[tici_88]

"The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code."

I disagree. I simple flat tax rate where everything is taxed at a single rate would close every single one of the loopholes above, if only by making it moot.

The fact that the rich can maneuver themselves into a much lower tax rate than the average person presents a significant, unfair advantage in my opinion. A flat tax rate would make things much more equitable. Plus it would asimplify the tax code tremendously.

[4c2383f5c88e911]

A flat tax rate is not a good idea whatsoever; if you tax e.g. 20% of earnings ,do you believe people who earn $30k a year are impacted the same way as people earning $200k or more? Sure, those who earn more pay more, but it hits them in "extra" earnings, while the poor are taxed on money they need to survive.

A (very) progressive tax rate with a few ways of reducing the tax based on social (e.g. number of children, etc) criteria would probably work better here.

[chirau]

A "flat rate" can also be tiered. In this case I'd take it to mean a flat rate on all money earned during a time period. Whether income or capital gains, dividends, assets or whatever, you are still giving up x% of whatever you earned that year.

So even when tiered, a person earning under some amount in total might get a lower tax rate than a person earning a higher amount but it is still flat.

The "flat tax" would be taxed on all jurisdiction. So call it a "universal flat tax". That way, there is no persuasion to register in a foreign country and it would dissuade multi geography registrations as you would just be taxed in multiples by each territory.

To avoid double taxation, perhaps, a company can register in multiple countries but since the tax is the same everywhere, the portion of the x% taxed would be proportionally divided to the territories.

This assumes of course that the whole world agrees on one tax policy and tax havens are eliminated. :)

[openasocket]

Wait, how do you make the flat tax tiered? Isn't that an oxymoron?

[ghostbrainalpha]

You are correct it is an oxymoron, but the most realistic Flat Tax proposals do just that.

They say there should be a 20% tax, on any income above the $35,000 a year threshold. While it still does effect people on the lower end more, the first part of their income is at least partially untaxed.

And the bar is low enough that the super rich will not be able to create schemes to keep there income under that bar.

[openasocket]

I'm having trouble seeing a flat tax proposal that doesn't massively decrease tax revenue. Also, a tax on what, exactly? Income? Capital Gains? Sales? Property?

[cpursley]

> A flat tax rate is not a good idea whatsoever

Tell this to the nations which have successfully implemented a flat tax:

http://www.economist.com/node/3860731

https://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_f...

It's ironic that a number of former Soviet countries have moved on to the flat tax, while the west has a progressive income tax (#2 plank of the Communist Manifesto).

[SimbaOnSteroids]

Idk about you but I can't think of many former soviet block countries that have a healthy distribution of wealth between working, middle, and upper classes. Furthermore the list of countries given there are not places where you want to be poor.

[cpursley]

I don't disagree. These countries often have systemic issues that go deeper than any one tax system can resolve.

[croon]

Are you saying that flat tax is good, but that all countries that have implemented it coincidentally have other economic issues that are wholly unrelated?

[sokoloff]

What is the list of countries where one would want to be poor?

[SimbaOnSteroids]

Obviously there isn't a list where you'd want to be poor , but I'd definetly rather be poor living in Sweden than poor living in Russia.

[sol_remmy]

ex-Soviet countries like Romania and Poland are definitely on their away up.

Compare them to slowly declining western European countries like Italy and Spain.

[sbalea]

Romania and Poland were never soviets. Communist, yes. Behind the Iron Curtain, yes. Members of the Warsaw Pact, yes (Poland is kind of obvious on this). But never soviets.

[0xcoffee]

How about a flat tax rate, but have essential goods be tax free?

[sp332]

That seems like an income tax mixed with a sales tax credit? It sounds awkward because income tax comes out of your paycheck but the sales tax is applied at the point of sale. You'd have income tax withheld, buy food with the money you have left over, get credited for the essential goods you bought, then pay rent, then get a credit for that...

[wolfgke]

> but have essential goods be tax free?

People/politicians are very creative in what is to be considered essential.

[turc1656]

You would do a flat tax on anything above X, where X is essentially a number calculated on base living costs in your area for the number of people in your household. Anything above X is taxed at a flat rate. This ensures people can afford to live and meet their minimum requirements. It also makes it so that the tax code is extremely simple.

For me personally - I would add one more change that most people don't like. I would put an actual cap on total income tax that can be paid in a single year. The reason for this is that these progressive systems act as a social welfare system that transfer money. That's why people propose a flat tax. Well, flat tax is much better but still presents the possibility for a wealthy person to pay, for example, 200k in income tax in a year. A lot of people would say "so what?". Well, I believe income tax shouldn't be treated as a maximum pain threshold. The basis of taxation is to fund public goods. We all consume roughly the same amount of public services on average. If someone is paying something like 200k a year in income tax they are paying way, way above anything they could possibly consume in public goods/services for that year.

[imglorp]

That might be oversimplifying what flat means. Suppose it's not a linear function? Pick your function to begin kicking in above the poverty line and maybe get linear above 200k.

But "no loophole tax" might be a better characterization of the flat idea, yes?

[maxerickson]

It certainly isn't an oversimplification in context. The comment up the thread that raised the idea of a flat tax defined it as "everything is taxed at a single rate".

Maybe single means a complex function? I doubt it.

[dageshi]

A flat tax you only start paying above a certain threshold then? For sake of argument everything under 20k is tax free, you pay flat tax on everything above? Problem solved?

[msla]

A lot of people would consider that flatly immoral, and as evidence that the poor aren't paying their fair share.

Remember that Flat Tax is also called Fair Tax. The concept of fairness is central.

[dageshi]

If everyone receives the same tax free allowance then it certainly is fair. Fairer and simpler.

[turc1656]

I think what msla is saying is that people who are at or below the threshold for taxation would contribute nothing to taxes, which would be unfair in theory because they consume public goods and services like the rest of us.

[maxxxxx]

In what way would a flat tax rate close loopholes? I hear that all the time but it doesn't make sense. In the end the problem with taxes is determining what counts as taxable income. The flat tax doesn't change this. As of now it would just be another huge tax cut for high incomes which in my opinion it's designed for.

[JSONwebtoken]

Exactly, a flat tax society would end up being a cash-under-the-table society.

[baursak]

> I disagree. I simple flat tax rate where everything is taxed at a single rate would close every single one of the loopholes above, if only by making it moot.

Flat tax rate has nothing to do with the loopholes, those are completely orthogonal. You could as well say "a simple progressive tax rate ...".

If you meant to say 1) close all loopholes, and 2) implement flat tax rate, then OK, but those are still two different things. In that case, what's wrong with 1) close all loopholes, and 2) leave the progressive tax rate?

[shortstuffsushi]

What would the flat tax actually tax though, income? Wouldn't they just dodge that then by not having income? Sure, for you and me it would make it easier -- my W2 says I made exactly 100k, here's exactly 50k of it, period. For people who have a flexible income, why report any amount that would make you pay in?

[gambiting]

Don't have income tax at all, tax every transaction 20%, like a flat rate VAT except that you can't claim it back on your business expenses. Simplify the entire tax system without having loads of brackets, exemptions and special cases - if you sell goods or services, 20% of that is paid as tax, end of story.

I mean, I am not an economist, I have no idea if that would work or not(probably not)

[MichaelBurge]

The big problem there is that it encourages companies to grow as big as they possibly can, because "internal" transactions aren't taxed.

So Amazon would own the entire supply chain: Manufacturing widgets, selling widgets, storing widgets, shipping widgets, handling returns, etc. They already sort of do this, but if you add a 20% tax at each hop they would eliminate the remaining hops as fast as they possibly can or buy the hops.

And you could never start a small business, because everyone who'd want to buy from you would save a ton of money doing it themselves. By not taxing business transactions, it's zero additional cost to have someone else do something for you, so it makes it possible to grow a small business.

In particular, grocery stores with a 2% margin would be hit hard.

[tici_88]

The idea is to have everything taxed at the same rate: income, dividends, capital gains, whatever. So every source of 'money coming in' gets treated and taxed the same way.

By having a flat tax it doesn't make sense to shift 'money in' under different categories because all gets taxed the same rate.

So for example, income, capital gains, dividends would all be taxed at 10% or 15% or whatever.

[ch4s3]

Then why not hold stock, realize no gains by not selling it, and take out a loan with stock as collateral. Or, you could leave it all in a company that you own, draw no income and have the company pay for your housing, meals, travel, etc.

[aianus]

> Then why not hold stock, realize no gains by not selling it, and take out a loan with stock as collateral.

You can already do this today. Eventually you will need to sell and pay the taxes, eg. if interest rates rise and it's no longer worth it or when you die and have to pay the loans off.

> Or, you could leave it all in a company that you own, draw no income and have the company pay for your housing, meals, travel, etc.

If your company pays for your personal expenses like housing, it's taxable as income. Lots of SV companies pay for their interns' housing and the rent was always listed on their W2's.

[ch4s3]

>If your company pays for your personal expenses like housing, it's taxable as income.

Sure, but it can be a strategy to reduce taxable income. My point is that people at the top end are highly incentivized to avoid taxes and will find ways to do so. I'm not making any policy prescription, tax policy is hard and I don't claim to know what's optimal or even necessarily better.

[aianus]

Explain how you're reducing taxable income? The taxes on the free rent are the same as the taxes you're saving by reducing your company profits with the extra expense.

[ameister14]

Wouldn't that remove the incentive for investment over speculation?

[jrimbault]

And then we'd have to redo/relearn the last millenium of why we do the things the way we do them.

[wyager]

The modern progressive income tax system is not even remotely a millennium old. We didn't even have income taxes in the US until 1861, and they weren't generally applied until 1913.

[jrimbault]

Because History started when the US began and there was no financial system before and nobody ever learned anything before.

[ameister14]

First income tax in the UK was in 1842, first income tax in France was 1789 - could you find one that has been going since 1017 AD?

[wavefunction]

There aren't many sovereign nations that have been in existence since 1017 AD, so that sort of makes your question moot.

The Code of Hammurabi describes Babylonian taxes and the manners of levy. The Egyptians and Romans levied income taxes. There is of course the gafol/Danegeld/heregald of the Anglo-Saxons. You've got taxes/tolls paid by merchants on the Silk Road and certainly I've read of taxation in Ashoka's era and other sub-continental sovereignties.

You have the taxation/feudal levy system that existed even in archaic Greece where boats, rowers and soldiers were expected to be provided by patricians in times of war.

China (especially) and Japan have long histories of taxation.

The idea that recorded human history has been mostly without tax seems to be ahistoric.

[ameister14]

>There aren't many sovereign nations that have been in existence since 1017 AD, so that sort of makes your question moot.

Sure. Which is why it's a bit ridiculous to say there has been a millennia of income tax we have been learning from.

Tax in general has existed - progressive income taxes, however, seem to be a fairly recent development. Purely in the administration sense, it would have been far more difficult to do in the past and as a progressive tax system does not actively benefit the people in power in a feudal or imperial government, it would be unlikely for a progressive tax to be implemented, especially one that exists in peace-time. In fact, feudal era taxes seem to have been actively regressive.

Removing a progressive tax system, something I believe is a bad idea to do, wouldn't roll things back to older systems of taxation. We wouldn't sacrifice the development of financial policies and tax frameworks, and we didn't arrive at the concept of a progressive system because of hundreds of years of failed tax policies. We have a structurally different government than countries did for hundreds of years prior.

[jrimbault]

Thank for putting into words what I thought ^^

[jrimbault]

I'm talking about learning not "income tax"...

The first "bank" was also founded much earlier than 1000 years ago (and wasn't a bank), but we did know a bit about financial systems even before then.

[ameister14]

You replied in a discussion of income tax to a person talking about the history of income tax. Your objection appeared to be that the person you replied to was talking about US income tax history and your millennia of progressive income tax talk covered other countries.

[inetknght]

Is that such a bad idea?

[jrimbault]

Not necessarily. But in that case we wouldn't argue for a "simple" tax system. A tax system has to be complicated because humans and their activities are complicated things.

edit: at that point, if we threw out the tax system, why not just get rid of states and corporations and start everything from scratch, said the junior dev

[graphitezepp]

Seems like we should make another go at trying to structure this whole "society" thing for the good of everyone from where I am sitting.

[namarie]

It is if you think not every moment in the last millenium was pleasant for everyone.

[cbcoutinho]

How would a flat tax rate avoid the unfortunate reality of burdening the poor with relatively high taxes? Tax brackets, in theory, mitigate this by reducing or eliminating taxes for low income individuals and families. A flat tax rate would surely simplify things, but I'm not convinced it would be the best solution.

[mrob]

A flat tax (eg. land tax + sales taxes, which are harder to manipulate than income tax) can be used to fund a universal basic income, which automatically gives you a smooth progressive tax system with no weird breakpoints setting up inefficient incentives.

[cbcoutinho]

I was under the impression that by flat tax you meant flat income tax. Property taxes are, at least in California, a very local form of taxes that finance local school districts. Using property taxes for something else (ie, to provide UBI for anyone not living in the direct school district) would be a large change in how those funds are distributed.

[mrob]

The exact mechanism of taxation is an implementation detail. All that's need to qualify as "flat" is that the tax paid must be in fixed proportion to the property or activity being taxed. The only reason I suggested other taxes is because precisely defining "income" in such a way that taxpayers can't manipulate it to their advantage is difficult.

[naravara]

Oh so all we need to do is eliminate the principle of Federalism and govern the entire country as one large state then?

[tici_88]

There could be a basic minimum income level that is tax free. This would be very similar to what we have right now. For example, income under around 9,000 (or was it 10,000?) in Canada is not taxed federally.

[djrogers]

That’s true in the US as well, although the number changes depending on marital and dependent status (from $9,500 to $21,300).

[wyager]

While I agree that a flat tax is drastically superior to our current convoluted tax scale, it would still have many unfortunate depressant effects. When you introduce friction at every trade, you hurt the market's ability to reach an optimum. This could never happen in the US (or any country that follows the Geneva convention, since it forbids revocation of citizenship), but it would be extremely interesting to have a small nation where the only tax was a constant head tax, like $X thousand/person/year. All of a sudden, many incentives that don't currently line up would start to.

[logfromblammo]

No matter how simple you make the calculation of tax owed, you cannot simplify the complexity of relying on individuals and businesses to report accurate information to feed into the formulas.

You eventually have to define your terms, and those definitions will have the loopholes embedded in them.

That's not to say that simplification is useless. It would still cut a lot of waste out of the costs of collection, enforcement, and compliance.

[namarie]

A flat tax rate would put a significant, unfair burden on poorer people.

[djrogers]

Every flat tax proposal I’ve seen has either an income floor or a ‘prebate’ to counteract this. Generally they are set at an amount that actually improves the lot of the lowest income earners, largely due to knee-jerk reactions such as yours.