Scott Lovingood writes:
Two specifics that should be addressed immediately.
Stop double taxation
1) Eliminate the estate tax. You pay taxes on everything you make and then you get taxed again when you die? Tell me that makes any sense.
2) Stop taxing Dividends on personal accounts- Companies have already paid taxes on the profit they generate. Encourage payouts of dividends. They provide safe distributions of cash to stock owners and encourage more stable stock markets. Dividends are a huge part of a long term wealth strategy but the current structure of taxation prevents many companies from issuing them.
This one may take a little while longer. Stabilize and limit the tax code. Now I know that doesn’t sound like much but that tax code has grown out of control. What started as something relatively simple, now encompasses volumes. Each year Congress passes more changes, more taxes, more credits, more exemptions, more of everything. It taxes a law degree and years of study to geta good grasp of the system.
Make every tax be voted on separately every four years. Congress should be held accountable for the taxes they pass. They should not be allowed to blaim previous administrations. Shoulder the onus for governing and make the tough choices.
Remember the telephone tax refund credit refund from 2006? A tax that had been around for decades that should have eliminated. By forcing Congres every four years to vote on taxes you can develop a stable system for companies and individuals to operate within. It also eliminates the ability for Congress to make last second changes that cause no end of headaches.
Everyone focuses on the healthcare system and the cost it has on the economy. Look at the cost of our current tax system. The number of people who sole focus is helping companies reduce their taxes. Simplify the system and streamline it. Take the breaks off the economy.
I agree completely with the third issue he addresses: “Look at the cost of our current tax system. The number of people who sole focus is helping companies reduce their taxes. Simplify the system and streamline it. Take the breaks off the economy.”
The Wandering Tax Pro and I are talking about organizing Tax Professionals for Simplification in an effort to get Congress to take the need to simplification seriously. Would anyone else join us? It seems like we won’t get anywhere unless we combine forces. Otherwise, the special interest groups keep getting credits and deductions and things just get worse.
Very true. Special interests will always be in the tax code. Congress likes to tinker. They use the tax code to try to modify behavior. They pass home mortgage interest deductions to encourage home ownership and the recent First Time Homebuyers to try to stop the drop in home prices.
As long as people are in Congress demanding a fair tax code it won’t be simple. I would like just to have one that doesn’t contradict itself or is clearer to understand and know what is acceptable. My head hurts from reading too many rulings and opinions. 🙂
What about triple taxation for the GSTT? We get the double taxation of the estate tax and then add a 3rd layer of GST tax!
Count me in Monica!
We live in a country of codified laws, where “ignorance of the law is not an excuse.” How many years would it take to read all the tax laws and codes? How can we say that ignorance is no excuse when it’s physically impossible to read the laws?
I would be in favor of limiting ALL laws to the number of pages that the average person could read in a year.
(200 Word per minute X 60 Min per hour X 8 hours per day X 5 days per week X 50 weeks = 24,000,000 words.) 24 Million words should be more than enough to codify all the laws that are important to us as a people. Everything else will have to be left up to the states.
The best part about this plan is that once they reach the limit they’ll have to repeal old laws in order to pass new ones.
Oxnate,
AMAZING! It would also cut down on the use of superfluous wordage!
Okay, nobody will like me for this, but I like estate taxes. Death and taxes, together again! Actually, one aspect of the estate tax is that it makes it harder to establish multigenerational dynasties. On the other hand, why eliminate the estate tax if you keep the gift tax? Give it to someone when you’re alive and pay big taxes — will it to them and no tax. Makes no sense to me.
JBruce – Gift taxes are another form of double taxation. You have already paid taxes on the money you earned. Why do you have to pay taxes when you give it to someone else? I think the gift tax should be eliminated as well.
If Congress wants to see the economy grow by leaps and bounds, it needs to take the breaks off of it with the tax code. Not by establishing tons of credits and exemptions and minutia of rules, but by an overall lowering of the tax liability.
Our country’s spending has grown to outpace any amount of taxation. The only way we can get it under control is to start cutting it deeply. Taxes and spending. Free markets have always outperformed government controlled ones.
Working in the tax industry I see the ones who are impacted by these rules. The middle sized guy is the one who bears the brunt. The rich have staff to help them find ways around them through legal channels. The middle sized guy gets the hammer every time because he doesn’t.
I disagree that the estate tax is a form of “double taxation.” For example. If in 1986 you would have taken $10,000 in post tax funds and bought Microsoft, it would be worth $2.9 million today. That appreciation has never been taxed.
Why is there an estate tax?
(1) The government needs money. Instead of talking about eliminating the estate tax, talk about drastically cutting government spending.
(2) There is a notion that we are not a country with a permanant aristocracy in which wealth is passed on from generation to generation forever. Warren Buffet has said, “I want to leave enough money to my children so that they can do anything, but not so much that they can do nothing.” See also Hilton, Paris.
David Shulman said it better than I did. Also, he mentioned something that I forgot: estates don’t pay capital gain taxes. In his example of the long-time owner of Microsoft shares, if he sold the shares he’d have to pay tax on the gain. If died with them, his estate would not pay any tax on the gain (or gains from any other assets in the estate).
We can discuss the efficacy of the tax on capital gains elsewhere.
Regardless of my feelings on the Estate Tax, which go back and forth since it employs me but I hate taxes, I find it interesting that this is such a hot button with everyone here (I have never seen 10 comments on Tax Girl’s site, besides the Gay Marriage Issue) as well as the general public; only 2 to 4% of the entire country’s estates are subject to the federal tax. While there are a lot more hit by the decoupled states especially in NY, where I am, this post and the following comments seem to be focused on the Federal Estate Tax.
Gift tax is another hot button, yet there aren’t many people, in terms of % of population, gifting more than $13,000/year where the money isn’t part of tution or medical payments (they are excluded from the Gift tax). And then even if they do gift more than that they have up to another $1,000,000 lifetime to gift.
Back when W’s tax “cuts” were being worked out the Republicans managed to rile up vast numbers of people about “death taxes” even though they wouldn’t affect most of them. Notice, they made little mention of gift taxes, which gives you an idea of what their underlying agenda really was: keep the plutocracy intact.
Just like they’re doing today, by making up non-issues and fabrications in support of our existing godawful (and highly profitable) health care system. It always has disgusted me that the legislation that created the loopy Medicare drug benefit specifically prohibits Medicare from negotiating lower drug prices with the drug companies (which your insurance company can, and does, do). How does THAT benefit Medicare recipients, or the deficit?
JBruce,
I am going to have disagree with you. I don’t believe this has to do with “W” as you so nicely put it. The Estate Tax was an inssue going back decades.
While I can agree with you Health Care reform would benefit the country, GOVERNMENT CONTROLLED ANYTHING is not the answer.