@Anthony Wick
@Anish Tolia
@Shiloh Lundahl
You’ve all made good points. Here’s my experience as a Canadian living in the U.S. for ten years now. For additional context, I’m a permanent resident but not a citizen, so I’m neither Republican nor Democrat (why only two choices?!) and “don’t have a dog in the race”, yet am taxed without representation, which I read somewhere is a bad thing, but I digress.
In Canada I had much higher income tax which kicked in at lower income brackets. And since I live in WA, I don’t pay state income tax. It’s a very regressive tax scheme (using the economic term) which has benefitted me personally. That, combined with more job opportunity (high tech) has dramatically accelerated my net worth. I had a job opportunity in OR which I didn’t take for one because of taxes: WA is regressive and OR is progressive (state income tax but no sales tax). I’m an example of how those at a certain level reduce their taxes through mobility.
I hated the high taxes in Canada. I’d pay more than half in income tax, higher sales tax spending it, and again when I made money on my savings through capital gains. The capital gains in particular really irritated me because it felt like, after the pennies left over from taxes I then had to pay again.
But I never worried about my fellow human in the way I worry about them here. The U.S. is a really great place to make money, I did. But it’s a terrible place to be poor. There’s not much in terms of social safety net compared to Canada. So now I see what those taxes were paying for. Look we all want to pay less taxes and every government, here or in Canada, does a poor job of spending it. And as a “rational economic player” I will seek out and ensure I receive all the advantages that the tax scheme allows, that’s what the government wants me to do. But you get the society you pay for and we need to be very careful about the incentives and disincentives we set up. Much as I’ve benefited from the U.S. tax system and the opportunity it’s provided me, which I am grateful for, I see the signs of social erosion everywhere and a legitimately disaffected populace. The trend lines aren’t good, the system needs a reboot.
As a starting point, I think we should get rid of the 1031 exchange. In a previous post on this thread I suggested grandfathering existing holdings so they can make one final exchange as well as primary residence to avoid inhibiting mobility. I’m not against tax deferral, I just think it shouldn’t be geared towards one special interest group (us). The arguments about leaving money in the system to make more money should be applied more broadly through increased ROTH limits. That said, I’m not a believer in trickle down economics, so my tendency is to want to decrease sales tax to make the system more progressive, and move tax revenue from income tax to capital gains to allow the lower / middle class to more easily graduate to the “investor class” which we here are all a part of, with ROTH as the tax deferral mechanism to incentivize entry to the investor class. Oh, and while I’m pontificating and waving my magic wand, transfer payments from federal tax to municipalities since that’s where most of the services that affect our daily lives are provided, reducing reliance on property tax which is uncorrelated with ability to pay and thus one of the most heinous taxes devised.
