New U.S. Tax Bill Singles Out Video Game Studios

Stiletto said:

How would the same percentage across the board disproportionately affect the poor? The same percentage would take the same percentage from everyone. If you're saying that the rich have more left over, well, duh. That's like complaining that some big corporation made a huge amount of money as profit while a small business made a smaller amount. It's all about the margin of profit. What percentage are you keeping from what you make, and how much is seized by government forces?

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Because, with no deduction for basic cost of living, you are taking a deep cut of the poor folks ability to simply feed themselves and put a roof over their head, whereas the rich don't feel that pain at all. A, say, 5% tax on all income might mean a poor person can't buy medicine. For a wealthy one, it might mean literally nothing at all.

Now, if you build in a certain "floor", with income below that untaxed by dint of it being necessary to a very basic, no frills existence, you effectively negate that complaint. Some of the better flat tax proposals do exactly that, which makes them much more viable.

-Tuthmose

Tuthmose said:

Because, with no deduction for basic cost of living, you are taking a deep cut of the poor folks ability to simply feed themselves and put a roof over their head, whereas the rich don't feel that pain at all. A, say, 5% tax on all income might mean a poor person can't buy medicine. For a wealthy one, it might mean literally nothing at all.

Now, if you build in a certain "floor", with income below that untaxed by dint of it being necessary to a very basic, no frills existence, you effectively negate that complaint. Some of the better flat tax proposals do exactly that, which makes them much more viable.

-Tuthmose

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Another reason a floor is needed on income tax is that the poor do pay sales tax more than the rich so they are already taxed in other ways. A flat tax would only impact federal taxes since all other taxes are state or locally controlled so even with a flat federal (and potentially flat state tax) you still have sales tax (local and state), property tax (local and state), and possibly income tax (state).

pgwalsh said:

Taxes shouldn't be use to curb behavior or punish people

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They already use the tax code to punish people. Obamacare punishes you for not buying health insurance, and that punishment is considered a tax thanks to the US Supreme Court. That set a precedent, so expect more punitive "taxes" like this down the road. Video games are just a trial run. If they can get away with that, they'll go after firearms and ammunition next. It's a classic strategy. If you can't succeed in outlawing something then regulate and tax it to extinction.

There are lots of good reasons to have a progressive tax system, and it is entirely fair. There's no reason to whine about it unless you don't understand how it works or you're some kind of sniveling corporate apologist / brown noser to the ultra rich

Well, time to set up shop in another country then, good bye one of the largest money making industries the US has, besides porn, and movies of course.

sfsuphysics said:

For every watt of solar or wind energy we product that's just that much less CO2 as a biproduct from things like coal, natural gas, etc that we don't put into the air. Just as an example.

I'm not arguing that it costs money and we're further in debt as a result, however arguing about this as "reckless spending that's putting us further in debt" is kind of like complaining that the hat a fat guy is wearing is too heavy when he sits on you.

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So, those billions of dollars were better off thrown down a rat-hole to provide 6.2% of the total power in the U.S., meanwhile that debt takes money out of the economy for God knows how long (will we ever pay down the debt?) in the forms of interest and debt payments... sure makes a lot of sense to me.

The further in debt we go, the more tax that must be collected to repay that debt. The higher taxes go, the bigger hit on the economy for a myriad of reasons. The bigger the hit on the economy, the less jobs there are and the less income people have due to lower wages. What good is clean energy if people cannot afford to use it?

mavrocket said:

Based on who signed the income tax into law, I wouldn't be surprised...

For those who don't know, it was the progressive, liberal, left-wing, Democrat Woodrow Wilson.

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The Revenue Act of 1862 was the first income tax in this country. It established the IRS. The 16th Amendment, passed in 1916, made income tax a permanent fixture of the US. The majority of our present tax code was passed into law in 1986 with the Tax Reform Act of 1986.

President in 1862... Abraham Lincoln
President in 1916... Woodrow Wilson
President in 1986... Ronald Reagan

2/3 of the above are... Republicans!!!

maverikv said:

There are lots of good reasons to have a progressive tax system, and it is entirely fair. There's no reason to whine about it unless you don't understand how it works or you're some kind of sniveling corporate apologist / brown noser to the ultra rich

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There are lots of good reasons not to have a progressive tax system, and it would be entirely fair. There's no reason to support it unless you don't understand how a flat-tax works or you're some kind of sniveling welfare-queen apologist / brown noser to the ultra rich progressive "liberals".

mavrocket said:

There are lots of good reasons not to have a progressive tax system, and it would be entirely fair. There's no reason to support it unless you don't understand how a flat-tax works or you're some kind of sniveling welfare-queen apologist / brown noser to the ultra rich progressive "liberals".

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Sure, there are lots of reasons to have a flat tax, but none of them are good reasons. Bad for the economy, bad for the poor and middle class. And having a flat tax with a cost of living deduction is the same thing as having a progressive tax system that only has two brackets, so its just a crappier version of what we have now. Pass.

Tuthmose said:

Because, with no deduction for basic cost of living, you are taking a deep cut of the poor folks ability to simply feed themselves and put a roof over their head, whereas the rich don't feel that pain at all. A, say, 5% tax on all income might mean a poor person can't buy medicine. For a wealthy one, it might mean literally nothing at all.

-Tuthmose

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This is a nonpoint. By the same logic, you could argue for the seizing of 99% of a billionaire's assets, claiming that he'll still have tons left over for basic cost of living. Setting floors means setting living wages. If you're going to go that route, do so directly.

mavrocket said:

Based on who signed the income tax into law, I wouldn't be surprised...

For those who don't know, it was the progressive, liberal, left-wing, Democrat Woodrow Wilson.

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Well the amendment to the Constitution to allow income tax was passed by Congress first. Fox guarding the bloody hen house. Hmmm who would benefit from this... CONGRESS.

maverikv said:

Sure, there are lots of reasons to have a flat tax, but none of them are good reasons. Bad for the economy, bad for the poor and middle class. And having a flat tax with a cost of living deduction is the same thing as having a progressive tax system that only has two brackets, so its just a crappier version of what we have now. Pass.

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I can think of a lot of good reasons for a flat tax with no cost of living deduction or exemptions/credits (I never said a flat tax with a cost of living deduction).

1. Everyone pays
2. Simpler tax code
3. Less lawyers
4. No special deals between corporations/government (i.e. cronyism)
5. No social-engineering
6. Filing taxes would only take 5 minutes for the vast majority of people
7. Did I mention everyone pays?
8. Provides stability for business
9. No more fake middle-class propped up by tax credits
10. Allows for a true middle-class to emerge, see #9.
11. Not sure I mentioned about everyone paying?

Ok here is one important question WHO determines what is considered a violent video game and what is the guidance?

The low hanging fruit is FPS's. But does Tekken qualify, Mortal Kombat, Street fighter, Super Smash Brothers, StarCraft, WoW, any Mario Game, Zelda, Pac-Man or classic Adventure (the text adventure. You do strangle to death a giant snake with your bare hands)?

pgwalsh said:

If this does't throw a big red flag for most people, then there's something seriously wrong with the people of the U.S. Taxes shouldn't be use to curb behavior or punish people or industries. Our tax code is ridiculous and it's seriously time for either a Flat Tax or the FairTax. No more write-offs and no more punishing people or industry.

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I partially agree, and partially disagree.

IMHO, industry specific taxes are mostly wrong, as are sweetheart deals to give tax breaks to individual companies to lure them in to create jobs.

States and the federal government should be forced to treat all companies and industries equally.

That being said, taxation CAN be a very good tool to steer the market away from things that are bad for society. Fossil fuels, cigarettes, etc. ARE good targets for this. Similarly tax breaks for renewable energy sources and certain medical research would be fantastic.

This works, because we all know that economic incentive is one of the strongest forces in the world.

In fact, right now we are losing out on the next generation of renewable energy industry in our country, because China is flooding the market with subsidized cheap components (solar panels, etc.) and our unsubsidized or poorly subsidized companies in competition are dropping like flies. They know that this is the basis of the future economy, and they are going after it forcefully at our expense.

In a perfect world, where people were less selfish, and did things based on what was the best for the world, and for society out of the goodness of their hearts this wouldn't be needed, but sometimes a gentle nudge to push people in the right direction can be very effective.

That being said, it's been said before, and I'm going to say it again. Going after video games is just plain dumb. The evidence simply does not support that violent video games have any negative impact on people.

Croaker said:

Ok here is one important question WHO determines what is considered a violent video game and what is the guidance?

The low hanging fruit is FPS's. But does Tekken qualify, Mortal Kombat, Street fighter, Super Smash Brothers, StarCraft, WoW, any Mario Game, Zelda, Pac-Man or classic Adventure (the text adventure. You do strangle to death a giant snake with your bare hands)?

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Mario, that violent turtle killing motherfucker! Soon kids all over the world are going to start murdering each other by jumping on each others backs!

weuntouchable said:

President in 1862... Abraham Lincoln

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For war purposes, not intended to be permanent.

President in 1916... Woodrow Wilson

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Both houses of Congress controlled by...Democrats!

President in 1986... Ronald Reagan

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Both houses of Congress controlled by...Democrats!

Little known fact, as well. You know why the income tax was made permanent in 1916? To make up for all the lost taxes that Prohibition would cause. That's the main reason such an onerous law was allowed to pass. It was a tradeoff with the prohibitionists who wanted to tell others how to live.

Well, we repealed Prohibition. Soooo...income tax repeal? Anyone?

mavrocket said:

Based on who signed the income tax into law, I wouldn't be surprised...

For those who don't know, it was the progressive, liberal, left-wing, Democrat Woodrow Wilson.

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Oh, just get over yourself and stop whining about taxation.

True, no one likes paying taxes, but the honest truth is they are a necessary evil. Society doesn't pay for itself, and unless we want to live in anarchy, the piper has to be paid.

Every developed nation in the world has an income tax. There is no reason why we should be the exception. Our tax burden is still among the lowest in the developed world.

mavrocket said:

I can think of a lot of good reasons for a flat tax with no cost of living deduction or exemptions/credits (I never said a flat tax with a cost of living deduction).

1. Everyone pays
2. Simpler tax code
3. Less lawyers
4. No special deals between corporations/government (i.e. cronyism)
5. No social-engineering
6. Filing taxes would only take 5 minutes for the vast majority of people
7. Did I mention everyone pays?
8. Provides stability for business
9. No more fake middle-class propped up by tax credits
10. Allows for a true middle-class to emerge, see #9.
11. Not sure I mentioned about everyone paying?

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So you want a flat tax with no cost of living deduction then? You know rampant inequality is horrible for the economy, right? Poor people spend all of their money.

Yeah...I'm not sure what the claimed advantage is of a flat tax, it is the opposite of 'fair'. I know exactly what segment it benefits. Besides the disproportionate impacts on lower class, it's always been significantly easier to make money once you have capital accumulated. In our society more and more opportunities open up for easier accumulation of money as you collect more and more capital.

The first million or billion is the toughest. On the low end, If I have a few million in the bank I can buy up rental properties and generate passive income in excess of what most people can make in their full time job, and I can do that on the side. There's a reason that wealth disparity grows so easily, even under our relatively weak progressive tax system, and it's not that 100 guys are vastly superior geniuses than the other 6 billion people.

Wealth gets concentrated over time, and that wealth offers inherent advantages and can be used to create huge advantages for the accumulation of more wealth. It is often used to (legally or illegally) buy influence, modify rules to entrench your position and to stamp out other competitors.

Wealth concentration is not conductive to fueling innovation, it actually accomplishes the complete opposite. It is anti competitive. Ideally you want a system that makes it progressively more difficult to make your next million or billion to counteract the built in advantages that that wealth offers. In turn you get a larger base of innovators and entrepreneurs fighting on a more even playing field (which is the exact opposite of what established wealthy want). With more competition, a wider base and less barriers to entry you're actually going to have a healthier market for those famed job creators.

Besides that...just look through history for what happens when wealth disparity between the top and bottom becomes as massive as it is becoming. It is not stable and it is not healthy.

The potential win on flat taxes is the elimination of the huge loopholes and tax breaks the uber rich and corporations take advantage of. I am tired of hearing how GE always ends up paying zero taxes at the end of the year. They should be paying several billion not zero dollars.

One clarification a base living deduction (single, family etc) should be in there. It would still be an extremely simplified tax code at the end of the day. It would benefit the lower income brackets but higher barely at all.

Stiletto said:

How would the same percentage across the board disproportionately affect the poor? The same percentage would take the same percentage from everyone. If you're saying that the rich have more left over, well, duh. That's like complaining that some big corporation made a huge amount of money as profit while a small business made a smaller amount. It's all about the margin of profit. What percentage are you keeping from what you make, and how much is seized by government forces?

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Because in order for the government to collect the same amount of revenue (and lets be honest that needs to happen at a minimum) the poor would have to pay more in taxes. So effectively the rich get a tax break and the poor get a raise in taxes.

Then combine that with what was said earlier where more of a poor persons pay check goes toward living, even though you did address it, it would be a double whammy against them.

mavrocket said:

I can think of a lot of good reasons for a flat tax with no cost of living deduction or exemptions/credits (I never said a flat tax with a cost of living deduction).

1. Everyone pays
2. Simpler tax code
3. Less lawyers
4. No special deals between corporations/government (i.e. cronyism)
5. No social-engineering
6. Filing taxes would only take 5 minutes for the vast majority of people
7. Did I mention everyone pays?
8. Provides stability for business
9. No more fake middle-class propped up by tax credits
10. Allows for a true middle-class to emerge, see #9.
11. Not sure I mentioned about everyone paying?

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The problem is that a flat tax is only flat in its numbers, not on it's impact.

Taxing a poor or median income earner a flat rate has a MUCH larger impact than it does on a high income earner. In some cases it can mean the difference between being able to put a roof over your head, or food on your table.

The focus should be on a FAIR tax system, not a FLAT tax system. A Flat tax rate is inherently unfair.

From those whom much is given, much is expected. It is only natural that those who have a greater ability to pay for the necessary evil cost society incurs, should do so.

Now, that doesn't mean to say that we couldn't simplify and clean up the tax code. We definitely could. On the personal income side I would do away with all deductions, and replace them with a simple formula based on family size and statistical cost of living data from a 5 mile radius around their home.

Anyone earning up to or at the cost of living for their family size and location would pay no taxes at all. Taxation would start on the first dollar above the cost of basic living, and would be highly progressive. I see no problem with 90%+ top tax brackets like we had back in the 50's. (when - I might add - our economy was booming).

Essentially - with this formula you would be taxing people only on luxury. Not on the cost of just surviving.

Furthermore I would make all income treated the same, whether it is from investment or from wages or salaries.

To make it simple, I would then get rid of all other taxation (property, excise, etc.)

I would force states and municipalities to use an even multiple of the federal tax assessment in their own assessments. They could decide how much tax to collect, but not the formula to do so, so they couldn't undercut the overall simple fair tax solution.

On the corporate side, I haven't quite figured out what I'd do, but a few things are certain:

1.) All companies and industries would be treated the same. No sweetheart discounts to individual industries or businesses, even if in exchange for opening a new plant. if you want to be competitive by having a lower tax rate, lower it for everyone.

The only exception would be a national priority list, limited to a short (maybe 10 or 20?) entries, designed to drive societal behaviors, like lower tax rates for renewable energy, electric cars, etc. etc.). The justification would have to include how they benefit the future of the country and the economy, and when their end date would be.

2.) Transfer pricing would definitely have to change, so large multinationals no longer can evade taxation through off shore shell accounts.

The current tax system is indeed a mess., but a flat rate system is not the answer It would lead to disaster, and even worse concentration of wealth at the top.

Just wait and see, income inequality will likely be the political issue of our generation. We are in bad shape, but still surviving right now, but as it gets worse and worse, and the middle class crashes out of existence, and the top 1% increase their opulence, I wouldn't be surprised if tempers rose to the point where we might find ourselves in a tense Russia in 1917 type situation. It's in all of our best interest to avoid that.

maverikv said:

So you want a flat tax with no cost of living deduction then? You know rampant inequality is horrible for the economy, right? Poor people spend all of their money.

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You know our current progressive tax system creates rampant inequality, right?

Our current system of taxation giving breaks here and there based on who can out-lobby the other guy allows the top earners to use loopholes to not pay or pay very little. For example, the Obama's tax rate for 2012 was 18.3%, and they are multi-millionaires.

I would like your evidence on how a flat-tax would be horrible for the economy.

sfsuphysics said:

Because in order for the government to collect the same amount of revenue (and lets be honest that needs to happen at a minimum) the poor would have to pay more in taxes. So effectively the rich get a tax break and the poor get a raise in taxes.

Then combine that with what was said earlier where more of a poor persons pay check goes toward living, even though you did address it, it would be a double whammy against them.

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First of all, no, we don't necessarily need to collect the same amount of revenue. Until we've explored serious cost-cutting measures, we have no idea how much we need to collect.

Secondly, I think we can agree that on average the rich pay a smaller percentage of taxes then they're supposed to. You don't think that we're actually collecting an amount commensurate with the rates they're supposed to pay, right? So, from the beginning, under the current system we are not collecting what is actually advertised. Hence, a new system without the ability to dodge the actual rates would result in a different collection altogether.

And as for the cost of living, that can easily be covered under a standard deduction. That particular facet of tax law need not die. It actually works quite well for lower and middle-income people.

Zarathustra[H];1040660235 said:

Oh, just get over yourself and stop whining about taxation.

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Oh look! A representative from the federal government!

mavrocket said:

You know our current progressive tax system creates rampant inequality, right?

Our current system of taxation giving breaks here and there based on who can out-lobby the other guy allows the top earners to use loopholes to not pay or pay very little. For example, the Obama's tax rate for 2012 was 18.3%, and they are multi-millionaires.

I would like your evidence on how a flat-tax would be horrible for the economy.

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If loopholes are the problem, perhaps we should close the loopholes? Your issue shouldn't be with progressive taxation, because the progressive taxation itself doesn't by definition allow for breaks, goodies and loopholes.

The more money you make, the less likely you are to spend that next dollar. Poor people spend pretty much everything they take in. If you implement a regressive tax like a flat tax, it puts less money in their pockets, which puts less money into the economy. Its not rocket science.

Progressive taxation is extremely fair. Every bracket is flat, and you don't pay a dime extra in taxes on the money you earn below a bracket once you cross into it.

I think a lot of the activity we incentivize and/or reward with our current tax code is wrongheaded. That doesn't mean we throw out progressive taxation. It means we address the issues we have with it.

UH... didn't they spend tons of stupid ass money and gotten results that was against the whole violent video game causes violence was a hoax. See... all that was a farce for this, probably, and when it fell through, they still pushed it.

I can't wait for news of congress men being shot.

mavrocket said:

Based on who signed the income tax into law, I wouldn't be surprised...

For those who don't know, it was the progressive, liberal, left-wing, Democrat Woodrow Wilson.

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Wow, way to keep it real! Funny how in all those years CONSERVATIVES never overturned it, like PROHIBITION, which was not just a law but an admendment to the Constitition.

I think we should increase taxes on movie studios that make movies I don't like.

pgwalsh said:

If this does't throw a big red flag for most people, then there's something seriously wrong with the people of the U.S. Taxes shouldn't be use to curb behavior or punish people or industries. Our tax code is ridiculous and it's seriously time for either a Flat Tax or the FairTax. No more write-offs and no more punishing people or industry.

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Our tax code has always been used to punish or reward individuals or companies.
It PUNISHES you for being productive and REWARDS those who are unproductive.
It will also reward you (with lower taxes or exemptions) if your lobbyist pad the pockets of crooked politicians (which is almost all of them)
If this exercises you something like the EITC (earned income tax credit) should enrage you.
The transfer of wealth PAYS in the form of a tax return on MONEY THEY NEVER PAID IN.
It is nothing but a welfare scheme in the tax code.

Stiletto said:

For war purposes, not intended to be permanent.

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http://en.wikipedia.org/wiki/List_of_wars_involving_the_United_States
Since shortly after the Civil War the US is constantly at War with other nations. So thank you for solidifying my argument for Republicans establishing income tax.

Republicans and Democrats aren't to blame for the income tax. Trying to keep 100s of millions of people moderately happy requires an income tax. I disagree with a lot of the ways tax dollars are spent, but repealing federal income tax is an argument no one can possibly justify without everyone in the room pointing and laughing at them.

weuntouchable said:

http://en.wikipedia.org/wiki/List_of_wars_involving_the_United_States
Since shortly after the Civil War the US is constantly at War with other nations. So thank you for solidifying my argument for Republicans establishing income tax.

Republicans and Democrats aren't to blame for the income tax. Trying to keep 100s of millions of people moderately happy requires an income tax. I disagree with a lot of the ways tax dollars are spent, but repealing federal income tax is an argument no one can possibly justify without everyone in the room pointing and laughing at them.

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This.

The discussion should center around the best uses for tax dollars, not on whether or not income tax is collected. No matter what we do, we will always need an income tax.

Stiletto said:

First of all, no, we don't necessarily need to collect the same amount of revenue. Until we've explored serious cost-cutting measures, we have no idea how much we need to collect.

Secondly, I think we can agree that on average the rich pay a smaller percentage of taxes then they're supposed to. You don't think that we're actually collecting an amount commensurate with the rates they're supposed to pay, right? So, from the beginning, under the current system we are not collecting what is actually advertised. Hence, a new system without the ability to dodge the actual rates would result in a different collection altogether.

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All very valid points. Even if we can't find ways to cut (and I'm sure, given the rampant waste, that isn't the case), eliminating the rich's ability to dodge tax liabilities would bring in a ton of money, even at lower rates of taxation. The loopholes currently in place mean that nothing is as it appears in the tax code.

Stiletto said:

And as for the cost of living, that can easily be covered under a standard deduction. That particular facet of tax law need not die. It actually works quite well for lower and middle-income people.

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Although this is what I argued for earlier, I do see your point about it being equivalent to setting a living wage. I think the issue here, at least as I see it, is that given fluctuating cost of living, inflation, etc., it's perhaps more practical to set a cost of living deduction than it is to set and maintain a workable living wage law.

-Tuthmose

Dr. Righteous said:

Our tax code has always been used to punish or reward individuals or companies.
It PUNISHES you for being productive and REWARDS those who are unproductive.
It will also reward you (with lower taxes or exemptions) if your lobbyist pad the pockets of crooked politicians (which is almost all of them)
If this exercises you something like the EITC (earned income tax credit) should enrage you.
The transfer of wealth PAYS in the form of a tax return on MONEY THEY NEVER PAID IN.
It is nothing but a welfare scheme in the tax code.

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There's some huge flaws in the tax code, but that's kind of an odd way to state it.

If by rewards you mean helps with a minimum living standard, then sure. I don't view that as a reward personally and most do not. It's a small nod to relieve tax burdens on the less well off. The goal is to help them have some breathing room to make advances, which often necessitate some small accumulation of savings. I think you vastly overestimate the % of people that like being poor.

Your ability to earn income in this country is hugely related to the infrastructure and environment which has been cultivated around you. That does not come to fruition out of thin air. If I open a business I need stability- a stable surrounding community, low in crime, low in pollution, well maintained roads for employees and suppliers to be able to transport goods, and countless other things to be in place that most people take for granted.

Generally speaking, the bigger the business and more money you are earning the greater benefit you are deriving from your surrounding infrastructure, right? Every customer that purchases something from you is able to do so in part because that infrastructure and environment exists.

I've never felt remotely punished by taxes for making more money. I make more money..I get more money. I may pay a slightly higher rate on dollar amounts over a certain bracket, but I understand why. Warren buffet paying the same tax rate as his secretary on the other hand does not make sense.

Not that you hold this idea, but one of the silliest misconceptions about progressive tax rates is when people think that by making more money they actually lose money. i.e. the whole if I make $199,999 I'm taxed at 20%, but if I make $200,000 I'm taxed at 25% and I actually reduce my take home amount. Er....no only the dollars earned after $200,000 in that example are taxed at the higher rate.

Sounds like EA didn't pay their bribes..... errrr wait,....I mean make their "campaign contributions"... to congress.

The REAL problem is tariffs.
We used to run them high, so our industries can compete and most of the government's money came from tariffs.
Income tax became a permanent source of income to the government in 1913, which was the same year tariffs started to take a nose dive.
Tariffs are now so low (1.3%, 1900 it was 27.4%) its cheaper for US big business to outsource all the jobs overseas effectively eliminating our ability to manufacture.
End result?
The rich get richer selling good with cheaper labor and ditches all of their former employees onto the government for support, bankrupting the government in the process.

Well, at least that's the way I look at it.

fdiaz78 said:

Thank you. I for one and tired of tax laws written to discourage and/or discourage behavior. Taxes are for one thing, to pay for the reasonable cost of government, not to police our spending habits. I agree we need a flat tax.

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I am a subject to a flat tax system. Unfortunately it has a rather low ceiling. No one has explained to me why do we even need ceiling with a flat (fair) tax. Fucking hypocrites.

Stiletto said:

First of all, no, we don't necessarily need to collect the same amount of revenue. Until we've explored serious cost-cutting measures, we have no idea how much we need to collect.

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I'm not disagreeing with you, but lets look at reality. Our lawmakers whether they are democrats, republicans, liberals, conservatives, libertarians, green party, nazi party (I hate Illinois nazis!), they are incapable of cutting back, if there's money they might have, they'll spend it, if there's money they don't have they'll spend that too. So for the sake of argument, I was going with we need to collect the same amount of revenue as we do now, we're already over spend beyond our means, even if we do have drastic cuts to the tune of a trillion a year collecting the same amount will make us break even.

Secondly, I think we can agree that on average the rich pay a smaller percentage of taxes then they're supposed to. You don't think that we're actually collecting an amount commensurate with the rates they're supposed to pay, right? So, from the beginning, under the current system we are not collecting what is actually advertised. Hence, a new system without the ability to dodge the actual rates would result in a different collection altogether.

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The problem is that it's not just the rich who pay a smaller percentage, every single tax bracket on average pays a smaller percentage. Now while that one rich guy who does a texas two step funneling his equity checks through a 3rd world nation's massage parlor isn't going to be able to use that type of deduction, neither is that poor working family with 3 kids who take a child deduction on each one.

And as for the cost of living, that can easily be covered under a standard deduction. That particular facet of tax law need not die. It actually works quite well for lower and middle-income people.

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This is what I was eluding to earlier, different forms of a "flat tax" that people use. Before you know it it's not really flat anymore it's a graduated tax rate, just starting over from scratch with no deductions.

Stiletto said:

How would the same percentage across the board disproportionately affect the poor? The same percentage would take the same percentage from everyone. If you're saying that the rich have more left over, well, duh. That's like complaining that some big corporation made a huge amount of money as profit while a small business made a smaller amount. It's all about the margin of profit. What percentage are you keeping from what you make, and how much is seized by government forces?

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The concept of Marginal Utility basically. Specifically in this case how the utility for a unit of value decreases for each additional unit gained and increases for every unit lost. In plain speak regarding money that means the additional buying power gained or lost for each unit that is either gained or loss changes exponentially. The increase in buying power from getting your first dollar is worth more then whats added from the second which in turn is worth more then what the third on adds and so on. Eventually you get to the point where the additional utility gained by adding another dollar to your pile reaches zero. Now reverse it and each dollar removed increases the utility of whats left exponentially until with the final dollar it reaches a value of one.

Example:

You have two men who each pay a 10% flat tax. Bob's gross income is $10,000/year while his friend Dave grosses $100,000/year. For simplicities sake lets assume all living expenses come out of the remaining net income as one lump sum after taxes even though that would be spread throughout the entire fiscal year.

Bob goes and pays his income tax for the year, which is 10% of $10,000 or $1,000. This leaves him with only $9,000 of his income to cover all other expenses. Rent/Mortgage, utilities, food, medical, clothing, tuition, etc. Due to the smaller quantity of money he possessed to start with overall each individual dollar gained or lost therefor has a much higher utility to him. As such even though he paid out the same amount he has actually lost a much greater level of utility or buying power when compared to what he started with.

Dave then goes to pay the same 10%, which based on his gross income of $100,000 is $10,000. This leaves him with $90,000 to cover everything else just like his buddy Bob. Afterwards Dave grumbles about the tax man bleeding him dry but he's still fairly well off with $90k remaining in his accounts. As he had a fair bit to start with the utility each dollar he possessed was much lower to him then it was to his friend Bob and thus even though he paid the same tax he has lost a much smaller amount of utility or buying power overall.


This is incidentally a big reason why we have a progressive tax system as it turns out, ironically enough, that the more you make the more of the tax burden you can shoulder without losing an excessive amount of utility. Thus scaling the percentage of overall taxes taken to ones income ensures that in theory the overall utility lost is spread out equally rather then concentrated in one particular area. Now I do agree our current tax system is a mess and needs a full on reform but flat tax plans are not a viable answer.