Streams

Alternative Tax

Friday, April 16, 2010

Our own forms may be mailed in, but the tax discussion isn't over. Robert H. Frank, Cornell economist and "Economic View" writer for the New York Times, talks about his proposal for a "progressive consumption tax" and other alternative tax structures.

Then, Felix Salmon, an economic reporter for Reuters, joins the discussion to reflect on taxes and the current financial reform bill. 

→ We're asking how you would restructure the tax system. View the responses or submit your own.

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Comments [40]

dhard

re: the discussion on the fed tax deduction for mortgage interest.
Mortgage interest is in fact taxed for anyone subject to alternate minimum tax, as are capital gains, qualified dividends and other "tax preference" items with nominal tax rates below 28%. Why don't your tax "experts" know this? AMT is paid by almost any household with income over $120K, and ensures a minimal tax rate of 28% of one's income calculated when these "deductions" and preferences are removed.

Apr. 16 2010 11:21 AM
jgarbuz from Queens

All taxation is theft, but in an economy where most people no longer live on farms and grow their own food, and work for salary, taxes are as inevitable as death. But there is no such thing as a "fair tax." The only system of "fair taxation" is one that does not inhibit economic growth. That is, economic growth such that strengthens the future potential of the national economy. as a whole and not merely advantages one class over the others, whether that be the rich or the poor. Such a system has to be flexible to account for changing conditions.

Apr. 16 2010 10:58 AM
Barbara from New York, N. Y.

The tax on my social security is double taxation. I paid taxes while working, and now on a limited income, social security is taxed again!!!
But capital gains aren't taxed for those who don't work? That's a definition of American values....
b

Apr. 16 2010 10:50 AM

Sam
it's the same with the tea baggers and healthcare reform. only the corps win, but the people follow blindly.

Apr. 16 2010 10:48 AM
Megan

The Alternative Minimum Tax does limit New Yorker's ablility to deduct items such as local school property taxes on their federal income tax forms. The federal tax treats taxpayers as if cost of living is the same across the US. So suggestions such as a VAT which is regressive also adversely affects residents of high cost of living areas such as Metropolitan NYC.

Apr. 16 2010 10:44 AM
Erik Johanson from Lincroft, NJ

April 8th, (AP) – Tax Day is a dreaded deadline for millions, but for nearly half of US households it's simply somebody else's problem. About 47% will pay no federal income taxes at all for 2009.

Apr. 16 2010 10:43 AM
Paddy from Boston from Boston

Hi Brian,

Love your show. Your guest seems to be making an error. As I understand it, the tax code limits deduction for home mortgage interest to the first million dollars, which may limit Mr. Bloomberg's deduction, I would wager!

Apr. 16 2010 10:41 AM
Roberta from Brookjlyn

I have a friend whose daughter goes to a private school ($50k tuition/year) whose building was funded with a "charitable contribution" from a Goldman Sachs mogul. How "charitable" is that?

Apr. 16 2010 10:40 AM
jgarbuz from Queens

All taxation is theft, but in an economy where most people no longer live on farms and grow their own food, and work for salary, taxes are as inevitable as death. But there is no such thing as a "fair tax." The only system of "fair taxation" is one that does not inhibit economic growth. That is, economic growth such that strengthens the future potential of the national economy. as a whole and not merely advantages one class over the others, whether that be the rich or the poor. Such a system has to be flexible to account for changing conditions.

Apr. 16 2010 10:40 AM
Sam from Manhattan

The right-wing's ability to engingeer the loyalty of middle and working class Americans to the top 1% of earners is the most cynical rouse perpetuated in our country today.

Apr. 16 2010 10:38 AM
Frank from Rockaway, NJ

At the heart of the tax debate are the lobby groups trying to get the best for their constituents. Only a flat tax with minimum deductions has a chance of doing the job of being equitable.

Apr. 16 2010 10:38 AM
upper_man from manhattan

what about corporate taxes and the news recently about exxon making billions of dollars, none of which generates a single tax dollar to the u.s. but does to foreign governments? how does this factor into establishing fair tax code for businesses desiring markets in the u.s.?

Apr. 16 2010 10:38 AM
Steve

@Black market - they figured a way around this in Italy back in the 1990s - station tax authorities outside the storefront. If customers didnt walk out of the store with a receipt the owner was fined.

@Teresa - I think your grad student friend would 1) still have to file a return and report the income 2) still get a personal exemption 3) still pick up the withholding on that income and 4) be entitled to a refund or owe. If she only made $2,500 it makes sense she would get a refund. She didnt earn enough. Your friend isn’t afforded any tax privileges.

Apr. 16 2010 10:37 AM
Erik from Lincroft, New Jersey

I read a AP news item in the last few days that said almost 50% of Americans paid no Fed taxes. Is that true?

Apr. 16 2010 10:37 AM
Michael from Long island

Didn't Allen Keyes have a similar idea in the 2000 Republician primary. He said that 'Income tax was a form of slavery, your taxing someone on the money they've earned.'
He also said that he was the only Rebublician with a substancial platform. The other republicians would never be able to successfully debate Al Gore.

Apr. 16 2010 10:35 AM
Rick Bruner from NYC

Ugh. More tax talk? Really? I just turned on the radio now, and winced to hear we were still talking about taxes. I'd like to forget about the topic for a few months, anyway. Like offering me a bloody mary for breakfast on a hungover morning. I'm not that much of a masochist.

Apr. 16 2010 10:35 AM
Tony from Santa Clara, CA

A value-added tax would penalize people who saved money on Roth IRAs and Roth 401k because they would be taxed twice:

Once when they put the money in.

A second time at retirement when they use the money saved up to buy things.

Apr. 16 2010 10:30 AM
Paul from Ridgewood NJ

For Theresa: Theresa, I doubt that anyone can get a "refund" or tax credit for tax they didn't pay in the first place.

There are certain government incentives for this and that, but I don't think that's what your friend is talking about.

Apr. 16 2010 10:30 AM
Steve from Morristown, NJ

Deductions are social engineering...once upon a time credit card interest was a deduction. Mortgage interest is a deduction as is property tax in order to promote home ownership so you "get something" for the payments to the banks instead of the payments to the landlord.

Apr. 16 2010 10:30 AM
Renata De Oliveira from Plainview

Can your guest comment on the EXXON fiasco? How can we avoid big corporations not paying their fair share? What are his ideas on this?

"Exxon tries to limit the tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that (legally) shelter the cash flow from operations in the likes of Angola, Azerbaijan and Abu Dhabi. No wonder that of $15 billion in income taxes last year, Exxon paid none of it to Uncle Sam, and has tens of billions in earnings permanently reinvested overseas." Posted originally by benarmbruster at 7:29 am
April 6, 2010

Apr. 16 2010 10:28 AM
Paul from Ridgewood NJ

As usual, virtually any flat-tax proposal will fall flat (all other issues notwithstanding) because of the tax deduction for homeowners. Home prices have this deduction figured in. Many homeowners will be priced out of their own houses.

So the question remains (and will always remain): Flat tax - *maybe* a good idea but - How do you get there from here?

And of course, under a personal flat-tax scheme, how are *businesses* taxed?

Apr. 16 2010 10:27 AM
Paddy from Boston

Hi Brian, I love your show. Isn't tax evasion by wealthy taxpayers a real issue here, a significant issue for Greece right now. The recent crackdown on the Swiss bank accounts does not seem to be capturing the real evaders. I worked on Wall Street and there is a real cottage industry making tax shelters for wealthy people and corporations. Look at Microsoft's effective tax rate, as an example.

Apr. 16 2010 10:27 AM

cut the military budget (biggest budget item) end medicare, end social security.

the boomers never paid for their retirement.

then cut taxes.

Apr. 16 2010 10:27 AM
robert

Is it feasible to have a blend of consumption and income taxes, allowing gov't to shift emphasis to one or the other as the economic environment dictates?

Apr. 16 2010 10:25 AM

aren't there southern states with no or low income tax? no economy, no jobs, poor student performance and poor quality of life.

Apr. 16 2010 10:25 AM
ericf

consumption tax avoids problem of defining taxable income but introduces problem of defining taxable consumption.

Apr. 16 2010 10:24 AM
The Truth from bkNY

Why in the world is this so difficult? Make more pay more, there will be some credits for the rich but, they can't all hide under the "small business" category

Apr. 16 2010 10:24 AM
Alvin from Manhattan

We once had a rather crude progressive consumption tax: The luxury tax. Should we revisit that?

Apr. 16 2010 10:22 AM
ericf

relying only on consumption tax seems attractive in an era of high consumption and low savings, but wouldn't that be going from one extreme to the other. how about about a balanced combination of low income tax and low consumption tax?

Apr. 16 2010 10:20 AM
ericf

relying only on consumption tax seems attractive in an era of high consumption and low savings, but wouldn't that be going from one extreme to the other. how about about a balanced combination of low income tax and low consumption tax?

Apr. 16 2010 10:20 AM
Walter Kiernan from NJ

What if I have to spend a large amount on medical bills or college tuition? Is it fair that my tax bill goes up because I am sick or want to get educated?

Apr. 16 2010 10:19 AM
Peter from Manhattan

What if we limit the consumption tax to energy, fossil fuels in particular? That would provide all the right incentives.

Apr. 16 2010 10:18 AM
Martin Chuzzlewit from Manhattan

This is ridiculous.......a tax on less than 1% of the population won't dent this deficit.

Another left wing academic with a "tax the rich only" scheme......(the rich being anyone who makes more than he does.)...because the courage to tackle our massive entitlements is lacking.

Apr. 16 2010 10:17 AM
jim from NJ

The high end consumption tax goal, is a good idea but, the logic is weak. New York today is full of average middle class Europeans shopping here because it is to their advantage. Of course anyone who has 500 thousand to spend will spend it elsewhere than the U.S. to avoid this tax.
Sheesh.

Apr. 16 2010 10:17 AM
Anne from Merrick

I like the idea of the consumption tax. I have a couple of questions:

* How would small business owners be taxed? It would be easy for a SBO to "spend" over $500K/year on basic expenses.

* How would buying a primary residence be taxed? Some folks might spend a big chunk of an inheritance on a home - one time only. In the NY Metro area, that could easily exceed $500K.

Apr. 16 2010 10:16 AM
Black market

My immediate thought is that you would see an explosion in the black market, off-the-books economy with discounts for cash payments, no receipts required.

Apr. 16 2010 10:16 AM
RLewis from Bowery

Conservatives always complain that raising taxes on the wealthy will hurt small businesses - isn't there anyway in the tax code to seperate the small businesses from the rich people, so that this stupid argument will go away???

Apr. 16 2010 10:14 AM
Alan from New York

Many/most small personal businesses are used as vehicles to not pay any taxes.

All you have to do is come up with enough expanses to offset any income that you earn and viola! No Taxes!

Isn't that what many people are fighitng to protect when they say don't increase taxes on small businesses, and isn't this the reason that small businesses actually emply so many people?!

Apr. 16 2010 10:10 AM
Martin Chuzzlewit from Manhattan

It is important that this tax BE "regressive."

Everybody.....EVERYBODY....should participate fully in the pain of paying the tax burden that Albany and Washington relentlessly feed. Without a shared responsibility, there will be no request for fiscal accountability...just a demand for more freebies and handouts by some...and a demand that others pay for it.

Apr. 16 2010 10:08 AM
Teresa from New York, New York

Hi, This is a somewhat unrelated question, but while talking with a fellow grad student yesterday, she told me that while she's not a US citizen (although considered a NYS resident for tax purposes) AND didn't pay any income tax on the $2500 she earned last year, she'll be getting a $500 tax refund from the federal and NY state governments. Did she fill out her income tax forms incorrectly or are federal and state governments giving away money to non-citizens?

Apr. 15 2010 11:25 PM

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