jtr, would you then tax regular income minus inflation?
No, the income tax was a bad idea from day one which is why it was purposely made illegal under the original US Constitution. I could probably write pages on why the income tax has caused a myriad of problems since it was enacted, but you can just as easily probably dig up the information on your own.
What makes interest & capital gains different from pay for a regular job? They're all income. I fail to see why or how the source of income matters.
Assuming we tax income, which as I said is a horrible idea on many levels, interest and capital gains are different for one reason-
the initial invested principal was already taxed. Since it was already taxed, the only gain subject to further taxation should be gains above the prevailing inflation rate. That's the only real source of income. The rest is eaten up by inflation. Sure, this adds another layer of complexity, but it's certainly feasible to do it this way if we wanted to.
The argument that capital gains are generally re-invested is again a false argument. If the gains were taxed the government budget would be satisfied from more sources and the overall tax rate would be lowered. This happened here locally; during the housing boom enough new homes were built that the local county budgets were being spread among more and more people/sources so the amount per household needed to satisfy the budgets was lessened. My property tax rate went down. I'd also mention that there are no controls that say the capital gains would be re-invested domestically.
Well, for what it's worth the housing gains during the boom which only existed in the minds of the media were well beyond the prevailing inflation rate, so even under my system there would have been a windfall.
One could even argue that given the competition on the world stage we should more fully fund education beyond high school.
Probably a good idea, but with the caveat that everyone stop going to college. Some people are better served with trade schools. Everyone and his brother going to college has diluted the value of a degree.
Everyone harps about how voluminous the tax code it. I say so frickin' what. We have computers and accountants to manage the process. The tax code should be revised - things like AMT need to be re-examined - but the problem isn't in a tiered tax structure with deductions. The problem is really managing how that money is spent and getting value for the tax dollar.
The problem is the complexity. Do you have any idea how much productivity is lost figuring out taxes or keeping records which otherwise would be unnecessary? That army of accountants could be put to work doing something more productive for society, like maybe figuring track profiles for new high-speed rail lines, or trajectories for spacecraft, or anything else involving detailed numerical calculations. Besides these direct hits on productivity, you also have the government using the tax code to manipulate behavoir. In short, they decide which behavoir gets favorable treatment, not free markets. The pols give lip service to the free market all while standing on the sidelines deciding what's best for us, or rather for their rich campaign contributors who send lobbyists to Washington. We have a simple consumption tax and all this behind the scenes stuff mostly vanishes.
We tried restructuring and simplifying our tax code how many times now? I think it was 26 when I finally stopped counting. Each time it comes back even worse than before. The AMT is just another example of a ticking time bomb hidden in the tax code. When it was passed, the lawmakers knew damned well that inflation would eventually push middle class families into AMT brackets. They could have indexed for inflation same as they index a lot of other things in the tax code if they wanted to. They wanted this to happen since it would be mean more money, and would occur long after their terms were up. I wonder how many more ticking time bombs are hidden in our tax code? The lawmakers are counting on most people not noticing them until its too late. One thing is for sure-no human being or even computer program is capable of agreeing how much tax many corporations owe due to the varied interpretations of the tax laws. And this is good for us how? I hate doing my taxes with a purple passion. I hate all the extra records I have to keep. All this for a lousy $5,000 to $10,000 a year. On such a miniscule income the government should leave me the fuck alone. Anybody who gets rid of the income tax gets my vote regardless of what else they stand for. That's how much I hate the whole process.
