Tax Discrimination - It's that time again

[Danoff]

I never thought about the "only pay for what you use" theory. That would be fair, and would encourage conservation of resources and services. I'd be up for it. But you'd have to have some government credit account or something to keep tabs on exactly what you use. That's 280,000,000+ account records...

It wouldn't really be practical to implement, but that's the ultimate in fairness. And you're right, it sends the right signal to everyone about usage of public resources.

And why would you prefer a higher sales tax over an income tax? You would be reminded of the tax every time you bought something, instead of just once a week for the income tax.

Sales tax is semi-voluntary whereas income tax is completely involuntary. Both create black markets, though the sales black market would be unbelievable given how much the government needs to collect these days to stay as bloated as it is.

Sales tax is simpler. Fewer people are collecting the taxes and the people who are paying them are essentially agreeing to pay those taxes in order to get the goods/services. Plus, you don't have to keep as much information about citizens. Income tax requires that the government knows who you work for and how much you get paid. Sales tax only requires that the government know what is being sold - not even who its being sold to or for what reason. It removes a great deal of government oversight.

One reason that a flat tax makes a lot of sense (besides being fairer) is that it simplifies the tax process. Right now the tax code isn't even completely understood by tax professionals or IRS employees. There wouldn't be a need for tax professionals or 90% of IRS employees (both of which cost taxpayers a great deal every year) if there were a simple flat income tax. Even less would be required to keep track of a simple flat sales tax.


Another reason I like the sales tax is that it offers a more fair way for the government to coerce you into buying certain products and giving the poor tax breaks (not that I'm big on either of those things). The government can exempt bread, milk, some meat, etc. from taxation to give the poor a break - but to do so they have to be fair and make it free of taxation for everyone.

 

[Danoff]

I got interested in figuring out whether or not I'm benefiting from our "progressive" (ie: unfair) tax system. So I got to wondering what each person who pays income tax would have to pay in order to reach the same income tax levels we have now.

Total 2007 US Budget: $2.5 Trillion
Percentage of Budget from Income Tax: 45%
Total Budget from Income Tax: $1.125 Trillion
Number of Adults in the US: ~220 Million

So if the income tax burden was divided equally among all adults (including prisoners, mental patients, etc.), the tax burden would come to: ~$5000



I pay more than that in taxes on my way to work!

But how many adults are paying taxes? Well, the number of tax returns is ~104 million. Joint returns were 45 million. Head of household returns were 13 million (I think that means your wife/husband who doesn't work doesn't file). So that adds up to ~165 million taxpayers, with 50 million getting away without paying somehow.

So how much is it per share of the 165 million people who pay taxes:

$7k.

So if you paid less than $7 grand in income tax (per person) last year, you owe quite a few people a thank you note.

Edit: As a side note, I don't even want to tell you how many people's share my wife and I paid for last year.

 

[Omnis]

What are the cutoff points between each tax tier?

 

[Danoff]

What are the cutoff points between each tax tier?

If you're trying to figure out how much money you'd have to make to cross that 5k or 7k line, it's somewhere around $50-$70k per year on average. But it's highly variable because of the number of deductions out there. You'd have to make substantially more to be over the line, for example, if your wife didn't work. A huge mortgage also helps.

 

[Sureboss]

I presume you work on a rate basis, like us?

I think ours is 40% at over £30,000 pa. They just got rid of the 10% and reduced the next band to 18 from 20. Reimbursing people who lost out (Logical!).

In reference to:

So if the income tax burden was divided equally among all adults (including prisoners, mental patients, etc.), the tax burden would come to: ~$5000

I pay more than that in taxes on my way to work!

You drive quite a few miles?

 

[YSSMAN]

Simple answer:

Don't make so much money, stupid!

(har har)

---

Hmmm, $7000 to pay in every year, eh? Well... That'd be just over 40% of my annual income (give or take), so, unless I'm getting free healthcare and a free college education, I'll stick with my 15% tax rate.

At least in my opinion, if I'm making more money, I'm more likely to not care much about paying higher taxes. Its not "fun," but its there for a reason. I suppose that all depends on if you believe in those reasons or not...

 

[Danoff]

Its not "fun,"

"Fair" would be the word I'd use. Fair means you get what you pay for and you pay for what you get.*


*I don't take credit for this line but I can't remember who said it first.

 

[YSSMAN]

The notion of "fair" is going to depend on the person, I believe. As someone who has been on the receiving end of government aid, I understand how important it is, and consequently no matter how much money I may make in life, I'm not likely to complain about it. But, that's just me and my crazy ideas...

 

[Danoff]

The notion of "fair" is going to depend on the person, I believe. As someone who has been on the receiving end of government aid, I understand how important it is, and consequently no matter how much money I may make in life, I'm not likely to complain about it. But, that's just me and my crazy ideas...

That's fine for you to say about yourself. It's when you start saying that for others that it becomes a problem.

 

[emad]

That's fine for you to say about yourself. It's when you start saying that for others that it becomes a problem.

So what happens to people who make under $20,000/yr? When I was a student, my yearly income was $10,000. Is it then fair to pay $7000/yr in taxes? 7 grand is a year of tuition here. Add another 1-2 grand on course materials each year. Going by this logic, someone of my income level would have been entirely unable to attend university to obtain a higher education which would allow a job with reasonable pay.

 

[Danoff]

So what happens to people who make under $20,000/yr?

You mean like, for example,... $0/yr? It's kinda hard to fork over your $7k of the government burden when you're not working.

Edit: Somehow I doubt that my property tax collector will take that excuse.

But be not concerned, I know exactly where we can cut government spending to get that $7k (or $5k depending on how you count) under control.

IMO, the most fair method would be to choose a percentage based income tax without the brackets we have now.

Fair in the sense that it's totally unfair. Yes, it is our income being taxed, but only out of convenience. The basic problem is getting money to the government, and this is how they chose to do it.

 

[emad]

Even now, I'm an intern. My income is $21,000 and I have loans to pay off. Shall we let the interest accumulate? Financial responsibility dictates that I should get these paid off asap. That's what I'm working on doing at the moment. Every spare dollar (within reason) goes to getting my loans cleared out. At this rate, I'll be debt free by February. My company will hire me in two weeks time. Once that's done, my income will go up pretty drastically (well over 30k). At least THEN, the 7k tax seems a touch more reasonable.

IMO, the most fair method would be to choose a percentage based income tax without the brackets we have now. After all, it is our income being taxed. Just like product purchases - 13% sales tax, for example. A 15-20% or whatever may be reasonable income tax seems fair. At least this way, regardless of income, you still pay the same percentage of your income as everyone else - you get the same percentage hit to your disposable income.

 

[Anderton Prime]

You cannot have an equal tax system in a capitalist society. It's an oxymoron. When it's "everyone for themselves," you can't impose rules to make everyone equal and the same.

An unfixable situation. Now fill out your forms and stop griping. Or become poor.

 

[Duke]

You cannot have an equal tax system in a capitalist society. It's an oxymoron. When it's "everyone for themselves," you can't impose rules to make everyone equal and the same.

Why not? Everyone paying an equal percentage of their income is equal, even if it means that people making more money are paying more money in absolute terms.

 

[Danoff]

Everyone paying an equal percentage of their income is equal, even if it means that people making more money are paying more money in absolute terms.

Equal in a way, but not fair.

You cannot have an equal tax system in a capitalist society. It's an oxymoron. When it's "everyone for themselves," you can't impose rules to make everyone equal and the same.

Uh... what? It's part of the constitution - government should treat citizens EQUALLY. Discrimination is for free individuals, not for a government of the people and for the people.

A flat rate I think would be in alignment with the constitution (whereas the current tax system is not). But I'd argue that a flat rate isn't a fair system.

A fair system (flat fee)is possibly impractical, but we should try to approach it as closely as we can. That's why I'd be in favor of a flat rate capped at a predetermined total. In my opinion, it's absurd for Bill Gates to pay for 200 people's share of the government.

...and here's why this is important:

Bill Gates only gets one vote. Voters need the feedback on the size of government. If most voters are shielded from the effects of growing government, they don't get the proper economic information when going to the polls. It's important for everyone to pay taxes. When rates go up, it's important for everyone's rates to go up. Otherwise the economic signal inherent in growing government is not getting through to the people it needs to - and that will result in exactly what we have now, a government that grows without end.

 

[Omnis]

So what happens to people who make under $20,000/yr? When I was a student, my yearly income was $10,000. Is it then fair to pay $7000/yr in taxes? 7 grand is a year of tuition here. Add another 1-2 grand on course materials each year. Going by this logic, someone of my income level would have been entirely unable to attend university to obtain a higher education which would allow a job with reasonable pay.

Why should person A steal from person B to finance person C? Besides, schools would get awfully competitive without government largess.

Solution incoming... :

...and here's why this is important:

Bill Gates only gets one vote. Voters need the feedback on the size of government. If most voters are shielded from the effects of growing government, they don't get the proper economic information when going to the polls. It's important for everyone to pay taxes. When rates go up, it's important for everyone's rates to go up. Otherwise the economic signal inherent in growing government is not getting through to the people it needs to - and that will result in exactly what we have now, a government that grows without end.

Bingo.

 

[YSSMAN]

So what happens to people who make under $20,000/yr?

People like you and I pay 15% of our yearly income to the feds if we're filing for single status stuff. We're making just enough to not be officially in "poverty," but bills are tight (generally speaking). Of course, that also gets into a discussion of what is a living wage and what is not, but this isn't the place for it...

Most people have enough common sense to want to keep lower income people and families paying a smaller portion of their income in taxes, but the problem we're starting to see is how best to separate the system in to equal or fair terms that keep people on the top (and bottom) happy. I'm personally in favor of the progressive system, but I'd give that up for a consumption tax if possible. The simple answer is that there really aren't any good answers when it comes to taxes, mostly because it'll never make anyone happy.

 

[FoolKiller]

I thought I would give this a quick revival as tax day is fast approaching.

Mine were filed and my return recieved (technically, it is my wife's return as I owe) about six weeks ago.


So, anyone want to complain about how much money the government stole took from you this year?


Oh wait, according to Senator Harry Reid you voluntarily gave it to them.


If its voluntary can I get mine back, please?

 

[Danoff]

I got interested in figuring out whether or not I'm benefiting from our "progressive" (ie: unfair) tax system. So I got to wondering what each person who pays income tax would have to pay in order to reach the same income tax levels we have now.

Total 2007 US Budget: $2.5 Trillion
Percentage of Budget from Income Tax: 45%
Required Income Tax: $1.125 Trillion
Number of Adults in the US: ~220 Million

So if the income tax burden was divided equally among all adults (including prisoners, mental patients, etc.), the tax burden would come to: ~$5000

But how many adults are paying taxes? Well, the number of tax returns is ~104 million. Joint returns were 45 million. Head of household returns were 13 million (I think that means your wife/husband who doesn't work doesn't file). So that adds up to ~165 million taxpayers, with 50 million getting away without paying somehow.

So how much is it per share of the 165 million people who pay taxes:

$7k.

So if you paid less than $7 grand in income tax (per person) last year, you owe quite a few people a thank you note.

I thought it might be fun to figure out what the new number is now that our government is spending so much more.

Total 2009 US Budget: $3.1 Trillion
Percentage of Budget from Income Tax: 45%
Total Budget from Income Tax: $1.4 Trillion
Number of Adults in the US: ~220 Million
Number of Taxpayers in the US: ~165 Million

Tax Liability Per Adult: $6363
or
Tax Liability Per Taxpayer: $8484

So if you paid less than $8484 (by yourself, not including a spouse), someone else is paying part of your burden of the government. Keep in mind that the 2009 Budget is actually Bush's. It goes up farther for 2010.

 

[FoolKiller]

Wow, I totally got away with about $5,000 then.

Thanks, guys!!!

 

[NLxAROSA]

I'd have to look up the exact numbers, but I think it will be similar over here in NL. We have a progressive income tax rate, which means that the rate goes up with your income. The highest rate is 52%, which starts at a salary of 55k euro and up.

So yes, if you earn 55k euro, you get around 26k net. Which is why I pay myself a certain salary from my company, and keep the rest of the money in my company, or pay it as dividend (which has a way lower rate). And lots of deductions of course.

EDIT: Just saw the first post was from 2006. Oops. Anyway, the above is still true.

 

[Duke]

Looks like my wife and I paid about our share this year.

 

[Keef]

I'd like to thank you all for giving me a free ride last year. I received about three times the unemployment benefits as I paid in income tax last year!

 

[Kylehnat]

So if you paid less than $8484 (by yourself, not including a spouse), someone else is paying part of your burden of the government.

Someone got a freebie on me! You're welcome! First round at the bar is on you, whoever you are .

I actually ended up with a refund this year, but I had to buy a new car to do it...otherwise I still would have owed a couple-hundred bucks.

 

[TheBook]

I got a whole $191 back from the Feds. Yay me...

However, I only paid $1000ish in taxes. I need to thank a whole lot of people, even if I only do work part-time.

 

[Public'sTwin]

I actually ended up with a refund this year, but I had to buy a new car to do it.

O_O

. . . cash for clunkers?

 

[Kylehnat]

No, state sales tax on new cars purchased Feb-Nov 2009 was tax-deductible. I found that out long after I purchased the car, so it was a nice surprise .

 

[ROAD_DOGG33J]

No, state sales tax on new cars purchased Feb-Nov 2009 was tax-deductible. I found that out long after I purchased the car, so it was a nice surprise .

American Recovery and Reinvestment Act?

 

[FoolKiller]

To add to all the tax talk:

http://hosted.ap.org/dynamic/stories/U/US_NO_TAXES?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT

Nearly half of US households escape fed income tax
By STEPHEN OHLEMACHER
Associated Press Writer


WASHINGTON (AP) -- Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it's simply somebody else's problem.

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.

Most people still are required to file returns by the April 15 deadline. The penalty for skipping it is limited to the amount of taxes owed, but it's still almost always better to file: That's the only way to get a refund of all the income taxes withheld by employers.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

 

[Joel]

ABSURD. Although I shouldn't talk, because in Canada we are enslaved by the government for 7 months of our annual income.