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.