TAX THE RICH!

[makattak]

Oh, we already are:

http://www.aei.org/publication/new-cbo-study-shows-rich-dont-just-pay-fair-share-pay-almost-everybodys-share/



If you read the article, only the top 40% are net taxpayers and the VAST majority is the top 20%.

The bottom 60% are net government beneficiaries to the tune of about $10K per household.



Now, I couldn't help but think of this discussion when I saw that. How would we afford to pay for $10K per household as a minimum income? Well, we're already doing it, apparently. 

[Firethorn]

I'm not for increasing taxes on the 1%.  I'm interested in increasing the taxes on the .01%, where taxes paid tend to actually invert as tax shelters and the 15% cap on long term capital gains exceeds income from things like salary.

After that, well, it's to cost cutting, balancing the budget, while engaging in policies to encourage full employment.  If various low-paying businesses have trouble hiring people at minimum wage, they'll eventually pay more or go under from not being able to provide goods&services due to shutdowns from not enough workers.

[Balog]

What do they consider ".gov transfer"? Also does not take into account all the myriad non-Federal income tax taxes that people pay.

[bedlamite]

What do they consider ".gov transfer"? Also does not take into account all the myriad non-Federal income tax taxes that people pay.

Welfare, SS, subsidies.

[charby]

A compelling reason for a flat tax with no shelters or exemptions.

[Firethorn]

A compelling reason for a flat tax with no shelters or exemptions.

I don't think you can get rid of 'all' exemptions, but I remember reading recently that, especially today, the home mortgage tax credit has turned into a giveaway to the rich - most middle class types today aren't paying enough interest and don't have enough other itemized exemptions to take much advantage of it.

We're at the point that something like a 22% flat tax with a $10k initial deduction would be revenue neutral.  It would help the middle class, but really soak those .1%ers who lose the advantage structuring their income through long term capital gains.

[zxcvbob]

I'm sure as hell not getting $14100 per year in subsidies or transfer payments.  

AFAIK, the only money I've ever received from .gov was a few thousand in tuition tax credits.  I would have rather had lower taxes without the credits, because the tuition might have been cheaper.

I wonder if they are including the money we don't pay because of tax deductions and personal exemptions? (still doesn't add up to $14k)

[Firethorn]

I wonder if they are including the money we don't pay because of tax deductions and personal exemptions? (still doesn't add up to $14k)

Tax deductions and credits probably do feature in there, especially the earned income credit.  You might not get much, but the barely employed single mother of 3 kids gets a heck of a lot...

[RoadKingLarry]

I'm sure as hell not getting $14100 per year in subsidies or transfer payments.  

AFAIK, the only money I've ever received from .gov was a few thousand in tuition tax credits.  I would have rather had lower taxes without the credits, because the tuition might have been cheaper.

I wonder if they are including the money we don't pay because of tax deductions and personal exemptions? (still doesn't add up to $14k)

Apparently another fourth quintiler... I sure don't see $14k in .gov give backs anywhere in my numbers. My house is paid for, my kids are long grown, no student loans. I'd also have to question if they included other taxes like social security and Medicare deductions and any state or local taxes in the total of how much is paid out.

[sumpnz]

I'm sure as hell not getting $14100 per year in subsidies or transfer payments. 

AFAIK, the only money I've ever received from .gov was a few thousand in tuition tax credits.  I would have rather had lower taxes without the credits, because the tuition might have been cheaper.

I wonder if they are including the money we don't pay because of tax deductions and personal exemptions? (still doesn't add up to $14k)

Do you take the child tax credit?  Any of the other myriad of credits?

FWIW, that actually comes fairly close when you factor what I make, vs the federal income taxes I pay.  FICA and all state/local taxes are on top of that of course.

[zxcvbob]

Do you take the child tax credit?  Any of the other myriad of credits?

FWIW, that actually comes fairly close when you factor what I make, vs the federal income taxes I pay.  FICA and all state/local taxes are on top of that of course.

No, just personal exemptions.  And itemized deductions; mostly for state taxes and charitable contributions.  All the tax credits I've taken in my entire life probably add up to less than $20000.

[wmenorr67]

Curious if they are considering things like pre-tax deductions like health care?

[MechAg94]

I'm not for increasing taxes on the 1%.  I'm interested in increasing the taxes on the .01%, where taxes paid tend to actually invert as tax shelters and the 15% cap on long term capital gains exceeds income from things like salary.

After that, well, it's to cost cutting, balancing the budget, while engaging in policies to encourage full employment.  If various low-paying businesses have trouble hiring people at minimum wage, they'll eventually pay more or go under from not being able to provide goods&services due to shutdowns from not enough workers.

If you want to tax the people at the very top, don't define them in terms of income.  You might find that many wealthy people have zero income, but lots of capital gains and other stuff.  I recall a review of Nancy Pelosi's taxes one year and a great portion of her wealth was in tax free municipal bonds.  It wasn't a great interest rate, but it was a lot of money.  

Taxing income is just a way to inhibit middle class people from getting rich.  

I would personally rather see the income tax go away entirely.  Think about how many things in our society are defined by income tax regulations. 

[MechAg94]

I don't think you can get rid of 'all' exemptions, but I remember reading recently that, especially today, the home mortgage tax credit has turned into a giveaway to the rich - most middle class types today aren't paying enough interest and don't have enough other itemized exemptions to take much advantage of it.

We're at the point that something like a 22% flat tax with a $10k initial deduction would be revenue neutral.  It would help the middle class, but really soak those .1%ers who lose the advantage structuring their income through long term capital gains.

I get a mortgage interest deduction.  It does help quite a bit.  Do have any articles on this "giveaway to the rich"?  I would like to see that.

22% is a higher final income tax rate than I have paid ever (not counting SS, FICA, etc).  Do we really need to pay taxes based on Obama's wild spending?  Originally, the flat tax was revenue neutral at about 10%.
I am single filing with TurboTax.  No real deductions beyond mortgage, personal, and other taxes.  22% is way way too high. 

[charby]

I don't think you can get rid of 'all' exemptions, but I remember reading recently that, especially today, the home mortgage tax credit has turned into a giveaway to the rich - most middle class types today aren't paying enough interest and don't have enough other itemized exemptions to take much advantage of it.

We're at the point that something like a 22% flat tax with a $10k initial deduction would be revenue neutral.  It would help the middle class, but really soak those .1%ers who lose the advantage structuring their income through long term capital gains.

Drop the shelters and exemptions and the overall tax rate should go down.

[Firethorn]

If you want to tax the people at the very top, don't define them in terms of income.  You might find that many wealthy people have zero income, but lots of capital gains and other stuff.  I recall a review of Nancy Pelosi's taxes one year and a great portion of her wealth was in tax free municipal bonds.  It wasn't a great interest rate, but it was a lot of money.

I specifically mentioned 'long term capital gains', which are currently capped at 15%.  Municipal bonds and such are another shelter - they're untaxed.  Not sure if I want to get rid of that advantage*, but it's something to consider.  Capital gains are, as far as I'm concerned, still income, just 'unearned' as opposed to 'earned' which takes the form of salary, sale of services and goods produced.  Take an apartment manager who owns the apartments he rents.  The part of the rental income that comes from his working as a manager is earned income.  The rental income that would go to the owners if it wasn't him is 'unearned'.  That doesn't mean that unearned is bad, just treated differently tax wise.

*If you eliminate that deduction municipal loans would have to compete with commercial bonds, increasing the percentage that local governments need to pay in order to borrow money.  Meaning that you'd end up paying more for necessary(and unnecessary) improvements by local governments.

Taxing income is just a way to inhibit middle class people from getting rich.

The problem you have today is that a doctor with a practice might be paying the marginal 40% rate(effectively 30-35%), but Bill Gates, where effectively 100% of his income is capital gains today, is paying 15%, which is what a lower-middle class type making under $36k is paying.  Effective rate, Bill Gates(and others in his bracket) are paying the same percentage of income(earned and unearned) that people earning a mere $50k/year are. 

This means that our tax system is currently rather majorly regressive - there's a huge 40% HUMP you have to get over, but once you're over it you're clear sailing as far as income goes(15%).

I would personally rather see the income tax go away entirely.  Think about how many things in our society are defined by income tax regulations.

I agree, I just didn't think it was time to roll out the fairtax spiel.

I get a mortgage interest deduction.  It does help quite a bit.  Do have any articles on this "giveaway to the rich"?  I would like to see that.

Hmm...  I may have been wrong or hit an unreliable source.  The NAHB says that 2/3rds of the benefit goes to those who earn less than $200k and that they benefit more from it.  I just know that when I bought my house I only got to take the deduction 1 year - not enough to itemize beyond that.  On the other hand, there's some movement to replace it with a credit, which I think has some merit.

I should probably put it in the context that if I wouldn't just eliminate it - I'd add a housing credit to tax returns.  IE rich or poor, everybody gets the same amount.

22% is a higher final income tax rate than I have paid ever (not counting SS, FICA, etc).  Do we really need to pay taxes based on Obama's wild spending?  Originally, the flat tax was revenue neutral at about 10%.
I am single filing with TurboTax.  No real deductions beyond mortgage, personal, and other taxes.  22% is way way too high. 

22% is what I remembered off the top of my head for fairtax(which is actually 23% from their site).  The trick is that I was counting ALL income taxes, so yes, I was including SS, FICA, and such.  Assuming you're not stinking rich you'd still pay less than 22-23% because I'm drastically increasing the standard deduction.  Currently it's $6.2k, and I propose increasing it to $10-12k for a single person.

Example:
$80k income
-$10k standard deduction
$70k*.22=$15.4k in tax
Effective tax rate: 19% of gross income.


Currently:
$80k income
-$6.2k
$73.8k-> $5,081.25+$9,225=$14,306.25, 18%.

Hmm...  Might need to kick the standard deductible up to $15-20k.  Would get quite a few people out of paying income taxes at all, but that might not be a bad thing - saves a lot of people from having to file income taxes, and sadly a lot of minimum wage types pay the preparers obscene amounts of money just to do their taxes.

As for the rate itself - it's not just Obama's spending either.  We have a couple wars to pay for, as well as servicing and paying down our government's debt.  I will make no bones that I'm a proponent of a balanced budget and elimination of debt, so while I support elimination of wasteful spending I do not support dropping tax rates/income until we have actually STOPPED borrowing money.

Drop the shelters and exemptions and the overall tax rate should go down.

Yeah, it's just that, as I mentioned to MechAg94, I'm a balanced budget freak.  No reducing income until we're paying down the debt.  Eliminate the shortfall, start paying down our debt, THEN I'll support dropping taxes as the costs of servicing our interest drops.

[zxcvbob]

Yeah, it's just that, as I mentioned to MechAg94, I'm a balanced budget freak.  No reducing income until we're paying down the debt.  Eliminate the shortfall, start paying down our debt, THEN I'll support dropping taxes as the costs of servicing our interest drops.

Republicans like to ridicule "tax and spend Democrats" -- and perhaps they should.  But spend-and-dont-tax Republicans are even worse because they run up the debt even faster.

[charby]

Yeah, it's just that, as I mentioned to MechAg94, I'm a balanced budget freak.  No reducing income until we're paying down the debt.  Eliminate the shortfall, start paying down our debt, THEN I'll support dropping taxes as the costs of servicing our interest drops.

I think income to the feds will go up, but the people in the middle will pay less income tax. The wealthier people will be paying more.

[Firethorn]

I think income to the feds will go up, but the people in the middle will pay less income tax. The wealthier people will be paying more.

Somebody somewhere should have a database of 'sample taxpayers' that you can play with different scenarios and it'll tell you how much to expect.  Well, before people start reacting and changing their money management to avoid/exploit the new tax rules.

My general proposals:
1.  Put unearned income(IE capital gains and such) into the same progressive tax ladders as earned.  'Separate but equal' ladders, basically.  First $10-20k/year* is tax free, then it climbs up the ladder.  If you make over $1M a year you should pay around the same in taxes no matter if it's salary or investment income.
2.  Transform the mortgage interest deduction into a housing credit.  We shouldn't be encouraging people to stay in debt.  We shouldn't penalize the poor or those who have to move often for their employment and thus rent.
3.  Flatten the tax system as much as possible - increase the standard deduction/exemption, get rid of lots of the steps. 
4.  Like I've said before, keep it at a minimum revenue neutral, if not increasing income(through increased taxes on capital gains) until we've managed to balance the budget.  I support cutting federal expenses while we're at it, but getting into details on that would be a different thread.  At this point I'm also doubtful that we could cut enough, fast enough, to balance the budget.

*Exact amount is highly negotiable.  Consider it a yardstick

[MechAg94]

My 2 cents:
1.  I don't want to put anything more into the taxable income bucket.  There is enough crap that is taxed.  If you do that, you will soon find your self paying tax on every penny you make when you sell your house (or anything else for that matter).  Don't assume the minimums that exist today on capital gains will stay there.  I would rather remove taxable stuff that I pay like interest income. 
2.  If you change it to a credit, you just open the door for more screwed messes or back door welfare such as what the earned income tax credit has become.  It should be a deduction on actual expenses if it remains at all.  
3.  Flattening the tax rates would be great, but with the current group of political nutjobs in D.C., don't expect to get something out of it you like.  The legislation would probably end up at 20,000 pages or more and be just as bad as it was before.
4.  There are past examples of the FedGov taking in more money.  Did they pay down the debt or did they just spend more?  I think you know the answer.  Giving the Govt more money won't help without better governors.

No good changes are likely with the current people in D.C.  Change the people and a lot better changes are possible than what you mentioned.  

Somebody somewhere should have a database of 'sample taxpayers' that you can play with different scenarios and it'll tell you how much to expect.  Well, before people start reacting and changing their money management to avoid/exploit the new tax rules.

My general proposals:
1.  Put unearned income(IE capital gains and such) into the same progressive tax ladders as earned.  'Separate but equal' ladders, basically.  First $10-20k/year* is tax free, then it climbs up the ladder.  If you make over $1M a year you should pay around the same in taxes no matter if it's salary or investment income.
2.  Transform the mortgage interest deduction into a housing credit.  We shouldn't be encouraging people to stay in debt.  We shouldn't penalize the poor or those who have to move often for their employment and thus rent.
3.  Flatten the tax system as much as possible - increase the standard deduction/exemption, get rid of lots of the steps.  
4.  Like I've said before, keep it at a minimum revenue neutral, if not increasing income(through increased taxes on capital gains) until we've managed to balance the budget.  I support cutting federal expenses while we're at it, but getting into details on that would be a different thread.  At this point I'm also doubtful that we could cut enough, fast enough, to balance the budget.

*Exact amount is highly negotiable.  Consider it a yardstick

[KD5NRH]

I will make no bones that I'm a proponent of a balanced budget and elimination of debt, so while I support elimination of wasteful spending I do not support dropping tax rates/income until we have actually STOPPED borrowing money.

A big part of that would be foreign aid.  IMO, no borrowing money to give to other countries would be the logical first step there, and were there ever a Constitutional Convention, no charity while in debt would be one hard, fast and unambiguous rule I would push hard for.

[Firethorn]

A big part of that would be foreign aid.  IMO, no borrowing money to give to other countries would be the logical first step there, and were there ever a Constitutional Convention, no charity while in debt would be one hard, fast and unambiguous rule I would push hard for.

The problem with this is that eliminating foreign aid, while perhaps a worthy start, wouldn't even come CLOSE to closing the deficit.

Foreign Aid:  Around $23B
Deficit: $680B.

Foreign aid, all of it, is only 3% of the problem.  You'd probably save more money simply providing personnel to and empowering the various auditing organizations to actually prevent wasteful spending. 

[Ron]

Years ago I read that a simple freeze on Federal spending would go a long way toward balancing the budget.

Maybe I misremember but, I thought I also read that the founders were OK with taxing what we call unearned income ie gains on investments. On the other hand they considered compensation for a persons labor synonymous with their 'life' and off limits to governmental greedy grubby hands.



 

[MechAg94]

Yeah, if they would just freeze all budgets and end any and all automatic increases, the budget would trend down versus revenue due to inflation and growth. 

[makattak]

Yeah, if they would just freeze all budgets and end any and all automatic increases, the budget would trend down versus revenue due to inflation and growth. 

Except for the pesky Social Security and Medicare, that would work. Under the current arrangement, those cannot be frozen and will be devouring an ever larger portion of the budget.