or Connect
AppleInsider › Forums › General › General Discussion › Real Tax Numbers
New Posts  All Forums:Forum Nav:

Real Tax Numbers

post #1 of 70
Thread Starter 
The WSJ always has the best op-eds on economics and taxes. When you just look at the plain tax numbers you can see how unfair the tax system is.


<a href="http://www.opinionjournal.com/editorial/feature.html?id=95001783" target="_blank">A Rich Tax Debate
Hide your wallet, Ted Kennedy's in town.
</a>
Sunday, January 27, 2002 12:01 a.m. EST

The sage of Hyannisport, Senator Ted Kennedy, has received media hosannas for daring to propose a tax increase, especially on "the rich." And we have to admit his timing was perfect, because his proposal arrived along with the latest Internal Revenue Service data on who actually pays taxes.

This offers what Teddy's Harvard tutors would have called a teaching moment--maybe even for the Senator, if he cared to learn, but at least for American taxpayers who are too busy making a living to follow the details. So here are the taxing facts, courtesy of Congress's Joint Economic Committee, which coaxed the data for 1999 out of the IRS.

Start with the richest of the rich, the top 1% of all earners. In 1999 they earned 19.5% of all adjusted gross income reported to the IRS. Yet they paid 36.2% of all federal income taxes that year. You read that correctly: The superrich pay in taxes nearly double their proportion of national income.

It gets even richer. The top 1% of tax filers are also paying a much higher share than they used to: About 20 years ago they paid only 19% of all federal income taxes. By 1991, thanks to the progressive impact of the Reagan tax cuts, that share had climbed to 24.8%, and by 1999 it was above 36%. The story is the same for the merely filthy rich, the top 5% of filers, who paid 43.4% of all taxes in 1991 but by 1999 paid 55.5%.
[code]
Who's Paying Taxes
In 1999
Percentiles* \tTotal Share of AGI \t% of Federal Personal Income Tax
Top \t1% \t\t19.5% \t\t36.2%
Top \t5% \t\t34.0% \t\t55.5%
Top \t10% \t44.9% \t\t66.5%
Top \t25% \t66.5%\t\t83.5%
Top \t50% \t86.8% \t\t96.0%
Bottom \t50% \t13.2% \t\t 4.0%

Source: IRS
*Ranked by adjusted gross income (AGI)
</pre><hr></blockquote>

There's a word for this kind of tax system (see the nearby chart). It's called progressive, not to mention confiscatory. What more do liberals like Teddy want? He already has a tax system in which a mere 5% of all earners pay more than half of all taxes, and he wants to soak them some more? This is progressive pig heaven.

And it is getting more confiscatory all the time. From 1989 to 1999, the share of total taxes paid by the entire top 50% was largely unchanged. But the share paid by the top 10% of filers jumped by 19%, the share paid by the top 5% leapt by 26%, and the share paid by the top 1% soared by more than 43%.

The Kennedy and Tom Daschle Democrats describe President Bush's tax cuts as a huge drain on the Treasury. But in reality they were so modest--cutting the top income tax rate to 35% from 39.6% but not until 2006--that they'll barely make a dent in Teddy's soak-the-rich paradise. The Bush cuts are the minimum needed to offset the economic forces and tax policies that have been raising American tax burdens to record levels. The last time we looked, the federal tax share of GDP was 20.7%, the highest since World War II.

It starts with economic growth kicking more and more taxpayers into higher and higher tax brackets. This is known as bracket creep, and all the Bush tax cut does is offset its inexorable grip on ever more taxpayers. Targeted tax breaks--the personal exemption or itemized deductions--are also phased out as income grows. This is a double-whammy: Each new dollar of income is taxed by the ruling marginal rate and taxed again by the reduction of credits, exemptions and deductions. The result is even higher marginal rates. (The Bush tax cuts don't eliminate these phase-outs until 2009.)


And, by the way, what does Mr. Kennedy mean by "wealthy"? According to the 1999 IRS numbers, all you had to earn to be among the top 25% of all tax filers was a whopping $52,965. (And your reward as an income class for working that hard was to pay 83.5% of all taxes.) To be among the top 50%, you had to earn only $26,415. The 27% marginal tax rate kicks in for single taxpayers at only $27,050 of income.

Many of those average Joes and Janes are tomorrow's "wealthy." According to an analysis of the University of Michigan's Panel Study of Income Dynamics, from 1975 to 1991 more than 80% of the families who started at the lowest one-fifth of the earning population had moved to middle-class incomes (earning an average in 1991 of $22,304) or above. About 30% had increased their income to become the top one-fifth of all earners.

Kennedy liberals prefer to ignore this truth about income mobility because it means their main political claim is false. They want voters to believe that the only people being taxed at these rates are the Trumps and Rockefellers. But what really happens is that the higher rates end up soaking essentially middle class people whose incomes rise during their careers until they end up paying the same tax rate as the Kennedys, though they still can't afford to sail off Cape Cod.

Mr. Kennedy knows what he's doing, of course. By calling for a tax hike, he hopes to shift the national debate to the left and make it that much harder to cut taxes any further. Which is all the more reason for tax cutters to point out how much the government soaks both rich and middle class alike.

[ 01-27-2002: Message edited by: Scott H. ]</p>
post #2 of 70
You're right. Americans are overtaxed. In fact, let's not even have taxes. None at all. That way, the government couldn't spend 'the people's money' at all!

Seriously, though, the top 1% of tax payers hardly ever pay out this money any way. There are tax shelters, tax deductable donations, etc. for them.

The other thing that should concern the American people is President Bush planning on increasing the budget for the military to the highest levels in over 20 years (when we were in the Cold War), not to mention his proposed $10 Billion + increase for the Border Patrol. Right now, the Democrats aren't the ones doing the spending; it's Bush.

If taxes aren't going to go 'up', where is this extra money coming from? What programs are going to be cut? We don't know yet, and that should concern a lot of people.

A lot of people still don't understand that the tax 'refund' they got already this year came out of the tax returns they are calculating now. It was just an 'advance', and it was an expensive one at that.

Now that the surplus is a thing of the past, how can the government think about lowering taxes even more? Where is this money going to come from?

The 'super rich' mentioned are just that: super rich. After all of the donations, tax shelters, etc. they don't feel much of the rest of that money going to the government.

If they really are that wealthy, then their lifestyle isn't going to change because of these taxes.

On the other hand, increasing the taxes of the lower tax brackets to compensate would really hit the pockets of the people of our country that are really on the lower end of the economic scale.

The people with the most money pay the most taxes. That's the way the system works, and it can't work any other way, unless you pay no taxes at all.
post #3 of 70
Thread Starter 
[quote]Originally posted by Fran441:
<strong>Seriously, though, the top 1% of tax payers hardly ever pay out this money any way. There are tax shelters, tax deductable donations, etc. for them.</strong><hr></blockquote>

Fran these are real tax numbers. It's how much money the IRS took from whom in 1999. It's real. Not theory. Top 1% paid 36%.

[ 01-27-2002: Message edited by: Scott H. ]</p>
post #4 of 70
Maybe we could see the typical income for the 'top 1%'. How many hundreds of millions / billions do these people make?
post #5 of 70
Thread Starter 
What about the middle class tax payers? The paragraph bolded.
post #6 of 70
[quote]According to the 1999 IRS numbers, all you had to earn to be among the top 25% of all tax filers was a whopping $52,965. (And your reward as an income class for working that hard was to pay 83.5% of all taxes.) <hr></blockquote>

The problem with this is that it includes the top 1% (which pays 36.2%), the top 2-5% (which pays 19.3%), the top 6-10% (which pays 11%), and the top 11-25% (which pays 17%).

The true middle class plays 12.5%. To say that the middle class pays 83.5% of all taxes is wrong.

In the same sense, the 'working class' pays 4% of all taxes, but a lot of these people are barely above the 'poverty line'. It is these two lower 'classes' that need the tax cuts more than the rich classes do. These two classes (middle and working) will see a much more dramatic benefit from tax cuts then the rich will.

Unfortunately, tax cuts usually result from cuts in programs that benefit them any way.
post #7 of 70
Thread Starter 
[quote]Originally posted by Fran441:
<strong>

The problem with this is that it includes the top 1% (which pays 36.2%), the top 2-5% (which pays 19.3%), the top 6-10% (which pays 11%), and the top 11-25% (which pays 17%).

The true middle class plays 12.5%. To say that the middle class pays 83.5% of all taxes is wrong.

In the same sense, the 'working class' pays 4% of all taxes, but a lot of these people are barely above the 'poverty line'. It is these two lower 'classes' that need the tax cuts more than the rich classes do. These two classes (middle and working) will see a much more dramatic benefit from tax cuts then the rich will.

Unfortunately, tax cuts usually result from cuts in programs that benefit them any way.</strong><hr></blockquote>


I think their point is that the top 25% are considered "wealthy" (those earning more than 53k). And that "wealthy" groups pays 83%.
post #8 of 70
Yeah, let's have a flat tax.

So people who are earning $10,000 a year pay $2000 in taxes, and people earning $1,000,000 a year pay $200,000 in taxes.

That way more rich people can buy the extra yacht and those stupid, lazy poor people can live on the streets like they deserve.
post #9 of 70
Thread Starter 
[quote]Originally posted by tonton:
<strong>Yeah, let's have a flat tax.

So people who are earning $10,000 a year pay $2000 in taxes, and people earning $1,000,000 a year pay $200,000 in taxes.

That way more rich people can buy the extra yacht and those stupid, lazy poor people can live on the streets like they deserve.</strong><hr></blockquote>


Yea that's the whole point. The "take home" message.

Of course some see the tax code as an instrument of social justice and others see it as a method to fund the operation of the government.
post #10 of 70
I love articles like this. But two misleading things:

1. The WSJ has followed Bush's line (I added the 'n') that Kennedy is proposing a tax increase. In reality, he's proposing that we shouldn't enact all of Bush's future tax cuts, just part of them. Sorry, but that's not a tax increase.

2. This article suggests that the rich are being soaked. But over the past 20 years, the average after-tax income of the top 1% has increased by over $400,000, while the income of the bottom 20% has decreased by $100. <a href="http://www.cbpp.org/5-31-01tax.htm" target="_blank">That's from this study.</a> Bush's plan would probably widen the gap even more. So the rich have been doing just fine over the past two decades, and will be doing just fine in the future.
post #11 of 70
Thread Starter 
Well even that could be missleading. The poorest person will have zero. 20 years from now the poorest person will have zero. Where as there is room to grow at the top. Factor that into your stats.
post #12 of 70
Thread Starter 
Also consider that for the top 1% 400k aint that much for them. I'd bet it represents a small % of their total income.

But then again you are bring social engineering into the picture. The tax code is not there to fix disparities in income between the rich and poor. It's there to fund the government in a fair way.
post #13 of 70
But why isn't it fair? They have the most money, and can still live without a change in their rich lifestyles even with the 'high taxes'.
post #14 of 70
[quote]Originally posted by tonton:
<strong>
That way more rich people can buy the extra yacht...</strong><hr></blockquote>

Well, the best way to soak the rich is to get them to buy a boat. Those suckers are money pits.
shooby doo, shooby doo
Reply
shooby doo, shooby doo
Reply
post #15 of 70
[quote]Originally posted by Fran441:
<strong>But why isn't it fair? They have the most money, and can still live without a change in their rich lifestyles even with the 'high taxes'.</strong><hr></blockquote>

Your argument isn't about fairness. It's about envy and your justifications for using government to take money from someone else.
shooby doo, shooby doo
Reply
shooby doo, shooby doo
Reply
post #16 of 70
[quote]Your argument isn't about fairness. It's about envy and your justifications for using government to take money from someone else. <hr></blockquote>

LOL. That couldn't be further from the truth. The truth is that to fund our government, the super rich have to pay more taxes than the lower 'class' because the lower class can't pay the amount of taxes that the rich can. Taking even more from them would push more than a few of them below the poverty line. On the other hand, the rich aren't as affected. Look at tonton's example as 'proof' on a smaller scale.
post #17 of 70
So a 'rich' guy isn't phased by making 400k more a year, but he's pissed that he pays 400k a year in taxes?

The taxes on Bill Gates' income alone is probably more than the combined taxable income of the 1600 people in the company I work for. He seems to be doing ok.

From my experience, it's the middle to upper middle class family with two working parents that get hurt the worst. Especially if one of them trys to be self employed.

I just have a hard time feeling sorry for millionaires and billionaires (athlete's anyone?) who have to pay large taxes on the interest they're living off of. Ask these guys what percentage of taxes they pay and they'll spout it off, ask em how much a loaf of bread or a dozen eggs cost and they'll defer you to their maid.
post #18 of 70
Thread Starter 
[quote]Originally posted by seb:
<strong>So a 'rich' guy isn't phased by making 400k more a year, but he's pissed that he pays 400k a year in taxes?

The taxes on Bill Gates' income alone is probably more than the combined taxable income of the 1600 people in the company I work for. He seems to be doing ok.

From my experience, it's the middle to upper middle class family with two working parents that get hurt the worst. Especially if one of them trys to be self employed.

I just have a hard time feeling sorry for millionaires and billionaires (athlete's anyone?) who have to pay large taxes on the interest they're living off of. Ask these guys what percentage of taxes they pay and they'll spout it off, ask em how much a loaf of bread or a dozen eggs cost and they'll defer you to their maid.</strong><hr></blockquote>

Once again... the tax system is there to fund the government. Not exact justice on those no good rich people. You may feel that it's unfair that some have so much and others so much less BUT IMO it's not the job of the tax code to fix that.
post #19 of 70
[quote]Originally posted by Scott H.:
<strong>The tax code is not there to fix disparities in income between the rich and poor. It's there to fund the government in a fair way.</strong><hr></blockquote>
So if a tax plan were to increase the disparities between rich and poor, would that be wrong too?
post #20 of 70
Thread Starter 
[quote]Originally posted by BRussell:
<strong>
So if a tax plan were to increase the disparities between rich and poor, would that be wrong too?</strong><hr></blockquote>

I guess it would.
post #21 of 70
[quote]Originally posted by BRussell:
<strong>
So if a tax plan were to increase the disparities between rich and poor, would that be wrong too?</strong><hr></blockquote>

Good point Bertrand. Personally, I would get rid of the IRS altogether, but I like your logic. Your point being that tax policies by their very nature impact on social conditions.

Also, kudos to Scott H. for conceding the point. Amongst so many rants it's nice to see dispassionate, reasoned arguments.

My thoughts-

1. Disparities between the rich and poor aren't as important as the mean quality of life. Has this increased or decreased in the last, say 20 years?

2. The IRS tax code is too complex for any one, or even several, people to know in full. More people are employed in handling tax related matters than all the factory workers in America. (I could go on about what a money-sucking abyss the IRS is, but that's a given). Should we really be in a situation where the average citizen needs professional assistance to do their taxes and so much productivity is wasted managing this bureaucracy?

3. Is a progressive income tax the only means to effect the social changes that are desired by those who which to employ it as such?

4. On the spending side- What should taxes be spent on? I know this usually divides people into liberals (anywhere that it might help) and psuedo-libertarians (defense, paving roads, fighting drugs, nothing else). Personally, I try to think in terms of return on investment. That is, show me that it will improve my life in the long run and isn't negated by the costs of bureaucracy (leaving me somewhere in the middle of these two extremes).

[ 01-28-2002: Message edited by: Nordstrodamus ]</p>

--
"Evolution is not random. Mutation is random, but natural selection is entirely non-random. Evolution doesn't predict that all the complexity of life just came together randomly. "

Reply

--
"Evolution is not random. Mutation is random, but natural selection is entirely non-random. Evolution doesn't predict that all the complexity of life just came together randomly. "

Reply
post #22 of 70
<strong>Originally posted by Nordstrodamus:
Personally, I would get rid of the IRS altogether, but I like your logic.</strong>

What do you mean? Anarchy

Sales tax could work, though I have to put some more thought into how it impacts society.

<strong>1. Disparities between the rich and poor aren't as important as the mean quality of life. Has this increased or decreased in the last, say 20 years?</strong>

Quality of life has a direct correlation with wealth (in the generic statistical way). There are exceptions of course, but wealth will typically buy better education, better health care, and better living conditions. Whether one is happy may not be applicable to the question.

<strong>2. Should we really be in a situation where the average citizen needs professional assistance to do their taxes and so much productivity is wasted managing this bureaucracy?</strong>

I don't think the tax situation is that bad, ie, that the average individual needs professional help. If an average person needs it, they aren't trying hard enough or they are getting duped into thinking they need it.

But I would agree the tax code is abysmal.

<strong>3. Is a progressive income tax the only means to effect the social changes that are desired by those who which to employ it as such?</strong>

If the funding required is more than a flat tax or sales tax would give, it's obviously a yes.

But I'm not sure I understand the question. How but asking the question backwards. Is a large income gap dangerous to a society? With the presumption that the lower class, consisting of the great majority of the population, lives at or below the poverty line, I don't think it's good for the society and a progressive tax would be needed. If the class below or at the poverty line is a great minority, then no.

<strong>4. On the spending side- What should taxes be spent on? I know this usually divides people into liberals (anywhere that it might help) and psuedo-libertarians (defense, paving roads, fighting drugs, nothing else).</strong>

1. Science and Technology
2. Law enforcement
3. Infrastructure
4. Education
5. Aid programs
x. Defense

If the object of the government is to protect a society, then I believe its main responsibility is to ensure the society's survival. Science and Technology advancements, 99% of the time, directly translate to economic and military power. (GWB gets a failing grade here). Defense depends on the state of the world, hence the variable "x".
post #23 of 70
Man ya know I tend to feel like I get screwed on taxes for a couple of reasons. First I'm in that top 25%, but not by much. Second I live and work in NYC which is a total income distortion. Third I have no kids and lastly I don't own a house or a co-op.

But ya know what, it really doesn't bother me that much. What bothers me is I don't feel like I get value for my money. I mean you look at countries like Denmark or Sweden that have really high tax rates and you know what they get value for their money. Great healthcare and education, good essential services.
post #24 of 70
Here's a hypothetical question: If a flat tax could be conclusively shown to yield the same amount of revenue as the current progressive tax, how many of our liberals here would be in favor of it?
shooby doo, shooby doo
Reply
shooby doo, shooby doo
Reply
post #25 of 70
trick fall: me too.
post #26 of 70
[quote]Originally posted by roger_ramjet:
<strong>Here's a hypothetical question: If a flat tax could be conclusively shown to yield the same amount of revenue as the current progressive tax, how many of our liberals here would be in favor of it?</strong><hr></blockquote>
It would depend on the balance between the size of the exemption and the tax rate. A flat tax could be fairly progressive if it had a high rate and a large exemption, like if you didn't have to pay taxes on the first $50,000 of income, but the rate was 40% (I have no idea if that would be revenue neutral).

But most of the actual plans I've seen have lower rates and exemptions, and so would keep things the same for poor people, lower the rates on rich people, and raise them for middle people. I wouldn't be in favor of that.

Those flat tax plans that every one and their mother proposed a few years back were mostly shams. They had absurdly low rates and high exemptions, making them seem better than they were, because they were not revenue neutral.

Also, people think flat tax = simple tax, and that's not the case. There can still be all the complex exemptions, deductions, loopholes, etc. in the system.
post #27 of 70
As for means of taxation-

I support replacing the IRS and most other taxes with a national sales tax. Possibly with either exemptions for food and other basic costs of living or, instead, a refund system in which everyone (rich and poor) receives a monthly rebate equivalent to the taxes that would be spent on the basic costs of living. Such proposals have been worked out that show that with about a 23% sales tax you could bring in the same revenue as the current system. Here's the really cool thing- in a lot of cases the costs of things would drop nearly 23% because the added expenses of business tax on production would be eliminated.

As for purpose of taxation-

As I said, return on investment. The financial costs of 9-11 make it evident that a good defense is worth paying for. Education and research are important to keeping our people and country competitve. Some social programs are worth it if they reduce the need for prisons or healthcare and do not encourage dependency, Foreign aide can be an extension of defense if it cultivates democracies and an extension of healthcare if it reduces the spread of disease.

As for the disparity between rich and poor-

I believe that the mean quality of life has improved in the last umpteen years, mostly due to technological advances. I think the advancement of technology is much more critical to a continued improvement in mean quality of life than redistribution of wealth.

OTOH, I am concerned with the disparity of infuence people have in our government due to disparities of wealth. Reducing the influence of money in Washington requires several reforms, but among them is eliminating a complicated tax code which is the target of so much lobbying.

THT: For some reason when I tried to respond to your post it only qouted my statements and being the lazy guy I am I didn't put in the code to qoute yours so if I missed addressing anything I'm sorry.

--
"Evolution is not random. Mutation is random, but natural selection is entirely non-random. Evolution doesn't predict that all the complexity of life just came together randomly. "

Reply

--
"Evolution is not random. Mutation is random, but natural selection is entirely non-random. Evolution doesn't predict that all the complexity of life just came together randomly. "

Reply
post #28 of 70
<strong>Originally posted by Nordstrodamus:
I support replacing the IRS and most other taxes with a national sales tax.</strong>

Unless we move to a cashless society, perhaps not even then, there will always be a need for a bureaucratic agency to handle the paperwork. Ie, sellers will have to pay their share of the money to the government, and an IRS type agency needs to be there to keep them honest.

<strong>Possibly with either exemptions for food and other basic costs of living or, instead, a refund system in which everyone (rich and poor) receives a monthly rebate equivalent to the taxes that would be spent on the basic costs of living.</strong>

The system could be just as complex as the current one because a myriad of exceptions and loopholes can be made into law If I sell my car, is it taxed? If I sell stock, is it taxed? Are there exemptions if I have kids? If I give to charity is there a tax exemption for the things I sell?

Simplicity in the tax system needs to be fought for like it's a Constitutional right, otherwise, Congress will introduce laws that will make it messy.

<strong>Here's the really cool thing- in a lot of cases the costs of things would drop nearly 23% because the added expenses of business tax on production would be eliminated.</strong>

Yes. In theory, all businesses should not have any tax on it whatsoever because they'll pass the cost of their taxes to the consumers and employees anyways. But like in deregulated markets, businesses will sell at what prices they can get away with. That's not the same thing as the lowest price they can sell at. So, I'm not sure that there will be an actual reduction in costs of things. There should be, but it isn't a guarantee.

<strong>As I said, return on investment. The financial costs of 9-11 make it evident that a good defense is worth paying for.</strong>

The terrorist attack on 11 Sept was due to incompetence on the part of the DOT, FBI, CIA, DOD, NSA, and the West Wing itself. It's not because of the lack of money. All of the above agencies have more than enough funding. So sometimes, money doesn't solve everything

However, defense as whole a should wholly be dependent on the conditions of the world. We're in a situation where we really don't need a military of our size. There's nobody to fight anymore. We need more speed perhaps, and that may cost more money.

<strong>I think the advancement of technology is much more critical to a continued improvement in mean quality of life than redistribution of wealth.</strong>

If there is a great majority of people living at or below the poverty line and a very small minority super rich, the society might not be very stable and may require redistribution of wealth.

<strong>Reducing the influence of money in Washington requires several reforms, but among them is eliminating a complicated tax code which is the target of so much lobbying.</strong>

I'm sure there will be some sort of lobbying to make this and that exempt from taxation or this and that exempt from regulation. All systems can be messed up. It's only through vigilance that they can be kept clean.
post #29 of 70
[quote]Originally posted by BRussell:
<strong>
It would depend on the balance between the size of the exemption and the tax rate. A flat tax could be fairly progressive if it had a high rate and a large exemption, like if you didn't have to pay taxes on the first $50,000 of income, but the rate was 40% (I have no idea if that would be revenue neutral).</strong><hr></blockquote>

No it wouldn't be. It would result in hundreds of billions of new revenue for the government if it didn't cripple the economy first.

[quote]<strong>Those flat tax plans that every one and their mother proposed a few years back were mostly shams.</strong><hr></blockquote>



[quote]<strong>Also, people think flat tax = simple tax, and that's not the case. There can still be all the complex exemptions, deductions, loopholes, etc. in the system.</strong><hr></blockquote>

But that's not what has been proposed. The plans that have been presented eliminated 99% of the loopholes. The only significant one that would survive would be the home mortgage interest deduction. If that was ever eliminated (in a perfect world it would be) it would raise hell with property values.
shooby doo, shooby doo
Reply
shooby doo, shooby doo
Reply
post #30 of 70
[quote]Originally posted by roger_ramjet:
<strong>It would result in hundreds of billions of new revenue for the government if it didn't cripple the economy first.
</strong><hr></blockquote>
I tried to answer your question in a straightforward manner, and I admitted I wasn't sure if the exact numbers I proposed were really going to turn out revenue neutral.

I was just expressing the principle: high rate + large exemption = OK with me. How about a $75,000 exemption rather than a $50,000 one? Why don't you tell me where you disagree with the basic principles I stated.
[quote] <hr></blockquote>You're really good with those rolleyes. Congratulations. Now care to tell me where you disagree with why I said they were mostly shams? Even you said "if it could be conclusively shown to yield the same amount of revenue" as the current tax, so I know you're aware that that was a big issue when they were being proposed. So then why are you rolling your eyes?
[quote]But that's not what has been proposed.<hr></blockquote>I know, but you didn't specify that in your hypothetical question, so I thought it was important to address the issue. In theory, flatness has nothing to do with simplicity, and that's what I was trying to convey.

The reason the tax code is complex is not because it's progressive, it's because there are lots of deductions. Looking up your number in the tax table is not difficult. It's figuring your AGI after all the absurd deductions like for buying your grandma Pennsylvania-hand-made slippers for Christmas and investing in business larger than 18.3 employees that recycle their toilet paper for at least 87.4 days, but only if you make less than $62,761.81 dollars, including capital gains but excluding interest income.

Let me ask you a hypothetical question - which would you prefer:

1. Getting rid of all or most deductions, but retaining the progressive rate system, or
2. A single flat rate, but retaining all the deductions/credits/etc. that exist now.
post #31 of 70
<strong>Unless we move to a cashless society, perhaps not even then, there will always be a need for a bureaucratic agency to handle the paperwork. Ie, sellers will have to pay their share of the money to the government, and an IRS type agency needs to be there to keep them honest.</strong>

Much, much, much less bureaucracy with an NST is the key. All but a couple states already have systems for collecting sales tax. For the most part it simply requires upping the percentage collected (and maybe some more money for ensuring compliance). Also, common sense suggests that it takes less work to monitor the financial activities of all businesses instead of that of all people in the US.

<strong>The system could be just as complex as the current one because a myriad of exceptions and loopholes can be made into law If I sell my car, is it taxed? If I sell stock, is it taxed? Are there exemptions if I have kids? If I give to charity is there a tax exemption for the things I sell?</strong>

In the proposals I've seen everyone receives a rebate that is adjusted based on number of dependents. No taxes on used items or charity donations. Stocks I'm not sure about. I would suspect that the broker (providing a service) might have to charge something.

Personally I would be in favor of a system with no exemptions or rebates because it would lower the rate even more, but I don't think it would sell with the people or, frankly, the government. People don't want to feel like they are taxed for food or other basics of living even when an added cost of bureaucracy might negate the savings. And the government likes to do social engineering.

Honestly, I think an NST would eventually have both exemptions and rebates, but I just don't see how it could possibly be as intrusive as the IRS. Sure, they might start putting luxury taxes on certain things and "sin" taxes on others (like cigarettes). They might start quarenteening off part of it for social security (that might not even be that bad an idea). But so long as we are vigiliant, as you say, and resist taking money from people simply because they can afford it I think it would be a much better system.

<strong>Simplicity in the tax system needs to be fought for like it's a Constitutional right, otherwise, Congress will introduce laws that will make it messy.</strong>

Simplicity is another great advantage to an NST. If taxes are 23% on everything you buy then whenever congress wants to raise taxes to say 24% you can know immediately how it will affect your life. No more of this smoke and mirrors bullshit about targeted tax increases, deductions, credits with politicians promising that the "average" person won't even feel it.

As for the constitutional right thing- i would agree that it would be a good idea to dictate the extent and limitations of an NST in an amendment. An amendment might be required, after all, since we have to get rid of the IRS for good to make sure we don't end up with both an IRS and NST.

<strong>Yes. In theory, all businesses should not have any tax on it whatsoever because they'll pass the cost of their taxes to the consumers and employees anyways....So, I'm not sure that there will be an actual reduction in costs of things. There should be, but it isn't a guarantee.</strong>

First, under the NST businesses would have no taxes to pass off to the consumers. Second, with the exceptions of monopolies and price fixing (both already illegal) every competitive business will be forced by the marketplace to pass the reduced costs to the customer. As "theories" go this one is almost as strong as relativity and evolution.

<strong>However, defense as whole a should wholly be dependent on the conditions of the world. We're in a situation where we really don't need a military of our size. There's nobody to fight anymore. We need more speed perhaps, and that may cost more money.</strong>

Whatever. My point is simply that defense is a worthy expenditure of our taxes. Obviously, anyone can argue about the pricetag.

<strong>If there is a great majority of people living at or below the poverty line and a very small minority super rich, the society might not be very stable and may require redistribution of wealth.</strong>

What is considered poverty today in the US is 10x better than poverty 50 years ago, and 100x better than poverty in the rest of the world today. Investments in education and healthcare are necessary for equity of opportunity and to fuel the continued technological advance of our country. I shudder, however, at the thought that people might rise up against the better off simply out of a sense of greed. The only moral justification for redistributing wealth is if it was obtained by violating someones rights.

<strong>I'm sure there will be some sort of lobbying to make this and that exempt from taxation or this and that exempt from regulation. All systems can be messed up. It's only through vigilance that they can be kept clean.</strong>

I agree. But some systems are more prone to manipulation than others. IMHO, an NST beats an income tax if only due to it's visibility. People would notice on a daily basis the nature and extent of taxation instead of sitting down at the end of the year with a enyclopedia sized tax code.

--
"Evolution is not random. Mutation is random, but natural selection is entirely non-random. Evolution doesn't predict that all the complexity of life just came together randomly. "

Reply

--
"Evolution is not random. Mutation is random, but natural selection is entirely non-random. Evolution doesn't predict that all the complexity of life just came together randomly. "

Reply
post #32 of 70
I've read reports that say the National Sales tax proposal of 23% is bogus. They're doing exactly what the flat-tax proposals did: set a rate that would take in a lot less revenue than the current system in order to make the proposal look better than it really is.

<a href="http://www.ctj.org/html/nytsales.htm" target="_blank">One analysis</a> says that the rate would actually have to be 56% in order to get rid of the income tax.

I do like that a sales tax would discourage spending rather than working, especially when a big problem right now is consumer debt. But the killer for me as a liberal is that the overall tax burden on the poor would go way up, and it's hard to find a way of counteracting that easily.
post #33 of 70
AAaahh . . .its a pleasure to read a well argued debate.
"They never stop thinking about new ways to harm our country and our people, and neither do we."
--George W Bush

"Narrative is what starts to happen after eight minutes
--Franklin Miller.

"Nothing...

Reply
"They never stop thinking about new ways to harm our country and our people, and neither do we."
--George W Bush

"Narrative is what starts to happen after eight minutes
--Franklin Miller.

"Nothing...

Reply
post #34 of 70
[quote]Originally posted by BRussell:
<strong>
I tried to answer your question in a straightforward manner, and I admitted I wasn't sure if the exact numbers I proposed were really going to turn out revenue neutral.

I was just expressing the principle: high rate + large exemption = OK with me. How about a $75,000 exemption rather than a $50,000 one? Why don't you tell me where you disagree with the basic principles I stated.</strong><hr></blockquote>

And I'm just saying it's a lousy principle. 40% - That's the problem. That rate doesn't kick in today (to be precise it's 39.6%) until you are well over $100k (for a single filer). If you had it on everybody over $50k or even $75k what do you think will happen? And I'm not at all in favor of exemptions anywhere near what you are proposing. You'd essentially take most of the population off of the tax rolls.

[ 01-30-2002: Message edited by: roger_ramjet ]</p>
shooby doo, shooby doo
Reply
shooby doo, shooby doo
Reply
post #35 of 70
[quote]Originally posted by BRussell:

<strong>You're really good with those rolleyes. Congratulations. Now care to tell me where you disagree with why I said they were mostly shams? Even you said "if it could be conclusively shown to yield the same amount of revenue" as the current tax, so I know you're aware that that was a big issue when they were being proposed. So then why are you rolling your eyes?</strong><hr></blockquote>

Yes, the rolleyes are not a very substantive argument but then again neither is just labling the various flat tax proposals as shams.
shooby doo, shooby doo
Reply
shooby doo, shooby doo
Reply
post #36 of 70
<strong>Originally posted by Nordstrodamus:
Much, much, much less bureaucracy with an NST is the key. All but a couple states already have systems for collecting sales tax. ... Also, common sense suggests that it takes less work to monitor the financial activities of all businesses instead of that of all people in the US.</strong>

I was just arguing that the NST wouldn't get rid of a tax agency. The size of the bureaucracy is dependent on the complexities of the tax codes. It'll get rid of the unsavory part of doing taxes for the great majority of people, but the IRS is still going to be there, not of the same size obviously. Whether you call it the IRS or the NSTS, it doesn't matter which, there will be an agency to control incoming money for the government.

I'm not against any tax system really. As long as it works and is fair and equatable, I pretty much don't care. A NST would be fine with me. I have the nagging suspicion that the gov't will have to shrink a large percentage to really make it work though.

<strong>But so long as we are vigiliant, as you say, and resist taking money from people simply because they can afford it I think it would be a much better system.</strong>

Well, government services costs money. If a tax system increases the tax burden too much on the lower class and breaks their back, than a progressive system (in this case, increased luxury taxes) NST will have to be implemented. Like, in the case of a major war, who pays?

When income taxes were illegal, the US gov't had a very small military, virtually zero aid programs, and virtually no oversight agencies.

<strong>First, under the NST businesses would have no taxes to pass off to the consumers. Second, with the exceptions of monopolies and price fixing (both already illegal) every competitive business will be forced by the marketplace to pass the reduced costs to the customer. As "theories" go this one is almost as strong as relativity and evolution.</strong>

No, I don't think that's the way the whole system works. Yes parts of the system work that way (commodities), but not all. I said businesses will price their product at what they can get most away with, not at the minimum they can sell it at. The former denotes price competition can go up or down depending on the nature of the product or market involved.

With public companies, the value of their shares is dominated by the amount of profit the company makes. This forces public companies to maximize their profits, not sell their products at the lowest prices. The fact there's competition doesn't mean it will force the companies to sell their products at the lowest prices.

The theory would always be true if the product was only judged on its merits (quality, functionality, et al), but popularity of things isn't entirely based on that. There's marketing, business acumen, cost of entry into the market sector, market dominance, etc., that can negate the advantages of having a competitive market. That's if the competitor wants to play the "lowest prices wins" game in the first place. They can just go along and increase prices lockstep with its competitors.

<strong>I shudder, however, at the thought that people might rise up against the better off simply out of a sense of greed. The only moral justification for redistributing wealth is if it was obtained by violating someones rights.</strong>

They did it in France

When I hear the argument that the tax system is a redistribution of wealth, I cringe a little. The system doesn't make the wealthy poor and the poor wealthy, which the language of "redistribution of wealth" seems to imply. What it does is help the poor get by on deterministic level of funding while the wealthy still stay awfully wealthy.

If the society is such that the lower classes are suffering badly, and the gov't needs to provide aid, I don't think there is a choice but to have progessive system.

<strong>But some systems are more prone to manipulation than others. IMHO, an NST beats an income tax if only due to it's visibility. People would notice on a daily basis the nature and extent of taxation instead of sitting down at the end of the year with a enyclopedia sized tax code.</strong>

My only problem with it is that it would seem to make the low times very low (gov't deficits would balloon) and the high times sort of so-so, while an income tax would guarantee a revenue stream for the government. Otherwise I'm fine with it, though I think some more thought and detail needs to be put into it.

[ 01-30-2002: Message edited by: THT ]</p>
post #37 of 70
[quote]Originally posted by trick fall:
<strong>Man ya know I tend to feel like I get screwed on taxes for a couple of reasons. First I'm in that top 25%, but not by much.</strong><hr></blockquote>

Then you should be all right. If I read the numbers correctly the 15% that is between 11% and 25% pay 17% of total US tax. It looks like its the top 10% to 15% percent that is losing on your progressive tax system.
"I reject your reality and substitute it with my own" - President Bush
Reply
"I reject your reality and substitute it with my own" - President Bush
Reply
post #38 of 70
IMHO, the richer you are, the higher tax rate you should have. Why?

Simple. The rich typically get richer or stay rich by exploiting the poorer. The low-income earners are working their butts off to bring profits to their employers. Employers get rich from the profits and from their stock options that they so graciously award themselves. They also get even more money from buying and selling huge amounts of stock, because they have enough money to buy lots of shares.

The lower tier employees often get some stock but usually not enough to make too much of a difference.

So basically it's the low-income earners that allow the rich to get their money, so why not take some of it back in the form of paying to run the country.

Or maybe I'm just cyncical because I watched my retirement investments drop 66% in the last two years.
post #39 of 70
[quote]Originally posted by Gustav:
<strong>Or maybe I'm just cyncical because I watched my retirement investments drop 66% in the last two years. </strong><hr></blockquote>
Yeah, it was scary looking at the annual report. Guess I won't be retiring at 35 like I had planned.
post #40 of 70
I don't know. I think rich people should get taxed for a reason other than being wealthy. Rich people should be taxed accordingly for what they indulge in, not what they make in a year.
I can change my sig again!
Reply
I can change my sig again!
Reply
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: General Discussion
AppleInsider › Forums › General › General Discussion › Real Tax Numbers