Muddling For Solutions

[AKDoug]

I think a lot of those folks are seasonal and part-time workers, plus there will still be a need for CPA's and accounting firms.

If you look at it, computers replaced a lot of book keepers, digital medical records replaced a lot of medical records folks (I know a couple of folks who were displaced) and cellular phones have all but eliminated telephone operators.

I agree, creating jobs to keep workers employed is important. As we automate further it is going to be increasingly difficult.

If a flat tax was passed, I would send notice of termination to my CPA the next day. (as I imagine most of her clients would). My bookkeeper would stay on because she still is needed to do payroll and keep track of everything else. As for medical records folks. I only know the industry for the last decade, as my daughter is a certified medical coder and my sister-in-law manages a doctor's practice. They are constantly hiring and coders are still needed to translate the digital data and properly bill it. They both don't think the digital record keeping is all that it's cracked up to be.

[sundance435]

We were discussing this today when we were doing year end office work at our business. One of my lower level employees asked a pretty good question. "What happens to all those employed in the tax business?" I quickly Googled up that there are about 1.3 million people involved in that service industry. I also support the idea of a flat tax, but this question has me thinking of a solution that I can't wrap my head around. The only thing I know is that if the flat tax idea didn't put more money back in the hands of the job makers, there is no way to re-train that workforce into something else.

First, let me say that I don't believe any tax system can be fair, but I also think that it's a red herring to say taxes should be fair in the first place. I am not a Bernie-backer or a fan of Elizabeth Warren. I think people are entitled to the fruits of their labor up to a certain point. At some point, the untaxed or undertaxed accumulation of wealth starts to hurt the rest of us. Along those lines, I don't believe that one person's wealth should be allowed to continue into perpetuity without ever having been taxed like the rest of us.That's what the very wealthy have got most of us to buy into while they reap the benefits. My opinions are based on what is pragmatic/realistic and not the premise that all taxes are bad and unfair and should be done away with. I'm not an economic libertarian.

My take is that those with means will always be able to game any tax code, especially until it goes from byzantine to double-digit pages in length. I will say that I'm more in favor of a "wealth" tax now, even as my own income has gone up, because I think it's the only government-provided solution that will do anything to tackle income disparity. Granted, I think any wealth tax needs to be implemented with huge tax reform in general and not as a one-off solution, so I'm probably in a very small minority here. My line of thinking is that if you make it expensive enough for corporations to pay a CEO $66 million a year, then that will fall out of fashion - either the board will realize it or shareholders will demand it. The key is to not provide a bunch of workarounds for the individual and the corporation through byzantine tax provisions like those that currently exist. It's also very popular for CEO's to be paid a more modest base compensation with the rest of it being options, actual stock grants, and retirement incentives - none of which will ever be taxed at the "income" rate. There is absolutely no reason that capital gains realized as income prior to retirement need to be taxed at a substantially lower rate than what is currently considered income by the IRS. Any argument to the contrary is incredibly esoteric, ephemeral, and not tied to real-world results. Same with the estate tax. The very wealthy and those with vested interests have done a fantastic job of convincing most of us that increased capital gains taxes and any death tax are harmful to everyone, neither of which is true if exclusions are kept few and objectively reasonable thresholds are maintained.

A flat tax, on the other hand, is inherently the most disproportionately painful tax system for the kind of people you're speculating about that are under-employed and whose wages haven't risen. Granted, a flat tax would not happen in a vacuum and other tax code changes would need to happen, but 26 Inf's own example of a 75% tax on $1 billion vs. $100,000 starkly illustrates the inherent problem with a flat tax, unless it is lower than what the guy making $100,000 is paying now. The tax credits that are intended to ameliorate disproportionate impacts of taxes are a nightmare and need to be changed, regardless. A true progressive tax system with multiple bands like some states have would arguably be the "fairest". There should be some kind of "means" test for SSI, Medicare, etc. I would guarantee Warren Buffett is drawing a social security check. Yes, he probably earned it under the current rules and he takes it because he's not the type to leave money on the table - there's no objectively valid reason for it, though. Social Security doesn't need to be run like everyone paying in gets payed out. That's the bulk of the problem. Same with Medicare.

I'm not sure where I stand on a national sales tax. It would arguably be more "fair" by taxing consumption and not production, but I don't think it would have much of an effect on income disparity. I have no idea what the broader harm would be to our economy through a federal sales tax, since 70% of our economy is driven by consumers. The wealthier the person, the more likely they are to game a sales tax and alter their lifestyles to avoid paying it. Poorer people just won't or can't do that. That's not a knock on people who make more, it's just the reality. I have a feeling that if you experimented with this, you would see lower-income people being disproportionately affected by a national sales tax, as well. Excluding "essential" goods and services would change little. By the numbers, it's the non-wealthy driving our consumer-centric economy, anyway, so there'd be little narrowing of income disparity. People always think of mega-yachts, mega-mansions, etc. when talking about how a national sales tax would be more fair, but in reality those types of transactions are an aberrance and wouldn't have much of an impact on the tax amounts collected. The bulk of transactions generating it would be small to medium purchases for regular folks.

An additional observation: I think the idea that higher taxation stifles creativity and the drive to grow companies is overblown. Yes, at some tax rate capital will not be available to expand, but history indicates that through out America's golden age of economic growth, tax rates on the wealthiest American's were much higher.

I agree, to the extent that higher taxes on the very wealthy have little to no negative impact on the broader economy. The reality is that those folks set up their lives to avoid paying the kinds of taxes that regular folks do, including income and sales. Only by simplifying the tax code and closing the myriad loopholes that exist would higher taxes translate to a benefit for most Americans, though. Simply increasing the marginal tax rate on the very wealthy is pointless. One thing I liked about the 2017 tax bill was that it incentivized corporations to repatriate profits and to spend profit on capital expenditures here. I think there's a lot more room for that and more incentives should be created for that type of investment, while closing loopholes for shielding profits from U.S. taxes through various accounting gimmicks. We have some of the most lax corporate tax laws in the world and we were on the low end for effective corporate tax rates before the 2017 law.

[jsbhike]

And I think the rich dudes, for the most part, are not saying to themselves 'eff 'em' they just have no real idea.

JMO

Not all, but some.

I had a superior who would sometimes forget to shut his door when on the phone with even higher ups in the company and owners of businesses we dealt with and got clued in how we were viewed somewhere between vermin and live stock.

Another was bragging about how an item the company had produced in the US had cost $43 per unit to manufacture while the deal he had made to get it made in China(and close the US facility) resulted in a delivered price of $32 per unit and how he wished they had made the move sooner. What he failed to mention during the self aggrandizing was the bulk of the Chinese products failed to work properly and he and the rest of our brain trust failed to get any guarantee from the Chinese on product quality so it was actually $64 plus additional money for reshipping, removal/reinstall costs, and further penalties.