We make those choices now. We’re subsidizing people now with the standard deduction. A person who makes minimum wage makes $14,500/year; the standard deduction is $13,850; taxable income is $650, tax is $66. Under my plan $14,500 would be taxable at 20%, tax would be $2,900. I’d rather that the minimum wage rise to $9/hour so that that person would earn $18,000, pay $3,600, end up with $14,400 after tax, but without such adjustments the standard deduction would become a credit for wage-earners.
I said nothing about benefits or money for people not in the workforce. I referred to EITC, had in mind wage subsidies. I recommend Edmund Phelps’s ‘Rewarding work’. (Rewarding is a gerund, not a participle.); he won the Nobel Memorial prize in economics, holds a named chair at Hahvahd. It’s short and non-technical.
What that misses is how much greater wealth has become in relation to income.
Japan holds a bit more than a trillion, China comes next with a bit less, both less than 3%
Under your 20% flat tax plan without deductions, taxes on the median household income ($80,610 in 2023) will increase by 182% MFJ, by 68% single/MFS, and by 140% HoH. If those taxpayers have children, you’ve raised their taxes significantly more. A good friend of mine has 5 kids and makes $140K/yr. Your 20% flat tax raises their MFJ taxes by 524% (or $23,518). Even if you tax wealth to increase overall government revenue, you’ve crushed the middle class in the process. But, hey, a lawyer making $1M annually will see a nice tax cut of 30% MFJ (or $85,321), so that’s a nice perk for them.
There’d be credits and subsidies. And 20% was just a number to use; last I remember, the annual budget was about 18% of total AGI, so I used 20 for a sample calculation. Huge amounts of income go untaxed via the stepped-up basis, putting money in foundations, perhaps other gimmicks. Including those would drop the flat rate. I haven’t done the research to figure that out. Is a lawyer making $1M really getting all that in wages? I suspect otherwise.
I think they get it in wages. What else is there? They don’t have stock options and they have to buy into a partnership. By the time they get very high wages they are probably partners anyway.
Example: Peter Angelos, a lawyer in Baltimore ( new deceased) became incredibly wealthy as a result of asbestos class action suits. He was rich enough that he bought the Baltimore Orioles.
Did you mean revenue as a percent of GDP? The annual budget is generally +/- 50% of AGI. ($6.8T and $14.8T in 2022, respectively.) Budget as a percentage of AGI would be a strange way to determine a flat tax rate because it ignores receipts from corporate income tax, ss and payroll taxes, excise taxes, estate and gift taxes, etc.
Of course. I like to use examples from my own experience and not exaggerated examples simply to illustrate a point. A family member is CFO of a mid-sized law firm and they have ~25% of attorneys making between $600K and $1.6M in W-2 wages. It’s a C-Corp, so they pay out all corporate net income to the employees in wages/bonuses to avoid the double-taxation of C-Corp income. And, to keep this car-related, some of those attorneys drive BMWs and Mercedes.
I don’t disagree that the stepped-up basis has its issues.
While you are right that removing lead will cost a ton of money, even if the costs are not paid by the local water authority or customer, the costs of NOT removing lead from our drinking water will be much, much, much higher to our society as a whole. So yes it makes sense for the state and federal governments to step in and fund these expenses for poverty stricken communities, such as Flint Mich. Here in central NY, Syracuse is facing a huge problem. A huge majority of Syracuse city residents and property owners cannot afford the costs of replacement. Neither can the city. Yet it has to be done, otherwise we risk poisoning people, especially the young. The bottom line is that this is a basic income and equity problem. Its my opinion that the poor have just as much of a right to fresh clean water as the rich. So state and Federal governments need to step up and provide funds, hopefully from state and federal taxes on people who can afford to pay, like the rich, even if they don’t live in Syracuse and like most other services.
I agree. Government doesn’t and shouldn’t make decisions based on traditional business practices. If they did, there would be virtually no infrastructure investment and investment in rural America would be abandoned. The Fifth Risk by Michael Lewis is an excellent resource for understanding this. He asked high ranking career federal workers what kept them up at night. The results are very interesting.
I agree that it MUST be done, no question. And it has been done, or so they say.
We’ve known about the effects of lead pipes for a very long time. Flint was not always a poor city. In the 50s and early 60s it was “Buick City” with lots of tax base providing lots of money. The time to fix this was then. So why wasn’t it?
As I understand the issue, lead was not leached from the pipes using the old water source. When the new water source was turned on, it was acidic enough to corrode the pipes. How would they know 70 years ago that the water source would change to the detriment of the entire city? Given the cost to change the entire city’s water pipes, they probably would have had to forego a lot of things to pay for copper pipes.
The acidic water did trigger the higher lead content but the lead pipes were a known problem from decades earlier.
Copper water pipes came into use in the 1930s to replace lead pipes in new installations. Lead pipes were not even outlawed until the 1980s. Public water systems knew they had the issue and should have been replacing lead pipes from 1930 onwards. They knew the problem, the city had the tax base to do the work but kicked the can down the road.
Some kind of gimmick I don’t know about, not worth it for the 90% but worth it for the wealthier.
Roy Cohn lived a luxurious lifestyle in a fancy Manhattan apartment and paid little tax. His firm wrote it all off as expenses.
I used AGI because I had the number. I’d get rid of the corporate income tax - GE has a tax department with a thousand lawyers, I read. The unpaid tax would inure to employees and stockholders, which would become personal income eventually. Other taxes would discount the necessary rate. SS is separate. Estates and gifts would be taxed as ordinary income.
Giving them company cars instead could be a way to avoid taxes.
Simple examples to suggest an idea. We don’t have room in this forum.
Everyone is defended by the armed forces. Everyone benefits from roads (etc.) even people who don’t drive, etc. - even the 47% who pay no federal income tax. BTW, my tax example, and a sensible tax policy based on my suggestion (if that were possible), would increase my FIT greatly; I’m not proposing a break for me.
I bet they spend more money on beer.
They omitted the orthophosphate when they switched - that was the problem. Even if it were too acidic, water is treated, can be neutralized.
The Trump Organization paid Allen Weisselberg in this manner. Weisselberg was eventually convicted of tax evasion and faced $2,000,000 in fines and a 5 month prison sentence.
“A ruling which was handed down in February 2024 also resulted in Weisselberg being permanently banned from serving in financial control function of any New York corporation or business, and also banned him from serving as a director or officer for any New York corporation or business for three years.” (From Wikipedia)
Any lawyer facing a similar criminal conviction would be disbarred and never allowed to practice law again. While they wouldn’t have to wash dishes to make ends meet, they certainly would miss that big salary.
When I was working - I’d stop paying into FICA about early October. The engineers that worked for me stopped paying about mid-October to the mid-November. Billions of dollars were left on the table that was never collected with that cap.
At one point, GE had 1,000 lawyers company-wide, not just tax attorneys. With all due respect, if the points you’re making are supported by such inaccurate facts, we should move on.
Where did you get this fact? All money spent on tax accounting (which Warren Buffett claims he doesn’t) is a waste, and happens at most corporations for which the saving exceeds the cost.
‘As debates over corporate tax policy raged last year, John Samuels LLM '75 was an oasis of calm: As vice president and senior tax counsel for General Electric, Samuels, 67, has built the firm's global tax operation into the equivalent of a giant tax firm, with approximately 1,200 tax experts in 44 countries, and a reputation as one of the most aggressive corporate tax operations.’
‘In a move that illustrates how the professional services market is changing, about half of General Electric's tax department -- once described as “'the world's best tax law firm” -- is moving toPwC in April.
‘Under the deal, about 600 people – the majority said to be lawyers or accountants – were offered positions at PwC where they will handle GE’s tax work for at least five years. PwC will also be able to sell their advice to other clients as part of a packaged suite of other services that extend well beyond its traditional focus on accounting.’
