Saturday, May 28, 2005

Taxes and the poor Bastards who pay them

Dave and Matt are discussing the Sirota article, which seems to be longer of rhetoric than new and useful facts. The short version of the article they are discussing is that 36,000 S corporation owners are not taking a salary, but instead are taking dividends. The benefit of this method of accounting is that you can avoid paying 12.6% self employment taxes. Of course, what is not mentioned in the article is that this type of behavior is an instant invitation to a tax audit. What fun!!!
The problem as I see it, is that the Tax code is no longer used to siphon revenue to pay for the government and instead is being used for social engineering purposes. Every time that you create an exception, you create a loophole. No wonder the tax code is about equal to one page for every 3 tax payers.
Iam no fan of the sales tax, because it hurts poor people more than the rich. However, a Value Added Tax would be a lot more useful and fairer. If you were to apply the VAT tax to any product whose final value was $100 or more, you could bypass food and most essentials. Say for instance that you were going to buy a computer for $400. When the people who mined the ore to make the metal sell it to the processors, they would include a 20% VAT to the government on their profits. Repeat the process all the way through, and the net cost to the consumer is still 20% for a total of $40, raising the cost of the computer to $440. The difference from this and a sales tax, is that it is collected all along the chain, and the consumer sees the price as $440 and that is what is paid. But, the consumer would not be paying income taxes, so that the net cost between a VAT and the present system would be the same.
Companies which make profits off items that fall below the VAT tax would pay a 20% tax of their gross profits. No exemptions, deductions, whatever.
Probably the only way that this will work, is to change the way we budget for the government. Right now, we forecast what the government expects to collect, and then proceed to spend it all and then some. Let's take 5 years, and shift the spending from a future guess, to actually being based on revenues collected the prior year, and keep the government from spending more than they have.
In the meantime, we need to change the tax code to eliminate phamaceutical companies from being able to deduct as an expense advertising for their products. I am so sick and tired of seeing advertisements to "see your doctor, to find out if XXX will work for you." They don't even tell me what the heck it's for. Or, they tell me may have possible side effects of heartburn, diahrea, heart attacks, cancers, or really painful side effects that linger forever, making you seek the freedom of eternal rest. In the meantime, you can't get an appointment to see your doctor because he is so tied up with these yahoos who are following their pied piper, the TV and asking stupid questions like, "Do I need this?" Let the person who went to medical school figure that out. If nothing is really bothering you, don't bother your doctor because the TV said so.
Boy, what a rant, but I feel better now.

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