Monday, February 2, 2009

Why can't we abolish the income tax?

The income tax was probably the worst idea (okay, not the worst, but close) when it comes to taxes. Who thought of this anyway? "Hey, I have a great idea: let's tax everyone's incomes." Or an even better idea, "No, no, no, let's take it further and the more someone makes, the more they get taxed!" Penalize people for producing. Great Idea.

Not only has the income tax stifled production (why would someone want to produce more when they can only keep .15 for each dollar they earn?) but it is simply inefficient. The tax code is so complex that only the very rich can afford to hire teams of accountants and lawyers to find loopholes so they can pay as little as legally possible. Not to mention the hours upon hours that people spend each year filing returns. How about we spend that time doing something a little more efficient? We all know that we can surely spend that money much more efficiently than government could ever dream of.

Especially in this time of economic downturn, you would think the government would think of a better way to stimulate economic activity than pull close to a trillion dollars out of the private market (that 'stimulus' money has to come from somewhere!). Come on, how many of you out there honestly think that the income tax is a good idea? Honestly! I would seriously doubt that more than 25% of the American population (when they actually stopped and thought about it) would rather have the income tax than NOT have it.

Alas, there is at least one voice of sanity when it comes to sound economic policy. Who else but Ron Paul?:

"If Congress really wanted to do something helpful, it would cut taxes. Ideally, we would repeal the income tax altogether and get the IRS off the economy’s back, which would be a huge boon. We should also cut spending. Cut every unconstitutional department and program, every wasteful governmental encroachment on the people’s liberty and money, starting with our massive overseas empire. The cost of our empire is bringing us to our knees, just as the Soviets’ empire did to them. Congress should also abolish the Federal Reserve and take back its responsibilities to ensure sound money, safe from the manipulations of powerful banking interests."

-Ron Paul, Texas Straight Talk

15 comments:

Greg said...

Come on, how many of you out there honestly think that the income tax is a good idea?

Me.
-Greg Thompson

jpberthiaume said...

There are some things that we do need to pay for (ie. our emergency response teams, road maintenance, a strong military), and there are varying ways we could pay for it. If the income tax is the one we choose, it should be a flat tax with no write-offs. This, too, would get (the majority of) the IRS off of our backs. If the tax rate is 12%, for example, have your employer take that amount off or cut a check for gross x .12 at the end of the year. Done. Then whatever is left at the IRS can go after people for hiding income rather than figuring out where we miscalculated by 20 bucks.

I guess I don't really care what the method is. I know we have to "render unto Caesar," and I'd just like it to be fair. If it's 15% of yours, then it should be 15% of mine, too.

DC said...

I would love to hear your reasoning.

-DC

DC said...

Judd

-I couldn't agree more. At the very least it should be a flat tax rate. Not only is it fair, it leads to economic growth. Again, I would love to hear Greg T.'s defense of the income tax.

-DC

dane said...

If memory serves me correctly, Dr. Paul stated in his book Revolution that if we eliminated the income tax, we would reduce our Federal government's ability to spend by over 40%. That would mean our government would have to live on the same budget it did way, way, way back in....1997.

People have been brainwashed into believing the government HAS to tax people's income in order to survive. In reality, the more government takes the MORE it needs.

Even worse, those who do support the income tax do so out of spite, jealousy, or their desire/need to use the government to institute THEIR version of social justice on to those more successful than themselves. In reality, when the argument comes down to punishing the "greedy", people need to understand that when it comes to money and power there is no one greedier than our government...

jpberthiaume said...

Dane- I'm not arguing with your overall sentiment. My point is that there are some things that do need funding. I'm not sold on the idea that income tax is the only way. Just that if it's the chosen way, we ought to make it fair.

What the government has their hands in is way, way, way beyond where they should be. The only massive thing (relatively speaking in terms of budget) they should be in charge of is the military. Everything else, from airports to education, should be off-limits. It's impossible to be an objective referee and a player in the same game.

Jason Lewis, filling in for Rush yesterday, basically said that it's going to take one of these conservative governors to challenge the federal government on some issue. When the feds "mandate" something that isn't constitutional (and they could have their pick daily), one is going to need to stand up and say "no." (I think it would be a great way to create a massive conservative/libertarian uprising in unison with that person, too.) I think we are at a tipping point of sorts, but we need one, small dramatic action to set the wheels in motion. Tax opponents, pro-lifers, libertarians (all obviously can apply to a person, but each identifies with one part more than another) are at the stage where they have been knocked down and are ready to get up swinging.

DC said...

Greg,

Still waiting on your response. Anyone can say they think something is a good idea, but if you don't post an argument or even direct us to a link (or anything really!) your comment isn't really helping anyone see WHY the income tax is a good idea.

-DC

dane said...

Actually jpberthiaume, from a pragmatic sense, if we HAVE to have an income tax, I am with you on the flat tax idea. It is the fairest way to go. Nor am I denying that all taxes are unnecessary. But governments are entities that produce nothing and only exist by taking from the real production of their own citizens. An income tax is a form of slavery. It means we all work for the state.

I was really directing my comments to Greg's response. I just get frustrated that people automatically buy into the notion that things are the way they are, because that is the ONLY way we can exist.

Interestingly enough, the history of the income tax in this country is closely tied to war. The government NEEDS war. People are much more willing to give up their liberties when they believe they need their government to "protect" them. Big Government LOVES war. It thrives on it. It is what it uses to justify what would otherwise be unjustifiable taxation.

The history of income tax in the US.

And our government loves the income tax because it can pit the "two" parties against each other. The Liberals take charge: big government spending on social programs. The neo-cons take charge: big government spending on the corporate/military/industrial complex. Either way, Big Government wins and BOTH SIDES LOSE when the other side takes over again! The government gets bigger either way!

Those of us who dream of eliminating the income tax don't do it out of personal greed or lack of compassion for others. In fact, quite the opposite. We want to restrict government where ever we can BECAUSE of our compassion for our fellow man and a desire not to use our government against those who disagree with us (unlike the two major parties). Individual liberty is more important than any government program or any "justifiable" war, and the income tax is a direct assault on that liberty.

dane said...

Hey David,
Great to see your post over at www.unitedliberty.org as well! Keep up the questioning!

Greg said...

Typed too quickly during a break at work:

My logic is as follows:
-Everyone seems to think that government needs to pay for some things. There may be disagreement on what, but even on this blog, there is that basic expectation.

-Government then needs income

-Options are: Government making income, Government taxing

-Government making income would be through them owning some means of production or natural resources. Alaska and Arab states make money without taxes, but I don't think any of your readers are advocating this as policy, as it takes away from the private sector. That leaves some sort of tax

-Of the various taxation options (property, sales, income, etc), I believe that all but income are inherently regressive, meaning the lower and middle class have a disproportionate amount of the tax burden. For example, Huckabee's "Fair Tax" - which is basically the elimination of the income tax in favor of a higher sales tax - would shift a larger tax burden to the lower and middle class.

-We may fundamentally disagree on this next point, but for several reasons, I feel like progressive taxes are better than regressive taxes. I don't have time at work to outline this in detail, but I think consumer economies are stronger with a strong middle class, I think the American dream is more fitting with a strong and upwardly mobile, I think a higher percentage of lower class expenditures will go back into the economy, and I think that it is fundamentally fair that more is expected of people given much by society. Numerous polls have shown that the American people agree with the fundamentals of progressive taxation. I may add links from home later.

-The goal here isn't to convince the libertarian readership that progressive tax is the way to go, merely that it is a viable option that I, as well as a majority of the American people, think is a good plan for reasons both philosophical and practical

-Thus, based on the logical progression outlined, I think the income tax is a good idea.

-Greg Thompson

DC said...

Greg,
1) Yes, government does need to pay for some things. There are very few who would argue that point.
2) Yes, government then needs income
3) Yes, Government then needs to either make income or tax
4) Yes, that leaves us with taxing.
5) Greg, here is the thing you totally misunderstand and is undeniable through documented evidence (see “The End of Prosperity”). Countries that have gone to a flat tax rate have prospered. Beyond that, the standard of living and employment level has risen across the board when taxes are cut (again, read “The End of Prosperity” it just might change your mind).

I have many problems with this statement
“I don't have time at work to outline this in detail, but I think consumer economies are stronger with a strong middle class, I think the American dream is more fitting with a strong and upwardly mobile, I think a higher percentage of lower class expenditures will go back into the economy, and I think that it is fundamentally fair that more is expected of people given much by society.”

Here is the problem: you ‘think’ that consumer economies are stronger with a middle class. Wait a second, who ever made an argument against a middle class? This is irrelevant to our debate about a flat income tax and a progressive one. Also “I think a higher percentage of lower class expenditures will go back into the economy...” Are you therefore arguing that when the ‘wealthy’ have to pay a high percentage of taxes (the top 10% pay more than 50% of all taxes) that this creates a stronger economy? The problem is, anyone can ‘think’ that. I would rather rely on economists who have devoted their life to research of different tax systems and their effects on economic prosperity than what someone thinks. It is statistically proven that the lower tax rates are (or especially when it goes down to a flat tax, which is ideal) there is more economic prosperity. This causes more people to have more jobs, and with this the standard of living for all increases.

“I think that it is fundamentally fair that more is expected of people given much by society”
Wait, last time I checked we were (for the most part, though I would argue as Ron Paul does that we are far from a free-market society) a free market society. Why should people who have worked hard and make a lot of income have to redistribute their wealth? They were not ‘given’ anything. What they have attained is by their labor, and in a free market anyone can attain a high income. They were not given anything by society.

“Numerous polls have shown that the American people agree with the fundamentals of progressive taxation. I may add links from home later.”
-Of course they do! They get a free ride! 10% paying more than 50% of the taxes! Without understanding the reason why this totally goes against the belief that we are a free AND EQUAL society, on top of the fact that statistics show that flat tax rates result in much more prosperity, it’s too bad that so many Americans support a policy that actually hurts our economy.

“The goal here isn't to convince the libertarian readership that progressive tax is the way to go, merely that it is a viable option that I, as well as a majority of the American people, think is a good plan for reasons both philosophical and practical”
-I care more about whether or not a taxation policy is going to cause more prosperity, and I rely on statistical evidence to support my claims, regardless of what the majority thinks. A majority of people also thought that slavery was a good idea back in the day. Just because a majority thinks something is a good idea definitely does not prove that it is the right policy.

“Thus, based on the logical progression outlined, I think the income tax is a good idea.”
-And I will choose to disagree. The evidence points so hard the other way, it would be unconscionable for me to support a progressive income tax.

-DC

DC said...

Dane,
I absolutely agree with you on this one, as well as Judd. If we must have an income tax, a flat tax rate only makes sense. It has been proven to lead to the most economic prosperity, and that helps everyone (poor and ultra-rich alike).

And United Liberty is great! I think I will just submit a few blogs here and there. It’s a great mix of contributors on the site (its funny how some of the doctors and phd's will submit long articles they write up, while me and some of the younger bloggers will keep it short and sweet) and it has lots of potential.

jpberthiaume said...

Greg,

First off, the government pays for NOTHING. We pay for everything. They decide what to pay for and how much they need to take from us to pay for it, but they ultimately do not pay for anything.

Second, I can't understand anyone who supports a "progressive" tax system, as you call it, and doesn't stop short of taxing everyone up to the point where we all take home the same amount of money. Surely such supporters see the flaw in that -- the fact that no one would be motivated to work for any more than the magic amount they got to keep -- but admitting that is admitting that the whole system is flawed by nature (and any level in between where a person is taxed disproportionately is not viable).

Third, there is no reason why if income is going to be taxed that every dollar shouldn't represent as meaningful of a unit as any other. The first dollar a person makes should be regarded as the 10,000,000th dollar a person makes and be taxed the same.

Fourth, the "progressive" tax system discourages (or at least diminishes) the virtue of charity. If we were all taxed a flat rate and were allowed no write-offs and no deductions, our charity would truly be charity (not something done for a tax writeoff or because of what our tax burden is going to be "anyways"). The way the tax system is set up the wealthy, knowing they are going to pay x number of dollars in taxes, choose to offset part or all of that amount by donating to a charity of "their choice." I'm sure there is some good will there, but this actually causes greater tax burden for the middle class and lower class. Let's say a small government needs $100 from its 3 people, and the tax burdens of those people are 10, 25, and 65, and let's say the person with 65 knows their burden and realizes they can offset 30 of that by donating the amount to charity (let's say three different politicians). All of a sudden the tax burden for the "middle class" and "poor" has gone from 35 to 65 (because the 30 that the wealthy donated to the politicians doesn't meet the needs for the $100 the government needs). This actually raises the overall "tax burden" of the 3 to $130, something many people overlook (though the loss truly comes for the lower two on the totem pole -- the wealthy is still shelling out the $65).

The point in all of this is that the progressive tax system is not a long-term viable option because it is inherently flawed. This is largely due to the fact that all of the taxpayers are not independent variables in the overall puzzle, and the wealthy have ways to minimize their tax burden by writing off more expenses on years when their income was higher, and even taking "losses" on ventures that they, themselves, are actually making pretty good money off of.

Last, the income tax may very well be a good idea (and that is hard to dispute either way because it's never been done properly in this country). The progressive income tax is surely not.

jpberthiaume said...

I received this via email before the November election and it applies nicely as another example of the progressive tax system.
--
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes,it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by $20.' Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free.

But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?'

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
The fifth man, like the first four, now paid nothing (100%savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

'I only got a dollar out of the $20,'declared the sixth man. He pointed to the tenth man,' but he got $10!'

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I got'

'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, ladies and gentlemen, journalists and college professors, is how our tax system works!!

The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

Food for thought for Obama supporters!

allamerican777 said...

Unfortunately, jpberthiaume, that's just a bad example with the guys drinking/paying for beer. This is known as an 'argument of distortion'. Distort the facts as something obviously out of whack and then cast out the distortion. What's the distortion? You assume everyone drinks the same amount and the same drink at the same cost and propose by adjusting costs things go from fair to unfair. Just your initial example of a rich guy paying $59 for a beer that another would pay a dollar for is so out of whack that your example is ridiculous.

Your next example with 10, 25, and 65 is better but still highly inaccurate as it doesn't relate to any actual entities or facts. In fact, it would be most accurate if the one who should pay $65 reduced their taxes to 0 by deductions and other means as this is far more common and actual examples are more numerous (do I need to dig this up for you?).

Ask yourself this. Why do the richest companies and individuals fight against a flat tax. Why do these same companies lobby the government with huge sums of money to keep things the way they are or give more breaks for large companies/income producers. If you even think the richest 10% are paying for 50% of the taxes then you are highly misinformed and do not understand U.S. economics. You are also manipulating statistics by looking at gross pay versus net income. Gross may pay for 50% but their net is not nearly the same burden and the middle or lower class.

My strongest point I'd like to state is this. A 'flat tax' will never occur in America! America is primarily run by large companies and they very much like the way things are. If you, as an individual, are so disinclined to believe this and really, honestly, believe in a flat tax then go to another country that has a flat tax. No one is stopping you, there's nothing wrong with doing so (it's not 'un-American') and you will learn a huge amount.

Regardless, these trite examples proposed in this Blog are just people venting and who do not understand facts, statistics and actual real world data. Like philosophers they will argue and never come to an agreeable conclusion. Meanwhile, in the real pay-as-you-go world, all of us will live with tax policy until things get so bad we revolt or leave the country. We aren't even CLOSE to a revolt or even able to gather as a group to work against IRS policy. And as for individual revolt, look what Joe Stack did; pointless, waste of time, will be forgotten in a week.

So move on to something that can be changed people and stop wishing for a fantasy. Grow up, move to another country if it works better for you. You do not have control of America or large corporations.