Federal Tax Deductions (Split From Interesting Articles)

[ExGingi]

Aren't the poor worse off with a consumption tax?

Which is why I said:

How about a consumption based Tax with no exemptions, but a personal allowance?

I am also not saying this is necessarily the solution, but it's one way.

There have been many proposals throughout the years. Steve Forbes Flat Tax, Fairfax.org, 9/9/9, and others. The common denominator of all of them is the simplicity, and leaving out special interests and powers.

[ExGingi]

Can be progressive also.  Can say that if you spend 20k, it's zero, and then 10 percent until 40k, and then 20 percent until 60k, etc.

How are you going to track that?

[henche]

How are you going to track that?

How are you going to track the rest of it? Unless were you only planning to count spending in the U.S.?

[ExGingi]

How are you going to track the rest of it? Unless were you only planning to count spending in the U.S.?

Tax sending in the US, tax net money going out at double the US consumption tax rate.

[henche]

Tax sending in the US, tax net money going out at double the US consumption tax rate.

what do you mean money going out? Like if you go on vacation to Montreal and you spend money on your credit card? How is that tracked? Does your cc company report when they pay to a non-U.S. payor and give you some sort of 1099 corollary?  And do you report cash that you are taking out, and then get a credit for cash you bring back in? Does U.S. Customs keep track of that?

And why double?  Are you trying to build in an incentive to spend money in the U.S.  That may be a good idea.  Maybe we should also give a discount on money that you spend on things for education. And solar panels! And...

[ExGingi]

And why double?  Are you trying to build in an incentive to spend money in the U.S.  That may be a good idea.  Maybe we should also give a discount on money that you spend on things for education. And solar panels! And...

It's not about incentives, it's about limiting the ability to game the system (earn money in the US, under a low or no income tax regime, and spend it elsewhere). I don't know that double the rate is the answer, but I do think it should be higher than the rate for a consumption tax in the US.

[ExGingi]

Can we fix the title of this thread. It's not (only) about deductions, it's about the tax code in general.

[henche]

It's not about incentives, it's about limiting the ability to game the system (earn money in the US, under a low or no income tax regime, and spend it elsewhere). I don't know that double the rate is the answer, but I do think it should be higher than the rate for a consumption tax in the US.

How are you gaming the system if you live in the U.S. and go on vacation in Canada? Why should you pay double tax if you vacation  on the Canadian side of Niagra instead of the U.S. side?

[ExGingi]

How are you gaming the system if you live in the U.S. and go on vacation in Canada? Why should you pay double tax if you vacation  on the Canadian side of Niagra instead of the U.S. side?

You may not, but the super rich could definitely spend big $ offshore to save money, and might be able to leverage or further profit from this.

[henche]

You may not, but the super rich could definitely spend big $ offshore to save money, and might be able to leverage or further profit from this.

Sure, they definitely would. Especially using money they also earned offshore, so it would be very hard to track.  Maybe we should also have some sort of required reporting of income earned offshore, and of bank accounts, etc.  I'm not sure taxing your vacation in Niagara is the best way of getting at that.

By which I mean, you can't avoid complexity.

[ExGingi]

Sure, they definitely would. Especially using money they also earned offshore, so it would be very hard to track.  Maybe we should also have some sort of required reporting of income earned offshore, and of bank accounts, etc.  I'm not sure taxing your vacation in Niagara is the best way of getting at that.

By which I mean, you can't avoid complexity.

It's a mindset.

If you want to avoid complexity, you could (to a certain extent).

If you make the US favorable enough for investments, freedom, etc. money will eventually come here.

[Menachem613]

It's a mindset.

If you want to avoid complexity, you could (to a certain extent).

If you make the US favorable enough for investments, freedom, etc. money will eventually come here.

I love complexity.

[ExGingi]

I love complexity.

Move to Haiti and try to start a business there.

[Menachem613]

Move to Haiti and try to start a business there.

The US has the perfect level of complexity for me.

[ExGingi]

The US has the perfect level of complexity for me.

Just suggesting an option for you if we get some simplification.

[Menachem613]

Just suggesting an option for you if we get some simplification.

Will never happen.

[gozalim]

Aren't the poor worse off with a consumption tax?

+12k
EIC

[ExGingi]

+12k
EIC

I am not necessarily saying this is the solution, but I suggest everyone reads: http://fairtax.org/faq and browses around the site a bit.

Is the FAIRtax progressive? Do the rich pay more and the poor pay less as a percentage of their spending?
Absolutely. The poor actually pay less than zero-percent retail sales tax on their spending. Much like with the earned income tax credit of today, the prebate may give them more money than they actually spend on retail taxes. Especially if they are frugal and buy mostly used products. On the other hand, the wealthy approach a maximum of 23-percent retail sales tax on their spending.

[henche]

+12k
EIC

You can have welfare with a consumption tax also. EIC is just welfare, and can be run under any tax system.

[Moshe123]

The US has the perfect level of complexity for me.

Of course. Make it simple and lawyers and accountants go bankrupt.