The Worst Tax


By Patrick   Follow   Fri, 23 Nov 2012, 2:03pm   3,794 views   62 comments
In Menlo Park CA 94025   Watch (0)   Share   Quote   Permalink   Like (3)   Dislike  

Sales tax is our worst tax for many reasons:

First, sales tax falls disproportionately on the poor, who must spend all of their income to survive. Moving up the income scale, the wealthier pay a smaller and smaller percentage of their income as sales tax because they can save and invest more and more. They may keep that money in investments forever, never paying any sales tax on it.

Second, sales tax penalizes commerce. Commerce in general is a good thing, as people exchange money for things they need or want, raising their quality of life in the ways they see most fit. There is no good social reason to punish commerce with a tax.

Third, sales tax reduces free market competition and raises prices. Free market competition should be truly free, but registering for a "seller's license" and the overhead of tracking, filing, and paying sales tax disadvantages tiny sellers, often preventing them from competing with larger sellers, who are then free to raise prices on consumers. The overhead on small sellers is larger than on big sellers who can amortize the overhead over larger quantities.

Fourth, sales tax administration at the state government level itself sucks up a significant amount of money from the sales tax, perpetuating bureaucracy simply because it can. If we did not have a sales tax, the state could save many millions of dollars per year in tracking and collecting the tax.

Last, requiring a "seller's licence" simply to engage in small-time commerce could be rightfully be considered a human rights abuse. The right to exchange money for goods or services without any government interference whatsoever should have been written into the constitution, since it is fundamental to all human societies and has been since time immemorial. I find it expecially offensive that the State of California assumes that it somehow has the right to grant or withhold the "privilege of making sales at retail within the state of California":

http://reedroth.com/Publications/SalesTax/Summary.html

The solution is to replace all sales taxes with a small increase in land value taxes. We already collect property taxes, and we distinguish between land values and building values. It would be a relatively small change to tax land values such that exactly the same amount of revenue is collected by the state as was collected by sales taxes. The total taxes paid would actually be less, since the entire California State Board of Equalization could be completely eliminated.

I welcome your comments.

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  1. Bellingham Bill


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    23   12:32pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike (1)  

    pkennedy says

    We have done this already, and it creates large ghetto areas.

    yes, our unique shitty socioeconomics is a chicken & egg thing here.

    Finland, Germany arguably do "public housing" better than us.

    France, maybe not if all their riots and immigrant slums are any evidence.

    Thing is though, housing is the DOMINANT life expense cost. I for one have paid $300,000 for it thus far in my life -- the next expenses are an order of magnitude less.

    But so much of this money flow is pure economic rent to the receiver, the landlord, so it is a primary structural imbalance of the economy. LLs skim billions from rental housing neighborhoods and then we wonder why these neighborhoods have shitty economics.

    The problem with LVT is that it does not eliminate these rents, but just redirect them from the LL to the state. To the extent the LVT displaces other taxes, we will just use this savings to bid up the LVT more.

    Thus the only fix in reducing housing's footprint in our daily budgets is increasing the supply such that we are not forced to bid it up so much.

  2. curious2


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    24   1:25pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (2)   Dislike  

    Bellingham Bill says

    housing is the DOMINANT life expense cost. I for one have paid $300,000 for it thus far in my life -- the next expenses are an order of magnitude less.

    You keep saying that, but the numbers don't support your claim. Healthcare is a larger share of GDP, and federal actuaries project it will become even larger with ObamaCare. Maybe you don't count the cost because you haven't seen it, perhaps it's been deducted from employer paychecks without your knowledge, but it adds up to more than housing and you will see it soon.

  3. errc


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    25   1:51pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike (2)  

    I think pretty much all the taxes I pay suck, and don't see the connecting benefits I supposedly receive from paying them. I think our very recent history paves the way for a new approach to an old idea. Silvio Gesells stamped money, with a ben bernanke twist. Why not just have the government spend what it will, and then the money supply itself is 'taxed' to pay for the expenditures? Simply put, we "print money" to pay for our government. I mean, most people seem ok with printing money to bailout the FIRE/baby boomer retirement complex, so why not print money to pay for our social services\government actions?

    Wouldn't that make everyone happy?

  4. curious2


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    26   1:56pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    errc says

    Wouldn't that make everyone happy?

    It would be better than what we're doing currently. As of now, 40% of the federal budget is deficit spending, which younger people are expected to repay with interest. An additional amount equal to about the same is Bubbles Ben printing $$$ to buy mortgage-backed securities and other debt instruments with the express purpose of propping up housing prices, making housing less affordable or unaffordable for younger people. So, compared to what we're doing now, it might be better to abandon the pretense of taxation and simply print the federal budget. The Koch brothers would love the idea so much they'd put Ben in a padded room somewhere with a printing press all his own, and meanwhile housing would become affordable to a generation mostly living with their parents.

  5. Patrick


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    27   2:16pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    The inflation tax falls mostly on the poor, who must spend all their income, and whose incomes increase only slowly.

    The rich can escape inflation easily by buying assets that move up with inflation, normally stocks and land.

    Kevin says

    They'll just invest elsewhere.

    If the LVT stops the rich from investing in land, that would be a wonderful thing. Land is not productive investment. It's just a lazy way to suck wealth out of productive people.

  6. errc


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    28   2:26pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike (1)  

    The inflation tax

    I'm not sure if that wording was in response to my post, but an inflation tax wasn't really what I was suggesting. I also made sure to add that I think implementing something similar to Silvio Gesells stamped money parlayed to simply printing money to cover the federal budget (if there even is still such a thing as a fed budget)

    http://delong.typepad.com/sdj/2009/04/silvio-gesell-and-stamped-money-another-thing-fisher-and-wicksell-knew-that-modern-economists-have-forgotten.html

    There's a need for balance in everything. If printing money to pay for gov expenses is assumed inflationary because it expands the money supply, then the counter balance would be stamped money (tax) to parlay into a means of destroying some of the money supply as well

  7. curious2


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    29   2:31pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (2)   Dislike  

    Patrick says

    The inflation tax falls mostly on the poor....

    and savers too. Basically savers and renters, the people Bubbles Ben hates and his banker friends no longer need. Their creditors (bankers' creditors are savers and bondholders) suffer from inflation, but don't get bailed out, unlike TBTF banks.

    BTW without rent stabilization, rents can rise faster than wages. Certain landlords made a reputation for "mailbox roulette," raising rents above market in a game of chicken to see who would actually move out rather than submitting to the overcharge. In SF, that led to rent stabilization law.

    Property taxes can also increase faster than wages, which was a factor behind the enactment of Prop 13. I understand Patrick's criticisms of Prop 13, and I do think it should be limited to actual human original occupants' primary residences (rather than including corporate owners and certain successors and vacation properties as now). But, I also understand the concerns of the people who voted for Prop 13, i.e. they felt their homes were being taken away from them for reasons that were not their fault and in fact were due to forces totally beyond their control. The inflation of the 1970s hit retirees like a tsunami.

  8. errc


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    30   2:33pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike (1)  

    I appreciate the wealth of information that I encounter on this site. I'm also very thankful for what I've learned about economic rent and LVT/georgism here at patnet. But at times it feels like some of you weight its role too heavily. Economic rents are extracted from us rubes in more ways than one.

    I understand it because of my understanding of marijuana economics in this country. If economic rent is simply the cost above production, than the most grotesque example is the poor sap forced to pay $60 for 3.5 grams of high quality dope here in the states, when, in a free market, the same eigth of grass wouldn't even cost a dollar,,,,people buy drugs with cash, which most of them obtain from working a job. These poor saps are soaked by the economic rent in the drug trade more than any other housing or healthcare costs, and as always, if you want to find out why, you need only ask cui bono?

  9. curious2


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    31   2:39pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike (1)  

    errc says

    as always, if you want to find out why, you need only ask cui bono?

    Yes, regarding the drug war, one of my favorite public comments was from an observer who chronicled the policy's decades of failure and concluded that its continuation can only be explained if it is a success on other terms. The prison-industrial complex is hugely lucrative to corporations and executives who fund ALEC and buy state legislators' support for harsher drug laws. Also NY's Rockefeller drug laws helped pave the way for Purdue and its licensed pushers to sell fraudulently OxyContin, basically opium but marketed as "not habit forming" even though executives knew it was addictive; they paid a fraction of their ill-gotten gains to regulators and kept the rest. By its stated aims, the drug war is a catastrophe, but from a different perspective it is a smashing success: it operates as a tax on cash buyers, while enriching the corporations and executives and practitioners in both the medical-industrial complex and the prison-industrial complex, while also incarcerating huge numbers of disobedient contrarian people who are now made to manufacture office furniture and missiles instead of possibly questioning authority and making trouble.

  10. errc


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    32   3:08pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    Curious2, I agree and feel that its reaches are even greater.

    For example, my girlfriends 12 yo daughter and her 13 yo old friend were bouncing around the house the other night when school was cancelled for the hurricane. They demanded a trip to the convenient store, to load up on sugary candies and ice cream. My gf was sipping on some alcohol, and I joked juust give them some of that to calm them down, but in our society of people that unquestionably follow the laws, that would land us in a people cage. How about giving them some healthy, medical mj snack? Blasphemy, the law says that is evil and we should be in prison for even considering it! Eventually I folded and did what any good american would do, I took the girls for ice cream so they'd crash and we could have some freaky sex in peace

    All the while, I realize that the government controls our thoughts and actions via their laws

    The alcoholic mixer is bad because its illegal, otherwise, everything being relative, I'm not sure what's "bad" about it persay

    The mmj coconut oil snack? People cage for my ass there, although it has healthy benefits, not sure of what is "bad" with that one

    Two half gallons of ice cream, that I threw away the empty containers the next day? now that's being a good Merican, following the law and all

    The reality of the situation was, my hand was heavily forced to make what is clearly, the absolute worst decision give those three choices,,,,,

    Now how does the usfedgov treat/regulate sugars like the candy and ice cream we ended up consumeing? We subsidize the hell out of it, and literally force it down childrens throats, with the blessing of the government (food pyramid)

  11. Patrick


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    33   3:18pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    errc says

    I appreciate the wealth of information that I encounter on this site. I'm also very thankful for what I've learned about economic rent and LVT/georgism here at patnet. But at times it feels like some of you weight its role too heavily. Economic rents are extracted from us rubes in more ways than one.

    Yes, I get obsessed with the unearned rents from land, but all non-productive rent-seeking is fair game for taxes in my book.

    Laws are very often used by businesses to collect non-productive rents from the public. Good examples in who opposes marijuana legalization:

    * prison guard unions (their revenue is proportional to the number of prisoners)
    * beer distributors (they don't like the competition)

    So the public pays more in taxes and more for beer, without any public benefit at all.

    I'm sure the drug cartels are violently opposed to legalization as well, but at least they have no lobbyists in DC. At least I think they don't.

  12. Bellingham Bill


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    34   3:33pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    Taxi services, too.

    Thing is, economic rents in medicine and corporate profits in general are at least the result of quid-pro-quo trade -- a service or good is being created and sold to the buyer, even with the embedded rents due to monopoly pricing power and whatnot.

    Land rents, however, are getting something for nothing. So much of a rental housing unit's set rent is dependent on what's OUTSIDE the lot lines -- access to area shopping, schools, jobs, etc. And listers on Craigs List are never shy about mentioning these community amenities!

    And land rents are a very large flow in our economy. I don't think we've got a good grip on their magnitude, actually. HALF of Sunnyvale's 55,000 housing units are rentals -- at an average of $2000/mo that's over $500M a year flowing out of the city to god knows where (my rent checks were going to Boston when I lived there).

    And we wonder why we're broke!

  13. errc


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    35   3:34pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (2)   Dislike (1)  

    Yes, I get obsessed with the unearned rents from land, but all non-productive rent-seeking is fair game for taxes in my book.

    Laws are very often used by businesses to collect non-productive rents from the public.

    I'm not certain that the solution to nonproductive rentseeking is to tax it. For instance, that seems to be the way everyone views this so called shift from marijuana going from illegal to illegal. To tax it. They don't seem to think it thru as to why it needs be taxed and who benefits from this

    Fighting bad with bad under a different label doesn't magically make good. Especially when talking about systems and adding layers of complexity

    In my opinion, the american, freedom and liberty loving means to solve the mmj war on people, would be simply to remove all laws and treat the same way we treat the rest of the things I grow in my garden,,,corn, tomatoes etc. Why is the end user expected to pay this immense penalty for being allowed to smoke grass? Who the fuck do they owe and for what? How would this country be a worse place to live with less freedoms if I grew a couple plants of dope in my backyard and gave out a couple ounces to my friends come harvest time? I apply this to every action the government does, so I see it with this jilted vision that they are merely out to fuck people over because they can, for their own benefit. This is all without mentioning all the utility that we are being deprived from the magic plant,,,but I'm all the way off topic now

  14. curious2


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    36   3:38pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    I'm sure the drug cartels are violently opposed to legalization as well, but at least they have no lobbyists in DC. At least I think they don't.

    The banks that launder their $$$ do. Remarkably, even with all of that illicit revenue, C still needed a bailout.

  15. Dan8267


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    37   3:56pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Patrick says

    Sales tax is our worst tax for many reasons:

    I would have gone with the inflation tax, followed by other unaccountable and non-transparent taxes like fines, but I agree that the sales tax is a terrible thing.

    A sales tax is essentially a transaction tax. There are other transaction taxes we pay. Whenever you guy with a debit card or, worse yet, a credit card, you and the merchant are taxed by banks with a transaction fee. As a customer, you might not see that tax, but it's still being applied to your purchases increase the prices of goods you buy. Worse yet, the tax revenue goes to rent-seeking banks rather than the treasury. It pays for no social services, but rather just increases the unearned profits of a few bank executives.

  16. woppa


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    38   4:06pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    So why don't businesses offer discounts for using cash, I'm talking about legit businesses, not the ones who don't charge tax cause they won't claim that revenue you just paid.

  17. Dan8267


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    39   4:10pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    woppa says

    So why don't businesses offer discounts for using cash, I'm talking about legit businesses, not the ones who don't charge tax cause they won't claim that revenue you just paid.

    Some do like gas stations. However, offering a discount for cash is the same as charging for a debit card and/or credit card. It has the effect of losing sales.

    The bottom line is that a transaction fee for electronic currency imposed by the bank has the same effect on lowering the dollar velocity and economic efficiency as a sales tax, but without the benefits of social services.

  18. errc


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    40   4:16pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    woppa says

    So why don't businesses offer discounts for using cash, I'm talking about legit businesses, not the ones who don't charge tax cause they won't claim that revenue you just paid.

    If I remember correctly, the gov made it illegal for gas stations in NJ to advertise (and charge) a lesser price for using cash. Imagine that

    http://m.ocregister.com/articles/credit-344140-cash-card.html

    Or I guess I had i t backwards. The suit allows merchants to advertise and charge less for cash customers, rather than allowing the cc companies from forcing merchants to upcharge everyone to cover their fees

  19. Dan8267


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    41   4:19pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    "Part of the retailers' agreement (with credit-card companies) was you could not charge a differential price for credit cards vs. cash," said McKeeman, whose association members own both independent and branded stations.

    Damn bankers. Obviously an anti-trust violation if I ever saw one.

  20. taxee


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    42   4:48pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (2)   Dislike  

    Patrick says

    Yes, I get obsessed with the unearned rents from land, but all non-productive rent-seeking is fair game for taxes in my book.

    As an old guy I have thought long and hard about what I contributed and who I supported during my productive years and who it is that provides for me now and how the natural progression should work and how it has been corrupted. Simply put, no amount of hoarding will carry you through old age. Young people are served by parents and they must return the favor. Investments, rents and mortgages were meant to do this and always have been the mechanism to transfer responsibility between the generations . That this mechanism has been stolen by greedy clever people to create vast personal wealth that is unearned and undeserved is a condemnation not of the natural order but of certain individuals and the triumph of a fallen nature that seems to be more and more prevalent.

  21. taxee


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    43   4:59pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    The thirty something quant who gets paid millions to use obscure math formulas to game the market is no different than the young, jack booted, gun toting patriot who protects an oil pipeline in some far away third world country. They may or may not think about the damage they cause. But behind each of them someone who put them up to it is acquiring a fortune.

  22. taxee


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    44   5:13pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    The reason the Dimons, Bernankes, Paulsons, Geithners, and their ilk are allowed to exist is that they make sure that there is fiat provided to those who are part of the 'franchise'. Some of whom contributed a lifetime of labor and are getting back only a meager amount. That there are young workers chasing that fiat is essential for without them money is worth nothing. I do take issue with the compensation they and their friends provide themselves. It is obscene and should be taxed away.

  23. errc


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    45   5:24pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    taxee, reading your thoughts touches on a point I've been struggling with for awhile now. I read many peoples postings that say things like "if you can't beat them, join them",,,,or along the lines of "what's right is what is legal, and what's wrong is what is illegal". Its a very sad byproduct that comes from the loss of thought and thinking

    I determine what's right and wrong for myself, never would I allow someone to take away my freedom to choose how I will react in this life. That, to me, is what fascism is. Marching to the orders of the state, benign to what is actually "right or wrong", and thoughtlessly playing SOMEBODY ELSES GAME.

  24. taxee


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    46   8:20pm Tue 27 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    It's important to understand you are stuck playing a game that lasts a lifetime against or with people who own the casino. They can create unlimited funds and can change the rules and the chips you need to use. Even when you get some points on the board you aren't assured of financial security.

  25. Kevin


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    47   9:31pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    TechGromit says

    Sales taxes is one of the few taxes illegal immigrates pay. Eliminate the sales tax? Hell I say raise it. Double or even Triple the sales tax to decrease the tax burden on the middle class by lowering property taxes. Social programs that benefit all, should be paid for by all, not just those that own property.

    It pisses me off to no end to know I have to pay for the education (with my property taxes) of children of illegal immigrates that contribute nothing toward that goal. Raise the money with sales taxes and let everyone pay the same.

    This is just not true. Illegal immigrants pay every tax that legal residents pay. They just don't get to collect most of the benefits because they're paying under a dead person's SSN.

  26. bob2356


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    48   10:22pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike (1)  

    curious2 says

    Rockefeller drug laws helped pave the way for Purdue and its licensed pushers to sell fraudulently OxyContin, basically opium but marketed as "not habit forming" even though executives knew it was addictive;

    Wow this is your most ridiculous post to date, and you've had a lot. The Rockfeller drug laws from the early 70's "paved the way" to Purdue execs lying about OxyContin in the late 90's? Really? Be serious. Drug companies didn't lie before the Rockefeller laws? Get a grip.

    BTW OxyContin is a time release form of oxycodone which has been used the world for something like 100 years under dozens of different names.

    If you want to rant and rave, try addressing a real problem, like why Purdue has a patent for a drug that has existed for a century already.

  27. curious2


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    49   10:37pm Tue 27 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    bob2356 says

    Wow this is your most ridiculous post to date, and you've had a lot. The Rockfeller drug laws from the early 70's "paved the way" to Purdue execs lying about OxyContin in the late 90's? Really?

    And, Bob, your latest post is entirely typical of you. As usual, you try to pick a fight somehow, any way you can think of, even misquoting and setting up straw men. All tediously familiar. Anyway, your misquote changed the meaning which helped (note that word) your predisposition to set up straw men, but I do not call you a liar in this instance because I have seen your lack of careful reading and your faulty memory lead you astray before, for example The New Yorker article that you so badly misrecalled. How sad that you bury your limited knowledge under a haystack of fighting words, simply because of your need to be disagreeable rather than merely disagree. And, yet again, you're wrong: the fact remains that prohibiting naturally growing plants that have been used medicinally for centuries does, in reality, help pave the way for drug companies to market the active ingredients in those same plants and push them onto people with fraudulent marketing, and to buy politicians, and to tip out to regulators. Further, as others have pointed out, it does have the effect of acting like a tax, because it increases both actual taxes and the cost of products that people could otherwise grow in their own gardens. Look around you Bob, though try not to get too dizzy with all the opioids and whatever other narcotics you might be on. I am not going to bother responding to the remainder of your sarcastic and rhetorical questions, which seem more about setting up straw men than about having any worthwhile discussion, because when you insist on your usual pugnacity you're not worth my time.

  28. Homeboy


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    50   1:24am Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    BobbyS says

    To get around the issue of the poor having to pay a disproportionate amount on basic necessities, a guaranteed income for every adult earning under a selected 6 figure income would allow everyone to pay for necessities and then work for luxuries. This could easily be implemented if nearly every governmental 'handout' were eliminated. The amount paid per individual could be based on each states COL. For the state of CA, $12K would be a fair amount to pay every adult resident.

    I'd love to see your math to prove it.

  29. TechGromit


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    51   4:27am Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Patrick says

    If you don't like illegal immigrants, why don't we start putting the employers of illegal immigrants in jail? Not probation, not fines, but jail. Without jobs, illegal immigrants will go home.

    The trick is catching the employers of illegal immigrates. U.S. Immigration and Customs Enforcement (ICE) is more concerned with terrorists or immigrates that are violent criminals. Call up and report an illegal immigrate, nothing will happen. One police officer said they pick up illegal immigrates on minor crimes all the time, they call ICE and they say if you don't have a bus load of them, don't bother us. The Agency is vastly under funded and staffed. There are laws on the books that jail employers that are repeat offenders of hiring illegal immigrates, but good luck getting them enforced.

    The situation is even worse then just one underfunded government agency, there really not a effective government immigration enforcement policy. On one hand the country erects fences, employes border guards and an agency to keep illegals out, but on the other government agencies help illegal immigrates, with health care, education, and housing subsidies. Instead of reporting illegals to ICE, they actually help them and do not report them.

    It is however true they are denied benefits such as social security, public assistance, and unemployment.

    Patrick says

    Land is not productive investment.

    It's not? I think your forgetting farming, raising cattle, harvesting trees, drilling and mining operations.

  30. Patrick


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    52   7:36am Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    TechGromit says

    The trick is catching the employers of illegal immigrates

    Employers are much easier to find than employees. Businesses have a specific location, pay taxes, etc.

    TechGromit says

    It's not? I think your forgetting farming, raising cattle, harvesting trees, drilling and mining operations.

    Farming, raising cattle, and everything else you can do with land is work and that is where the production occurs. The land itself does not produce money without work.

    Think of it this way: nothing any human being did created the land. Whether you tax land or not, the same amount of land is there. You cannot "discourage" land.

    The work should be completely untaxed. The unearned rent from land is what should be taxed.

  31. CaptainShuddup


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    53   7:52am Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    Farming, raising cattle, and everything else you can do with land is work and that is where the production occurs. The land itself does not produce money without work.

    In that case neither does a Widget stamping machine. Someone has to work the switches and dials, and warehouse people has to catalog and store the goods, and stock hands has to pull merchandise to ship it to market.

  32. Kevin


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    54   9:08am Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    All the work in the world can't extract value out of land lacking resources.

  33. CaptainShuddup


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    55   10:58am Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    And all the work in the world can't extract Twinkies from a closed Hostess plant.

  34. Bellingham Bill


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    56   12:08pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    The work should be completely untaxed. The unearned rent from land is what should be taxed.

    There is wealth in the land, and there is the value-add provided by labor that productizes this wealth, which is multiplied by capital investment.

    We should untax the labor and capital input, and tax the wealth in land.

    For natural resouces, the technical term for this is a severance tax.

  35. taketheplunge


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    57   12:09pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    I personally find the Alternative Minimum Tax (AMT) to be the worst tax. Yes, I realize that it's mostly paid by wealthier tax payers, but the reason I dislike it so much is the way it can work out in practice for the less affluent. If one receives stock options that have large gains at the time they are exercised, there can be a large tax liability. Then if the stock crashes before the stock is sold, there may be little to no value in the stock to pay the tax on it.

    During the Dot-Com boom, some people had stock options that had become worth millions at the time the stock was exercised. Then the stock plummeted and often, the company filed for bankruptcy making the stock worthless. But because there was a big paper gain on the stock at the time of exercise, there was a huge AMT tax liability.

    Some people not only lost the entire value of the stock that they had purchased, but they also had millions of dollars of tax liability for a worthless stock that they still had to pay. The AMT drove people to bankruptcy.

    With capital gain taxes, there at least is a gain that can be used to pay the taxes. (I realize inflation might make this gain not an true economic gain.) Unfortunately, the AMT applies to stock options that have theoretical gain, that may never have been realized.

    People often times work for stat-ups that have below market base pay but generous stock options to make taking the risk worthwhile. The AMT too often is devastating.

  36. thunderlips11


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    58   1:06pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    CaptainShuddup says

    In that case neither does a Widget stamping machine. Someone has to work the switches and dials, and warehouse people has to catalog and store the goods, and stock hands has to pull merchandise to ship it to market.

    Of course, Capt. Quiet. However, the warehouse is on land, which is taxed, the stamp machine has to be located somewhere and that somewhere is taxed. However, the fruit of the Stamp Machine and the production of goods shouldn't be taxed.

  37. curious2


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    59   1:10pm Wed 28 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Patrick says

    nothing any human being did created the land.

    We usually assume that, but what about reclaimed land? For example, much of Holland was reclaimed from the sea. Southwestern Manhattan island got expanded significantly into area that used to be underneath the Hudson River, creating land that is hugely valuable today. Likewise San Francisco expanded northeast into area that used to be underneath SF Bay. How should a land value tax apply to reclaimed land?

  38. thunderlips11


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    60   1:47pm Wed 28 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Good question. However, since the land is valuable...Patrick says

    Sales tax is our worst tax for many reasons:

    All awesome points.

    Here's a sixth reason: At the moment additional revenue is needed to prime the pump in a recession, is precisely when the sales tax declines from a slowdown in economic activity. Property taxes are more stable.

  39. TechGromit


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    61   7:05pm Thu 29 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    TechGromit says

    The trick is catching the employers of illegal immigrates

    Employers are much easier to find than employees. Businesses have a specific location, pay taxes, etc.

    You still have to have the people to investigate the business to determine weather or not they are employing illegal aliens. If they don't have the personally to pick up an illegal the police arrest for minor crimes they are not going to have the people they need to investigate a business.

  40. Kevin


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    62   12:49am Fri 30 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    taketheplunge says

    I personally find the Alternative Minimum Tax (AMT) to be the worst tax. Yes, I realize that it's mostly paid by wealthier tax payers, but the reason I dislike it so much is the way it can work out in practice for the less affluent. If one receives stock options that have large gains at the time they are exercised, there can be a large tax liability. Then if the stock crashes before the stock is sold, there may be little to no value in the stock to pay the tax on it.

    The only reason to exercise and hold is if you're trying to get the long-term capital gains rate. If you're taking that gamble there's going to be some risk -- that's the whole reason why it gets special tax treatment!

    Of course, what you said doesn't really make much sense. Every non-qualified stock option I've ever seen was taxed when exercised. Sell to cover is the norm, and you have to go out of your way (i.e gamble) to avoid that happening. If you defer paying the taxes at the time of exercise then you're taking the risk and you deserve it.

    Furthermore, few rank and file employees are given NQSOs anymore, except at young or pre-IPO companies. Stable companies give RSUs, and maybe ISOs to execs.

    Lastly, it's a myth that stock options specifically have a negative impact on AMT liability. Technically everyone pays AMT -- it's just that for people who are making less than a certain threshold, the AMT amount is zero. Options are actually better than owing AMT due to other means, because at least they're considered a 'timing item' (if you had sold them in a different time, you wouldn't have owed the taxes), and you might be able to deduct them in the future.

    Anyone making between $200 and $400k a year will be on the AMT schedule no matter what. Mortgage interest is the only thing we can deduct. Once you go back over the $400k threshold or thereabouts, the regular tax amount exceeds AMT again so it doesn't matter.

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