Whats Fair When it Comes to Taxes?
 

So this thread is inspired by Herman Cain’s 999 but isn’t necessarily about it. Its also inspired by the occupy Wall Street guys who have several messages, one of them being paying for one’s “fair share”. With both the occupy movement and Cain’s 999 plan we have seen a lot of philosophical thought with regards to what different people think is fair when it comes to paying taxes. Cable news, articles online and blogs offer their opinion as what they deem fair or just but they don’t really get any counter point or devil’s advocate type opinion because all too often they are directing their message at a base that is all ready set to agree with them.

I have never heard so much thought and talk centered around taxes in my life! I think this is one of the most important debates or talks people and politicians can have because its routed in thoughts around prosperity, fairness, equality, and personal & social responsibitly. So whats thewarpath's opinion on equality?

[B]my thoughts:[/B]

With regards to taxes I believe they are a necessary evil. I hate them but not because I don’t appreciate the things they provide, but because I view the progressive and incentive laden system as intrinsically unfair and overly complicated. I studied some tax while in school and something that shaped me tax ideology was stumbling on a particular part of the Hobby Loss Rules. Without getting into much detail the Hobby Loss Rules try to prevent people from taking income deductions on what the IRS determines is more hobby then actually business. The rules are pretty straight forward; however, if your hobby/business happens to be breading, showing, training or racing horses the rules are much more laxed. In my experience the only people who bread, show, train or race horses, and therefore benefit by doing so, are rich.

In recent weeks or months we have been reminded that 47% of households pay no federal income taxes. Many are quick to point out that even those who may not pay federal income taxes still pay taxes via payroll taxes at 15.3%. The problem with that line of thought is that payroll taxes are forced savings that are held for your direct benefit later in life. In the case of SS the amount you end up getting when retired is directly related to how much you were forced to save during your working lifetime.

About 15% of ”taxpaying” households pay absolutely zero in combined federal income and payroll taxes. While half of these people are seniors that do not work and are therefore not subject to any payroll tax, the other half are people who make less then 20k a year and have at least 1 kid. A portion of these poorest families actually pay a negative tax as they get money back in excess of any income withholding and payroll tax paid during the tax year. Also worth noting is that many people receive benefits unrelated to tax deductions, credits and refunds. Welfare, food stamps and housing vouchers are some of the more substantial benefits available for the lowest income earners.

With all that said I personally believe that everyone who earns money should pay taxes. I also think everyone should pay the same percentage in taxes, which is absolutely not regressive as some say, its proportional. Don’t worry under a completely proportional tax system the rich still pay more in taxes. I do not understand (although im open to consideration) why some people should pay a different percentage in tax then others. I will say that while I like flat tax plans and hybrid flat/fair tax plans like Cain’s, I do think “passive income” should also be taxed the same as “earned income” under a proportional system, so things like capital gains and qualified dividends would be taxed like everything else. As much as the estate tax sounds like a “king’s tax” I would be up for taxing estates but only at the same equal rate as all other income. Im undecided on SS.

I do feel that its society’s responsibility to help and I have compassion for the 7% percent or so of families that currently pay zero or a negative amount in combined income and payroll taxes, as well as those in very hard but slightly better situations. I think additional benefits should be available to people who need them although instead of just giving them money in the form of a yearly refund check to spend on anything they want I think the benefits should be more controlled and have a focus on eliminating generational poverty.

So my thoughts are everyone should pay taxes at a equal rate on all and any income. I also think business should pay taxes in the same fashion. This all comes from a fairness and equality standpoint.

What are you thoughts? Should some people pay a higher percentage in taxes than others? Should everyone pay the same? Should people only pay based on what they consume? Is it okay that we all benefit for services that only 50% pay for while the remaining 35% only pay for direct future benefits to themselves and with 15% paying nothing at all? Is it okay that the 15% who pay nothing at all are giving tax refunds paid by everyone else to do with whatever they like?

Re: Whats Fair When it Comes to Taxes?
 

i agree with most of what you said.

after looking into welfare, medicair medicaid i came to the conclusion that you are better off getting medicaid, welfare, unemployment, section 8, food stamps while working an under the table job like a drug dealer, house cleaner, dish washer, cook, etc.

the people who work for 22 to 40k a year are getting screwed. you make just enough not to qualify for any assistance, have to actually wake up and work a shit job while getting shitted on, have to pay taxes, find a way to pay rent and provide helthcare for your family.

anybody who makes less than 40k should work under the table jobs and qualify for all types of govt assistance. if you got paid 20k a year to clean houses 15 hours a week plus all that govt assistance youd probably end up making 40k plus and you wouldnt have to worry about ever being evicted or getting large medical bills and have all the free time in the world to watch murray and the price is right.

my lady currently works a part time under the table job, i wish she would collect unemployment and welfare, food stamps etc but she has too much pride. .. well, pride dont pay your cell phone bill does it honey pie?

what i dont agree with you on is i think rich people have way to many tax loopholes that they can make 10 mil a year but their taxable income is like 83k. i just reviewed a business owners tax returns, he made 113k and NONE OF IT WAS TAXABLE! WTF! he got money back.

Re: Whats Fair When it Comes to Taxes?
 

[quote=over the mountain;849911]
my lady currently works a part time under the table job, i wish she would collect unemployment and welfare, food stamps etc but she has too much pride. .. well, pride dont pay your cell phone bill does it honey pie?

what i dont agree with you on is i think rich people have way to many tax loopholes that they can make 10 mil a year but their taxable income is like 83k. i just reviewed a business owners tax returns, he made 113k and NONE OF IT WAS TAXABLE! WTF! he got money back.[/quote]


[COLOR=black][FONT=Verdana]Yeah you need to talk some sense into her! Maybe you could guilt trick her with something like “Do you think a person who accepts handouts should be looked down upon, or should a kid still be proud of his mom because she’s on welfare? Maybe I just think people can still be proud of the things they accomplish regardless of the circumstance they are in or the opportunities they are offered…..”[/FONT][/COLOR]

[COLOR=black][FONT=Verdana]I also agree that we have too many loopholes or what i call incentives and i think everyone should pay the same percent. So if that number happens to be 9% a guy making 10 mill will be paying 900k in taxes and the guy making 113k will be paying 10k in taxes. If Warren Buffet make 100 million via capital gains he pays 9 million in taxes which would be more in dollar terms but equal in percentage terms as his security making 50k paying $4,500 in tax. No loopholes or incentives for anything except charity. [/FONT][/COLOR]

Re: Whats Fair When it Comes to Taxes?
 

[quote=over the mountain;849911]i agree with most of what you said.

after looking into welfare, medicair medicaid i came to the conclusion that you are better off getting medicaid, welfare, unemployment, section 8, food stamps while working an under the table job like a drug dealer, house cleaner, dish washer, cook, etc.

the people who work for 22 to 40k a year are getting screwed. you make just enough not to qualify for any assistance, have to actually wake up and work a shit job while getting shitted on, have to pay taxes, find a way to pay rent and provide helthcare for your family.

anybody who makes less than 40k should work under the table jobs and qualify for all types of govt assistance. if you got paid 20k a year to clean houses 15 hours a week plus all that govt assistance youd probably end up making 40k plus and you wouldnt have to worry about ever being evicted or getting large medical bills and have all the free time in the world to watch murray and the price is right.

my lady currently works a part time under the table job, i wish she would collect unemployment and welfare, food stamps etc but she has too much pride. .. well, pride dont pay your cell phone bill does it honey pie?

what i dont agree with you on is i think rich people have way to many tax loopholes that they can make 10 mil a year but their taxable income is like 83k.[B] i just reviewed a business owners tax returns, he made 113k and NONE OF IT WAS TAXABLE! WTF! he got money back[/B].[/quote]

For that to be true he lost his ass over the year. When I first started my business the business might have made 80k one yr but after I paid everyone and all the bills I made nothing. So I owed no taxes.

Re: Whats Fair When it Comes to Taxes?
 

[quote=over the mountain;849911]i agree with most of what you said.

after looking into welfare, medicair medicaid i came to the conclusion that you are better off getting medicaid, welfare, unemployment, section 8, food stamps while working an under the table job like a drug dealer, house cleaner, dish washer, cook, etc.

the people who work for 22 to 40k a year are getting screwed. you make just enough not to qualify for any assistance, have to actually wake up and work a shit job while getting shitted on, have to pay taxes, find a way to pay rent and provide helthcare for your family.

anybody who makes less than 40k should work under the table jobs and qualify for all types of govt assistance. if you got paid 20k a year to clean houses 15 hours a week plus all that govt assistance youd probably end up making 40k plus and you wouldnt have to worry about ever being evicted or getting large medical bills and have all the free time in the world to watch murray and the price is right.

my lady currently works a part time under the table job, [B]i wish she would collect unemployment and welfare, food stamps etc but she has too much pride. .. well, pride dont pay your cell phone bill does it honey pie?[/B]

what i dont agree with you on is i think rich people have way to many tax loopholes that they can make 10 mil a year but their taxable income is like 83k. i just reviewed a business owners tax returns, he made 113k and NONE OF IT WAS TAXABLE! WTF! he got money back.[/quote]

So your point is the tax payers should subsidies her cell phone bill.

Re: Whats Fair When it Comes to Taxes?
 

No one likes the IRS, including me, but we all have to do what we must. It's funny you posted this thread today because I just got a letter today from the IRS saying I owe them 25K in back taxes from 2009 on top of a 5K in penalty for unreported income. Of course what these mother fckers don't realize is they've already collected taxes on said income and all I have to do is file an amended Schedule D. It's a pain in the ass but what isn't these days?

Bottom line is a lot of people want simplicity these days but they also want the ability to do some deductions and take tax breaks. I dont know how you simplify that. Shiit, I want more deductions not a simpler process.

Anyways, I got to go dig-up my records and settle this matter before the 90 days they've given me and avoid having wages garnished.

Re: Whats Fair When it Comes to Taxes?
 

[quote=firstdown;849926]So your point is the tax payers should subsidies her cell phone bill.[/quote]

Well its already being done for others:

[url=http://www.snopes.com/politics/taxes/cellphone.asp]snopes.com: Free Cell Phones for Welfare Recipients[/url]

[COLOR=black][FONT=Verdana]Should a person with a mortgage and real-estate taxes be subsidized by tax payers by being able to itemizing and deduct many of the costs associated with that purchase?[/FONT][/COLOR]

Re: Whats Fair When it Comes to Taxes?
 

[quote=saden1;849930]No one likes the IRS, including me, but we all have to do what we must.

Bottom line is a lot of people want simplicity these days but they also want the ability to do some deductions and take tax breaks. I dont know how you simplify that. Shiit, I want more deductions not a simpler process.

[/quote]

[COLOR=black][FONT=Verdana]The only thing i love more then a deduction is a credit, and if its refundable im really smitten. But I would be happy with having a simple incentive free tax code as long as it was fair. Fair to me means everyone pays the same percentage on all their income (earned or otherwise) less charitable donations. [/FONT][/COLOR]

[COLOR=black][FONT=Verdana]In your opinion would it be fair to treat everyone equally and charge them the same percentage? Do you think its currently fair that only half of us pay federal income taxes? [/FONT][/COLOR]

Re: Whats Fair When it Comes to Taxes?
 

I actually don't have a problem with a progressive tax but I think everyone should have to pay some taxes.

Re: Whats Fair When it Comes to Taxes?
 

[quote=mlmpetert;849932]Well its already being done for others:

[URL="http://www.snopes.com/politics/taxes/cellphone.asp"]snopes.com: Free Cell Phones for Welfare Recipients[/URL]

[COLOR=black][FONT=Verdana]Should a person with a mortgage and real-estate taxes be subsidized by tax payers by being able to itemizing and deduct many of the costs associated with that purchase?[/FONT][/COLOR][/quote]

Yes, because I own a home and getting ready to build a new one.

Re: Whats Fair When it Comes to Taxes?
 

I think the real question is the balance of having a closely knit society which values the free-market VS. the rising income/wealth disparity between the top and bottom of society(rising tide lifting boats unequally). At what point society so far apart in terms of socio-economic status that the society really isn't "one" anymore? Are taxes somewhat of an answer and if so, to what extend until we start moving towards big govt/socialism(sure some will say we are already there). If we are already there or we shouldn't try to correct this, what is it to be American? Are we all really equal with the same rights if life is a race and people starting in the "back" never will be able to catch up?

Re: Whats Fair When it Comes to Taxes?
 

Taxes are simply the overhead we pay for living in a society that (1) is subject to the rule of law; (2) operates under an essentially free market capitalist system; and (3) recognizes the interdependence of citizens within that society.

There have been many "tax the rich" threads/discussions before and I am not going to rehash the research but, for all the loopholes, the top 10% of income earners pay about 50% of the federal government's income. Those may not be the right percentages, but you get the gist. A small minority of individuals is subsidizing the funding that benefits us all.

I got no problem with a progessive tax system. The more you benefit from a system that promotes and protects your ability to create and retain wealth the higher proportion of your created and protected wealth you should pay. With a flat tax rate, the underlying assumption is that we all benefit equally from the taxes collected [I]i.e.[/I] a person making 25,000K receives a value of approximately 10% from the government performing its function as does a person who makes 250,000 and a person making 2,500,000. I would humbly suggest, however, that a person making 250,000 or 2,500,000 receives a significantly higher proportional benefit from living in a society ruled by laws and supporting a free market economy than the the guy making 25K. There is a reason that the US has one of the highest ratios of millionaires per capita - it's a good, safe place to become rich and that should be worth a proportionally higher premium than being safely poor.

With all that said, I think it's a rough balance. When does "paying overhead" in proportion to your ability to accumulate and retain wealth become straight up "wealth redistribution" - I'm just not sure. I'm okay with the system in place - I think it needs some tweaking but, in general, everybody's paying taxes of some form or another (sales tax, licensing fees, etc.) and those that make the most, pay the most.

The biggest problem is that for the last 20 years we have spent vastly beyond our means and somehow that deficit needs to be made up.

Re: Whats Fair When it Comes to Taxes?
 

Found the chart I had posted once before somewhere: [url=http://www.taxfoundation.org/research/show/250.html#Data]The Tax Foundation - Summary of Latest Federal Individual Income Tax Data[/url]

Essentially, in 2010, the top 1% of income earners (those making over ~354K) pay ~38% of all income taxes collected (based on the total number of tax returns filed and adjusted gross income). The top 5% (those making over ~169K) pay ~58% of all income taxes.

From the same site:
"•The largest corporations pay the lion’s share of taxes. In 2008, the 1,937 largest companies were responsible for 68 percent of corporate tax revenue
•The overall effective corporate income tax rate on the worldwide income of U.S. corporations is between 32.1 and 33 percent, which is close to the statutory rate of 35 percent."

Re: Whats Fair When it Comes to Taxes?
 

What about everyone paying the same percentage from their income minus a basic living cost? Set the basic living cost at the current poverty level, which is around $22k. So if you earn $35k then you'll be taxed on only $13k.

Re: Whats Fair When it Comes to Taxes?
 

[quote=mlmpetert;849934][COLOR=black][FONT=Verdana]The only thing i love more then a deduction is a credit, and if its refundable im really smitten. But I would be happy with having a simple incentive free tax code as long as it was fair. Fair to me means everyone pays the same percentage on all their income (earned or otherwise) less charitable donations. [/FONT][/COLOR]

[COLOR=black][FONT=Verdana]In your opinion would it be fair to treat everyone equally and charge them the same percentage? Do you think its currently fair that only half of us pay federal income taxes? [/FONT][/COLOR][/quote]

Who told you life is fair? If it was fair we would all be well off, there wouldn't be children that go to sleep hungry at night or homeless veterans, or fund managers who pay 15% CGT on the hard earned money of others.

Get over your pursuit of perfection and fairness and start seeking sensibility and practicality. It doesn't seem fair to me to have the local grocery bagger pay $4 for a loaf of bread and 15% on their income tax and for the CEO of the grocery store to also pays $4 for a loaf of bread and 15% on their income tax. On the surface it looks pretty fair but while the CEO wipes his ass with $100 bills and is unable to notice a measly $4 the grocery store clerk will.

The cost of rent/mortgage and consumable goods are high and unless you want to live like a caveman someone making 30k can barely survive in this country. Bottom line is the clerk will consume most of his income on all the things one need to live a decent life while the CEO can't spend enough to on his neighborhood for eternity. As such they shouldn't be treated the same in matter of taxation.

Some will say, well, why should the CEO have to subsidize other people...to these people I say who is subsidizing the CEO and why shouldn't they pay more considering they benefit the most?

Re: Whats Fair When it Comes to Taxes?
 

[quote=mlmpetert;849872][B]my thoughts:[/B]


With all that said I personally believe that everyone who earns money should pay taxes. I also think everyone should pay the same percentage in taxes, which is absolutely not regressive as some say, its proportional. Don’t worry under a completely proportional tax system the rich still pay more in taxes. I do not understand (although im open to consideration) why some people should pay a different percentage in tax then others. I will say that while I like flat tax plans and hybrid flat/fair tax plans like Cain’s, I do think “passive income” should also be taxed the same as “earned income” under a proportional system, [B]so things like capital gains and qualified dividends would be taxed like everything else.[/B] As much as the estate tax sounds like a “king’s tax” I would be up for taxing estates but only at the same equal rate as all other income. Im undecided on SS. [/quote]

The bolded portion is the main thing I have a problem with. It's fashionable now to complain about the capital gains tax, but I actually have a real problem with it. Here's an example:

Let's say, for instance, I'm able to invest $10k of my [B]after tax income[/B] in a given year. In that year I make $1k on my investments and I sell off my stock. I don't think I should then be taxed again because I earned $1,000 after I already paid taxes on the money I invested, and if I am, I certainly don't believe it should be at the same rate as I already had been for earning the money I invested.

Now, that example doesn't address folks like Warren Buffett who don't really do anything other than invest, but it illustrates the issue that lots of normal people could face. So, what would be a solution to this? Progressively tax higher capital gains earners? I'm not exactly sure, but I can tell you if the capital gains tax rises to the same level as my payroll tax, I'll probably be a little hesitant to invest any of my money.

Re: Whats Fair When it Comes to Taxes?
 

[quote=jdlea;850029]The bolded portion is the main thing I have a problem with. It's fashionable now to complain about the capital gains tax, but I actually have a real problem with it. Here's an example:

Let's say, for instance, I'm able to invest $10k of my [B]after tax income[/B] in a given year. In that year I make $1k on my investments and I sell off my stock. I don't think I should then be taxed again because I earned $1,000 after I already paid taxes on the money I invested, and if I am, I certainly don't believe it should be at the same rate as I already had been for earning the money I invested.

Now, that example doesn't address folks like Warren Buffett who don't really do anything other than invest, but it illustrates the issue that lots of normal people could face. So, what would be a solution to this? Progressively tax higher capital gains earners? I'm not exactly sure, but I can tell you if the capital gains tax rises to the same level as my payroll tax, I'll probably be a little hesitant to invest any of my money.[/quote]

You only get taxed on your profit which is new income. The billionaires hide their money from taxes using similar strategy with capital gains and it isn't fair at all.

Re: Whats Fair When it Comes to Taxes?
 

[quote=saden1;850038]You only get taxed on your profit which is new income. The billionaires hide their money from taxes using similar strategy with capital gains and it isn't fair at all.[/quote]

I know that, I still have a problem with it when it's on a smaller scale, though. I'm not saying that I necessarily have a solution to the problem, but I don't know that raising the tax is fair to the people who aren't able to put much in and don't end up earning much, either.

Re: Whats Fair When it Comes to Taxes?
 

At this point... I don't even know any more. I've always felt a "Flat Tax" would be good because everyone would have to pay the same % of what they earn. There would be no complaining about how the rich get richer, the poor get poorer, and the middle class is what runs this country.

Then I've felt everyone has to eat so make a "Food tax". Everyone gets hit equally. Same for the most part with a "Gas tax". Everyone who drives gets hit equally.

I'm not a smoker and hardly a drinker but what pisses me off more is when they want to raise tobacco tax as if that will solve our problems. Lets make the smokers pay for everything. Another was VA's stupid idea a few yrs ago to attack the people who get DUI's. The Gov. had this brain storm that it costs like 60 mill to repair VA's roads and on average there was "X" number of drunk drivers a year and by taxing them extra VA would make the 60 mill easily. They reduced everyones taxes figuring the drunk drivers would carry the load, but most Judges didn't think the law was fair so they started throwing DUI cases out of court. VA quickly fell 60 mill in the hole. lol. Then after it was challenged in VA's courts it was considered unconstitutional. All the extra tax that drunk drivers paid had to be repaid back to them by the state. lol.

Re: Whats Fair When it Comes to Taxes?
 

[quote=jdlea;850041]I know that, I still have a problem with it when it's on a smaller scale, though. I'm not saying that I necessarily have a solution to the problem, but I don't know that raising the tax is fair to the people who aren't able to put much in and don't end up earning much, either.[/quote]


Whatever problem you have with it is unfounded. You have 1k in new income, how you got it is irrelevant. If it helps think of the process investing in stock as having invested in a business and making a profit (exactly what you're doing actually). You will pay and you should pay taxes on those proceeds.

Re: Whats Fair When it Comes to Taxes?
 

[quote=hooskins;849945]I think the real question is the balance of having a closely knit society which values the free-market VS. the rising income/wealth disparity between the top and bottom of society(rising tide lifting boats unequally). At what point society so far apart in terms of socio-economic status that the society really isn't "one" anymore? Are taxes somewhat of an answer and if so, to what extend until we start moving towards big govt/socialism(sure some will say we are already there). If we are already there or we shouldn't try to correct this, what is it to be American? Are we all really equal with the same rights if life is a race and people starting in the "back" never will be able to catch up?[/quote]

So I need to stay in a lower income bracket because my neighbors decide that they are OK making $35,000 a year? Why should I feel the need to hold myself back because others make the poor or wrong decisions? You also say people are stuck in the back and never catch up. Good thing not all people have this mind set or they would never make it in life. Its sad that people actually think that way because they then tell people on the bottom there is no hope for them only hurting them even more. I was told because I did not have a College Degree I could never get the job I have today. If I listened to those people then I'd be probably be stuck in a dead end job. How come the Chinese lady down the street could come here speaking no english and little to no money and now own three dry cleaners? The only dead end in America is the dead end that people allow to be put in or behind. Is it harder for some then others. Yes, see the chinese lady but if people have the will they can suceed.

Re: Whats Fair When it Comes to Taxes?
 

To clarify... I know I mentioned I had a problem with Gov. picking on any one group, and by making a "Gas tax" it would only hit drivers, but... they could add a tax to people who ride the trains as well. Taxies and Buses would most likely pass their gas tax down to the common man by raising the rates so they would pay their fair share also.

The only ones not hit would be walkers and bike riders. I can live with that since they are doing their part to keep smog to decent level.

Re: Whats Fair When it Comes to Taxes?
 

[quote=firstdown;850051]So I need to stay in a lower income bracket because my neighbors decide that they are OK making $35,000 a year? Why should I feel the need to hold myself back because others make the poor or wrong decisions? You also say people are stuck in the back and never catch up. Good thing not all people have this mind set or they would never make it in life. Its sad that people actually think that way because they then tell people on the bottom there is no hope for them only hurting them even more. I was told because I did not have a College Degree I could never get the job I have today. If I listened to those people then I'd be probably be stuck in a dead end job. How come the Chinese lady down the street could come here speaking no english and little to no money and now own three dry cleaners? The only dead end in America is the dead end that people allow to be put in or behind. Is it harder for some then others. Yes, see the chinese lady but if people have the will they can suceed.[/quote]

Your right. If people were told "you can't" or "never will" then they won't. You didn't listen to them good job. But what about the single mother with 5 kids who can't afford to pay for child care and work at McDonalds... the only place to would hire her? In VA when she goes to Social Services and asks for help or "assistance" they tell her she has a job or she makes too much money due to the job and they can't help her. So what does that mother do? She quits her job and then refiles and gets the full benifits for what they think a mother with 5 kids should get instead of simply supplementing what she was already making.

Our system of Gov. is bad from the top all the way down to the county level.

Re: Whats Fair When it Comes to Taxes?
 

[quote=jdlea;850029]The bolded portion is the main thing I have a problem with. It's fashionable now to complain about the capital gains tax, but I actually have a real problem with it. Here's an example:

Let's say, for instance, I'm able to invest $10k of my [B]after tax income[/B] in a given year. In that year I make $1k on my investments and I sell off my stock. I don't think I should then be taxed again because I earned $1,000 after I already paid taxes on the money I invested, and if I am, I certainly don't believe it should be at the same rate as I already had been for earning the money I invested.

Now, that example doesn't address folks like Warren Buffett who don't really do anything other than invest, but it illustrates the issue that lots of normal people could face. So, what would be a solution to this? Progressively tax higher capital gains earners? I'm not exactly sure, but I can tell you if the capital gains tax rises to the same level as my payroll tax, I'll probably be a little hesitant to invest any of my money.[/quote]

Yeah i hear you and this is something I really struggled with when I was thinking about tax equality. I decided there are 3 types of jobs in this world. Sales, Sales Support and Government. Everything falls under those 3 categories. Investing is sales, youre buying something in order to sell it to someone else at a higher price. So the deciding factor for me is that the gain someone made from selling the business they started or from a stock they sold is effectively income in my opinion, merely by the fact it can be sold. So just like a vender paying income taxes on the bananas he bought with after tax money and sold for a profit I think a investor selling stocks or ownership in a company for a profit should be treated the same way.

Re: Whats Fair When it Comes to Taxes?
 

[quote=SBXVII;850053]Your right. If people were told "you can't" or "never will" then they won't. You didn't listen to them good job. But what about the single mother with 5 kids who can't afford to pay for child care and work at McDonalds... the only place to would hire her? In VA when she goes to Social Services and asks for help or "assistance" they tell her she has a job or she makes too much money due to the job and they can't help her. So what does that mother do? She quits her job and then refiles and gets the full benifits for what they think a mother with 5 kids should get instead of simply supplementing what she was already making.

Our system of Gov. is bad from the top all the way down to the county level.[/quote]

this is the one problem i was addressing in my orig post. when you actually look into all the programs a person is better off not working and collecting all the diff types of govt assistance than working a mcdonalds job or as a cashier at walmart.

a person is much much better off (and probably making the equivalent of 50-60k) if they claim unemployment, etc but work an under the table job. its a windfall really. pay close to nothing for housing, even if you stop paying rent the landlord has a tough time kicking you out b/c your sec 8, sell your food stamps at 50 cents to the dollar, free healthcare and dental for you and your whole family.

unless you make more than 50k why work a job you have to claim income on?

Re: Whats Fair When it Comes to Taxes?
 

[quote=SBXVII;850049]
I'm not a smoker and hardly a drinker but what pisses me off more is when they want to raise tobacco tax as if that will solve our problems. Lets make the smokers pay for everything. .[/quote]

its my understanding that the tax of tobacco goes to help offset tobacco related expenses like lung cancer, cancer research, tobacco use awareness . . .which i think is a good thing. i could be wrong. i imagine it costs us alot of money for the older folks on medicaid who have been smoking for 60 years and get cancer . . .

Re: Whats Fair When it Comes to Taxes?
 

[quote=SBXVII;850053]Your right. If people were told "you can't" or "never will" then they won't. You didn't listen to them good job. But what about the single mother with 5 kids who can't afford to pay for child care and work at McDonalds... the only place to would hire her? In VA when she goes to Social Services and asks for help or "assistance" they tell her she has a job or she makes too much money due to the job and they can't help her. So what does that mother do? She quits her job and then refiles and gets the full benifits for what they think a mother with 5 kids should get instead of simply supplementing what she was already making.

Our system of Gov. is bad from the top all the way down to the county level.[/quote]

A women with 5 kids working at McDonalds gets plenty of assistance. That's not a good example but I get the point. At one time in this country the local churches and groups helped their own which made for a tighter community. Now the federal gov takes that role and uses it as an election tool driving a wedge in the community. When Bill Clinton and Newt reformed wellfair it forced mothers like that into programs that helped them obtain better jobs and off wellfair when they could care for themself. The program in VA was very successful and gave those mothers pride in providing for their families. That program has been distroyed over the years by both parties and its back to the wellfair programs of the 80s.

Re: Whats Fair When it Comes to Taxes?
 

[quote=saden1;850050]Whatever problem you have with it is unfounded. You have 1k in new income, how you got it is irrelevant. If it helps think of the process investing in stock as having invested in a business and making a profit (exactly what you're doing actually). You will pay and you should pay taxes on those proceeds.[/quote]

How should 401k's be handled then? This is before tax income that's earned compound interest for a number of years. I know it's taxed when it is paid out during retirement, but at what rate should it be taxed? Also, how would the "income" portion of it be determined?

I'm pretty ignorant to tax laws and such, so I'm asking for informational purposes, not to be combative.

I suppose I just never really thought about every bit of money I earn as income before; admittedly, I probably should have. It's just a way of thinking that needs to switch, but this is an interesting discussion, to me.

Re: Whats Fair When it Comes to Taxes?
 

[quote=saden1;849976]Who told you life is fair? If it was fair we would all be well off, there wouldn't be children that go to sleep hungry at night or homeless veterans, or fund managers who pay 15% CGT on the hard earned money of others.

Get over your pursuit of perfection and fairness and start seeking sensibility and practicality. It doesn't seem fair to me to have the local grocery bagger pay $4 for a loaf of bread and 15% on their income tax and for the CEO of the grocery store to also pays $4 for a loaf of bread and 15% on their income tax. On the surface it looks pretty fair but while the CEO wipes his ass with $100 bills and is unable to notice a measly $4 the grocery store clerk will.

The cost of rent/mortgage and consumable goods are high and unless you want to live like a caveman someone making 30k can barely survive in this country. Bottom line is the clerk will consume most of his income on all the things one need to live a decent life while the CEO can't spend enough to on his neighborhood for eternity. As such they shouldn't be treated the same in matter of taxation.

Some will say, well, why should the CEO have to subsidize other people...to these people I say who is subsidizing the CEO and why shouldn't they pay more considering they benefit the most?[/quote]

In school I was always taught that the reason people come to America is for opportunity. That America guarantees the pursuit of happiness for everyone but not a guarantee that everyone will be happy.

We are all born into different circumstances but just like you said life isn’t fair. Just like its not fair that some people are harder workers then others, smarter, better looking, smooth talking, better athletically, more innovative or...... just good ole rich. That’s just the way it is, some people are dealt better cards then others. Im not rich and I don’t come from a rich family, but I don’t think rich people should be punished just like I don’t think a hard worker, athlete or model should be punished because of their lack of misfortune.

I think people who earn more money should pay more taxes because like you said they are benefiting the most. That’s why I think a percentage is fair, as you earn more you pay more. I also think people at the bottom of the economic scale should be given more opportunity, kind of like they are now but through a more controlled process. So instead of giving someone a huge tax refund (relative to their income) at the end of the year to do what they like with, I think it would be more beneficial to provide them with tools through social programs that present individuals with opportunities to climb the economic latter if that what they choose to do. This would replace tax refunds and be in addition to the subsidies like housing vouchers and food stamps that many of us are already receiving. So more oppertunity for poorer people but its up to you to take advantage of it. Things will never be fair for everyone but i think treating everyone equally is start.

Re: Whats Fair When it Comes to Taxes?
 

[quote=jdlea;850066]How should 401k's be handled then? This is before tax income that's earned compound interest for a number of years. I know it's taxed when it is paid out during retirement, but at what rate should it be taxed? Also, how would the "income" portion of it be determined?

I'm pretty ignorant to tax laws and such, so I'm asking for informational purposes, not to be combative.

I suppose I just never really thought about every bit of money I earn as income before; admittedly, I probably should have. It's just a way of thinking that needs to switch, but this is an interesting discussion, to me.[/quote]

401k contributions aren't taxed at all until they are withdrawn and there a lot of rules around it. For one thing you can borrow against it and not pay taxes or penalty on it so long as you pay it back within 5 years (except when buying a home). You are required to withdraw a minimum amount of it when you turn 70.5 (this requirement was suspended by congress for 2009 because of the economic downturn).

You are technacally suppose to be taxed on it at the tax bracket you were in at your last income generating position before retirement (It doesn't mean you can go get a job at McDonald's though to lower your tax bracket). There are some strategies you can employ to lower your taxes. For example, if you don't anticipate your tax bracket to be lower as you get older and near retirement it might be wise to convert your 401k to Roth IRA before you retire since isn't subjected to minimum distribution rules which could cost you in the long run.


Bottom line is the rules around 401k are quite generous and if you combine it with other financial instruments (i.e. whole life insurance) you can definitely lower your tax bill when you retire.

Re: Whats Fair When it Comes to Taxes?
 

[quote=mlmpetert;850080]In school I was always taught that the reason people come to America is for opportunity. That America guarantees the pursuit of happiness for everyone but not a guarantee that everyone will be happy.

We are all born into different circumstances but just like you said life isn’t fair. Just like its not fair that some people are harder workers then others, smarter, better looking, smooth talking, better athletically, more innovative or...... just good ole rich. That’s just the way it is, some people are dealt better cards then others. Im not rich and I don’t come from a rich family, but I don’t think rich people should be punished just like I don’t think a hard worker, athlete or model should be punished because of their lack of misfortune. [/quote]

You seem to be missing historical context and profound misunderstanding of America. Land owners and the wealthy have always paid the most taxes since the inception of this country. In fact, today's rich pay much less than Thomas Jefferson or George Washington paid and with them being the founders you can hardly make the case that we are all of a sudden punishing anyone that's rich.

Those who are here or those who recently came here are free to leave at any time and take their belief and build their dream nation elsewhere.

[quote=mlmpetert;850080]I think people who earn more money should pay more taxes because like you said they are benefiting the most. That’s why I think a percentage is fair, as you earn more you pay more. I also think people at the bottom of the economic scale should be given more opportunity, kind of like they are now but through a more controlled process. So instead of giving someone a huge tax refund (relative to their income) at the end of the year to do what they like with, I think it would be more beneficial to provide them with tools through social programs that present individuals with opportunities to climb the economic latter if that what they choose to do. This would replace tax refunds and be in addition to the subsidies like housing vouchers and food stamps that many of us are already receiving. So more oppertunity for poorer people but its up to you to take advantage of it. Things will never be fair for everyone but i think treating everyone equally is start.[/quote]

A percentage is not fair for the simple fact that consumable goods and housing are expensive. A percentage wouldn't only punish the poor but the middle class. They are the biggest consumers of good....they will have to make decisions about whether to buy that 30K car + 17% sales tax or send their kid to college for another year. If these people have to make choices like that American would have a revolution brewing in no time.

Flat Tax advocates always present the bright side and positive numbers, they never present the potential pitfalls and ramifications. Any proposal to change the tax code shouldn't be a one page or three pages, it should be like a Form 10-K.

Re: Whats Fair When it Comes to Taxes?
 

[quote=saden1;850089]401k contributions aren't taxed at all until they are withdrawn and there a lot of rules around it. For one thing you can borrow against it and not pay taxes or penalty on it so long as you pay it back within 5 years ([B]except when buying a home[/B]). You are required to withdraw a minimum amount of it when you turn 70.5 (this requirement was suspended by congress for 2009 because of the economic downturn).

You are technacally suppose to be taxed on it at the tax bracket you were in at your last income generating position before retirement (It doesn't mean you can go get a job at McDonald's though to lower your tax bracket). There are some strategies you can employ to lower your taxes. For example, if you don't anticipate your tax bracket to be lower as you get older and near retirement it might be wise to convert your 401k to Roth IRA before you retire since isn't subjected to minimum distribution rules which could cost you in the long run.


Bottom line is the rules around 401k are quite generous and if you combine it with other financial instruments (i.e. whole life insurance) you can definitely lower your tax bill when you retire.[/quote]

Thats such a stupid rule. They allow people to dig into their retirement so they can buy a home they cannot afford.

Re: Whats Fair When it Comes to Taxes?
 

[quote=saden1;850038]You only get taxed on your profit which is new income. The billionaires hide their money from taxes using similar strategy with capital gains and it isn't fair at all.[/quote]

Why do you have to use billionair to make your point? Any investor who risk their money in the market benefiits with lower taxes for taking the risk. It also pumps money into corporations so they can expand and hire new people and help grow the ecomony. So its not just the rich that makes out. How about the plumer who has work his entire life and now wants to sell his small book of business for $300,000 so he has a retirement. If it was not for the lower tax he would get hit with a very high tax (remember that considered rich) for that year taking 1/3 $99,000 in taxes. Same with me. A large part of my retirement will be the value of my book of business and I cannot afford to give the fed gov. 1/3 of $600,000. That would be $200,000 from my retirement to the federal gov for selling a business I worked 20 to 30 yrs to build.

Re: Whats Fair When it Comes to Taxes?
 

[quote=firstdown;850094]Thats such a stupid rule. They allow people to dig into their retirement so they can buy a home they cannot afford.[/quote]


You're too grown to say stupid stuff like this. You know they can't afford it how? Because they are tapping into their 401k? I tapped into my 401k to buy a home I can afford. Why? because it's kinda smart to maximize your 401k investment, borrow money against yourself for 10 years and pay yourself back with interest.

Re: Whats Fair When it Comes to Taxes?
 

[quote=saden1;850098]You're too grown to say stupid stuff like this. You know they can't afford it how? Because they are tapping into their 401k? I tapped into my 401k to buy a home I can afford. Why? because it's kinda smart to maximize your 401k investment, borrow money against yourself for 10 years and pay yourself back with interest.[/quote]

No I'm correct. Your too smart to know people don't do this all the time. You used your 401 to save the money to buy a home. Most people do not think that far out and they decide to buy a home and because they have no savings they tap into their 401. Thats money they will never pay back.

Re: Whats Fair When it Comes to Taxes?
 

[quote=saden1;850089]401k contributions aren't taxed at all until they are withdrawn and there a lot of rules around it. For one thing you can borrow against it and not pay taxes or penalty on it so long as you pay it back within 5 years (except when buying a home). You are required to withdraw a minimum amount of it when you turn 70.5 (this requirement was suspended by congress for 2009 because of the economic downturn).

You are technacally suppose to be taxed on it at the tax bracket you were in at your last income generating position before retirement (It doesn't mean you can go get a job at McDonald's though to lower your tax bracket). There are some strategies you can employ to lower your taxes. For example, if you don't anticipate your tax bracket to be lower as you get older and near retirement it might be wise to convert your 401k to Roth IRA before you retire since isn't subjected to minimum distribution rules which could cost you in the long run.


Bottom line is the rules around 401k are quite generous and if you combine it with other financial instruments (i.e. whole life insurance) you can definitely lower your tax bill when you retire.[/quote]

Interesting. Thanks for that info!

Re: Whats Fair When it Comes to Taxes?
 

[quote=firstdown;850097]Why do you have to use billionair to make your point? Any investor who risk their money in the market benefiits with lower taxes for taking the risk. It also pumps money into corporations so they can expand and hire new people and help grow the ecomony. So its not just the rich that makes out. How about the plumer who has work his entire life and now wants to sell his small book (clientell) of business for $300,000 so he has a retirement. If it was not for the lower tax he would get hit with a very high tax (remember that considered rich) for that year taking 1/3 $99,000 in taxes. Same with me. A large part of my retirement will be the value of my book of business and I cannot afford to give the fed gov. 1/3 of $600,000. That would be $200,000 from my retirement to the federal gov for selling a business I worked 20 to 30 yrs to build.[/quote]

It can be a millionaire...these people only need a few hundred grand to live a lavish lifestyle and their is hardly any long term risk unless you're investing with Maddof. At the end of the day the risk you take means nothing. If you lose money, you get a tax dudction, if you make money you get taxed. Pretty simple stuff.


As for the business owner wanting to sell his business, why shouldn't he get taxed at the highest bracket if he is going to make out 300k? Why does it matter the years who has put into it? Was he not paying himself all those years? I would advise you to start paying yourself (at least 15% of revenue) and putting a chunk of that money you pay yourself away. If you can't, your business isn't doing as well as it should and you might be in trouble when retirement rolls around. Don't blame your piss poor planning on the government, plan better.

Re: Whats Fair When it Comes to Taxes?
 

[quote=firstdown;850101]No I'm correct. Your too smart to know people don't do this all the time. You used your 401 to save the money to buy a home. Most people do not think that far out and they decide to buy a home and because they have no savings they tap into their 401. Thats money they will never pay back.[/quote]



Umm, you're required by law to pay back that money within 10 years....and the consequences for not doing so is that it will be treated as a withdrawal with you owing Uncle Sam taxes on the distribution plus a 10% penalty on top of it.

Do you have statistics that shows most people don't pay back and that you are right?

Re: Whats Fair When it Comes to Taxes?
 

[quote=saden1;850105]Umm, you're required by law to pay back that money within 10 years....and the consequences for not doing so is that it will be treated as a withdrawal with you owing Uncle Sam taxes on the distribution plus a 10% penalty on top of it.

Do you have statistics that shows most people don't pay back and that you are right?[/quote]

You may want to read the rules again. Its a hardship rule that allows the use of 401s for a down payment or last resort funding. Pay back is 5 to 30 yrs and can be as little as 60 days. I'll stand by my statement.

[B]Rules for 401k Withdrawal for Home Purchase

[/B]The first rule of 401k withdrawal for home purchase is that you must be able to prove to the Internal Revenue Service (IRS) officials that you are going through a financial hardship. Secondly, you should be able to prove that it is your last resort of fulfilling your financial need. You should not have any other funds available, that could suffice your financial needs. Thirdly, you are not allowed to withdraw anything above your financial need. Meaning, if you are required to make a down payment of $10,000 and you cannot arrange for own contribution, then you are allowed to withdraw only $10,000 from your 401k account (provided you have enough balance in it.). The fourth rule is that you should have executed all other options of taxable loans, so that 401k withdrawal is your last option of raising funds for home purchase. After your withdrawal, you cannot contribute to your 401k account for a span of 6 months.

[B]How to Purchase a Home Using a 401k Withdrawal[/B]

The 401k regulations explicitly state that 401k withdrawal can be made only for a purchase of a first home. You cannot use this money to make a down payment for your second home. The money withdrawn from 401k is taxable. One important thing to remember, while applying for early 401k withdrawal is that, although the law permits the [URL="http://www.buzzle.com/articles/early-withdrawal-from-401k.html"][COLOR=#0027aa]early withdrawal from 401k[/COLOR][/URL], it is not mandatory for the employers to offer such a provision in their plan. Hence, inquire with your human resources department, to know the provision in your individual plan. Also, beware of the penalties you are subjected to, upon the withdrawn amount. A study of IRS regulations, regarding 401k withdrawal for home purchase, may give you a clear idea regarding the taxes and [URL="http://www.buzzle.com/articles/penalty-for-early-withdrawal-of-401k.html"][COLOR=#0027aa]penalty for early withdrawal of 401k[/COLOR][/URL] funds. At times, you may notice that after paying taxes and penalties, you are only left with considerably less amount than your exact need. Hence, you might anyway have to arrange for funds to cover up the difference.

[B]Implications of 401k Home Purchase Withdrawal[/B]

Withdrawing from your 401k funds is definitely not the wisest of all options. For one thing, you lose out on a large sum from your retirement funds, which can make your post retirement life less than secure. You unnecessarily have to bear the burden of taxes and penalties. Besides, you lose out on interest that would have incurred on the withdrawn amount. Hence, you should choose this option only when all the other doors have closed. Borrowing against 401k account may seem to be a good alternative, as it is free of tax and penalties. Besides, the interest accrued from your loan goes back to your account. The repayment span may be anywhere between 5 to 30 years. However, if you lose your job, you will have to repay the loan in as little as 60 days. Failure on your part may lead to penalties and taxes. The loan amount will be then considered as an early withdrawal.

Thus, you should weigh your options wisely, and choose one which can secure your future while still sufficing your current need. Hope this article on 401k withdrawal for home purchase was resourceful.
By [URL="http://www.buzzle.com/authors.asp?author=30033"][FONT=Arial][COLOR=#002277]Ashwini Kulkarni Sule[/COLOR][/FONT][/URL]

Re: Whats Fair When it Comes to Taxes?
 

[quote=saden1;850093]You seem to be missing historical context and profound misunderstanding of America. Land owners and the wealthy have always paid the most taxes since the inception of this country. In fact, today's rich pay much less than Thomas Jefferson or George Washington paid and with them being the founders you can hardly make the case that we are all of a sudden punishing anyone that's rich.

Those who are here or those who recently came here are free to leave at any time and take their belief and build their dream nation elsewhere.[/quote]

I dont know what i said to make you think land owners or wealthy shouldnt be paying the most taxes on their income? I think they should be paying the most but through a flat percentage not a progresive tier. I did not know that Washington Or Jefferson paid higher taxes then today's rich (and wouldnt mind seeing a source that says so), but was it because they paid taxes on property they owned while others didnt own anything?

[quote]
A percentage is not fair for the simple fact that consumable goods and housing are expensive. A percentage wouldn't only punish the poor but the middle class. They are the biggest consumers of good....they will have to make decisions about whether to buy that 30K car + 17% sales tax or send their kid to college for another year. If these people have to make choices like that American would have a revolution brewing in no time.

Flat Tax advocates always present the bright side and positive numbers, they never present the potential pitfalls and ramifications. Any proposal to change the tax code shouldn't be a one page or three pages, it should be like a Form 10-K.
[/quote]

[COLOR=black][FONT=Verdana]Im not really advocating the Fair Tax if thats what youre alluding to here. Im just saying the federal income tax should be an equal percentage for all. But I don’t think that’s possible to do overnight and that’s what I like about 9 9 9. Im assuming your 35k + 17% in state and federal sales tax is a 999 reference? That’s a misleading example as many people don’t understand that the car is currently 35k + 8% + A Portion of the Money You Already Paid in Federal Income Taxes . A lower and equal tax on business will also reduce the price of the goods businesses produce since prices will reflect a lower tax amount embedded in the final product, so it may now be a 34k car + 8% +9%. [/FONT][/COLOR]

[COLOR=black][FONT=Verdana]For some households that may be more than they would have paid in aggregate federal income taxes beforehand but for most it will be less. Also most poor people buy used cars, which wont be subject to federal taxes. While 999 lowers taxes for most it does raise it for some, but most importantly it gets rid of the loopholes for the rich….. except for capital gains which is partly why I think they should be taxed equall as well. Although Cain is promoting this as a jobs bill so not taxing capital gains will be a positive for the economy. [/FONT][/COLOR]