital.

I don't disagree, but to play devils advocate, while it isn't much harder to compute a graduated rate vs. a flat one, it brings into play a lot of complex tax planning strategies (ie, shifting income into lower rate entities/people). Tax planning probably results in more dead weight loss for the economy than the process of computing taxes.

The US tax policy incorporates an explicit preferential treatment for gains on capital to offset an adverse treatment for income within C Corps. I recall being taught in school that corporate income is subject to double taxation as a payment for the liability protections they provide their owners. But now that most corporations are S Corps that pay 0% tax, I struggle to see the theoretical difference.