I would be a bit concerned about the disincentive towards investing in that approach. I also think the pay back if loses in the following year just adds some complexity and opportunities for both confusion and gaming activities.
At the same time it does seem to fit with my view that one’s taxes should be proportional to the benefit derived by participating in the society and economy.
To the extent the concern is the (apparent?) imbalance between what the rich pay and what the bottom rungs pay I think I might try a different approach. What if:
W2 income were not taxed for revenue but each of us was still on the hook for FICA (all of it).
Income taxes were levied on business activity—net revenue
Dividend and Capital gains remain a bit as they are now.
I would keep capital gains taxes lower than income taxes for incentive reasons. Just where we put dividends, I suppose a case could be made they are very similar to business income so taxed at the same rate as the net business revenue.
I think two things fall out of that. First, taxing real people’s income is a bit like taxing their contribution to society and the economy and not the benefit they get by being part of society/the economy. Yes, I know it could be put in the same category as all other economic activity but really has a different feel to me—and I think others. So for those only collecting a paycheck their taxes are zero or near that. The perception that somehow the rich are getting over on the poor worker is now gone in terms of tax burdens and policies.
Second, I think that simplify both the over all cost of collecting and auditing taxes. Business no longer have to worry about employee related taxes (though that might be something they keep doing for a number of reasons), businesses already have tax experts where as individuals generally don’t. Even with fairly low cost tax services and software there are still a lot of things your average Joe/Jane misses keeping around or recording over the year. The IRS probably is smaller and I would guess that estimating government revenue would be easier as well.
There is also the whole shell type game with the funds going on. The employer pays the workers at a rate that allows the worker to pay the taxes that are collected on their income. Then the employee has to mess around with the income tax filing and account for some final adjustments. Seems like taking the employee out of the shell game eliminates pretty much all the questions about just how much tax is due so could be correctly paid on the defined quarterly schedules.
I would be a bit concerned about the disincentive towards investing in that approach. I also think the pay back if loses in the following year just adds some complexity and opportunities for both confusion and gaming activities.
At the same time it does seem to fit with my view that one’s taxes should be proportional to the benefit derived by participating in the society and economy.
To the extent the concern is the (apparent?) imbalance between what the rich pay and what the bottom rungs pay I think I might try a different approach. What if:
W2 income were not taxed for revenue but each of us was still on the hook for FICA (all of it).
Income taxes were levied on business activity—net revenue
Dividend and Capital gains remain a bit as they are now.
I would keep capital gains taxes lower than income taxes for incentive reasons. Just where we put dividends, I suppose a case could be made they are very similar to business income so taxed at the same rate as the net business revenue.
I think two things fall out of that. First, taxing real people’s income is a bit like taxing their contribution to society and the economy and not the benefit they get by being part of society/the economy. Yes, I know it could be put in the same category as all other economic activity but really has a different feel to me—and I think others. So for those only collecting a paycheck their taxes are zero or near that. The perception that somehow the rich are getting over on the poor worker is now gone in terms of tax burdens and policies.
Second, I think that simplify both the over all cost of collecting and auditing taxes. Business no longer have to worry about employee related taxes (though that might be something they keep doing for a number of reasons), businesses already have tax experts where as individuals generally don’t. Even with fairly low cost tax services and software there are still a lot of things your average Joe/Jane misses keeping around or recording over the year. The IRS probably is smaller and I would guess that estimating government revenue would be easier as well.
There is also the whole shell type game with the funds going on. The employer pays the workers at a rate that allows the worker to pay the taxes that are collected on their income. Then the employee has to mess around with the income tax filing and account for some final adjustments. Seems like taking the employee out of the shell game eliminates pretty much all the questions about just how much tax is due so could be correctly paid on the defined quarterly schedules.