What would be the most meaningful tax changes both the commonwealth and the federal government could enact that would drastically reduce poverty in this country, while investing in our future?
Please share widely!
Reality-based commentary on politics.
More progressive income tax
Fewer deductions that only the very wealthy can benefit from
Tax investment income at the same rate of that derived from your salary or wages
I would create a tax code that was confiscatory at its upper levels *we need more brackets too), but I would actually not restrict business deductions as much because I have come to the realization that many business deductions are a form of stimulus.
Yes, some deductions are just moving paper around, but if you allow a company to deduct new cars every year, if their tax rate is 95% they will buy new cars every year instead of giving 95% of those profits to the government.
I feel like the “reduce the rate in exchange for eliminating deductions” was exactly what the wealthy wanted. It gave them more money AND less incentive to spend it on their businesses.
Sure, some CEOs are going to spend their profits on jet planes and lavish office parties – who cares? They’re spending their money on Main Street instead of tying it up on Wall Street.
I guess the point I’m trying to make is that we need to stop thinking of the tax structure primarily as a way to raise revenue, and think of it more of a way to shape our economy. We need to create more economic activity, and that can only be done when the dollars aren’t being vacuumed up by a small handful of players.
People who own most of the stocks and bonds are the rich, very highly concentrated, trillions held by the very few. So, tax these properties at 2% (exempt first $100K or first $1 million in retirement funds). This will hit only those who are “rich” and is fair.
Limit deductions, cap deductions, especially “charitable deductions. Give from the heart,,not the wallet, especially when the rich lower their tax obligations, the middle class has to make up the shortfall in revenue.
Tax all endowment funds over $1 billion dollars, like Harvard Univ.
Phase out “non-profit” tax-exempt status over 4 year period, including religious and private universities. It’s all a business, no matter how you look at it.
These modest adjustments in the tax code won’t end or curtail poverty, just makes the tax code more balance and fair.
…worth discussing.
Thanks for the read and the acknowledgement.
A property tax on the value of stocks and bonds was a major source of revenue in Mass. before the income tax existed. It’s worth exploring.
The other ideas I’d really have to give some thought to. Nonprofits would be hit hard. Wealthier people should give regardless of deduction, but we all know some wouldn’t. A general cap on deductions would be OK if it’s high enough to hit only the top end. Romney was talking about $25K (or $50K, I heard both numbers) and that would hit just about every middle-class family with a house. I’m tempted to be on board with endowments like Harvard’s, but at least they’re using some of that now to educate less affluent kids for free.
Both MIT and Harvard payout in lieu of taxes (PILOT) and pay against the commercial interests… so a tax on endowments isn’t going to change anything. it’s a resentment tax, if anything, and may not represent material gain on government coffers of a single penny. Furthermore, the people who endow gifts get a tax break on the endowment… do you want to tax that too? What rationale is there for not taxing the gift into the bucket, but actually taxing the bucket?
Non profits, by definition, don’t generate profits (it’s right there in the name) and so, what would you tax? A non profit is a corporate entity that is legally required to re-apply what revenues they make back into their stated goals and to restrict excess revenue. People who work for non-profits are taxed at the same rate as people who don’t work for non-profits.
At least at the federal level, taxing religious organizations would require an amendment that would modify the terms of the first amendment. See also above about taxing the bucket but not the toss into the bucket…
How the hell do you think we could tax stocks and bonds held by the elite without offering something in return? And to say everyone who owns home has deductions exceeding $25K-$50K, I mean I guess I’m a poor slob in Waltham, but you seem to want to protect those who have vacation homes with a mortgage, or McMansions that have huge mortgage interest deductions and property tax deductions. Which towns have high property taxes? Typically wealthy communities where values are above average. Why should people who live in not so wealthy towns or even renters, subsidize the well-to-do in Wellesley, Brookline, or Dover? Amirite???????
The Pilot program by Harvard pays like 5% of the real property tax value, in other words…whoopie. When Harvard can pay $300K for a professor and offer 0% interest loans to their faculty, something is wrong with their “tax-exempt” status.
I don’t like Tea Party Organizations or Move On.org or League of Women Voters or Planned Parenthood or Catholic Church being tax-exempt. They all may do good work but its time for them to start paying taxes to the federal treasury. I’m not saying tax them at 77% like a BMG’er suggested bringing our income tax rate to, that would be crazy talk, but we need to revamp everything and all about the tax code.
…you’re not making sense, at all, in your first paragraph.
First of, the PILOT is only on non-commercial property. Harvard and MIT pay ordinary, everyday, run-of-the-mill taxes on commercial property they do own and, as part of the PILOT agreement, have agreed to limit the amount of commercial property they convert to tax-exempt.
On the tax exempt property neither Harvard nor MIT enjoys ‘real property tax value.’ because they cannot sell it or build condos on it or do anything on it that would fall afoul of the original charter… If they can’t make full use of the value, does that value exist? Harvards charter goes back to the original Ma constitution. MIT’s is a little later, but it too is a land grant from the state. There is a defined use and any use out of the defined use would trigger a conversion to commercial property….which, as already been stated, is taxed what, in your view, would be considered, “properly”
The endowments at Boston College, Boston University, Brandeis, Dartmouth College, Harvard, and MIT own over $10 billion in tax-exempt real estate. Don’t pretend the pennies they give are sufficient…
Anyway, IMO, we need to increase tax particiaption, not limit the number with all these tax-exempt organizations, especially if the have over $30 billion in their endowment.
… reality.
I’m not an obstructionist if, when you point out that the sky ought to be blue, I point out that, in fact, it’s rather grey today.
It’s obstruction when you tie our governing institutions in knots and not allow the vote to proceed at all.
when discussing overhauling the tax code.
I’m open minded about anything, even a carbon tax (although that would be terrible) if it gets the ball moving toward compromise and tax fairness. Bipartisanship is a two way street…
Non-starters often mean standing on strongly held principles.
… Non-starters (also) often mean, rather than being obstructionist, actually noting the real obstructions that exist.
Our callow friend, in essence, wants to eliminate tax-exempt status altogether. He doesn’t say that outright, but that’s the gist of wanting to tax endowments, religions and non-profits. It’s not being ‘obstructionist’ to point out that there are valid obstructions to this goal. Nor is it being all that obstructionist to point out the goal itself isn’t much of worthy goal.
There are several problem with taxing stocks/bonds:
1) You may want to set a higher exemption. One million, may seem like a lot, but it isn’t if you plan on living on the interest from your investments over a 30 year retirement period with uncertain future expenses. Obviously, you would also want any exemption to be tied to inflation.
2) For low-interest fixed income securities, a 2% a year ding would be a killer.
3) 2% might not seem like a lot, but this would without a doubt drive a lot of money out of the equity markets and into other investments. You should expect investors to put more money into annuities, real estate, collectibles, precious metals, etc. You could expect real estate prices and rents to go up. You should also expect a drop in the stock market.
4) It used to be that only the rich owned stock, but now almost anyone with any amount of retirement savings is in the market.
5) Stocks and even bonds can be extremely volatile. Is it really fair to tax someone 2% of the value of a stock that happened to go up for a while only to drop down again? Taxing capital gains when equities are sold avoids this issue.
6) This may be technically difficult to achieve. Do you tax stocks/bonds value on some particular date? That probably would not be fair. You would probably want to spread the value assessment over the year somehow, but that could lead to some complicated accounting.
7) What about options and futures? Do you tax the value of open contracts?
8) If investors get scared away from T-bonds and municipal bonds, the government may find it unable to finance its debts and public work projects at an affordable interest rate. Likewise, corporations would have to spend more to borrow money so this might slow corporate growth.
Are you saying people will no longer invest in stocks, which increased how much in 2013…20%? Because they may pay 2% of the total value after the first $100K? So if my portfolio is worth $200K, and in 2013, it increased to $230,000 in total value, I’m suppose to pull all my money out of the market b/c I need to pay Uncle Sam $2,600? Ahh, I’d do that all day long.
You can always play the “what if” game. Tax policies can always be changed or modified, but what we have now, is not working nor fair. Your other points about having higher exemptions is plausible.
If not, what if your $200K portfolio represented a net loss of $100K. Would you be happy with your $4000 tax bill?
$2000. Forgot it’s only on first $100K.
I know, I know, I don’t stray from Republican Orthodoxy, according to some BMG’ers, I get that.
But you like the idea?
I don’t have an opinion on it yet. I don’t like the idea of being taxed on holdings you could be underwater on.
First $100K (subject to negotiation) would be exempted. So if you are fortunate enuff to have assets (outside retirement) over $100K in stocks and bonds, you are swimming like an Olympian, not under water.
There is a saying an Old Timer told me many years ago, he said “don’t cry when you have a loaf of bread under your arms”…
You are talking about taxing assets not capital gains. Under your plan you pay 2% regardless of whether your portfolio went up by %50 or down by %50. You can’t pay your taxes in securities, so you may be forced to sell some of your portfolio in order to pay and that may in turn trigger capital gains taxes. If your money is all in an IRA or 401K then you cannot even withdraw the money without paying a penalty.
Yes, if you are always making 12% gains a year on your portfolio then 2% doesn’t seem so bad. If it is a bad year and you are losing money, it doesn’t look so good. If you are getting closer to retirement and most of your assets are in low-interest bond funds, it also sucks.
Instead of lazy hand waving, why don’t you actually try to answer all my questions? No one is going to ever adopt a half-baked proposal.
It is pretty clear that you have not thought this through.
Do you believe an individual with $230,000 in stocks and bonds (non retirement accounts mind you) does not have liquid cash of $2600 to pay the asset tax?
Lets say u are right, this person spends everything he/she earns. Then perhaps they need to withhold more money in taxes from their payroll check. Perhaps they may need to get less of a tax rebate. This tax is not onerous where people are forced to eat dog food to pay the tax.
If its and IRA account, and one has over a million (how many is that?), I am confident they are not living mouth to mouth either.
Lastly, go read Jim’s new diary, instead of splitting hairs why we can’t do things, offer ways how we can take this good idea and make it law. And it is not my original idea, it belongs to former UMass professor Richard Wolff. I know, I’m touting an idea from a UMass professor, whom I doubt is a Republican…………..
Really Dan. You are getting really lazy. Instead of actually thinking through your proposals you just wave your hands around and tell me to go look it up. You have got to stop your lazy habit of simply regurgitating something someone else says on the internet without bothering to really understand the implications.
And yes a retiree on a relatively tight budget could easily have 230K in a non-retirement account. Not all money saved for retirement can go into tax-deferred retirement accounts. But anyway, we could always just pick a higher exemption level.
The real problem is whether such a change would effect the bond and equity markets in such a way as to damage the economy.
I am not against taxing wealth, but this proposal is overly simplistic, at least as you describe it.
It also seems a bit silly to go to the trouble of creating a whole new complicated taxation system when perhaps all you need to do is to tax capital gains at a much higher rate and bring back the estate tax
Another idea would be a national tax on real estate above some regionally adjusted limits. Real estate is one thing the rich cannot hide in another country and already has publicly registered ownership.
Is phase out or capping of the mortgage interest deduction.
1. Carbon Tax
2. Enforce the Estate Tax by getting rid of the ways to avoid it with trusts.
3. Establish a VAT style consumption tax as an alternative to corporate income tax. Wouldn’t it be great if there were no longer any reason for any industry to ask for special tax treatment?
4. Change the holding period for long-term gains to 10 years. It’s time for people to actually be investors and not traders.
5. Get rid of “carried interest”. That’s just a rip-off.
6. Require annual 5% distributions (which are taxable events) for any individual retirement account with more than $2 million.
7. For Social Security Payroll taxes there is a maximum dollar amount that is subject to taxation. That maximum level should be increased, annually, by the rate of inflation.
Remember Herman Cain’s 999 plan? How about 777?
Everyone pays 7% on the first million dollars in income, with no deductions, no matter the source – W-2 wages, dividends, etc. Any income over $1 million, no matter the source, is taxed at 77%, again with no deductions. Everyone also pays Social Security and Medicare taxes on all income, no cap. Everyone files their tax statement annually on a single sheet of paper, massively simplifying the record-keeping and freeing billions of person-hours for actual productive work.
Some thoughts:
Any sense how this would work in terms of numbers? It seems dropping people making $150K or $250K down to 7 percent, even with no deductions, would lose a lot revenue at that end of the scale. The intention clearly is to get it back with the high rate on income over $1 million, but you better be sure to cover the bases to prevent massive-scale avoidance.
The discrepancy between 7 percent and 77 percent will get the wealthiest a-howling that they’re being asked to carry the whole society. Likewise, I’m OK with a much higher SS cap, but “all income” opens up those lines of attack if benefits for the wealthiest don’t increase too.
… the most meaningful change would have little to do with actual taxes and rather distribution of the revenue resulting from the taxes we have now. We could go a long way against poverty with the tax system we have now if we just spent the money on the poor instead of on the rich.
As of right now, nobody is particularly burdened by the present tax scheme more than enough to kvetch about it a thanksgiving. Neither the rich nor the poor make particular decisions based upon taxation, and the middle class are angered by a supposed burden of a few percentage point raise in taxes which, some of them purport, forces them to cover their month to month overages on a credit card… which is a crystalline example of innumeracy. The economy as it is set up now, taxes and all, is a fast funnel, upwards of capital. And yes this means I’m thinking directly and distinctly about re-distribution of wealth… and exactly because the presen, initial, distribution is so inequitable, even cruel.
I would make three changes to our tax system to help, at least, identify the problem:
1) All taxes paid at the state level and block grants to the federal government. The federal government gets out of the business of taxing individual Americans and instead, takes money directly from the states: no more federal income tax. Each state will have one state form that figures all taxes and the state taxes will be adjusted accordingly to compensate for the federal income tax even adding one where they don’t exist now. The federal government will continue to adjudicate disputes between states, with the only difference being that they don’t collect the funds, only direct where they can be collected. I can’t think of a more inefficient system than for the fed to collect against individuals and then block grant back to the states certain funds.
2) I would make it the job of the governor of each state to formally identify the most pressing problems. A concrete ‘state of the state’ if you will, not just the political pageantry and back patting it is now… The legislatures will have to ratify this list and encode into a statement of purpose.
3) I would computerize the living daylights out of the state revenue departments and ensure that each state tax form would add the list of formally identified, and ratified, problems ON THE FORM, changing from year to year alongside recurring costs. Individual taxpayers will have the option to identify where a portion of their taxes will go, up to 50%. The remaining %50 going to a general fund for the legislatures discretion. If you, for example, want 50% of your taxes to go to fed defense spending then whatever that amount is, gets added to the pool that that state blocks up to the fed. If, however, you want 50% of you taxes to go to early childhood education, if that is a problem identified by the gov or a recurring cost, then you can so allocate and so it shall be done. If you want 30% to go to early childhood education and 20% to go to federal defense spending, so be it.
Under this schema the problems are identified, where the are (in the states), and addressed. Furthermore, distinct payments can be tied to distinct problems and distinct efforts to reduce the problems making the problem of resentment (being the sole problem, as I can identify, preventing people from happily paying taxes in the first place) go away.