Wyden's Flat Tax


P

Paul J. Berg

`
News Article from The (Portland) Oregonian - July 23, 2007

Since United States Senator Ron Wyden (D-Oregon) introduced a plan 18
months ago to overhaul the federal tax code, he has implored President
Bush to team up with him on tax reform, as President Reagan did with
lawmakers in 1986.

Each time he makes his pitch, Wyden said, Bush replies along the lines
of "Great. Yeah. Good idea. Glad you're doing it." But outside of those
brief conversations, nobody in the White House or Treasury Department
follows up, the Oregon Democrat says.

Wyden's proposal to replace the 1.4-million-word tax code with a simpler
system is the most ambitious bill of his 26-year congressional career.
It would fundamentally change the U.S. economy and shake up nearly every
special interest in Washington. But Wyden acknowledged that, without
Bush's support, his bill doesn't stand a chance until at least the next
presidential administration.

The Wyden plan would reduce the six-bracket income tax system to three.
And all income -- including wages, capital gains and dividends -- would
be taxed at the same rates. The plan would eliminate many tax loopholes,
allowing for a one-page 1040 form.

Wyden doesn't have Senate co-sponsors for his Fair Flat Tax Act, but
Rep. Rahm Emanuel, of Illinois, the House Democratic Caucus chairman,
has backed the bill. Wyden is using every opportunity from his perch on
the powerful Senate Finance Committee to promote the plan.

Eventually, Wyden says, something has to change. "I expect to be
bringing it up again and again," he said.

Wyden is building momentum as advocates on the left and right say the
tax code is riddled with preferences, loopholes and bureaucracy. In
December, a coalition of groups including the American Conservative
Union and the Progressive Policy Institute signed a letter calling for
reform similar to the Tax Reform Act of 1986.

Earlier this month, conservative columnist George Will called Wyden the
"Senate's Sisyphus, determined to roll the boulder of tax reform up
Capitol Hill yet again."

Scott Hodge, president of The Tax Foundation, a nonpartisan group that
studies tax policy issues, notes that Wyden "has tried to reach out to a
broad spectrum of groups from both the left and right and the center to
work with him to advance fundamental tax reform. He should be given
great credit for putting a plan on the table, even if it's something not
everyone will support wholeheartedly. At least it's something that can
begin the discussion."

In recent hearings about contentious tax issues, Wyden stepped back to
promote his plan while other legislators and experts obsessed about
technical details.

Case in point: a hearing earlier this month about "carried interest," a
provision in the tax code that allows venture capitalists and private
equity managers to pay the lower capital gains rate on a portion of
their compensation. The discussion between senators and policy wonks
focused on whether it was fair to close that loophole and require them
to pay the income tax rate.

That is, until Wyden spoke up.

Just junk the whole tax code and start from scratch, Wyden suggested.
"This is a textbook case for why it is time to drain the tax swamp," he
told the lobbyist-filled room. "Knowledgeable people cannot even agree
on a problem, let alone a remedy."

Wyden proceeded to ask each witness whether it would be simpler to
return to the principles of the 1986 reform.

"It would be simpler," responded Peter Orszag, director of the
Congressional Budget Office. "There are obviously other considerations
also."

Orszag didn't elaborate, but "other considerations" would include
scrapping many tax loopholes that benefit both individuals and companies
as well as dealing with a changed political atmosphere.

"In 1986, you had clearly some different dynamics on Capitol Hill, maybe
a little willingness," said Hodge of The Tax Foundation. "Today, things
are very different. They're extremely partisan, very fractured."

Particularly objectionable to some groups is a provision in Wyden's
legislation that would tax income from investments at the same rate as
income from labor.

"Labor income usually goes into producing wealth income," said Pete
Sepp, vice president for communications at the National Taxpayers Union.
"Taxing it at the same rate amounts to a double tax."

But Sepp praised Wyden for raising the tax reform issue as well as
including provisions such as elimination of the alternative minimum tax.

"He has a lot in common with (Sen.) Russ Feingold (D-Wis.) in that he
has a set of principles that he feels need to get an airing in
Congress," Sepp said. "I think that's admirable. We will likely fight
like cats and dogs on the floor of the Senate over what's hammered out,
but he deserves a great deal of credit for raising the issue."

Wyden's plan might be too sweeping for some.

His "heart is in the right place," said Mark Gergen, a University of
Texas tax law professor who testified at the hearing.

"It's good on goals and big principle, and not very impressive on
execution," Gergen said. "I don't want to fault him for that because
it's important to get the ball moving in the right direction and then
get the details worked out."

Wyden says he will use every hearing on tax policy to make the point
that the tax code must become simpler, not more complex.

Though his other ambitious legislation -- to create a universal health
care system -- has the support of some Democrats and Republicans in the
House and Senate, Wyden remains a lonely soldier in the tax reform
fight.

He says he believes that will change.

"I think Republicans in the Congress have sensed the disinterest of the
administration," Wyden said. "We're having some discussions. I'm very
hopeful that we'll see Republicans in the Senate pick up on this."

Some of that interest was on display at a recent hearing. After Wyden
questioned the panelists about the need for a simpler tax code, it was
Sen. Jim Bunning's turn to ask questions.

The Kentucky Republican has little in common politically with Wyden. But
Bunning began with a question for Wyden, not the panelists.

"Every time we change one tax rule, we change the tax code," Bunning
said. "We've added how many thousands of pages since that time, Ron?"

"The experts say there have been 14,000 changes, three for every working
day," Wyden replied.

"Thank you very much," Bunning said.

`
 
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P

Paul Thomas, CPA

Paul J. Berg said:
News Article from The (Portland) Oregonian - July 23, 2007
Since United States Senator Ron Wyden (D-Oregon) introduced a plan 18
months ago to overhaul the federal tax code, he has implored President
Bush to team up with him on tax reform, as President Reagan did with
lawmakers in 1986.
The Wyden plan would reduce the six-bracket income tax system to three.
And all income -- including wages, capital gains and dividends -- would
be taxed at the same rates. The plan would eliminate many tax loopholes,
allowing for a one-page 1040 form.
Earlier this month, conservative columnist George Will called Wyden the
"Senate's Sisyphus, determined to roll the boulder of tax reform up
Capitol Hill yet again."
Wyden's plan might be too sweeping for some.
"The experts say there have been 14,000 changes, three for every working
day," Wyden replied.




I like what I've seen of Wyden's plan so far. It won't see the light of day
till 2009 or 2010 though.

And, as George Will's article said, 20 years and 14,000 Congressional
changes later, it'll be just as screwed up as what we have today.
 
R

Richard Macdonald

Paul J. Berg said:
The Wyden plan would reduce the six-bracket income tax system to three.
And all income -- including wages, capital gains and dividends -- would
be taxed at the same rates. The plan would eliminate many tax loopholes,
allowing for a one-page 1040 form.

Nice idea to have the same rete for all types of income,
but only is you can index the capital basis for inflation.

For example, I have 800sh of AT&T whish was origionally
200sh of SBC purchased in 1991 for ~11,800. This amount
adjusted the to current by the CPI-U is about ~24,600.

Without some consideration for the effects of inflation, a single
rate for all types of capital gain will stifle long term investment.
 
A

A. Stump

Richard Macdonald said:
Nice idea to have the same rete for all types of income,
but only is you can index the capital basis for inflation.

For example, I have 800sh of AT&T whish was origionally
200sh of SBC purchased in 1991 for ~11,800. This amount
adjusted the to current by the CPI-U is about ~24,600.

Without some consideration for the effects of inflation, a single
rate for all types of capital gain will stifle long term investment.

And so the slippery slope would begin. How about EXCLUDing dividends
completely from taxation? Dividends have already been taxed at the
corporate level, why tax them again? The trend in most of the world seems
to be to reduce the tax on capital (Cap Gains). Rather than talking about
raising them (or returning them to their prior level ... whichever spin you
are more comfortable with) why not just exclude them too? Oh yeah.... the
rich get richer... cann't let that happen ...gotta deal with that. Let's
overlook the FACT that an increasing amount <rich income classes are
reporting more and more Cap Gains and Dividends.
 
S

Scratch

A. Stump said:
And so the slippery slope would begin. How about EXCLUDing dividends
completely from taxation? Dividends have already been taxed at the
corporate level, why tax them again? The trend in most of the world seems
to be to reduce the tax on capital (Cap Gains). Rather than talking about
raising them (or returning them to their prior level ... whichever spin you
are more comfortable with) why not just exclude them too? Oh yeah.... the
rich get richer...

So really, your just a whiner. You complain about the rich yet do
nothing to get rich yourself. You don't like people that do the right
thing, get a good education, make good decesion and profit as a result.
Bet you have no problem with Ted Kennedy, John Kerry, Micheal Moore
e.t.c. thought, right?
 
A

A. Stump

Scratch said:
So really, your just a whiner. You complain about the rich yet do nothing
to get rich yourself. You don't like people that do the right thing, get a
good education, make good decesion and profit as a result. Bet you have no
problem with Ted Kennedy, John Kerry, Micheal Moore e.t.c. thought, right?
Not whining my friend, just observing the political reality of the day. I
got a good education, created my own business and retired quite comfortable
at age 50. Kennedy and Kerry are leaches. Moore, on the other hand, knows
how to use the system to acheive is goals. I think his messages are all
full of shit, but I respect the fact that he knows how to sell shit to the
masses.

My point was, while I agree with a flat tax, the discussion never seems to
go for more that two sentences before we start the process of adding
exceptions and reintroducing the complexities we are trying to eliminate.
 
P

Paul Thomas, CPA

Richard Macdonald said:
Without some consideration for the effects of inflation, a single
rate for all types of capital gain will stifle long term investment.



And the butchering begins.
 
P

Paul Thomas, CPA

Scratch said:
So really, your just a whiner. You complain about
the rich yet do nothing to get rich yourself.



I think the general population has the word "rich" confused with "high
income", as someone can be "rich" - which means wealthy - and have very
little current income. And someone who earns quite a lot can, quite easily,
spend it all with little of it invested in assets.



Would the fact that the standard deduction is quite high under Wyman's plan
help? $30,000 or more for MFJ, $15,000 or more for all others. Doesn't
matter if it's from wages, dividends, retirement, capital gains, etc. That
seems to go a long way toward easing the tax burden on low income people
(even those with high net worth).
 
S

Scratch

A. Stump said:
Not whining my friend, just observing the political reality of the day. I
got a good education, created my own business and retired quite comfortable
at age 50. Kennedy and Kerry are leaches. Moore, on the other hand, knows
how to use the system to acheive is goals. I think his messages are all
full of shit, but I respect the fact that he knows how to sell shit to the
masses.

My point was, while I agree with a flat tax, the discussion never seems to
go for more that two sentences before we start the process of adding
exceptions and reintroducing the complexities we are trying to eliminate.

k, but how do you PREVENT the hording of capital in this country "IF"
you tax the hell out of gain? I mean, what is the incentive to invest in
this country?
 
S

Scratch

I think the general population has the word "rich" confused with "high
income", as someone can be "rich" - which means wealthy - and have very
little current income. And someone who earns quite a lot can, quite easily,
spend it all with little of it invested in assets.



Would the fact that the standard deduction is quite high under Wyman's plan
help? $30,000 or more for MFJ, $15,000 or more for all others. Doesn't
matter if it's from wages, dividends, retirement, capital gains, etc. That
seems to go a long way toward easing the tax burden on low income people
(even those with high net worth).

If the left, was all that concerned with helping the poor, then stop
taxing minimum wage earners and lower the tax load on gas at the pump
e.t.c. They aren't. They just cry a lot to get those less fortunate to
vote to keep them in power and throw a bone to them once in awhile in
the form of another socialist program. I hope one day they will wake up
and say oh hell no! No more and they too can become good capitalists.
 
D

Don Homuth

If the left, was all that concerned with helping the poor, then stop
taxing minimum wage earners
As a general rule, they aren't taxed much. Indeed, the Wingnut Whine
on the matter seems to be precisely that -- that The Rich are taxed
much more while the Minimum Wage types aren't taxed hardly at all.
... and lower the tax load on gas at the pump
e.t.c.
How do You plan to pay for roads, Scratch?

There is no Tax on gasoline. If you don't use it on the road, you
don't have to pay a tax on it. That's a fact, btw. Farmers pay No
tax on gasoline purchases, nor does any (hallowed) Private Sector
entity that uses fuel off-road.

But if you want roads in the first place, they involve Costs. Costs
are Real and will and must be paid. Iron Rule everywhere -- I didn't
make it up.

Shall we put the costs of roads on your property taxes instead? They
did that in my local county last year, after all -- about $29 million
worth. Now all property owners, even those who don't drive, pay for
the county paved roads.

Is that more or less Fair than having those who drive on the roads pay
for them?
They aren't. They just cry a lot to get those less fortunate to
vote to keep them in power and throw a bone to them once in awhile in
the form of another socialist program.
Keeping this discussion properly focused, do You consider road
construction and maintenance a Socialist program?
I hope one day they will wake up
and say oh hell no! No more and they too can become good capitalists.
How do You want to pay for roads, Scratch? You've had the chance to
answer that question for some weeks now.

Got any answers?
 
P

Paul Thomas, CPA

Scratch said:
If the left, was all that concerned with helping the
poor, then stop taxing minimum wage earners
and lower the tax load on gas at the pump e.t.c.


You are using "poor" interchangably for "low income" which isn't always the
case.

Decide who you want to help, either "poor" people or "low income" people,
and stick to it.

Income tax and gas tax are two different animals. Any change in the income
tax (even the elimination of it) would have little to no impact on taxes on
fuel.



The current income tax mess has tax breaks for "minimum wage" earners in the
form of Earned Income Tax Credits. Apparently eliminated in Wyman's plan,
although some form of it could see itself through in a final bill.
 
P

Paul Thomas, CPA

Don Homuth said:
Shall we put the costs of roads on your property taxes instead? They
did that in my local county last year, after all -- about $29 million
worth. Now all property owners, even those who don't drive, pay for
the county paved roads.

Is that more or less Fair than having those who drive on the roads pay
for them?



To a degree, the better the road that fronts your property, the higher your
property values will be, and in some cases, paved roads bring lower
insurance bills on your house (something about dirt roads and fire trucks).
 
D

Don Homuth

To a degree, the better the road that fronts your property, the higher your
property values will be, and in some cases, paved roads bring lower
insurance bills on your house (something about dirt roads and fire trucks).
If you wish, I will provide a URL that discusses precisely that.

However....

Which is the more Fair solution to the question of how to finance
roads? Should they be financed by property taxes (remembering that
Everyone pays them in one form or another) or by those who demand and
use roads?

(And fwiw, the same sort of argument you pose above works for schools
and other sorts of public infrastructure and services as well.)

If you want the URL, let me know.
 
S

Scratch

Don said:
As a general rule, they aren't taxed much.
honu, Psssttt..., they don't make much so everything they make is important.


Indeed, the Wingnut Whine
on the matter seems to be precisely that -- that The Rich are taxed
much more while the Minimum Wage types aren't taxed hardly at all.


How do You plan to pay for roads, Scratch?
It don't cost as much as your sucking per gal at the pump to put in a
shitty patch or another un-used bicycle lane.

There is no Tax on gasoline. If you don't use it on the road, you
don't have to pay a tax on it. That's a fact, btw. Farmers pay No
tax on gasoline purchases, nor does any (hallowed) Private Sector
entity that uses fuel off-road.

But if you want roads in the first place, they involve Costs. Costs
are Real and will and must be paid. Iron Rule everywhere -- I didn't
make it up.

Shall we put the costs of roads on your property taxes instead? They
did that in my local county last year, after all -- about $29 million
worth. Now all property owners, even those who don't drive, pay for
the county paved roads.

Is that more or less Fair than having those who drive on the roads pay
for them?


Keeping this discussion properly focused, do You consider road
construction and maintenance a Socialist program?

LOL There are services that are required and there are others that are
not. Hey I know, why not utilize the labor force in the jails and
prisons. You know, Payback? Oh, wait can't do that it would piss the
unions off and and after all can't violate a mans rights, right?

How do You want to pay for roads, Scratch? You've had the chance to
answer that question for some weeks now.

Got any answers?

Read above for comprehension. ^^^^


YOU got any answers besides business as usual for the left?
 
P

Paul Maffia

Scratch said:
If the left, was all that concerned with helping the poor, then stop
taxing minimum wage earners and lower the tax load on gas at the pump
e.t.c.
Minimum wge earners pay virtually no income tax. A large percentage of them,
in effect, benefit from a negative income tax called something else like low
income credits.

Lowering the tax at the gas pump might well be worth considering except for
the fact some other tax would have to be increased to make up for that loss
of revenue if our already poorly maintained roads were to continued to be
maintained at current levels.
They aren't. They just cry a lot to get those less fortunate to vote to
keep them in power and throw a bone to them once in awhile in the form of
another socialist program. I hope one day they will wake up and say oh
hell no! No more and they too can become good capitalists.
That is not just something done by those on the left.
 
P

Paul Thomas, CPA

Paul Maffia said:
Minimum wge earners pay virtually no income tax. A large percentage of
them, in effect, benefit from a negative income tax called something else
like low income credits.

Lowering the tax at the gas pump might well be worth considering except
for the fact some other tax would have to be increased to make up for that
loss of revenue if our already poorly maintained roads were to continued
to be maintained at current levels.





Road repairs, maintenance and construction cost exceedingly more than the
total of gas taxes (federal and state) collected. That extra expense is
covered from general revenues from all sources (local, county, state and
federal).

Eliminating the fuel tax will only add to that disparity.
 
P

Paul Thomas, CPA

Don Homuth said:
If you wish, I will provide a URL that discusses precisely that.

Do you really need a URL to know that the value of a tract of land fronted
on a one lane dirt road is less than that same tract of land next to a paved
highway?


As far as insurance savings, if any can be obtained, talk to your insurance
agent about coverage of property only accessable by a dirt road. Get back
to me after he quits laughing.



Which is the more Fair solution to the question of how to finance
roads? Should they be financed by property taxes (remembering that
Everyone pays them in one form or another) or by those who demand and
use roads?


The costs of maintenance, repairs, upgrades, and new construction are not
fully covered with revenues from a gas tax. And yes, I've been down this
road (pun intended) before:



http://www.artba.org/economics_research/reports/gas_tax_history.htm
Table 2 shows the percentage distribution of the gasoline tax among the
different uses, including amounts used for general revenues and deficit
reduction.



http://www.artba.org/pdf/040207_Analysis_2006_DOT_Needs_Report.pdf

Analysis of 2006 Conditions and Performance Report 2
© 2007 American Road and Transportation Builders Association


It assumes the goal for the next surface transportation bill should be a
level of highway investment that, at minimum, stabilizes highway congestion
and prevents it from worsening. This goal would require an annual investment
of $89.7 billion, according to the report, $11 billion more than the
report's "maintain conditions" scenario. Most of the additional investment
would be for new capacity. An even better
objective would be to improve conditions, which would require even more
investment.


It uses a widely-accepted measure of inflation, the Consumer Price Index, to
convert the investment requirements into actual dollars.



It assumes the federal share of highway capital outlays will remain at its
historic level of 43 percent, plus a margin for administration, research,
and other non-construction expenditures.


Applying these adjustments to the 2006 report, ARTBA calculates that federal
highway funding
in the next surface transportation bill would have to be $54.5 billion, at
minimum, in FY 2010 and grow to $61.5 billion by 2015. This would maintain
both physical conditions and operating performance. Improving conditions
would require even greater federal investment.


Projected Highway Account revenues range from $37.4 billion in FY 2010 to
$40.5 billion in FY 2015. There is thus an annual funding gap averaging $19
billion. This is shown in Figure 1.


Future costs = $54 - 61 BILLION
Future revenues = $37 - 40 Billion
Future shortfall = $17 - 21 Billion




Guess where the shortfall gets paid from.
 
P

Paul Thomas

Scratch said:
k, but how do you PREVENT the hording of capital
in this country "IF" you tax the hell out of gain? I mean,
what is the incentive to invest in this country?


If the after-tax return is great enough to over ride your opportunity costs,
then you'll invest. Otherwise you'll stuff mattresses with your dough.
 
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S

Steven

If the after-tax return is great enough to over ride your opportunity costs,
then you'll invest. Otherwise you'll stuff mattresses with your dough.

I'd rather spend dough on a used mattress. After 12 years I can't
afford another new one.
 

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