Thesh wrote:Capitalism in no way, shape, or form leads to a meritocracy.
So... what does? How should it be determined who "deserves" how much of what? (Yes, this looks like it's getting off-topic, but taxation is related to this; how do we figure out how much of my money the government "deserves"?
More on the OP's question - the first thing I would do is simplify the actual income tax
forms, without changing any of the actual tax
rules. I'm concentrating on the income tax because it's the most obfuscated, and a discussion of taxation is fruitless when people don't actually know what's really being taxed, and by how much. To oversimplify, different kinds of income are taxed at different amounts, but they are all rolled together first, and then they are picked apart afterwards. In the end, it's hard to know what any piece of (incremental) income is
really being taxed at. I'd like the forms to calculate the tax for each (relevant) kind of income separately, and then add up the taxes.
Off the top of my head, and at a Presidential level of detail:
I'd like to see income averaging brought back; windfall profits should be able to be spread out rather than penalized just because circumstances (often beyond one's control) concentrates the income in one foop. (I work for ten years to develop {thing} and at the end of ten years, I sell the completed thing for {lots of money}. Well, "lots of money" divided by ten years isn't much, but I'd be taxed as if I were a rich man. Which I wouldn't be.
I do not agree that (long term) capital gains should be treated as ordinary income. Capital gains are what drives the economy in the first place. They represent the risk of losing everything; without that capital and the incentive to supply it, there would be no {expensive advances}.
I don't think I would eliminate the federal income tax; it is appropriate to appropriate money nationally for national things (i.e. defense, space program, interstate transport). To accept the argument that it should be done at the state level invites the next step; all taxes should be local. To me this is ludicrous.
I'd raise the alternative minimum tax threshold to
much higher. It's there to get the wealthiest edge cases; if a significant part of the population has to fill out those forms (essentially
recalculating their taxes under a different, more complicated, and more obscure system), then it's overstayed its welcome.
I also think that the welfare system needs to be discussed in the same breath. It's essentially an overlapping negative tax bracket, with reverse deductions (only certain things are funded...) and leads to the welfare cliff.
Keep in mind two definitions:
Business expense: The proper accounting of expenditures that lead to income; one should be taxed on net, not gross income.
Loophole: A business expense you don't get to use.
Jose