IRS

biochem wrote:So before I'd restore their funding (and to be honest I'd not only restore it, I'd increase it) I want genuine reform. I swing back and forth between reform it as it stands and clean slate. The big disadvantage of clean slate is the profound disruption it would cause, although that would be temporary. So in a perfect world I'd prefer reform in place. However, the past performance of the Federal government on reforming departments has been poor to say the least. So the clean slate approach might be the only thing that would actually work.

So you expect people who are already overworked and underfunded to pull off a fundamental reform on their current time and money budgets without fucking up in the process?

I am not sure this is a good idea.

As for the "clean slate" thing, well, the slate that has to be cleaned isn't the tax enforcers. It's the tax code.

The E wrote:

biochem wrote:So before I'd restore their funding (and to be honest I'd not only restore it, I'd increase it) I want genuine reform. I swing back and forth between reform it as it stands and clean slate. The big disadvantage of clean slate is the profound disruption it would cause, although that would be temporary. So in a perfect world I'd prefer reform in place. However, the past performance of the Federal government on reforming departments has been poor to say the least. So the clean slate approach might be the only thing that would actually work.

So you expect people who are already overworked and underfunded to pull off a fundamental reform on their current time and money budgets without fucking up in the process?

I am not sure this is a good idea.

As for the "clean slate" thing, well, the slate that has to be cleaned isn't the tax enforcers. It's the tax code.

Indeed so. Why reform the collection process before the code is reformed? The one drives the other. Depending on how simplified the codes becomes, the enforcement requirements might well need less funding to accomplish well.

The E wrote:

biochem wrote:So before I'd restore their funding (and to be honest I'd not only restore it, I'd increase it) I want genuine reform. I swing back and forth between reform it as it stands and clean slate. The big disadvantage of clean slate is the profound disruption it would cause, although that would be temporary. So in a perfect world I'd prefer reform in place. However, the past performance of the Federal government on reforming departments has been poor to say the least. So the clean slate approach might be the only thing that would actually work.

So you expect people who are already overworked and underfunded to pull off a fundamental reform on their current time and money budgets without fucking up in the process?

I am not sure this is a good idea.

I'll object to the overworked part. They're government employees with civil service protection. They can't be fired for anything. However, I'll grant the underfunded part. The problem is that if you give them more money BEFORE reform, it's just throwing good money after bad. They have not been good stewards of what they have and giving them more is simply bad policy. You do have a point about needing money to enact the reforms. If reform in place is done, money will have to be put in to enact those reforms, perhaps in stages as the reforms are enacted rather than at once.

As for the "clean slate" thing, well, the slate that has to be cleaned isn't the tax enforcers. It's the tax code.

BOTH need to be fixed.

On the tax enforcer side we need to fix the competence issues. Last year the IRS lost $5 billion to identity thieves because of their incompetent security procedures. (For those outside the US who haven't seen the 100s of news stories on the issue: ID thieves steal the name, social security number and date of birth, then file a fake return, requesting that the refund money be sent to a prepaid debit card. The IRS doesn't analyze the return until AFTER the refund is send. Basically they have a giant pile of returns in April - too many to handle realistically so they analyze them after the fact.) They are predicted to lose over $20 billion this year because the identity theft community has discovered that it is a source of easy money. The IRS is a soft target.

We also need to fix the fact that a corrupt politician at the top was able to use the IRS against her political opponents. This is the most notorious case but it isn't the first time someone in the IRS has abused their power. There needs to be very serious protections against this sort of thing put into place and perpetrators (including Lerner) should be jailed.

Now the tax code is is disaster! The tax code is 74,000 pages long and growing! It is a complete nightmare! I tend to support a clean slate here as well. I generally like the proposals for a flat tax with a floor and minimal/no deductions. For example: a 15% tax rate on everything over $15000 per person:

A married couple earning $25000 would pay zero
A married couple earning $40000 would pay 15% on $10000 = $1500
A married couple earning $100000 would pay 15% on $70000 = $10500
A married couple earning $ 1 million would pay 15% on $970000 = $145500

Indeed so. Why reform the collection process before the code is reformed? The one drives the other. Depending on how simplified the codes becomes, the enforcement requirements might well need less funding to accomplish well.

Good point, especially if it gets as simple as a flat tax with a floor. We'll still need some enforcement. There will always be those who try to hide income etc.

biochem wrote:

Indeed so. Why reform the collection process before the code is reformed? The one drives the other. Depending on how simplified the codes becomes, the enforcement requirements might well need less funding to accomplish well.

Good point, especially if it gets as simple as a flat tax with a floor. We'll still need some enforcement. There will always be those who try to hide income etc.

I think that tax reform has to be imbedded in the Constitution. Otherwise, the lobbyists will simply have more complexity added over time. So whether we go with a national sales tax or a flat tax, the change must be made in the Constitution. That way the sorts of complexity future laws can add to our tax code will be much more limited.

One sort of limiting language would be a Constitutionally mandated time limit on any sort of non-flat tax rate. So, any non-flat tax would have a 5 year term limit that must be voted on and is subject to veto to extend. The same for any non-sales tax based system should we have a national sales tax instead of a flat tax.

I am more in favor of a national sales tax than any sort of flat tax. One reason is that if the States collect both the national and state portion of sales tax, there is another check and balance to Federal power. Collections then would be much closer to individual citizens and so would be easier to monitor. Besides the cost would be obvious with each transaction.

The sales tax system would be regressive and would need provision to ease the impact on lower earners. Food, clothing and shelter would be exempt as would be prescription drugs and medical services. Everything else that is purchased would be taxed. I don't believe that stocks and bonds should be taxed, but can understand if those that want to have them taxed.

I think that tax reform has to be imbedded in the Constitution. Otherwise, the lobbyists will simply have more complexity added over time. So whether we go with a national sales tax or a flat tax, the change must be made in the Constitution. That way the sorts of complexity future laws can add to our tax code will be much more limited.

One sort of limiting language would be a Constitutionally mandated time limit on any sort of non-flat tax rate. So, any non-flat tax would have a 5 year term limit that must be voted on and is subject to veto to extend. The same for any non-sales tax based system should we have a national sales tax instead of a flat tax.

Agreed. The history of the income tax itself proves your point. It was once a tax the rich scheme.

After the 16th amendment was passed the Revenue Act of 1913 was passed to set the tax rates. Less than 1% of the population paid income tax in 1913. Two income households have shifted that a bit, now 20% of couples would be hit but the vast majority of those would only pay the 1% rate. And we're a slightly richer country, about 7% of individuals make >$100,000.

Converting to 2015 $$$ Married couples earning:

<$95,000 nothing
$95,000 to $475,000 paid 1%
$475,000 to $1.2 million paid 2%
$1.2 million to $1.8 million paid 3%
$1.8 million to $2.4 million paid 4%
$2.4 million to $5.9 million paid 5%
$5.9 million to $11.8 million paid 6%
>$11.8 million paid 7%

http://www.bls.gov/data/inflation_calculator.htm

Of course once the cookie jar was opened those rates inched up and the tax brackets inched down. NEVER trust the government when they say we're just going to tax the rich!!!!!!

I am more in favor of a national sales tax than any sort of flat tax. One reason is that if the States collect both the national and state portion of sales tax, there is another check and balance to Federal power. Collections then would be much closer to individual citizens and so would be easier to monitor. Besides the cost would be obvious with each transaction.

The sales tax system would be regressive and would need provision to ease the impact on lower earners. Food, clothing and shelter would be exempt as would be prescription drugs and medical services. Everything else that is purchased would be taxed. I don't believe that stocks and bonds should be taxed, but can understand if those that want to have them taxed.

Not my favorite thing. But workable if put in place as a constitutional amendment to keep those rates from inching up. Sales taxes are easier to do that with than income taxes. For example if you were to increase a 5% sales tax by 0.1% That changes tax on a $100 purchase from $5 to $5.10. Hey it's just another 10c that's nothing. Most people don't do a very good job adding up all of those 10c to an annual cost. Whereas if you had the same rate as an income tax annually, 5% of $100,000 at $5000 moves to $5100 and then people start thinking of all the things they could buy with that extra $100 (groceries, eating out, buy a Kindle etc). It's a lot easier to inch it up 0.1% at a time when that 0.1% is just 10c.

biochem wrote:Not my favorite thing. But workable if put in place as a constitutional amendment to keep those rates from inching up. Sales taxes are easier to do that with than income taxes. For example if you were to increase a 5% sales tax by 0.1% That changes tax on a $100 purchase from $5 to $5.10. Hey it's just another 10c that's nothing. Most people don't do a very good job adding up all of those 10c to an annual cost. Whereas if you had the same rate as an income tax annually, 5% of $100,000 at $5000 moves to $5100 and then people start thinking of all the things they could buy with that extra $100 (groceries, eating out, buy a Kindle etc). It's a lot easier to inch it up 0.1% at a time when that 0.1% is just 10c.

The cost in sales tax is offset by the savings in income tax. The bottom line is easy to notice. Are you seeing more in the bank account after all the bills are paid to maintain the current lifestyle? If not, then spend less of your increased income. The calculus or rather arithmetic becomes breathtakingly easy; earn what you want with impunity but either save or spend it based on the perceived costs of achieving your financial goals.

biochem wrote:I'll object to the overworked part. They're government employees with civil service protection. They can't be fired for anything.

I don't currently have anything I want to contribute to the general discussion so I will not be commenting on that.

Your sole basis for effectively calling every single person in the IRS lazy is because they work for the government, you don't even provide bad evidence to back up that claim. That is an incredibly ignorant and rude thing to say. Think through what you say before you say it, just because you have the anonymity of the internet doesn't mean you can forget that everyone reading what you say is a real human person too.

Note: I am not saying there aren't people that just skate by, you'll find those people in any job regardless of who their employer is, I'm saying that most do work hard and have more to do than there is time to do.

I'm technically retired after more than 50 years of many jobs across quite a few industries and both public and private sectors so do have some experience on this topic.

You get hard workers, drones, brown nosers, trouble makers, and team players in reasonably constant proportions across all spheres.
To lazily repeat the old myth that public sector workers are less productive on average is just plain wrong. My daughter is an accountant in the public sector and regularly does much unpaid overtime to keep the system working.

In our public sector you can't capriciously sack someone for petty personal reasons, but they can be sacked for many legitimate reasons including inefficiency. As a senior manager I got rid of quite a few, just had to use due process.

Donnachaidh wrote:

biochem wrote:I'll object to the overworked part. They're government employees with civil service protection. They can't be fired for anything.

I don't currently have anything I want to contribute to the general discussion so I will not be commenting on that.

Your sole basis for effectively calling every single person in the IRS lazy is because they work for the government, you don't even provide bad evidence to back up that claim. That is an incredibly ignorant and rude thing to say. Think through what you say before you say it, just because you have the anonymity of the internet doesn't mean you can forget that everyone reading what you say is a real human person too.

Note: I am not saying there aren't people that just skate by, you'll find those people in any job regardless of who their employer is, I'm saying that most do work hard and have more to do than there is time to do.

Now to tax matters. Many countries have a mix of taxation, with a consumption tax (VAT, GST, sales) of say 5% to 20%, plus an income tax, plus levies, stamp duty, excise, and user pays charges.

Our system has a 10% GST, progressive income tax from 15% to 45%, and lots of inefficient smaller taxes.

I'm puzzled by the flat income tax approach. Those paying progressive income tax, have firstly a tax free threshold, then several plateaus at increasing rates, followed by the highest rate only on the amount earned over that.
Thus all are treated equally (as in flat income tax) up to where they earn enough to get by on, then as the extra income comes in it does get a higher rate, but obviously those paying it can afford to do so. Plus at the higher levels you get tax minimization schemes to ensure that they don't actually pay as much anyway.

Years ago I used to be annoyed that I couldn't claim car expenses for a car that I had to have to get to work, yet my parents could claim for vehicles even though they lived on their sheep and cattle station (ranch), and were already at their place of work.