Since you cannot answer as the "left", could you answer as Danivon? You are one of the more articulate left leaning people I know, and want to see your end game.

Fine, but don't expect to see my 'end game' as that of the whole left. Or that every position I take is all part of a master plan to get us there. I'm more organic than that.

Inequality of wealth will always be present. the problem is capitalism after WW2 and how ingrained it is in the system. I will explain. inequality is between consumer and product. that is the creation of more and more industries that need to sell their products cars, washing machines, phones etc while ordinary people have a salary that barely is adept to buy one product. Hence the "solution" our economist geniuses found was to give to everyone credit, and then uncontrollable credit, to help boost our buying power. Unless this changes there will be more and more problems.

I implore everyone to download and see the movie-doc "inside job" http://www.imdb.com/title/tt1645089/
I guarantee you will find it informative, interesting and even smile with contempt for your/our system.

and for those who have patience to skip the greek there are some good interviews in this doc

http://debtocracy.gr

Brad, I warn you that this will be long. At the end of the post, I’ll give you an idea of my ‘end game’, having gone through what I think is a reasonable proposal for the balance of taxation.

But first of all, let me outline what I see as the intent in overall taxation policy, as I’ve outlined before but perhaps in more detail. It is to extract from the national economy the costs to the State of operating the government, in a way that causes least harm to the overall economy and to the people as a whole but does not leave a deficit problem. Additionally, you can then apply some parameters such as using taxation to ‘nudge’ behaviours or link activity to the costs arising (such as higher duties on tobacco or alcohol, or reduced/zero taxation on healthy foods). But I would always maintain that the key point is that taxation should be based on the ability to pay for it. When it comes to ‘redistribution’, I would argue that this is more about the spending policies than the taxation, or from other taxes than income (which I shall come to).

So, when you originally outlined what you called a ‘flat tax’, but which was a series of incremental bands, what you were actually outlining was a system that is simpler than the current US one, with the same underlying principles, but just flatter and lower. My preference would be to have a simpler system than the US one as well, but probably not lower, and certainly not as flat.

What’s more, if I’m going to outline my taxation ideas, it’s not just payroll taxes that I’d be concerned about, but the whole range of taxes (and not being an Americans with sensitivity about the Constitution, I shall ignore the difference between Local, State and Federal taxes but I recognise that this may not work will with my ideas).

So, Income Tax and Social Security. Basically, I think it makes some sense to keep these as separate items, but to make them as consistent with each other as possible. Basically, people who are retired or otherwise getting exemption from Social Security would pay slightly lower rates than these if liable. To start with, a tax-free allowance on all income below a defined ‘subsistence’ level should apply. I’m not sure what that would be in the USA but $12,500 per person sounds like a minimum wage rate. So, if everyone pays zero tax on the first $12,000 I think that’s fair. The initial rate I would argue should be low, so as not to unduly discourage people out of work or on low incomes from moving upwards. So a low rate of about 10-15% on the next few thousand a year would mean that people are starting to contribute but work still pays. I would then argue for a pretty broad standard rate, of about 20-25% on the next set of income. Now, checking the 2008 data, it looks like the 30th percentile level was just under $17,500. So it’s probably just over that today. I’d set the upper bound at the 90th quintile so over half of adults are paying the standard rate. Above that level, I’d then go for higher rates of 30-40% to cover most of the top 10% of earners, and 40-50% which would only affect about the top 1 or 2%.

So, as an example: each person, income up to $12,500 tax free, then 10% on the next $5,000, then 20% on everything between $17,501 and $80,000. Then 33.3% on everything between $80,000 and about $200,000 with 40% for income over that.

Pigsy’s Janitor would pay 10% of his income, and his millionaire resident would pay about 37.5% (but is pretty unusual). Someone on about $100,000 (still in the top 10% of earners) would pay under 20%

Note – I’m using numbers that are a bit about the same as UK income tax alone, out of recognition of the US sensibilities about tax. They are probably still shockingly high to some. My data is from http://en.wikipedia.org/wiki/Personal_i ... ted_States and includes all Americans over 15 in 2008, so include some minors and all retirees who would have lower income than working-age people.

Now, I agree with you that there needs to be a big cull of allowances and deductibles and loopholes, which those on higher incomes are more likely to be able to exploit.

Part 2...

As for other taxes..

Sales Tax / VAT: Over here I think it is too high (20% VAT), in the US I see it varies a lot but I think about 10-15% total is the maximum it should be, and that’s with exemptions or a reduced rate for essential items (basic food and drink, utilities, children’s clothing, pharmaceuticals, etc)

Corporation Tax: I’d reduce it in the US to be close to the Income Tax rates – which would encourage business and at the same time reduce the scope for avoidance

Capital Gains Tax: Again, in line with Income Tax rates (or counted as Income), but perhaps with a higher tax-free allowance and no tax on the profit from the sale of the primary household residence or assets held over a set period (5-10 years?)

Inheritance Tax: Zero between spouses, a similar rate to the standard Income Tax rate on estates going elsewhere with a tax-free allowance of about double the value of the median residential property.

Land Value Tax: Annual tax on land values at a low %. This would replace Property taxes and apply to all land, rather than the value of what it on it. This would encourage landowners to develop moribund sites, would probably be lower than current property taxes for the vast majority of households. It tends to be far better economically than traditional property taxes: http://en.wikipedia.org/wiki/Land_value_tax

Over time, I would probably want to move towards using the LVT as the main means of government income, reducing the proportion raised by the others (it could completely replace Inheritance Tax and perhaps Capital Gains) but still retaining the idea of progressive bands of taxation on income and profits. Ultimately, this means taxing those with a lot of assets based on the value of a major asset, and on income based ability to pay. I’m not a full Georgist, but LVT has a lot of advantages over other taxes. It also would seem to be to be a fair way to pay for the protective aspects of the state (defence, policing, regulation, etc) as it would be a relationship between how much you stand to lose if such things were to disappear and how much you pay.

I don’t object to all income (or asset) inequality. I do not propose complete equality in all respects, because it’s not possible. The equality I stand for is the equality of opportunity primarily, with equal protection, an equal voice, and common freedoms as a given. If people will not work through choice, I don’t see why they should get equality of income. If they cannot work, however, then there is a case for protection. Similarly, those affected by the poor choices of others should not be penalised.

But I do believe that there is a danger that increasing inequality and extreme inequality leads to a major imbalance in power. It’s all about balance. To put it plainly, my ‘end game’ is not communism, it’s more like social democracy – the economy is the servant of the people, just as the government should be, rather than the other way around. You let the economy run within reasonable constraints, don’t penalise growth too much, and harness the results to provide for the commonwealth (just to rub the point in, I should point out that ‘commonwealth’ means pretty much the same thing as ‘republic’ and so also has a similar meaning to ‘democracy’, except that it has Germanic roots rather than Latin or Greek). Those constraints mean not allowing a small minority to hoard the proceeds of the economy, or to entrench power amongst certain classes in society based on wealth. But they are not as tight as to say that the State controls everything – in my ‘end game’, the State is less of a power in itself and more a conduit for the sovereignty of the people, kind of like early democratic and republican thinkers believed it should be.

Danivon.

Surprisingly. the current US tax scales are similar to what you propose in part 1. The 2011 tax scales are as follows;

Rate - - - Single - - Married filing jointly -- -- Head of household
10% Bracket $0 – $8,500 $0 – $17,000 $0 – $12,150
15% Bracket $8,500 – $34,500 // $17,000 – $69,000 // $12,150 – $46,250
25% Bracket $34,500 – $83,600 // $69,000 – $139,350 // $46,250 – $119,400
28% Bracket $83,600 – $174,400 // $139,350 – $212,300 // $119,400 – $193,350
33% Bracket $174,400 – $379,150 // $212,300 – $379,150 // $193,350 – $379,150
35% Bracket $379,150+ $379,150+ $379,150+

Well, yes. Because I see some scope for modest increases, but there's no need for punitive taxes. I do prefer individual only income tax

Workers’ share of national income plummets to record low


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What does the y-axis stand for? Ok, whatever it is was at 100% in 2005, and is now at 95%, but that is utterly meaningless. Lets say that they had 1% of the overall income in 2005, and now they have 0.95% of the overall income. So they have lost 0.05% of the overall income. On the other hand, if they had 10% of the overall income, they have lost 0.5%, ten times as muc h income.