Thats not quite what that passage said

Post #331,259 by beepster 8/13/10 10:44:39 AM Reply	Thats not quite what that passage said but close enough...first you can't abstract fiscal externalities when your talking about fiscal response to tax changes. Simply, there will be an effect, if nothing but secondarily based on the actions taken Second, it only makes sense that the easiest paths (timing and avoidance) would be the first paths taken..and thus show larger impact when marginal rates change. 3rd, this is the same guy that knows (as he wrote a paper on it) research on levels of capital investment based on marginal tax rates, in his language, shows that, in his own words, Atlas does indeed shrug. Their research examines the income tax returns of a sample of sole proprietors before and after the Tax Reform Act of 1986 in order to determine how the substantial reductions in marginal tax rates for the relatively affluent associated with that law affected their decisions to invest in physical capital. They find that individual income taxes had a large negative effect, implying that a 5 percentage point increase in marginal tax rates would reduce the proportion of entrepreneurs who make capital investment and mean investment expenditures by approximately 10 percent. In their words, these particular Atlases do indeed shrug. http://www.bus.umich...introfinal899.pdf The interdependence cannot be ignored. I will posit, though, that the most prudent action of the Treasury would be to not touch income tax rates AT ALL, and instead focus on eliminating paths of evasion and avoidance (loopholes) first. The net effect will be positive on revenue and will not incur the kind of explosive noise associated with legislating the tax tables. It would probably also quiet the guys like Warren Buffet, who pay people to avoid taxes for him and then complain that his secretary pays more ;-) Sure, understanding today's complex world of the future is a little like having bees live in your head. But...there they are.
Post #331,264 by drook 8/13/10 11:13:18 AM Reply	How much difference could that make? Suppose evasion and avoidance were completely eliminated. Won't happen, but work with me here. What is the total estimated impact of that, in dollar and percentage terms? I'm guessing it would be less than a 10% increase in tax revenues. Though I'm willing to believe I'm off by a lot. As much as people scream about earmarks, they represent a trivial part of spending. I'm assuming this is similar. Just as a thought experiment, suppose increasing tax rates leads to increased avoidance. But suppose the total amount collected increases. Would that be a good outcome? Sure, it would shift some of the burden away from aggressive avoiders, but there's no rule you can pass that some people won't try to exploit. Closing loopholes is good and should be done regardless of anything else, if only to reduce the cost of compliance for everyone. (Simpler rules are easier to comply with. Loopholes == complexity.) But compared to doing only that, what percentage increase in income tax rates would be required to generate equivalent tax receipts? -- Drew
Post #331,266 by boxley 8/13/10 1:47:41 PM Reply	close the home loan interest deduction loophole that would increase collections by quite a bit and stop us poor folks from subsidizing the size of the houses of the upper middle class
Post #331,267 by beepster 8/13/10 1:50:37 PM Reply	Between personal and corporate... conservative estimates would put that about half a trillion per year. IRS estimates the personal income tax gap (owed vs collected) at 375M and I've seen stats on the corporate side that the most basic (offshore tax haven) would bring in another 100bn. Most of the contributers to the "tax gap" are all centered around use and/or abuse of deductions(loopholes). http://www.irs.gov/p...final_version.pdf This info shows the tax gap at about 300bn after enforcement collection...but that was 2005 based, I believe. So, just simple changes to simplify (which simplifies also the enforcement and collection) would have eliminated the highest budget deficit (up until 2009, that is..but it would have cut that by 35%. Sure, understanding today's complex world of the future is a little like having bees live in your head. But...there they are.
Post #331,370 by mhuber 8/16/10 2:04:10 AM Reply	deductions(loopholes) Devil is in the details. Yes, there are some deductions that are clearly loopholes. There are also very, very many that are entirely legitimate recognition that there is a difference between gross receipts and profit. But there are quite a few where it is not so clear. And that's not even getting into the use of special deductions to encourage activities that some power group (all too often a consortium of one well-connected taxpayer) rightly or wrongly convinces the authorities is beneficial to the public good. Which is the primary engine of campaign financing and a major part of why media ownership is profitable. If you are going to fix this category, you need to convince every politician to give up his biggest source of campaign financing, every company to give up its most profitable investment, and every media company one of its more profitable sources of business. I.e. it ain't gonna happen without really draconian (even if you don't think money is speech and corporations are people) campaign finance restrictions. --------------------------------------- I think it's perfectly clear we're in the wrong band. (Tori Amos)

Welcome to IWETHEY!