Gyroscopic Investing

Some here have tried to point out how even though Trump is pretty crazy on the surface, his positions seem very well-thought-out on his website. 

Since I have a tax background, am sorta-kinda a macro-econ nerd, or try to be, anyway, and have seen an unbelievable amount of bullsh!t from both sides on taxes, I thought I'd do a bit of a review of his so-called "well-thought-out" tax plan.  To start out, here are the biggest flaws with our tax code:

1) Different tax types/rates for different types of incomes.  May that phase in.  Some that phase out. For instance, someone making $100k per year in salary might be in a combined 43% federal bracket (more if they're in AMT), while someone who earns $100k in dividends might only be in a 15% bracket, and muni-bond income might be 0%.
2) Various complex deductions. Many phase-out.
3) Various complex credits.  Many phase-out.
4) The aforementioned phase-outs make planning very difficult and forms FAR more difficult, and taxes a lot more confusing, objectively unfair, and causes resentment.  These are worth mentioning on their own, because without them, the income, deductions, and credits would be FAR easier to compute.  We wouldn't need more and more forms.
5) Depending on you opinion of who pays too much, some may pay too much, others don't pay enough.  (I don't have strong opinions on this)
6) Depending on your positions on economics and deficits, either not taxing enough might be problematic, or over-taxing might be a problem. (I'm MR and think we are in a dearth of aggregate demand so take from that what you will).
7) Various rules to various different retirement tax-deferral plans.  Phase-outs of being able to being able to contribute to some of those plans.

So based on that, let's analyze Trump's "tax plan."  Keep in mind, because both payroll taxes and income taxes are MASSIVE in terms of deficits, take-home income, and employment costs, I'm going to be analyzing it in the context of understanding how those play into this.

Here are his main goals:

Tax relief for middle class Americans: In order to achieve the American dream, let people keep more money in their pockets and increase after-tax wages.

2.Simplify the tax code to reduce the headaches Americans face in preparing their taxes and let everyone keep more of their money.

3.Grow the American economy by discouraging corporate inversions, adding a huge number of new jobs, and making America globally competitive again.

4.Doesn’t add to our debt and deficit, which are already too large.

So far political fluff but that's common.  Tax-relief for "middle class."  Simplify. Grow economy.  Don't add to deficit.  Fair enough.

Wait a minute... he actually gets a bit more detailed.

The Trump Tax Plan Achieves These Goals

1.If you are single and earn less than $25,000, or married and jointly earn less than $50,000, you will not owe any income tax. That removes nearly 75 million households – over 50% – from the income tax rolls. They get a new one page form to send the IRS saying, “I win,” those who would otherwise owe income taxes will save an average of nearly $1,000 each.
2.All other Americans will get a simpler tax code with four brackets – 0%, 10%, 20% and 25% – instead of the current seven. This new tax code eliminates the marriage penalty and the Alternative Minimum Tax (AMT) while providing the lowest tax rate since before World War II.
3.No business of any size, from a Fortune 500 to a mom and pop shop to a freelancer living job to job, will pay more than 15% of their business income in taxes. This lower rate makes corporate inversions unnecessary by making America’s tax rate one of the best in the world.
4.No family will have to pay the death tax. You earned and saved that money for your family, not the government. You paid taxes on it when you earned it.

1)  Can't argue with that from a "helping the middle class" standpoint.  He just took 75 million households off of the "Tax roles."  I'm assuming he means income tax, and that the 15% payroll taxes we're all paying don't really count, but I'll give him a pass on that for now.

2) By eliminating the "marriage penalty" I assume he means the weaker graduation of tax rates than one would expect with a MFJ vs MFS return (since two people are involved).  I can appreciate this. IMO makes sense. 

3) Ok this is where my BS meter starts going off.  What is "business income."  While Modaville would have no corporate income tax (it would get paid at the individual level), this is an area where we already have a lot of game-playing where people can try to turn one type of income into another on pass-through entities.  Further, currently, business-owners pay both sides of FICA/Medicare via SE tax.  I HAVE to assume he's not going to completely eliminate this, as it would have huge budget implications for his favorite of our federal programs (SS, Medicare).  But even so, why do business-owners get a better rate?  Why do we still have different rates on different types of income when we are trying to SIMPLIFY the tax code, and one of the BIGGEST complicating factors in the tax code is all the slicing and dicing of different types of income.

4) Ok fine.  Not a huge budget item.  I could rant on why the estate tax is a good thing but not worth it here.

Here's how he's going to make it revenue neutral (the more detailed paragraphs from his website, not just the bullet-points):

1.Reducing or eliminating deductions and loopholes available to the very rich, starting by steepening the curve of the Personal Exemption Phaseout and the Pease Limitation on itemized deductions. The Trump plan also phases out the tax exemption on life insurance interest for high-income earners, ends the current tax treatment of carried interest for speculative partnerships that do not grow businesses or create jobs and are not risking their own capital, and reduces or eliminates other loopholes for the very rich and special interests. These reductions and eliminations will not harm the economy or hurt the middle class. Because the Trump plan introduces a new business income rate within the personal income tax code, they will not harm small businesses either.

2.A one-time deemed repatriation of corporate cash held overseas at a significantly discounted 10% tax rate. Since we are making America’s corporate tax rate globally competitive, it is only fair that corporations help make that move fiscally responsible. U.S.-owned corporations have as much as $2.5 trillion in cash sitting overseas. Some companies have been leaving cash overseas as a tax maneuver. Under this plan, they can bring their cash home and put it to work in America while benefitting from the newly-lowered corporate tax rate that is globally competitive and no longer requires parking cash overseas. Other companies have cash overseas for specific business units or activities. They can leave that cash overseas, but they will still have to pay the one-time repatriation fee.

3.An end to the deferral of taxes on corporate income earned abroad. Corporations will no longer be allowed to defer taxes on income earned abroad, but the foreign tax credit will remain in place because no company should face double taxation.

4.Reducing or eliminating some corporate loopholes that cater to special interests, as well as deductions made unnecessary or redundant by the new lower tax rate on corporations and business income. We will also phase in a reasonable cap on the deductibility of business interest expenses.

Ok, I'll eventually hit on the revenue neutral aspect, but first I have to go back to "simplifying the tax code."  If he's not willing to hit on credits or phase outs (he did AMT, which is essentially a series of phase-outs, which I'll give him credit for, but nothing else) for the middle-class, than I don't see how he's simplifying the tax-code.  However, if he IS going to get rid of those credits, he doesn't say so here, and I'd significantly question whether he's really going to reduce the tax burden of the middle class.

But if we're going to talk about revenue neutrality, and he's actually going to stick to keeping the deductions and credits that "help the middle class" I would LOVE to see the math on these items making up for the HUGE reduction in income taxpayers and marginal tax-rates.

The tax foundation (http://taxfoundation.org/article/detail ... s-tax-plan) found that Trumps plan would NOT be tax-neutral, and would in-fact reduce revenue by over $12 Trillion over the next decade.  Even if we factor in the supposed economic growth that would occur from these deficits, he'd still reduce revenue by $10 Trillion.  I don't know if their numbers are right, but this does NOT pass the sniff test.


Here's how Trump says he'll simplify taxes:

The Trump Tax Plan: A Simpler Tax Code For All Americans



When the income tax was first introduced, just one percent of Americans had to pay it. It was never intended as a tax most Americans would pay. The Trump plan eliminates the income tax for over 73 million households. 42 million households that currently file complex forms to determine they don’t owe any income taxes will now file a one page form saving them time, stress, uncertainty and an average of $110 in preparation costs. Over 31 million households get the same simplification and keep on average nearly $1,000 of their hard-earned money.


For those Americans who will still pay the income tax, the tax rates will go from the current seven brackets to four simpler, fairer brackets that eliminate the marriage penalty and the AMT while providing the lowest tax rate since before World War II:


(As most of you know I suck at posting pictures.  Inserted here was a chart of the various brackets Trump had built for various types of income levels and types and filing statuses)

Ok so moving the mortgage interest and charitable contribution deductions to page 1... I can get with that.  Get rid of the others... not bad.  However, what about all the credits folks get?  The big ones are the Child Tax credit and the Earned Income Tax Credit.  Both have a separate form just to calculate the credit, with complex phase-outs... not to mention the space it takes on the "one page."  These have a refundable portion, so even if people owe "no income tax," they're filing to get these refunds.

Is Trump going to eliminate these?  If so, why wasn't that mentioned in his plan in terms of the cost to the middle and lower-middle class?  If not, and he plans to make them super simple automatic credits that don't phase out, how is his plan revenue neutral?  If he is going to phase them out like they are now, then tens of millions of Americans will be filing not 1 page forms but several others.

Oh but he eliminated a few brackets.  Big whoop.  That means nothing.  They could have 25 brackets from 1-to-25% and it wouldn't be that complex compared to all the other crap.  In-fact, fewer brackets create more reason to try to play games on the margin (401k maxing in the 25% or Roth conversions in the 15%).


So, IMO this is the same bunch of bullsh!t we see from Republicans over and over:

1) Repeal the estate tax.
2) Lower corporate income taxes
3) "Simplify the tax code" by having fewer brackets
4) Keep prized deductions
5) Don't mention any credits, even though they are complex and cost the gov't money
6) Claim revenue neutrality even though the numbers don't add up
7) Get rid of AMT
Keep or expand preferred rates on certain types of income, even though it's a huge complicator
9) Ignore the FICA/Medicare taxes even though they are our biggest burden for the middle class


Moda's no Bullshit take on the areas of tax debate:

1) Any conversation about the plight of the middle-class tax-load that doesn't mention FICA/Medicare taxes ISN'T A CONVERSATION.  It's a bullsh!t distraction. 

Take a couple with two kids making $200k per year with $50k of itemized deductions and exemptions.  They're phased out of all major credits.  Even THIS couple is paying more into FICA/Medicare (including their employer portion of 7.65% that could be compensation) than they are into the federal income tax.  Take a couple making half that much, and their deductions are half as much, they'll pay 50% more in FICA/Medicare than their federal tax bill.

2) Any conversation about budget deficits being a problem that includes MASSIVE income tax cuts ISN'T A CONVERSATION.  It's a bullsh!t distraction.  I am not a fiscal hawk anymore (was as a highschooler and college student).  However, if we're going to talk about balancing budgets, or at least reducing deficits, you can't make massive tax cuts and then try to make up for it with "closing a loophole" that doesn't lose us much revenue by it being open.  Closing the loophole might simplify the tax-code, but it's not going to balance the budget.

3) Any conversation about tax simplification that includes eliminating a few brackets, but not taxing (both income AND payroll/SE taxes) different types of income at different rates, or eliminating phase-outs like AMT, EITC, Child Tax Credit, SS Income (phase-in), college credits, etc, is not a conversation.  It's a bullsh!t distraction.


This is a shell game, and we're the guy losing $5 every round to try to see how he did it.

Here's the thing... do I particularly blame Trump for coming out with a bullshit plan?  No.  All the republicans do it as do democrats.  But the thing is he is just as delusional on what his 'uuuuuuge ideas will do for this country.  The idea that he's anything other than a more flamboyant version of the same dip-shittery we've seen for decades is a joke, IMO.


Put him in charge of the bullet trains.  His history with abusing eminent domain might help.

Hi moda - glad to see you posting again.

What's your preferred tax structure, if you can streamline it for us non-accountant types

If a person has been totally biased against a candidate from the beginning then why would anybody accept their analysis?

Reub wrote: If a person has been totally biased against a candidate from the beginning then why would anybody accept their analysis?

If you care to actually address individual points, feel free.

I don't expect anyone to trust me beyond a grain of salt.  Take any knowledge you guys have of our tax code and pick my analysis apart.



Jafs,

I'll get to that later.

An so-called analysis from a totally biased source is not worth my time.

Reub wrote: An so-called analysis from a totally biased source is not worth my time.

Well why don't you enlighten us with your very own analysis independent of mine, then.  no need to bother with reading mine.

TennPaGa wrote:

moda0306 wrote: Moda's no Bullshit take on the areas of tax debate:

1) Any conversation about the plight of the middle-class tax-load that doesn't mention FICA/Medicare taxes ISN'T A CONVERSATION.  It's a bullsh!t distraction. 

Take a couple with two kids making $200k per year with $50k of itemized deductions and exemptions.  They're phased out of all major credits.  Even THIS couple is paying more into FICA/Medicare (including their employer portion of 7.65% that could be compensation) than they are into the federal income tax.  Take a couple making half that much, and their deductions are half as much, they'll pay 50% more in FICA/Medicare than their federal tax bill.

2) Any conversation about budget deficits being a problem that includes MASSIVE income tax cuts ISN'T A CONVERSATION.  It's a bullsh!t distraction.  I am not a fiscal hawk anymore (was as a highschooler and college student).  However, if we're going to talk about balancing budgets, or at least reducing deficits, you can't make massive tax cuts and then try to make up for it with "closing a loophole" that doesn't lose us much revenue by it being open.  Closing the loophole might simplify the tax-code, but it's not going to balance the budget.

3) Any conversation about tax simplification that includes eliminating a few brackets, but not taxing (both income AND payroll/SE taxes) different types of income at different rates, or eliminating phase-outs like AMT, EITC, Child Tax Credit, SS Income (phase-in), college credits, etc, is not a conversation.  It's a bullsh!t distraction.

I think this analysis is pretty good.  However, I would still say it *is* a conversation.  Just not a very satisfying one.

I remember looking at the Rubio's tax plan and thinking the same thing.  In particular, I was frustrated by the lack of details to enable me to do the calculations myself (so I couldn't verify numbers in his examples, nor figure out how my own tax burden might change).

As an aside, who better than Trump to come out with an MR-acknowledging tax code?

Whaaaaat!?

Cognitive.  Dissonance.  Engage.

I think I can help, Moda...  I don't think that's the real Donald Trump.  It's @realfakeDonaldTrump.

If I were to map out my own tax code, here would be the main priorities, similar to Trump:

1) “Do no harm.”  At the very least, lower and middle class tax-loads should not go up, and refunds should not go down.  However, when you significantly simplify the tax code, some people’s situations will get more difficult.  That’s just how it works.  Some will fall through the cracks and pay a bit more.  So-be –it. :/

2) Revenue Neutral.  Assuming no changes in growth as a result of my tax plan (at least to start out), projections would have to keep it revenue neutral .  Since I don’t have all the intense actuarial/economic tools that larger institutions have, I’ll solve this with magical “rate adjustments” that might annoy some here, but it’s the best I can do with the tools I have.

3) SIMPLIFY.  This one is huge.  This is the main thing to shoot for, IMO.  It will have limited immediate effect, IMO, as we have an infrastructure of tax software and accountants to handle the current complications, but it’ll increase social trust and reduce admin time considerably across the nation.

SIMPLIFY:

1) EDIT: I'd move FICA/Medicare to being funded by the general income tax.  

FICA/Medicare, if memory serves, makes up almost the same amount of federal revenue as the federal income tax and way more than the corporate income tax. Businesses should like it, as it leaves businesses with an effective 7.65% tax cut on employees.  I’m willing to accept that as a “gimme” to businesses, as it’s associated with employing folks.

Because all income types are now being subject to FICA/Medicare, we should be able to reduce the overall rate that it holds implicitly in the general income tax.

2) No more corporate income tax.  Get rid of it.  Tax people at the individual level as dividends are paid.  Corporations are bilking us via our elected representatives, IMO… not the tax code. 

3) All income taxed at the same rates.  ***THIS DOES NOT MEAN A FLAT TAX FOR ALL LEVELS OF INCOME***  This means that all income is treated the same.  No cap gains, dividends, or muni bond rates. 

I wouldn’t want to collapse municipalities all over the country, so perhaps there’d have to be some sort of phase-in of this adjustment, so I’ll put a caveat in for that.

Social Security income would get taxed at 40% (not that rate, but that much will be added to taxable income) as a compromise between where folks are at now (somewhere between 0% and 85%) and simplicity. 

This would also mean that if we have a FICA/Medicare tax, it would apply to all these types of income.

Some would say that this would reduce investment as a result of the tax-load of making investment changes.  Keep in mind, first of all, that this is mostly a result of the tax-deferral BENEFIT of being able to defer taxes year after year, and the implicit hit that’ll come at a sale transaction.  I’ve tossed around the idea of an inflation adjustment to capital gains, but I figured the best way to do it is to simply allow folks to spread capital gains over 5 years.  I’m putting a pin in this for further debate/discussion.  But there will be none of this “capital gains are tax free because people already paid taxes “ bullsh!t.  We all “already paid taxes.”  Income is income.  You pay taxes on income, whether because you borrowed someone your time, or borrowed someone your money.

4) Remove UNICAP adjustment and R&D Credit for businesses, and AMT, Social Security Taxation phase-in, almost all deductions, possibly including charitable (though I don’t think this complicates it much), and either NO interest is deductible, or ALL interest deductible (I’m ok with a max on this, but no phase-outs).  Very simple stuff that could fit on one page.

Also remove student loan interest deduction.  You’ll see why  later.
Also, REMOVE ALL PHASE OUTS.  These increase resentment, significantly increase people’s effective marginal tax rate at any given income they’re currently at, significantly increase complexity and number of forms, and increase the “games” people will play to avoid taxes, rather than just enjoying life.  This will be a tad difficult once I get to my “revenue neutrality principle,” but I will fix it the way I fix everything else… a magic tax rate adjustment. ?
5) Create a lot more simplicity and consistency among retirement plan options.  401(k)’s, IRA’s, and SEPs should have MOSTLY the same rules.  And no phase-outs of Roth IRA eligibility.  No quicker way to induce resentment in society, my God.
6) Remove the “marriage tax penalty.”  Make MFJ just an easier, doubled-up version of “Single.”  This can’t be done to perfection, but we can get 80% of the way there with ease.
7) Estate Tax:  Here’s a tough one.  For philosophical reasons I’m for it (as was Thomas Paine and Thomas Jefferson and George Washington, to a degree, it would seem).  Also, unearned income is still income.  Sure it was taxed already, but so is the money that I earned to go pay my lawyer to draw up legal documents, yet he has to still pay income tax on profits.  Inheritance is profit.  Coagulation of massive, massive wealth in the hands of the few isn’t good for society, IMO.  So I’d probably try to wrap it into the income tax code (gifts above $15,000 are taxed as income… inheritances above a certain level are taxed as income) rather than coming up with a ridiculous tax code for estates… but since one already exists and for the purposes of moving to more important items, I’ll just put a pin in that and leave the estate/gift tax as-is.

“DO NO HARM” and try to help



1) Here’s the problem… with ALL the changes I made to the tax code, it’s going to be difficult to “do no harm” to EVERYONE in the lower and middle class, but this is not about perfection, but creating a fair system that generally helps the middle class. 

I’ve just given a 7.65% deduction to BUSINESSES instead of individuals (who are now paying a higher general income tax rate to make up the difference), and I’ve just made sure that people who were losing credits as they earn more income are no longer doing so.  So here’s the plan to generally make up for that.

First off, the big credits to point out are college, earned income credit, and child tax credit.  The last two are essentially the same.  Basically, I’m going to combine them into a “working parent credit,” remove the phase-in/out of those credits, so more people will get more in those credits. 

As for college credits, once again, simplify it and remove the phase-out, so all parents can get it.

2) Cost of college up to a certain amount is tax deductible… stay with me here. 

Take a doctor, who spends hundreds-of-thousands on college and then ends up in a tax-bracket where he can’t even deduct his student loan interest.  The “moda plan” would allow folks to amortize and deduct up to $100k or so of college costs (whether debt was incurred or not) over a 30-year career, or so.

I’m willing to put a pin in this for discussion, but in the absence of free or affordable college choices, I truly hate how people come out of college after having spent a massive amount, don’t get to deduct their “basis” from their income, nor their interest expense as a deduction, which is TOTALLY unlike how investors get to deduct expenses (basis is essentially “deductible” against income, as is interest).

I realize this would sort of “complicate” things, but so does tracking basis for investors, and interest is already being tracked.  And like I said, this isn’t a given.

REVENUE NEUTRAL

Here’s where you guys might get annoyed with me... Assuming all of the above and bringing FICA/Medicare tax level projections currently, I want to keep this revenue neutral, but can’t be sure what exact tax brackets at what levels will accomplish that AND result in not taxing the Middle Class more, so here’s something of a model on that.
First off, having “few” tax brackets doesn’t make things much simpler at all.  In fact, when you have big gaps between tax-levels, you increase the games people play to avoid taxes now (For instance, the 15%-to-25% switch induces a lot of folks to spend time planning around that barrier).  Back in the day, we had a ton of barely-increasing tax brackets.  Modaville would go back to that model.  I would never want more than a 5% switch from one bracket to the other.  Probably more like 3%.  So with, that, here’s the next step…

This probably should be in my “do no harm” section but here goes… Model out everyone in the 0-20%ile, 20-40%ile, and 40-60%ile in this country in terms of what they pay in FICA/Medicare and Federal income taxes.  Take the Modaville plan requirements, and create a bracket structure that would ensure that on-average, those three sectors are not paying MORE into income/payroll/SE taxes than they were before.  Keep in mind, we are including FICA/Medicare, and  a lot of these folks are getting college and kid credits under the Modaville plan, so their stated bracket might seem sort of high (23% when before they were in the 15%, or something like that).  Keep in mind that FICA/Medicare and credit phaseouts have been putting lower income people into MASSIVE effective marginal tax brackets for decades.  It’s just not stated as such.  The initial numbers might look scary, but that is just because the government is finally simplifying things enough to be honest with people.

So now that we have “done no harm” to the middle class, just model out the tax rates (at no more than 3-5% jumps) that it would take on the top 40% to make us revenue neutral.  Once again, these rates might seem sorta high to some, but taxes would be far-simpler, wouldn’t include hidden phase-outs, and would include your old FICA/Medicare tax that you DON’T see when you see 25% as your marginal income tax bracket on your tax summary each year.



Into the future:  So now we’ve achieved huge simplification of taxes.  No more S-Corp owners trying to re-state income.  No more carried interest, where fund managers can get taxed like investors.  No more people having to worry about big bracket changes from one level of income to another, or phase-outs that significantly affect their effective tax rate.  No more complex forms to add to the back of your return calculating your credit phase-out or Social Security taxation levels.  No more resentment because your brother in law gets a credit that you don’t or you just got locked out of a Roth (but play games to contribute to one anyway (non-ded. IRA). 

NOW, if we want to add “single payer healthcare,” we can simply fajigger the brackets until we pay for it, if we feel we must.  We hit a recession and want to throw a credit in there, GREAT!  One extra line with a $300 credit per family member and no phase-out.  We can disagree on these things all-day-long, but let's at least agree that if we're going to do something, it's simple enough for Americans to understand it.

Lastly, every tax bill would have a page 2, not for the government, but for the taxpayer.  It would take their annual tax, and divide it out by annual expenditures at those ratios, showing them where their money is going.  Defense x%.  Social Security Retirement Y%.  Unemployment Z%.  Medicare W%.  This will help people align their feelings about taxes with reality.  They see the taxes they're paying, and they'll see a breakdown of where it's going.  So the next time someone wants to complain about government spending, they know what they're complaining about.

But here’s the thing… changing the tax-code isn’t gonna save the world.  To the degree we can improve people’s lives via the tax code, it’s mostly by simplifying it and walking away.  Let them make decisions on what is worth more work based on clear tax brackets.  Wanna make another $100,000 per year by working another 10 hours per week?  Well you’re only going to see $75,000 of that.  That’s  $145 per hour.  Is it worth it or isn’t it!? 

If we wanna build a bullet train, go to Mars, significantly grow the economy, repair the environment, improve education & college affordability, etc, there are far-better ways to approach that than some complex credit that has 15 requirements and phases out once your income hits a certain point.



But to all my friends here who think I'm anti-business, I've just taken away the corporate income tax, as well as decreased their employment costs by about 7%.  I'm a firm believer that taxes are effectively paid by those with the least bargaining power.  This was a huge piece to my micro-economics class (apply a gas tax, who loses more?  The consumer or the oil company?)  To the degree we think business is a problem in the U.S. (controlling congress, polluting, protecting themselves via legal fictions, etc) there are far-better ways to attack them on those fronts than to have a loopy-ass tax-code. 

Sorry if that all seems complicated.  When you try to talk about the flaws of our current tax-code and the benefits of one going forward, you essentially need to say WHY the current complications need to go rather than talking about "a few brackets" and getting rid of "some deductions."

The problem with cuts to FICA are that they make Social Security/Medicare less sustainable going forward, unless there are other changes to the systems.

TennPaGa wrote:

Desert wrote:

moda0306 wrote: 1) Any conversation about the plight of the middle-class tax-load that doesn't mention FICA/Medicare taxes ISN'T A CONVERSATION.  It's a bullsh!t distraction. 

+1

+2

Obama's and the Republican Congress's elimination of the 2% FICA tax holiday back in 2011 (?) was disappointing.

Yep.

Anyone who wants to increase the minimum wage should just support a payroll tax cut for anyone making near the minimum wage.  That would put 6-7% more money into low wage earner's pockets and it doesn't cost the employer a dime.

jafs wrote: The problem with cuts to FICA are that they make Social Security/Medicare less sustainable going forward, unless there are other changes to the systems.

You are buying the SS/Medicare "trust fund" arguments.  There is no trust fund.  There never was.  Those are just ledger entries for an entity that doesn't have any meaningful fiscal restraints.

You're supposed to be the bleeding heart guy.  I'm surprised you would trot out the tired SS "lockbox" arguments as a reason not to help our poorest workers.

I understand very well how SS works.

And, I'd help out the poorest folks in a lot of different ways.

But cutting revenue just increases sustainability issues if no other changes are made.

Overall, revenue has to be equal to or greater than spending to balance the budget and/or create a surplus.  I know a lot of you don't care about that, and don't think it's any sort of real problem.

Personally, I have some ideas about how to improve/change SS and Medicare, but they involve serious changes to the program that will never be considered.

And, I'm not "supposed" to be anybody, I'm just who I am.

Xan wrote: I think I can help, Moda...  I don't think that's the real Donald Trump.  It's @realfakeDonaldTrump.

So which is real?  The fiscal hawk or the MR'ist?

jafs,

You should check out Monetary Realism @ Pragcap.com.  We don't have to have these debates now.  Even if there is a fiscal restraint and we're gonna pretend the fund exists, We can easily be revenue neutral within SS/Medicare taxes by applying them to ALL other income by folks.

I'm not saying we should go in and slash the SE tax and payroll taxes without some debate about the fund accounting going on, but until we establish a good model of the reality of most Americans, debating these topics seems to be pretty fruitless.  Case-in-point, Republicans would never produce these ridiculous "tax simplification plans" the way they do if Americans far and wide didn't fall for it.  I don't expect everyone to be a tax expert, but at least try to identify a nuanced argument when you see it.


As far as a "realistic" short term solution to putting more money on the balance sheets of Americans during our greatest recession since the 1930's in a politically feasible way, some sort of deep payroll tax holiday in 2009 should have been the easiest play available.  People wouldn't have had to wait for a tax return to see money, it would have been a simple adjustment for employers (hell, I'd have given it to them too!).  Business owners paying SE tax would have seen a huge benefit.  Instead, we got some bailouts, clumsy tax credits, a few spending stimulus projects, and a bunch of supply-side tax enticements (bonus depreciation) during a demand-driven recession. 

I agree that we have economic sustainability issues, long-term.  Most of which are environmental and labor-value related, IMO.  Pieces of paper with fictitious meanings aren't our restraint, yet we make them that way when we don't apply proper fiscal or monetary policy to a crisis, but in ways that just increase instability.  That's a sloppy way to help the environment and future retirees.

TennPaGa wrote:

moda0306 wrote:

Xan wrote: I think I can help, Moda...  I don't think that's the real Donald Trump.  It's @realfakeDonaldTrump.

So which is real?  The fiscal hawk or the MR'ist?

@realfakeDonaldTrump was my invention.

http://simitator.com/generator/twitter/tweet

Holy crap!  Good one.  This must be what getting Punk'd feels like.

moda0306 wrote: jafs,

You should check out Monetary Realism @ Pragcap.com.  We don't have to have these debates now.  Even if there is a fiscal restraint and we're gonna pretend the fund exists, We can easily be revenue neutral within SS/Medicare taxes by applying them to ALL other income by folks.

I'm not saying we should go in and slash the SE tax and payroll taxes without some debate about the fund accounting going on, but until we establish a good model of the reality of most Americans, debating these topics seems to be pretty fruitless.  Case-in-point, Republicans would never produce these ridiculous "tax simplification plans" the way they do if Americans far and wide didn't fall for it.  I don't expect everyone to be a tax expert, but at least try to identify a nuanced argument when you see it.


As far as a "realistic" short term solution to putting more money on the balance sheets of Americans during our greatest recession since the 1930's in a politically feasible way, some sort of deep payroll tax holiday in 2009 should have been the easiest play available.  People wouldn't have had to wait for a tax return to see money, it would have been a simple adjustment for employers (hell, I'd have given it to them too!).  Business owners paying SE tax would have seen a huge benefit.  Instead, we got some bailouts, clumsy tax credits, a few spending stimulus projects, and a bunch of supply-side tax enticements (bonus depreciation) during a demand-driven recession. 

I agree that we have economic sustainability issues, long-term.  Most of which are environmental and labor-value related, IMO.  Pieces of paper with fictitious meanings aren't our restraint, yet we make them that way when we don't apply proper fiscal or monetary policy to a crisis, but in ways that just increase instability.  That's a sloppy way to help the environment and future retirees.

I don't understand your comment about applying things to ALL other income - are you suggesting we eliminate the payroll tax cap?  I think that's a perfectly good idea.

Not just the cap... apply it to all income.  Interest income, dividends, cap gains.

I forgot to make it explicitly clear (now it's edited), but I would wrap ALL FICA/Medicare taxes into the general tax code.  If we want to maintain fund accounting within that in some weird way, fine.

I have an even simpler plan.

Eliminate all Federal taxes and let the Fed print whatever money the Federal government wants to spend.

Since the US is a "currency issuer" and therefore doesn't have to worry about hyperinflation, this is the simplest and most effective tax reform plan possible!

That's very much what I would do as well, especially since they don't actually keep the money separately and save it for the programs.

I'd just have taxes collected and programs paid for.

But I'd also change the way SS/Medicare are structured as far as who gets benefits and how they're determined.

This is a response to moda, not Libertarian666!

Libertarian666 wrote: I have an even simpler plan.

Eliminate all Federal taxes and let the Fed print whatever money the Federal government wants to spend.

Since the US is a "currency issuer" and therefore doesn't have to worry about hyperinflation, this is the simplest and most effective tax reform plan possible!

Nobody says they don't have to worry about hyperinflation.  In-fact, even with a system like that, the problem WOULD be inflation if you spent a bunch of money into the economy without taking some out.  But anyway...


Re-fajiggering our entire monetary system wasn't really in the scope of my plan.  It was simply how to reform the tax code to those three mentioned metrics.



Considering that limited scope, what are your thoughts?  Remember, we have to maintain revenue neutrality, so you can't eliminate the tax. 

jafs wrote: I understand very well how SS works.

Really?  Then why are you talking about the sustainability of the program?

And, I'd help out the poorest folks in a lot of different ways.

Right, but most of what I've heard from you seems to involve telling businesses how much to pay their employees, regardless of the employees' worth to the organization.  IMHO, that approach won't solve any of the problems you have identified. 

I have identified three different alternative approaches (i.e., payroll tax cut, improved negotiation and enforcement process on trade deals, and expanded government employment for otherwise unemployable workers) that could get us to the place you say you want to go , and you have poo pooed all three of them. 

I'm trying to work with you here, but it's starting to seem a little troll-ish the way you don't want to explore creative solutions to the problem you have identified.  You just want to say that CEOs are overpaid, the minimum wage is too low, and you feel unwelcome and unsafe, even though you've got the smartest people here working with you to try to crack the nut you have brought to us.

But cutting revenue just increases sustainability issues if no other changes are made.

Well, many would say that if you increased employment at the bottom of the wage scale, almost every dollar in new wages would be spent, which would stimulate the economy.  A stimulated economy expands, which has a tendency to increase tax revenue. 

You're also using that "sustainability" word again.  If nothing else, I would like to see you loose up your thinking about this issue.  There are no "sustainability" issues when it comes to the U.S. government and its spending levels.  A world reserve currency issuer MUST run large budget deficits and maintain a large national debt in order to provide a bond market with enough liquidity to handle the largest international transactions.  That's a hard pill to swallow, but it's true.  The U.S. government's constraints are mostly political and cultural--they aren't financial.

Overall, revenue has to be equal to or greater than spending to balance the budget and/or create a surplus.  I know a lot of you don't care about that, and don't think it's any sort of real problem.

It has nothing to do with what I or anyone else here care about or think is a problem.  What you are doing is the equivalent of saying that when it thunders it means God got drunk and fell down in Heaven, and what I am saying is NO, there is a much better explanation for the thunder than that.

Sorry if that seems a little harsh, but in order to have a meaningful discussion about these issues, you've got to open your eyes to how our system actually works.  It's worth the effort, trust me.  Put you ego aside for a moment and look at things without preconceptions.  It's shocking what you will find has been right under your nose all of this time.  Most of the people here have had one or more of these "aha" moments.  It's worth the effort.

Personally, I have some ideas about how to improve/change SS and Medicare, but they involve serious changes to the program that will never be considered.

Me too.  How about Medicare for everyone and only pay SS to people with W-2 income under $1 million a year?

And, I'm not "supposed" to be anybody, I'm just who I am.

It sounds like who you are is who you are supposed to be.  That's all I was saying.  I was just depending on you to be you. 

moda0306 wrote:

Libertarian666 wrote: I have an even simpler plan.

Eliminate all Federal taxes and let the Fed print whatever money the Federal government wants to spend.

Since the US is a "currency issuer" and therefore doesn't have to worry about hyperinflation, this is the simplest and most effective tax reform plan possible!

Nobody says they don't have to worry about hyperinflation.  In-fact, even with a system like that, the problem WOULD be inflation if you spent a bunch of money into the economy without taking some out.  But anyway...


Re-fajiggering our entire monetary system wasn't really in the scope of my plan.  It was simply how to reform the tax code to those three mentioned metrics.



Considering that limited scope, what are your thoughts?  Remember, we have to maintain revenue neutrality, so you can't eliminate the tax.

My other plan is to cut the Federal government back to doing only what is explicitly authorized in the Constitution, which is approximately 1% of what they do today.

Then you could eliminate income taxes and FICA and still have plenty of money left over.

Libertarian666 wrote: I have an even simpler plan.

Eliminate all Federal taxes and let the Fed print whatever money the Federal government wants to spend.

Since the US is a "currency issuer" and therefore doesn't have to worry about hyperinflation, this is the simplest and most effective tax reform plan possible!

That's what we've been doing since about 1982.  We've just been doing it in stages.