Whats Fair When it Comes to Taxes?

[firstdown]

Originally Posted by SBXVII

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.

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.

[JoeRedskin]

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.e. 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.

[JoeRedskin]

Found the chart I had posted once before somewhere: The Tax Foundation - Summary of Latest Federal Individual Income Tax Data

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."

[724Skinsfan]

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.

[mlmpetert]

Originally Posted by 724Skinsfan

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.

It sounds like Herman Cain might be listening to you:

Under fire, Herman Cain tweaks 9-9-9 plan - Political Hotsheet - CBS News

[jdlea]

Originally Posted by mlmpetert

my thoughts:


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.

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 after tax income 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.

[saden1]

Originally Posted by jdlea

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 after tax income 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.

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.

[jdlea]

Originally Posted by saden1

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.

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.

[saden1]

Originally Posted by jdlea

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.

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.

[jdlea]

Originally Posted by saden1

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.

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.

[firstdown]

Originally Posted by saden1

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.

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.

[saden1]

Originally Posted by firstdown

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.

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.

[mlmpetert]

Originally Posted by jdlea

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 after tax income 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.

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.

[SBXVII]

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.

[over the mountain]

Originally Posted by SBXVII

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. .

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 . . .