January 8, 2012

WE WANT PEOPLE MAKE MONEY AND WE NEED THEM TO SAVE IT TO FUND THEIR OWN WELFARE...:

Time to junk income taxes? (David Cay Johnston, JAN 6, 2012, Reuters)

In ancient agrarian societies the ruler took a share of the crop. In the cash economies created by the Industrial Revolution the state taxed incomes. But is income the right tax base for the 21st century, when computer software makes it possible to wrap economic income in a cloak of tax invisibility?

And why, in our digital era, must Americans file 140 million tax returns? Digital technology could eliminate 120 million of those tax forms, saving billions of dollars in both private and government spending.

In a global economy, is taxing corporate profits smart? Or could we devise rules that both promote investment and job creation while preventing the accumulation of unproductive fortunes -- the great risk if corporations are tax-exempt.

Look at the same question in reverse -- is our tax system encouraging unproductive or even counterproductive activities?

What else should we call a system that lets hedge-fund and other financial speculators defer paying taxes for years or decades on their carried interest, while discouraging investment in long-term projects that may not pay off for a decade or more? How else to explain our gross overinvestment in housing?

And what about corporate tax accounting costs?

Under President Barack Obama, business has been able to immediately write off 50 percent of new investment one year and 100 percent in two other years. We need to examine the long-term benefits and costs of full expensing. The White House says full expensing lowers the average cost of capital for business investment by 75 percent. But what other effects are there?

More broadly, we need to debate why corporations must keep two sets of books, one for shareholders and one for the IRS. How much more efficient would taxation, and commerce, be with one set of books?

With the individual income tax in its 100th year, it's time to fundamentally rethink how we tax ourselves. Even if we end up keeping the income tax, personal and corporate, surely we can make the system easier and fairer.

...so don't tax income, tax consumption.

Posted by at January 8, 2012 1:23 PM
  

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