Category Archives: tax related issues

the cost of our system

Our Insane Income Tax Code

Chapter 67 Our Insane Income Tax Code

The original Income tax code, a bit over 100 years old, was 400 pages. Today is now runs 70,000 pages! Originally the rate was a fixed 1% and only paid by highest income earners.

The 1935 form 1040 had 2 pages while the current form contains 100 pages of sub-forms and instructions!

It is estimated that the code results in 9 billion hours (that’s 9,000,000,000) to comply with the tax code and that equates to $400 billion in lost economic productivity In either lost personal time or the cost of paid preparers). This does not include the cost to fund the IRS which currently is running at $13+ billion.

The real problem with the tax code is that it has evolved as a result of special interest influence which creates a plethora of complexity to reward those interests.

The solution is relatively simple, but not politically feasible. The following suggestion is taken from one of my earlier posts as simple way to replace our current level of income tax revenue:

“You have heard several potential solutions to this issue and here is my suggestion:

An average flat income tax of (5%) on all gross income except for capital gains. My math could be a bit off here, but the rate stated should be close to working. I would segment this into five categories with gross incomes at or below the poverty level at 0% (currently $25,000 for a family of 4). I would not provide incentives for larger families). For incomes from $25,000 to $50,000 I would make the rate 2%, from $50,000 to $100,000  4%, from $100,000 – $250,000 6%, from $250,000 – $500,000 at 8%,  and all over $500,000 at 10%. These rates would become the automatic withholding and there would be no deductions

The above would not change either SS or Medicare tax rates.

I would completely eliminate capital gains taxes. Instead I would propose an annual tax on wealth (assets minus liabilities). The proposed rates would be: 1% for under $500,000, 1.5% for $500,000 – $1,000,000, 2% for $1,000,000 to $5,000,000 and 3% for $5,000,000 to $100,000,000 and 4% over $100,000,000.

Also, a flat national sales tax at 2% on all business sales at retail. I would completely eliminate corporate income taxes.

At this time, I would not suggest any change to the excise tax structure.

Note: I have done my best to ensure that the above would effectively replace the total revenue achieved by the current tax system and freely admit that the results may not be perfect, but you get the idea. These numbers can be tweaked to achieve the desired revenue results.”

Education revisited

Education revisited

Not long ago I posted a lengthy treatise (several posts) on the unwarranted costs associated with securing a College degree. One area of concern that I did not adequately address was the impact of these costs on the taxpayer. The advanced education system is heavily subsidized via student loans. Keep in mind that these costs have increased over the last 2 decades at a rate of 3x that of overall costs.

Updated: January 24, 2018

It’s 2018 and Americans are more burdened by student loan debt than ever.

You’ve probably heard the statistics: Americans owe over $1.48 trillion in student loan debt, spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt. In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from the prior year.

Since these are loans and not grants how does this impact us. Currently the default rate is in the neighborhood of 10%. I have not been able to verify the actual cost to tax payers, but if we assume a 10% default rate and an average of 4 years borrowing that would equate to an annual write off to tax payers of almost $40 Billion. This is not acceptable!

Our government does little to mitigate the rise in these costs. Actually, they facilitate the increases by loaning without questioning the rates that are being charged. While only slightly more than ½ of these borrowers actually earn a degree we still are successfully pumping out about 3 million that earn a four year or higher degree. Only 15% of graduates are assured a college level requirement job on graduation and over time only 40% ever realize this level of employment. About 40% will end up taking a subpar job, often in area not related to their college major. Fully 20% will end up in low paying positions where their high school graduate compatriots have had a four year head start on career progression.

All of this is taking place while there is a shortage in many of the technical skill trades.

Violence and Incarceration

Chapter 62 Violence and Incarceration

The US has the highest incarceration rate in the World. In fact, with only 5% of the world’s population we incarcerate almost 25% of the world’s total inmates! There is a direct relationship between violent crimes (refer to the prior post) and the rate of incarceration. The average annual cost of inmate incarceration is almost $40,000. As taxpayers, we should be outraged. The US has an incarceration rate (at almost 700 per 100,000) that is 5 times higher than the following countries:

Country (or dependent territory, subnational area, etc.) Incarceration rate (Prisoners per 100,000 population)
Central African Republic 16
Comoros 19
Faroe Islands (Denmark) 23
Republic of Guinea 26
Congo (Brazzaville) 27
Liechtenstein 27
Democratic Republic of Congo (formerly Zaire) 29
India 33
Mali 33
Nigeria 35
Oman 36
Chad 39
Burkina Faso 41
Bangladesh 43
Pakistan 43
Mauritania 44
Niger 44
Iceland 45
Solomon Islands 46
Japan 47
Ghana 49
Liberia 49
Sudan 50
Timor-Leste (formerly East Timor) 50
South Sudan 52
Andorra 53
Qatar 53
Sweden 53
Yemen 53
Finland 55
Sierra Leone 55
Cote d’Ivoire 56
Mozambique 57
Gambia 58
Syria 60
Denmark 61
Nepal 62
Senegal 62
Togo 62
Equatorial Guinea 63
Papua New Guinea 63
Tanzania 64
Marshall Islands 66
Bosnia and Herzegovina: Republika Srpska 67
Djibouti 67
Indonesia 69
Netherlands 69
Malawi 70
Norway 70
Bosnia and Herzegovina: Federation 73
Slovenia 73
Afghanistan 74
Monaco 74
Benin 77
Burundi 77
Germany 78
United Kingdom: Northern Ireland 78. See notes below
Ireland, Republic of 79
Cyprus (Republic of) 80
Croatia 81
Madagascar 84
Switzerland 84
Sao Tome e Principe 87
Vanuatu 87
Sri Lanka 88
Italy 89
Greece 91
Isle of Man (United Kingdom) 92
Lesotho 92
Angola 96
Austria 97
Belgium 98
Libya 99
Kosovo/Kosova 100
Mayotte (France) 100
Haiti 102
France 103
Republic of (South) Korea 107
Cook Islands (New Zealand) 109
Tuvalu 110
Kuwait 112
Myanmar (formerly Burma) 113
Cameroon 114
Canada 114
Hong Kong (China) 115
Cambodia 116
Egypt 116
China 118 or unknown. See notes below.
Laos 119
Luxembourg 120
Reunion (France) 120
Uganda 120
Kenya 121
Tajikistan 121
Bolivia 122
Guatemala 122
Iraq 123
Bulgaria 125
Zambia 125
Guernsey (United Kingdom) 127
Micronesia, Federated States of 127
Ethiopia 128
Lebanon 128
Armenia 130
Kiribati 130
Malta 131
Spain 131
Brunei Darussalam 134
Portugal 137