Can We Make Taxes More Fair?

If there is one entity that is despised more than any other in the United States it is probably the Internal Revenue Service (IRS). It is the agency responsible for taking money out of our paychecks and ensuring that people pay up when their tax bill comes due. The tax code is thousands of pages long and gets longer every year.

Any dollar you earn is subject to taxation in one form or another. Examples include:

• Retirement accounts are taxed when the money hits your bank account
• Wage income
• When someone dies taxes are paid on the estate
• Excise taxes exist on certain goods
• Once you earn Social Security you pay tax again 
• You pay taxes on investments (called capital gains taxes).
• You pay tax on money earned outside the US 
• Corporations pay up to a 35% tax rate on their profits 

Social Security and Medicare tax are slightly different. You pay half of the 15.3% tax requirement up to a certain income amount and your employer pays the other half in the form of payroll taxes.

The above is a very simplistic view of how our current tax system works. People are frustrated with the IRS and the tax code because it doesn't appear to be transparent or fair. I have seen examples of a person making twice the salary I do pay a tax percentage that is actually lower than mine. Why would this be?

• People who earn more are more likely to use their money in such a way that would qualify them for exemptions or deductions
• People who are wealthy enough and make their money through dividends and investments are taxed at a lower rate than standard wage income (15%)
• Those with wealth and influence convince lawmakers to give their enterprises or themselves a tax deduction through lobbying
• Those who make less income have a greater impact to their take home monies due to the Social Security and Medicare tax - small businesses take a big hit since they pay the entire 15.3% rate.

Another reason people complain is that the money paid in salaries and the cost of goods doesn't accurately reflect their real value. Companies seek to ensure they keep their profit margins first and usually compensate for their overhead costs by passing them onto consumers in the form of price increases, moving their operations outside the country, or cutting wages.

Are there alternatives to this system? There are a couple being proposed by grass roots elements: a Flat Tax and what is called the Fair Tax. 

A flat tax would apply to all forms of income above deduction and exemption amounts at the same rate. This method simplifies overhead, but doesn't eliminate the SS/MC tax or any other component within the existing tax infrastructure. According to the chart below, higher income people would pay a lower total tax percentage than the poor because social security tax is not paid above certain income amounts (Flat Tax rate of 15%):

Taxable Income (inc standard deductions)	Flat Income Tax	Flat Real Tax Rate
20000	3000	22.65%
30000	4500	22.65%
50000	7500	22.65%
75000	11250	22.65%
100000	15000	22.65%
250000	37500	19.53%
500000	75000	18.44%

This method could be improved by eliminating "special" deductions, raising the tax threshold to the 15% tax bracket, or reducing the tax rate. Currently however, proponents would leave the current deduction and tax collection apparatus in place.

The third method is called the "Fair Tax," a completely different method of raising revenue. Instead of taxing income, end point consumer spending is taxed instead. An individual keeps their entire paycheck and any tax owed is discretionary. Certain spending is not taxed, including:

• Charitable donations
• Money spent paying debts (not credit card debt)
• Any item considered "used" - any item that had tax paid on it before is not taxed again
• School tuition
• State income and sales taxes

It is argued that the Fair Tax is naturally progressive since those who earn more will spend more and will spend on "higher class" goods. 

The Fair Tax also includes what is called a "prebate." Depending on the size of your household, you receive a check from the government that "preempts" tax you will pay on goods and services that month. The prebate is larger for bigger households (much like a deduction) but every household gets a check. The benefit is lower income individuals and families spending total money at or below the poverty line pay no tax at all. The prebate is not paid to people who aren't residents of the US (including illegal immigrants).

Another argument in favor of the Fair Tax is that the only overhead incurred is ensuring that businesses collect and pay the tax itself and that businesses pay tax on what would be considered "consumption". There are no payroll taxes, social security taxes (Social Security and Medicare is included in the actual tax rate), etc. and there is no tax paid in the manufacturing of an item, only its consumption. The price at market would thereby be more accurately reflected and an individual can see just how much they have to pay to support the Federal government. The reasoning behind this is that businesses pass the tax they owe to the consumer, so the actual tax incurred is hidden.

As far as the government itself is concerned, the Fair Tax calls for the elimination of the IRS as sales tax collection infrastructure is already well established. The state tax agency would collect the federal tax and pass it along to the US Treasury. Lobbying groups also lose their bargaining power.

According to fairtax.org, in order to maintain the current level of revenue generated by income and social security taxes, the FairTax rate would be 23%.

What are the drawbacks if any?

• Tax is collected only at the point of consumer purchase and licensed businesses are free to make business transactions tax free - it may be more difficult than it is claimed to ensure compliance
• All goods consumed are taxed including food, medication, and utilities which are often exempt from state sales taxes; see how much your "free spending prebate" would help you here.

There are plenty of tax calculators online - but if you want to see how different tax schemes would impact you visit:

Current method: IRS Tax Calculator

Use the following equation to determine your real tax rate:

(federal income tax + (total income x .0765)) / total income

For the flat tax, use the following equation:

(taxable income x (.15 + .0765)) / total income

To determine how much money you could owe via the Fair Tax use the Fair Tax Calculator

Decide for yourself what method of taxation would benefit you best and talk to your legislators about it.

Happy Weekend!

Windows vs Mac vs ... Google?

In the 21st Century it is an old story: there is a war for supremacy in the world of computing. Anyone who uses a computer has one opinion or another over which platform is better. A Windows user taunts with their gaming prowess and versatility while a Mac user flaunts their system's security, longevity, and creative know-how. Competition can get downright nasty or you get some interesting parodies like: this

This blog doesn't seek to settle the debate once and for all, but I shall try to objectively evaluate the different systems I have used and describe what I think works for me.

We don't rely exclusively on conventional desktops and laptops anymore; in fact we ask for more and more mobility and flexibility with our computing capabilities. Not to say the conventional laptop is going anywhere anytime soon. Business people, designers, engineers, gamers, and your average joe still need the regular computer for power tasks. However, with iOS, Android, and Windows Mobile thrown into the mix, suddenly there are a lot more options and ever expanding choices for touchscreen capable devices and smartphones.

The bottom line is this: what do you need/want out of your computer? Every choice we make as human beings is a cost vs benefit situation. When we spend a lot of money on a new computer or phone, we want to make sure we are getting our money's worth and would prefer to do our work to the system's potential. So what is it that these systems can do at a high level and what sets them apart?

Microsoft Windows has been the workhorse of the computing world for many years. It is difficult to go anywhere and not find a computer that runs one version of Windows or another. Because it is everywhere, it makes sense to even have compatible add-ons or aftermarket applications on a non-Windows machine. In this mobile, touchscreen happy world, Microsoft tried to shake the market with the completely re-designed Windows 8. 

It has a new tile based 'metro' interface in addition to the standard Windows desktop (with a couple of caveats we will get to later). They added an app store and injected themselves into the cloud with apps like SkyDrive. The interface is also compatible with tablets, touchscreens, and can still be used on the every day computer, so in essence you can get the best of all worlds ... right?

Not so fast!! 

The market at large has responded pretty poorly to Windows 8. I don't find this surprising as Microsoft seems to go through phases in what operating systems are good or bad. Windows 95 was horrifically unstable, but Windows 98 was a workhorse for many years. Windows 2000 was another dud, but it was followed by the recently retired long timer XP. Windows Vista had the first "next gen" interface, but failed miserably due to its large system footprint and constant crashes (you needed a high resource PC just to make it work - my first laptop had 512 MB of RAM and a single core Celeron processor running Vista, OUCH!) A wild Windows 7 appeared, fixed many of the bugs from Vista and dramatically improved the user experience. Windows 8 seems to be following this pattern. Why?

 Yeah - THAT Thing

In the first release of Windows 8, Microsoft mysteriously removed the Start Menu - the icon of the Windows user interface. From that button you could access every file, program, and control setting on your computer. In Windows 8, the Start Menu is gone completely and you have to do some funky mouse movement to the right of the screen or hit the Windows key to open the Metro interface; the Start Menu's replacement. In 8.1, the Start Button returns, but the Metro interface still opens in lieu of the menu. Supposedly you can install a hack to get the original Start Menu back or change your settings to open your machine to the desktop directly, so it is feasible to work around this particular gripe. 

What else is good and bad about Windows 8?

Pros:

• Access to legacy and next gen Windows applications (Office)
• Can be used on most any hardware platform you want. Some Windows 8 devices are "All in One" PCs which are like flat-screen TV's, a large tablet, and desktop, all in one platform. Cool!

• Security apps built in
• Cost effective for basic models - some start in the $3-400 range.
• Microsoft is trying to create a platform that can fit any function or feature associated with computing - referring to the Surface platform. It is a tablet, laptop, and can be set up in a desktop configuration with the right accessories. They introduced a larger screen in the Surface 3, so it should be more palatable to everyday users.

Cons:

• Does not function on any hardware platform particularly well - to be used effectively, your computer should have a touchscreen. 

• Full screen apps and associated UI commands for touch and keyboard don't make a lot of sense from an interactive point of view
• App store is nowhere near as developed as Apple or Android
• To use Surface's "all in one" style system you have to spend as much money or more than you would for Apple's desktops or laptops because the Surface doesn't come with any accessories.

Ugh, I cannot for the life of me determine how to best use the new user interface. You need to scroll in a number of ways to get to different Windows 8 style apps if more than one is open for starters. (Scroll from left > tap - or - hold > scroll left/right). 

Also, if you are using a small screen like a tablet, the regular desktop is tough to use. A keyboard is necessary to use Windows without compromising screen usage (which is extra if you buy a Surface as already mentioned). The tile interface doesn't work well with large screens either as I've had to scroll excessively to find the apps I wanted. I would rather have the regular Windows desktop we are familiar with on a conventional laptop. You can set up a Windows 8 computer to work this way, but you cannot remove yourself from the new tile interface when hitting "Start."  If Windows 9 can beat these inefficiencies, Microsoft can regain the advantage in the greater computing market. I don't think it would be so bad to separate a desktop OS from a mobile one. (In my humble opinion of course.)

Macs are the systems I am personally the least familiar with; I have used Windows almost exclusively because of its versatility and breadth of use. My first experiences with a Mac were "how do I use this thing without the right mouse click?" I also had gripes with the fact that everything Apple did was proprietary, I didn't have a lot of control over how my system was run, price, and concerns about cross compatibility with the applications I used. To each their own right?

Over the past few months I have tried tinkering with Macs when I got the chance. Much to my surprise, I found the UI learning curve to be much lower than I expected, Macs now have a host of apps already built in, access to its infinite media repository iTunes, extensions or apps for Microsoft applications like office, and data sharing/syncing with other Apple devices. Neat!

One thing that does impress me about Apple for both Mac and iOS is their emphasis on usability. Apple users like that their devices just plain work, work well, and look sleek and clean. I can't argue with that. I also found myself having fun with the track-pad. There are a host of apps downloadable from the App Store - one of Apple's hallmarks.

I also give Apple points for longevity. I've seen old iPhones that operate with little to no slowdown and Macbook Pro's from 5 years ago that work like new, even with newer (and now automatic/downloadable) OS updates.

Apple comes across to me as "run your apps, not your system." Apple also makes slow changes to how you interact with the device. Though the graphics and look have improved, commands and interface layout seem to be almost the same as the Macs I tinkered with in the 90's. Here's to consistency.

Per my argument about desktop vs. mobile platforms, Apple has a very defined line between both environments. If you want a touchscreen and mobility, get an iPad, iPod, or iPhone. If you want a desktop or laptop MacBooks or iMacs are the way to go. Apple has given no indication that they will introduce touchscreen capabilities into their laptops and desktops, but there are accessories you could add on for that purpose in some cases. You don't have the "all in one" capability that Microsoft has, but you can share your data across all of your Apple devices and apps exist in each environment that are suited for those environments.

I'd like to summarize my pros and cons for Apple as follows:

Pros:

• It just works - the machine, system, and UI
• Comes with apps you can use right away and share data across all Apple devices
• Longevity & stability over time
• No sudden changes in user interface after an upgrade
• Creative workhorse
• App Store for lots of new stuff right in front of you 

Cons:

• You need Apple or Apple compatible devices to share data or play media
• Limited hardware options - there are only a handful of desktop and laptop platforms
• Little control over the actual operating system
• Purchase price is much higher on average than competitors

Some things that are uniquely Apple - like the Thunderbolt port or Apple TV - I'd say are both pros and cons. Those ports allow for light speed transfer of data, but you need Apple adapters to get HDMI, VGA, or other ports. Apple TV allows for wireless playback and auto sync of movies, music, and other media, but you need Apple's media apps (iTunes) to do it. Though you can get Netflix, MLB.TV, and other sites if you have accounts for them.

So that's it right? Far from, there is a newcomer on the block: Google Chrome has evolved from a simple internet browser to a full computer, the Chromebook! Wait ... what? How does that work? Essentially, Google took their browser and Chrome app store, created a user interface, integrated some computer functions (remote desktop, a file browser, wi-fi hookup, and printing) into the browser and installed it on a laptop with some physical memory. You have a platform with little operating overhead and it is therefore extremely fast - since there is nothing to boot, start-up is in 5 seconds flat! There aren't any moving parts either so it doesn't overheat easily.

Chromebooks can do anything Google does: Maps, Docs, Drive, Music, Gmail, Calendar, etc. Any app that can run on Chrome can run on a Chromebook - with a couple of exceptions: you can't upload your own music into Google Play directly from Chrome OS (this has supposedly changed, but I haven't seen this feature work), but you can from a Windows or Mac computer. Nor can you run Mac or Windows executable files. 

A Chromebook is not a workhorse so don't expect to edit video and music or play high resource games, but you can do most basic computing capabilities with it like edit a word document, listen to Pandora, or update your Google/Android contact list. Oh yeah, Google data syncs to any device you have Google apps or Chrome installed on - Android, Apple, or Windows.

Google's Web App Store gives you access to a lot of functions that you would on a "conventional" laptop. You can install Netflix, Facebook, Drive, etc. which essentially "point" to the website and install an icon and URL into the interface. I think it is basically a bunch of bookmarks in a desktop UI.

The caveat is that, for the most part, all of these functions are done in the cloud. A Chromebook is a portal unto the internet; very little is done on the device save direct input into the internet. Therefore, security and privacy concerns are introduced. Google is introducing offline capability to some of its apps like Docs, Sheets, Gmail, and Keep, then syncs once you are re-connected to the web.

Ooh, similar to Apple TV, you can get a nifty contraption called Chromecast and beam ("cast") content to a TV with a HDMI port (for 1/3 the cost of Apple TV at that). You can cast Netflix, YouTube, Pandora, Google Play Music and Movies, and a number of other sites from your Chromebook (or any device with the Chrome browser installed) directly to your TV. What you cannot beam is your own local content, unless it is stored in a compatible site within the cloud. (e.g. you can cast a movie you have stored on Google Play Movies, but not a movie stored on the external hard drive next to you).

In terms of mobility, Google can keep up with Apple and IMO surpasses Windows. I would summarize Chrome OS as:

Pros:

• Lightweight/mobile - and therefore FAST!
• Cost effective (2-300 dollars)
• What Google can do, Chrome OS can do
• Cross compatible with any device using Chrome or other Google apps
• Automatic updates

Cons:

• Cannot run executable applications
• Not intended for "power" PC functions like gaming or media creation
• Privacy concerns
• Need a Google account to use Chrome OS

So which is best? As I wrote above, it depends on what you are looking for. It isn't a one size fits all - which is something I love. If you are an everyday user that wants something that most other people use, want the breadth and depth in available hardware and software (or games), and are moderately tech savvy, Windows is probably your thing. If you want consistency, stability, usability, creativity, and can afford it, get a Mac. If you spend most of your time lounging around the web, don't heavily invest in games or other "power" PC functions, have a Google account, and want to get your data from essentially anywhere, use Chrome.

I'm sure the PC Wars will continue unabated :)

I didn't mention a lot about security since that space is constantly evolving - faster than operating systems and hardware platforms can possibly match. All computers have a level of risk of compromise - yes, even Macs.

This post was compiled on a Samsung Chromebook - neat huh?