Should we abolish the cap on the payroll tax, and use it to replace income tax?

[A18]

Trying to move this forum away from daughter talk...

I say yes. Then we could also repeal the sixteenth amendment (since the payroll tax is not a direct tax), and Congress would not be able to levy taxes on income from "whatever source derived" anymore.

Then no one would have to worry about filing tax returns anymore, the IRS as we now it could be eradicated (the payroll tax collected by the states, the same way they collect sales tax now), and it wouldn't have all the negative side affects of a national sales tax (i.e. the 'regressivity' myth, double taxation on people with savings, etc.).

Social Security would become a welfare program, instead of a government-controlled retirement program. Rich people would bear most of the burden for paying the benefits for current retirees, while future generations would be able to invest in the free market, and plan for their retirement as they choose. Eventually, Social Security as a whole would be just a safety net, and hopefully could then be passed on to the states (since it'd no longer be based on what you put in).

One problem is I don't know how high the payroll tax would have to be. I think 15 percent would be good, and then just abolish wasteful federal departments (such as Agriculture) to make up for the shortfall.

What do you think?

[falling apart like the ashes of American flags]

no, because it would likely increase my taxes.

[MaC]

let's abolish the income tax altogether.  Our government should be so small that it doesn't need that much money to sustain itself. 

[A18]

let's abolish the income tax altogether.  Our government should be so small that it doesn't need that much money to sustain itself. 

Defense spending alone accounts for 3-8 percent of GDP.

[falling apart like the ashes of American flags]

and that needs to be seriously gutted.

[Ebowed]

let's abolish the income tax altogether.

I agree.  The income tax is an invasion of privacy.

[A18]

let's abolish the income tax altogether.

I agree.  The income tax is an invasion of privacy.

Not so much in this case, since the government would collect no information on individuals, only on wages companies pay.

[The Duke]

let's abolish the income tax altogether.  Our government should be so small that it doesn't need that much money to sustain itself. 

Defense spending alone accounts for 3-8 percent of GDP.

This is like saying John Ford is between 6 feet and 487 feet tall.

I'm 6'2'', so its technically true, but its also misleading.

Defense spending accounts for about 3.7% of GDP.

[A18]

During the Cold War, it was 8 percent. Under Clinton, it was 3 percent. I was too lazy to look up the current figure, but I figured it would be between the two extremes.

[dazzleman]

no, because it would likely increase my taxes.

I thought you didn't care how high your taxes went.  All of a sudden, you care about taxes.  Is this related to your belated renunciation of communism?

[opebo]

No, we should abolish the cap on the payroll tax and raise income tax rates on those making over $200,000/year.

[A18]

That sounds like a pretty cruel thing to do to the poor, but I suppose you don't mind.

[falling apart like the ashes of American flags]

no, because it would likely increase my taxes.

I thought you didn't care how high your taxes went.  All of a sudden, you care about taxes.  Is this related to your belated renunciation of communism?

No, I said I didn't care about how high my taxes were if I made over $30k a year. I don't now and need all the money I get.

[David S]

As I've said before, my idea of a fair tax system is one that causes equal agony for all citizens. If you apply your flat tax only to wages then retired geezers such as myself would be exempt from taxes. Although that would be a great benefit to me its hardly fair to others and it does not cause equal agony. So to be fair you would have to apply that tax to pensions, 401k and IRA withdrawals, social security and annuitys. I think the government already requires a withholding for all of those so it would not be difficult to just tax it at a fixed rate instead of a withholding. You could still do all of that without a tax form. That would make it simple and cause equal agony for the majority of people.

[A18]

As long as it's not a direct tax, and the governemnt collects no information on individuals, I don't care.

[John Dibble]

no, because it would likely increase my taxes.

It's fine to increase other people's taxes though.

[dazzleman]

As I've said before, my idea of a fair tax system is one that causes equal agony for all citizens. If you apply your flat tax only to wages then retired geezers such as myself would be exempt from taxes. Although that would be a great benefit to me its hardly fair to others and it does not cause equal agony. So to be fair you would have to apply that tax to pensions, 401k and IRA withdrawals, social security and annuitys. I think the government already requires a withholding for all of those so it would not be difficult to just tax it at a fixed rate instead of a withholding. You could still do all of that without a tax form. That would make it simple and cause equal agony for the majority of people.

I agree that taxes should be equally painful to everybody relative to their income.  This is not an exact science, but I firmly believe that it's politically destabilizing to create large classes of people who benefit from services but pay not taxes.  Taxes should be painful so that people think of the cost before they sign on to more and more government services.

I would really keep the present system over a flat payroll tax.  The main reason is that the elimination of the mortgage interest deduction at this point would cause a collapse in the real estate market, and more importantly, make it unaffordable for many people to remain in their current homes.

[phk]

We should abolish taxes and increase spending.

[A18]

http://www.heritage.org/Research/Taxes/BG1134.cfm

Criticism: Loss of the home mortgage interest deduction would reduce home values and harm the housing industry.

Response: In reality, fewer than 30 percent of taxpayers use itemized deductions. This group is comprised disproportionately of higher income taxpayers who presumably would be glad to give up deductions in exchange for a simple, low-rate tax system. Numerous studies by such nonpartisan organizations as the Congressional Research Service,19 Tax Foundation,20 National Center for Policy Analysis,21 and Institute for Research on the Economics of Taxation22 have demonstrated conclusively that tax reform will not have an adverse impact on home values. Above all, home values and home sales are tied to the overall health of the economy. As the first part of Chart 10 illustrates, home values are closely correlated to the growth of income. Because tax reform will boost income, the impact on the housing market would be beneficial, not detrimental.23 

Part two of Chart 10 shows specifically what happened to the housing market during the 1980s. When President Ronald Reagan reduced tax rates from a high of 70 percent to 28 percent, he also slashed the value of the mortgage interest deduction dramatically. Yet, as the chart clearly illustrates, this had no adverse impact on home values.

[opebo]

As I've said before, my idea of a fair tax system is one that causes equal agony for all citizens. If you apply your flat tax only to wages then retired geezers such as myself would be exempt from taxes. Although that would be a great benefit to me its hardly fair to others and it does not cause equal agony. So to be fair you would have to apply that tax to pensions, 401k and IRA withdrawals, social security and annuitys. I think the government already requires a withholding for all of those so it would not be difficult to just tax it at a fixed rate instead of a withholding. You could still do all of that without a tax form. That would make it simple and cause equal agony for the majority of people.

I agree that taxes should be equally painful to everybody relative to their income.  This is not an exact science, but I firmly believe that it's politically destabilizing to create large classes of people who benefit from services but pay not taxes.  Taxes should be painful so that people think of the cost before they sign on to more and more government services.

Actually it is impossible to make the rich feel as much pain as the poor, unless you actually taxed their income down the meager level suffered by the poor.  Pain is not reflected in the percentage taken but in the level of inadequacy represented by the remaining income.

[A18]

They each see a proportionally larger chunk taken out of their income for each new item of federal spending.

[A18]

would have to apply that tax to pensions, 401k and IRA withdrawals, social security and annuitys. I think the government already requires a withholding for all of those so it would not be difficult to just tax it at a fixed rate instead of a withholding.

What are 401k and IRA withdrawals? If it's invested money, you were already taxed on it... just getting it back shouldn't mean you get taxed again. That's basically punishing investment (might as well put it in the bank, where you don't get taxed on it). Would you tax interest banks pay? If you withdrawl money from an account, would you tax that?

Maybe the profit you made, but even then, there's the issue of inflation...

I dunno, please explain what you mean... after thinking about it, I'm back to supporting taxing just wages. True, this exempts people who don't make money anymore, but they're a comfortable enough minority that I don't think we have to worry (and they have children/grandchildren, etc. so it's not as if they have no incentive to keep taxes low).

[A18]

By the way, can someone with the statistics do the math for me. How high would a payroll tax have to be to replace all the money made off the current income tax?

[○∙◄☻¥tπ[╪AV┼cVê└]

There's no way it could replace the income tax.

[Beet]

Nope