The Instigator
BobTurner
Pro (for)
Losing
1 Points
The Contender
JohnMaynardKeynes
Con (against)
Winning
20 Points

How would you change the tax code?

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Post Voting Period
The voting period for this debate has ended.
after 4 votes the winner is...
JohnMaynardKeynes
Voting Style: Open Point System: 7 Point
Started: 3/21/2014 Category: Economics
Updated: 3 years ago Status: Post Voting Period
Viewed: 928 times Debate No: 49605
Debate Rounds (5)
Comments (0)
Votes (4)

 

BobTurner

Pro

The timing for each round is pretty short -- about a half hour -- because I want this debate to be based more on philosophical insight and economic intuition, as well as rhetoric, than genuine research. That's why, if you copy/paste in Paul Ryan's tax plan or something of the nature -- e.g., linking to FairTax.org and copying what's already been proposed -- I'd hope voters would take account of the lack of originality.

Round 1: Acceptance
Round 2: Present your changes to the current tax code. Or, if you wish, simply specify that you're starting from scratch -- obviously not realistic, but we're philosophizing, darn it. In this round, addressing your opponent's arguments is illegal.
Round 3: Address your opponent's tax plan. At this point, neither debater can address their opponent's arguments -- that is, Con who will go second in this round cannot address Pro's Round 3 argument.
Round 4: Offer a rebuttal of your opponent's Round 3 argument. Again, Con cannot at this point offer a rebuttal of Pro's Round 4 argument.
Round 5: Offer a final rebuttal of your opponent's Round 4 argument and conclude. Note: Con cannot address Pro's Round 5 argument.

The goal of this, obviously, is to remove the inherent advantage of posting your argument for the round after your opponent's, or of going last in the debate and being the last person able to post rebuttals. Now, you can only address arguments made in the round prior. If this rule is broken, it will result in a 7-point loss to that debater.

With that said, let the debate begin!
JohnMaynardKeynes

Con

I can't say I'm the biggest fan of the format, but I'll accept nevertheless. Best of luck to you.

On a side note (and I realized this after I accepted your challenge): This is the third debate we've had. I trust that your positions have evolved quite a bit, since you moved from abolishing all taxes, abolishing the minimum wage, et al. to arguing for a minimum wage hike. I find it fascinating is all, haha.
Debate Round No. 1
BobTurner

Pro

First, I'd throw out the entire tax code and start from scratch.

Then, there would only be three forms of taxes: 15% on sales, 15% on personal income, and 15% on business net sales.

I see this is as a way of eliminating the influence of lobbyists in politics, providing certainty to businesses in need, and collecting enough revenue to sustain the size of government that I'd like to see: one that can pay for military, roads, and the like, but doesn't involve itself in health care, education, and research where it does not belong. And we can discuss in a bit whether it should be there, or not, since that does ultimately have bearing on what the tax code ought to be.
JohnMaynardKeynes

Con

Here's what I would, by category, do:


I. Progressive Income Tax Code

I'm a big proponent of progressivity in the tax code, but there are undoubtely things I would want to change in it. The current federal income tax code is fairly progressive, as are total federal receipts, but when we move to the state level, we begin to see regressive taxation, as states like Louisiana have moved toward sales taxes in lieu of income taxes. Those taxes fall disproportionately on the poor. I presume, from this debate resolution, that we are only speaking of the federal tax code, so I won't address state systems. But I do think we need to, ultimately, formulate the tax code in such a way that its progressivity offsets the regresive nature of taxation in many states.

With that said, I would play around with a few income brackets toward the bottom of the tax code, reduce them by about 15% across-the-board -- up to about $250,000 in taxable income -- and add more brackets toward the top of the code with significantly higher rates to offset the tax cuts and raise revenue.

The new federal tax code would look something like this (note: this is for a family filing jointly. If Con would like me to address this sytem for an individual filing his income tax returns, I would gladly do that):

  • 8.5% on taxable income from $0 to $35,000, plus
  • 12.75% on taxable income over $35,000 to $80,000, plus
  • 18.75% on taxable income over $80,000 to $150,000, plus
  • 21% on taxable income over $150,000 to $250,000, plus
  • 41.25% on taxable income over $250,000 to $400,000, plus
  • 47.25% on taxable income over $400,000 to $1,000,000, plus
  • 57.42% on taxable income over $1,000,000 to $3,000,000, plus
  • 70% on taxable income over $3,000,000
To demonstrate briefly what I did, other than playing around with a few brackets: after cutting rates by about 15% for income under $250,000, I raised rates in progressive increments on higher income -- first by 25%, then 35%, then 25%, and then applied the top marginal income tax rate recommended by Nobel Laureate Peter Diamond (I'd find his paper, but I'm almost out of time).


Also, I would expand the amount of income subject to this tax by taxing capital gains, dividends, corporate income, interest, and foreign profits by this same tax system.
II. Loopholes, Deductions, Credits, et al.


I see a tendency among people who dislike breaks to corporations and affluent individuals to simply recommend that we remove all deductions. I'm not the biggest fan of this, though I wouldn't mind means-testing certain deductions -- mortgage interest, charitable, education, etc. We could say for charitable, for instance, that if you earn over $1 million in gross income, you can only write off charitable expenses equal to 5% of your income. We could go even further and cap overall deductions for corporations by eliminating the loophole for CEO compensation and carried interest, removing a myriad of subsidies that go to the oil, gas, and ethanol industry, and equalizing rates on investment, dividend, and interest income with the current tax system.

My point, ultimately, is this: I am a proponent of raising tax rates, but I want to do so in a way that actually will generate more revenue. If a company, like GE, is already paying a negative tax rate because of its loopholes, raising rates won't at all matter.


III. Tax Evasion

I can't say I have the figures off-hand, or that I have time to research at this point -- with 11 minutes remaining in the round -- but we know that extremely large companies, and affluent investors, tend to put their money overseas in Swiss or Cayman Island's bank accounts (anyone who has watched Wolf of Wall Street knows this to be the case).

Obviously the way in which we prosecute tax evasion is an issue that is usually left to law enforcement, but I wouldn't mind granting the IRS power by statute to impose penalties on people who have been tax dodging, including but not limited to back taxes, surchargers, potentially prison time with large fines, et al.


IV. Payroll Taxes
This is currentyl one of the most regressive taxes in the code. People pay payroll taxes up to $113,700 in income. This means that, if you earn less than that, all of your income is subject to the payroll withholding tax, whilst if you earn more than that, the tax applies to a smaller percentage of your income.

I'd remove the payroll tax cap entirely -- which actually solves the long-term solvency problem of Social Security -- and broaden out the rates, whilst first exempting the first $35,000 in income. It would, ultimately, work like this:

5% on income above $35,000 but below $150,000
10% on income above $150,000 but below $250,000
15% on income above $250,000 but below $500,000
25% on income above $250,000 but below $500,000
30% on income above $500,000

Important to note, also, is that capital gains, dividends, interest, and foreign profits are not subject to this tax under the current system. Under my system, they would be.



Debate Round No. 2
BobTurner

Pro

I think my system is superior, first and foremost, because it's simpler and compliance is simpler. Who would doge a flat rate tax, after all? That sounds fairly difficult to do, and I can't imagine why anyone would do that since rates are low enough that most people are getting a net tax cut.


For instance, I removed the payroll withholding tax and substituted with a single flat rate. I understand what Pro is intending by adding more rates to it, but all is he doing is making an already cumbersome system more complex -- and, in typical Keynesian fashion, attacking high achievers, Why should they shoulder most of the burden of the payroll tax system? Would you expand their Social Security benefits? I do not think it would be fair for you to raise their taxes, and not also their benefits.


You've equalized a lot of tax rates. I obviously agree with you on all of that, except for foreing profits, which I would leave untaxed. That's protectionism, is it not?


I also agree with you tax evasion.

Your progressive tax code is wonky. Why would you raise the top tax rate to 70%? Would businesses really expand in this country with a 70% effective rate? I think you've reached the peak of the laffer curve quite a while ago.
JohnMaynardKeynes

Con

I thank Pro for his arguments. Onto my rebuttals of his Round 2 argument:


"First, I'd throw out the entire tax code and start from scratch."


Well, you know what they say: It's not where you start that matters, but where you end up. I don't think it would be necessary for me to comment on throwing the system out, necessarily, other than saying that there are a myriad of taxes -- excise taxes, "sin" taxes, tariffs, et al. -- that the federal government collects that Bob is disregarding. Throwing out the code sounds good, in theory, but you need to account for the loss of revenue in some way.

"Then, there would only be three forms of taxes: 15% on sales, 15% on personal income, and 15% on business net sales."

I'm not a big proponent of a federal sales tax because, as I've already noted, many state tax systems are already highly regressive. I want the federal tax system to offset state systems in terms of progressivity, so I do not see any real benefit in this tax -- frankly, all it will do is depress demand of people who have to spend virtually 100% of their income in order to survive. By contrast, very affluent people consume with smaller percentages of their income, so they won't be nearly as affected by this tax. At a time when we need to boost variable consumption of the middle class, I do not think it's time to raise their taxes.

The 15% personal income tax and 15% business tax is interesting -- though I must ask whether the business net sales tax will allow businesses to deduct expenses,

But my main beef with these two taxes as your only taxes is that, without a doubt, you're going to lose a significant amount of revenue. In spite of all tax breaks to go to corporations, their average effective rate is about 19.4%. So, yes, you'd be raising GE's tax, but raising the taxes of local mom and pop shops. I'm not a big fan of treating these companies in the same way. The fact is, one is able to afford higher tax payments, while one likely can't.

The same logic applies to personal income. Mitt Romeny, who earns tens of millions of dollars each year, can afford to pay a higher tax rate, but I, a poor college student, cannot. So I don't see any real value in having us pay the same rate. What would you hope to gain from that?

"I see this is as a way of eliminating the influence of lobbyists in politics, providing certainty to businesses in need, and collecting enough revenue to sustain the size of government that I'd like to see: one that can pay for military, roads, and the like, but doesn't involve itself in health care, education, and research where it does not belong. And we can discuss in a bit whether it should be there, or not, since that does ultimately have bearing on what the tax code ought to be."

I do not believe this will eliminate the influence of lobbyists because the mere existence of an income tax means that there are going to be people who lobby for breaks -- not to mention exemptions from regulations and the like. If anything, I see this as conceding beforehand that it is impossible to remove the influence of lobbyists and politics, and therefore throwing a bone at the corporations, hoping they'll back off and say "15% is low enough." I don't think that's the case. Do you really think GE will move from a negative rate to 15% without complaining? I think the logic contradicts itself, honestly. You want to remove the corruption of breaks, which I agree with, and are then arguing that the rate is so low that corporate welfare is nonexistent. Isn't lowering the rate a form of corporate welfare?

As for the certainty point: I think the reason businesses are uncertain of the future is that they're not psychic. Can anyone actually predict the future, anyway? The problem that I see is lack of demand, not lack of productive capacity. So if we were to boost demand through the demand-side tax cuts that I have suggested, we would see businesses begin to invest the $2 trillion in capital they've been holding onto. Surveys conducted by the community show continously that the problems businesses are facing boil down to lack of sales.


Next, you speak about the "size of government." I honestly don't see this as a plausible case for tax breaks. Why shouldn't the government be involved in health care or education? For goodness' sake, even Mike Huckabee admitted that the federal government, not the private sector, should invest in cancer research because the profit motive itself delays progress. As for education, I simply do not believe it is a good idea to leave this to the states or to the private sector. I want to set high standards and key in on the sectors of the jobs market -- STEM in particular -- that are most in need, and provide incentives for students to study in those fields.

My main argument, however, is that focusing on the size of government is addressing the wrong problem. Why not ask how effective or efficient the government is with the funds it does have? Sure, we could cut back in some areas, but shrinking the government as an end in itself, I find, is not overall too productive.
Debate Round No. 3
BobTurner

Pro

Sorry, i got tied up in a few things.

I don't have enough time to complete this, so I'll concede this debate to John, whom I strongly disagree with, but who has some very strong arguments.

Voters, please give all 7 points to John.

Thank you, also, for this debate. I'm going to do some research and revise my views.
JohnMaynardKeynes

Con

Thanks for the concession, Bob. I was looking forward to finishing this with you, but we'll have to postpone that to a later date.

I'm also quite glad to see that you're willing to consider revising your views. That's something few people will ever admit to doing, or something they've only done once or twice in their life (unless you're Mitt Romney). I'm flattered that I was able to, at least, influence your thinking on these issues. That's one of the main reasons I want to become a professor, haha. There's the bounds of reason, of course, so I would never be as opinionated in the classroom as I am now, but I suppose the point still stands.

Best of luck to you in the future.
Debate Round No. 4
BobTurner

Pro

Posting here to move this to the voting period.
JohnMaynardKeynes

Con

And...to the voting period it goes!
Debate Round No. 5
No comments have been posted on this debate.
4 votes have been placed for this debate. Showing 1 through 4 records.
Vote Placed by Actionsspeak 3 years ago
Actionsspeak
BobTurnerJohnMaynardKeynesTied
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Total points awarded:07 
Reasons for voting decision: Pro urged me to give 7 points to Con.
Vote Placed by Wylted 3 years ago
Wylted
BobTurnerJohnMaynardKeynesTied
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Reasons for voting decision: Concession.
Vote Placed by Dakota-Hiltzman 3 years ago
Dakota-Hiltzman
BobTurnerJohnMaynardKeynesTied
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Reasons for voting decision: 7-point forfeit
Vote Placed by Krazzy_Player 3 years ago
Krazzy_Player
BobTurnerJohnMaynardKeynesTied
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Reasons for voting decision: Concession