Since we are rife with discussion lately about the nature of the Republican tax plan, I thought I'd break out an old post.

So, as I continue my rant on "How They Keep Us Apart" I'm going to use simple numbers.

Consider a system of taxation wherein:

Everybody files as an individual (no joint filing)

The first $20,000 of income is exempted from taxation.

All payroll taxes are abolished (FICA et. al.).

All deductions from taxable income are abolished.

All of em ......... quit your whining ......... no exceptions!

The one and only, universal rate is 20%.

God himself only asked for 10%.

So, if you make $20,001.00, you pay 20 cents in taxes, or 0.001% of your total income in taxes.

That's affordable.

If you are a couple, regardless of your status and each of you are making $20,001.00 a year, your total taxes will be 40 cents and your rate will still be 0.001%.

Still affordable. 

If you make $25,000, you pay $1000.00 in taxes or 4% of your total income in taxes.

Notice here that $1000,00 is more than 20 cents.

And .......

4% is more than 0.001%.

Let's say you make $50,000.00, you pay $6000.00 in taxes, or 12% of your total income.

$6000.00 is more than $1000.00 and way more that 20 cents.

And ...

12% is more than 4% and much, much higher than 0.001%.

Let's say you attain that magical number of $250,000 and are now "Rich".

You pay $46,000 in federal income taxes, or 18.4% of your total income.

Which is, I am sure you know by now, more than .......... etc.

How bout a cool million?

You pay $196,000 in federal income taxes, which represents 19.6% of your total income.

What if you are Tiger Woods and you used to make $80,000,000 a year?

Under this system you would have paid $15,996,000.00 in federal taxes or 19.9955% of you total income in taxes.

What I've described here is what is typically described as "The Flat Tax".

But, as far as I'm concerned, it ain't flat at all.

The more you make, the more you pay in taxes, which is as it should be if you're gonna tax income.

And ..... the more you make, the higher your tax rate.

Although, not by much and it does flatten out at the very top.

Still, it is "progressive".

The gravy here is that you can now fire your accountant.

(Sorry Doug, Willy, Loris. This isn't personal, and I still love you all very much) and most of the IRS.

And here is the most elegant part, regardless if you make $20,001.00 ... $25,000 ... $50,000 ... $250,000 ... a cool million ... or $80,000,000, you are secure in the knowledge that every single American anywhere in this glorious land who made the identical amount of income, paid the identical amount in federal income taxes, regardless of place of residence, fertility, charitable and religious proclivities or anything at all.

Now, wouldn't that be a nice feeling?

"This isn't enough income to fund the government." You might say.

The system we have now doesn't provide sufficient income to fund the government, nobody seems overly concerned about that.

This one has been bouncing around for the past couple of days, this particular version of the story is from The Guardian.

Our favorite part comes in the last paragraph.

As an aside, Ms. Lagarde swore that she was intent on adopting her own personal austerity budget immediately upon receipt of her new Wolf Systems Solar Storm 32S.

As always click on the photo for the entire story.

Christine Lagarde, scourge of tax evaders, pays no tax

IMF boss who caused international outrage when she suggested that Greeks should pay their taxes earns a tax-free salary.

Kim Willsher in Paris

Here's just a little more nonsense resultant from our nonsensicle tax code.

From Rueters, this FAIL like much of the rest of our system of taxation is the consequence of trying to work social policy through the tax code, which should be an instrument for raising revenue for the government and nothing else.

The funniest thing to me about the growing brewhaha over Google and now Apple's perfectly legal (and dare I say it? ... moral) by the letter application of our moronic tax code is the fact that their approach is so well known and by the way so pervasive, that not only does it have a name, "Double Irish With A Dutch Sandwich" it also has a Wikipedia page.

From Wikipedia.

As always click anywhere below for the entire article.

Double Irish arrangement

Overview

Typically, the company arranges for the rights to exploit intellectual property outside the United States to be owned by an offshore company. This is achieved by entering into a cost sharing agreement between the U.S. parent and the offshore company, in the terms of U.S. transfer pricing rules. The offshore company continues to receive all of the profits from exploitation of the rights outside the U.S., without paying U.S. tax on the profits unless and until they are remitted to the U.S.[2]

It is called "The Double Irish" because it requires two Irish companies to complete the structure. The first Irish company is the offshore company which owns the valuable non-U.S. rights. This company is tax resident in a tax haven, such as Bermuda or the Cayman Islands. Irish tax law provides that a company is tax resident where its central management and control is located, not where it is incorporated, so that it is possible for the first Irish company not to be tax resident in Ireland. The first Irish company licenses the rights to a second Irish company, which is tax resident in Ireland, in return for substantial royalties or other fees. The second Irish company receives income from exploitation of the asset in countries outside the U.S., but its taxable profits are low because the royalties or fees paid to the first Irish company are deductible expenses. The remaining profits are taxed at the Irish rate of 12.5%.

For companies whose ultimate ownership is located in the United States, the payments between the two related Irish companies might be non-tax-deferrableand subject to current taxation as Subpart F income under the Internal Revenue Service's Controlled Foreign Corporation regulations if the structure is not set up properly. This is avoided by organizing the second Irish company as a fully owned subsidiary of the first Irish company resident in the tax haven, and then making an entity classification election for the second Irish company to be disregarded as a separate entity from its owner, the first Irish company. The payments between the two Irish companies are then ignored for U.S. tax purposes.[1]

Dutch Sandwich

The addition of a Dutch Sandwich to the Double Irish scheme further reduces tax liabilities. Ireland does not levy withholding tax on certain receipts fromEuropean Union member states. Revenues from income of sales of the products shipped by the second Irish company are first booked by a shell company in the Netherlands, taking advantage of generous tax laws there. Funds needed for production cost incurred in Ireland are transferred there, the remaining profits are transferred to the first Irish company in Bermuda. If the two Irish holding companies are thought of as "bread" and the Netherlands company as "cheese," this scheme is referred to as the "Dutch Sandwich."[3] The Irish authorities never see the full revenues and hence cannot tax them, even at the low Irish corporate tax rates. There are equivalent Luxembourgeois and Swiss sandwiches.

Companies using the arrangement

Major companies known to employ the Double Irish strategy are:

I left the list out just because I wanted you to give Wikipedia a click as I couldn't figure a way to abbreviate this post and still have it make sense.

The moral remains constant.

The lower the rate, the less incentive to create and exploit loopholes in your tax code and more importantly the greater the incentive you create for the rest of the world to bring their taxable income to you.

That's a good thing.

Best of all, the only cost of this approach accrues to your corrupted government types who lose the ability to exchange tax writing favors for political power.

Be still my beating heart.

From The New York Times, here's yet another lesson on the consequences of our dumbass tax policies.

As always click on either photo for the entire piece.

Recommended.

How Apple Sidesteps Billions in Global Taxes

Published: April 28, 2012  By CHARLES DUHIGG and DAVID KOCIENIEWSKI

The following is taken from Zero Hedge.

With apologies to Tyler Durden, I took for all practical purposes the entire post as I couldn't figure a way to abbreviate it and still suck you into clicking through to read it all.

Following the all time record high February budget deficit of $232 billion, the US March budget deficit number is in, and in addition to being bigger than expected, coming at $198.2 billion on expectations of "only" $196 billion, the government outlay in the past month also is the largest March deficit on record.

This brings the total deficit in fiscal 2012 to $779 billion, which is to be expected for a country gripped in total political chaos and which is unable to either raise revenues or lower spending.

What is more disturbing is that over the same period (Oct 1 2011 - March 31, 2012), the US government issued $792 billion in debt, a trend that will continue.

What is most disturbing is that the comparable tax revenues net of refunds, "matching" this increase in deficit and spending, are only $693 billion, in other words the US government is funding well more than half of its cash needs with debt rather than with tax revenue. 

The chart below speaks for itself ...

... as does the long term chart.

Now, from Learn Liberty.org who typically do a very nice job of explaining economic issues in terms most civilians can easily understand, a two minute vid boiling the conversation about the deficit down to terms practically anybody can grasp.

Followed by an incomplete (IMHO) conversation having to do with the historical fact that over the past 50 years, massive changes to the tax rate and code have made very little difference in the government's total take as a percentage of GDP.

That which the left seemingly finds impossible to grasp is the notion that people make decisions about work and money and subsequently change their behavior in response to the tax code.

Raising capital gain rates influences some people to hold assets who would otherwise be sellers.

Reduced sales of financial assets yields a reduction in federal tax receipts as assets become locked in place while dampening economic activity as new endeavors find it more difficult to obtain capital.

Raising marginal rates on labor causes some people to work less as work becomes financially less worth the extra effort.

Fewer hours yields lower incomes along with reduced income and payroll taxes.

Which is why lower tax rates and a simplified tax code will always inspires economic growth and subsequently provide enhanced funding for government.

Here's just another in a long line of examples having to do with why that "Tax the Rch' idea never works.

Sneaky bastards just up and move away ..... take their money with em.

Someone else gains access to their disposable income and you of course, don't get squat.

As usual click on the photo for this Wall Street Journal story.

Tax Haven's Tax Haven Pays a Price for Success

By DEBORAH BALL 

ZUG, Switzerland—Developed nations from Japan to America are desperate for growth, but this tiny lake-filled Swiss canton is wrestling with a different problem: too much of it.

Zug's history of rock-bottom tax rates, for individuals and corporations alike, has brought it an A-list of multinational businesses. Luxury shops abound, government coffers are flush, and there are so many jobs that employers sometimes have a hard time finding people to fill them.

But when Stefan Hurschler, a man who works with the disabled, and his schoolteacher wife decided to expand their family and wanted a bigger house, they found nothing in Zug they could afford. They moved to Zurich, and Mr. Hurschler now commutes back to the town he grew up in.

"There are older people who still live [in Zug] because they bought their homes in the 1960s," said his wife, Lilian. "Or there are the very rich. But there isn't much of a middle class."

If Switzerland is the world's most famous tax haven, Zug amounts to a haven within a haven. It has the highest concentration of U.S.-dollar millionaires in Switzerland, a country where nearly 10% of households meet that standard, according to Boston Consulting Group. The highest personal income tax anyone in Zug has to pay is 22.9%, and companies pay an average of just 15.4%—rates lower than Switzerland's average and far below top rates in the U.S.

Here's a nice little chart that comes with an editorial from the Wall Street Journal.

The chart is so good at making it's point I don't think you necessarily need the editorial, but if you want it you can link it up by clicking on the chart ..... as usual.

This is pure human nature at work here.

If most of your profits are going to go to the government anyway but your losses are your own, why bust your ass, why put your capital at risk, why do anything other than the bare minimum?

If you want some more revenue for public development, your social programs, a couple more wars or straight out vote buying, you are going to have to figure out how to grow the economy.