We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
1. Eliminate all deductions in the individual income tax code 2. Eliminate the corporate income tax. 3. Tax capital gains and dividends as regular income. 4. Eliminate the death tax as well as the write-up of asset values at death
The main problem with the above would be an unemployment crisis for lobbyists, accountants, and tax and estate lawyers, and we can't have that. And golly, what would it do to the muni market?
Tax capital gains and dividends as regular income.
Why? Capital Gains and most Dividends come from the capital that (almost certainly) has already been taxed as it was acquired. Long term investments, which as I understand it, are taxed at a lower rate are still reduced by the devaluation of the dollar. (Did you know that the new dollar bills will have the disclaimer on them "Best Used by Date xx/xx/xx".) Why not eliminate taxes on both completely?
What's worse is that a tax on capital gains, if not indexed to inflation, ends up being an infinite percentage.
Let's say you buy a million dollar asset, and then sell it 20 years later for 2million dollars, which looks like you've doubled your money.. pay 30% Fed income tax, plus 10% state and local income taxes.
But what if the inflation adjusted value of that $2million is really only equal to the $1million from 20 years earlier? You haven't made any profit at all, and yet you'll lose $500,00 in taxes. Zero profit divided by $500k is an infinite amount percentage-wise, in my book.
And what would have to be implemented to prevent such catastrophes? -- more tax forms to fill out, schedules of adjustments for inflation, careful record-keeping (must be admissable in court!) as to when you bought and sold the asset, etc, etc.
As I understand it, the foreign income exclusion is not unlimited. Higher income individuals living abroad may well end up with a tax liability in the US. What may save them is if they've paid fairly taxes in the country in which they are resident, which is allowed - at least in part - as an offset to US taxes.
However, the real fun comes when a US citizen abroad has income which is not taxable in the country of residence, but it is the USA. Ask Boris Johnson, Lord Mayor of London and an accidental American. He sold his London residence for a profit. Canada does not tax any profits on sale of a principal residence, and - I gather - nor does England. But the US does. Mayor Johnson discovered this when he was refused entry to the US because he had not filed tax returns.
The rules, obviously - we're talking US Tax Code - are complicated but in general you don't pay income taxes on the first $118k of earned foreign income but from then on, you owe at the marginal rate up for that gross income. So the first dollar over $118,000 gets taxed at 35%.
You also get to credit foreign income taxes paid against your US tax bill.
But in principle, the idea of a foreign income exclusion seems good tax policy.
So Boris couldn't get back into the US? Finally, the IRS is good for something!
Why not eliminate the tax code completely?
Dissolve the IRS.
A national sales tax and no more. First, it will make the tax completely equal, everyone pays. Some things would be exempt of course, food (real food not sodas and candy), housing and clothing come to mind. We don't want the poor to suffer.
Drug dealers, criminals and even politicians would pay their fair share because when you get down to it money is really only good for one thing, spending.
Saving would be encouraged as the money and what it generates in interest would be tax free.
The economy would boom and the people I care for least, IRS agents, tax accountants and preparers and tax attorneys would all need to find meaningful work.
A win-win all around.
For me the biggest problem with federal and state income taxes is the inconsistent and unfair application of them. It should be levied perfectly equal. Every person should pay taxes on all income. Every company/group/organization/etc. should pay taxes on all income. No tax exempt/charity/religious/government exemptions; if you "exist" you pay taxes, period.
The second biggest problem is that bureaucrats fail to understand the impact of taxes. If you want to eliminate something; tax it. If you want to eliminate investments in business in America than tax capitol investment. If you want to encourage something than do not tax it or tax it at a very low rate. Taxes are punitive, period.