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Old 05-26-2011, 02:39 PM
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Why wouldn't a flat income tax work?


Say the feds do the math and a flat income tax of 27% for all Americans who have an income is needed to balance the budget (I know the number would be higher, it's the concept I am curious about).

The full time college student who works part time and earns $8000 owes $2160.

The single parent who works full time and earns $31,000 owes $8370 in income tax.

The physician who earns $245,000 owes $66,150.

And the NBA player who earns $2.6 million owes $702.000.

Is there an argument that this is unfair in any way?


mmm

ETA: Whoops, I thought I was posting this in GQ. Perhaps a mod could move it (unless a resulting great debate is anticipated)

Last edited by Mean Mr. Mustard; 05-26-2011 at 02:40 PM.
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Old 05-26-2011, 02:47 PM
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It depends on what you mean by "fair". Both the student and the athlete take home 73% of their gross incomes, $5840 and $1,898,000 respectively. It isn't hard to see that the 27% cut is going to be a far greater hardship on the student.

Perhaps you could work in a standard deduction: pay 27% on all income above $10,000 or something like that. If you add some brackets you will get something a lot like the AMT.

Last edited by Lubricious Integument; 05-26-2011 at 02:47 PM. Reason: sloppy grammar
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Old 05-26-2011, 02:55 PM
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I would go for a flat tax with a standard deduction at $16k or so if sales and property taxes were abolished. Sales taxes tend to be regressive and property taxes tend to target middle income taxpayers.
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Old 05-26-2011, 02:57 PM
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Sales taxes and property taxes are levied by state and local governments, not the Feds.
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Old 05-26-2011, 03:01 PM
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The reason a flat tax is generally not a good idea is that there is a certain irreducable minimum of money necessary for people to live in a modern society. A low-income person could be pushed below this minimum by a flat tax.
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Old 05-26-2011, 03:03 PM
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Sales taxes and property taxes are levied by state and local governments, not the Feds.
I know.
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Old 05-26-2011, 03:04 PM
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Originally Posted by Mean Mr. Mustard View Post
The single parent who works full time and earns $31,000 owes $8370 in income tax.
This person now has $22,630 take home, where she had much closer to $31,000 last year and was probably fighting to make ends meet on that budget. You have probably taken $5-6k more money in tax from this person, how would you propose they make ends meet now?

This person, and many many people like them, who have very little already, are now in a colossal financial hole, and the primary benefit is to ensure that Mr NBA gets to keep more of his millions to add a wing to his mansion.

Fair or unfair, YOU make the call.
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Old 05-26-2011, 03:08 PM
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Originally Posted by Mean Mr. Mustard View Post
Say the feds do the math and a flat income tax of 27% for all Americans who have an income is needed to balance the budget (I know the number would be higher, it's the concept I am curious about).
Well, it would almost certainly be higher and that would essentially mean a tax increase for most Americans and a tax decrease for some few wealthy Americans.

Also, if you disallow all tax write-offs you seriously damage the not-for-profit sector which currently provides a great many services that government can't or won't.

There'd have to be some phase-in at the least as a huge number of people got mortgages calculated on assuming they could write-off their interest paid on the loan.

ETA: I will have to look for the cite but when you consider *all* taxes people pay (sales tax, property tax, etc.) then the tax burden on everyone is actually pretty close and while not "flat" near enough to not get in much fuss about. If you flatten the income tax and the other regressive taxes remain you are seriously knocking the poor and middle class upside the head and handing a windfall to the wealthy.

Last edited by Whack-a-Mole; 05-26-2011 at 03:10 PM.
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Old 05-26-2011, 03:08 PM
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Sales taxes and property taxes are levied by state and local governments, not the Feds.
But still in reality a factor - the feds can't control every tax, but that's part of why the income tax is progressive. If you were to flatten the income tax and maintain the same overall tax burden, as the other taxes are regressive, the poorer you are the more taxes you'd pay as a percentage of your income. Income tax is one of the taxes where it's practical to make it progressive relative to income. It distorts the tax burden for the feds to pretend that those other regressive taxes don't exist because they aren't in direct control of them.

Another issue is that income isn't the only way to make money - would a flat tax proposal also include the same tax rates for stuff like dividends and capital gains? If not, the poor again get hit with a greater effective tax rate as more of their total incoming money is going to be in the form of regular paycheck income rather than other sources.

The reality is - the people who push for a flat tax are generally the rich. A change in the tax code isn't going to automatically reduce the overall tax burden, so the money has to come from somewhere. If the rich are paying less, that money must necesarily come from the non-rich. And as to why that's bad - that's simply an issue of the declining utility of each dollar you have over the last one.

Last edited by SenorBeef; 05-26-2011 at 03:10 PM.
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Old 05-26-2011, 03:10 PM
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Is there an argument that this is unfair in any way?
Some can view it as fair because everyone pays the same rate, but pretty much any flat tax proposal I have seen means very large tax increases on lower to middle classes, and generally substantial tax cuts for the very wealthy.

For example, the lowest 20% of earners (those with incomes that average $17,000) currently pay about 5% of their income in Federal taxes (including payroll and income taxes). It is really only until your get to incomes in excess of $500,000 (which is the top 5% of earners) a year that tax rates exceed 27%. Link.

Even if one provided a substantial standard deduction, let's say $15,000 with a tax rate of 27%, middle earners (averaging $60k a year) would have their tax burdens rise from 14% a year to 20% (or roughly $8.5k in taxes to $12k), and upper-middle types (averaging $90k a year) would see their tax burdens rise from 17% to 22% (or roughly $15.3k in taxes up to $19.5k).

On the other hand, the top 1% of earners (earning an average of $1.5 million a year) would see their tax payments decrease from an average of $470,000 to an average of $400,000.

One can fiddle with the size of the deduction and the rate of the flat tax, but in virtually every combination, it means that the overall tax burden must shift from the very rich to everyone else, mostly the middle class.

It may be "fair" in some people's view to have a single tax rate, but I don't see the results as desirable.
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Old 05-26-2011, 03:15 PM
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There are two sources of unfairness in this. First, the richer you are the more benefit you tend to get from society. Second, the idea of marginal utility. The more money you have, the less value each additional dollar. So, for someone making $500,000 a year, an extra $10,000 in taxes hurts less than $5000 to someone making $100,000, and even less than $2500 to someone making $25,000.

Part of the tax code is the idea of the standard deduction. The idea is that you should get a tax break on the minimum you need to survive. If you make barely enough to pay rent and buy the cheapest food, 27% tax will break you.

There is also the issue of shift of burden. A revenue neutral flat tax would cut the taxes of the highest earners and raise the taxes of the lowest. The income gap would go up even faster.

There is also the issue that taxes overall are already pretty flat (payroll taxes are regressive, sales taxes are flat, etc.) The last I looked, the poor pay a larger percentage in sales and payroll, while the middle income pay more in property taxes.
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Old 05-26-2011, 03:24 PM
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It would cause a necessary rise in wages, or else put a lot of people under the bare minimum needed to survive. Right now, a low-wage worker only needs to earn something like X+5%, or even just X with enough deductions (X being the bare minimum of take-home income to survive). But under a flat tax, that same person would need to find a job that pays X+27% just to stay afloat, and it's highly unlikely businesses are going to start raising their wages.

Either the minimum wage will need to be increased which will hurt a lot of businesses, or the homeless population will skyrocket.

Last edited by Bosstone; 05-26-2011 at 03:25 PM.
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Old 05-26-2011, 03:33 PM
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Originally Posted by Mean Mr. Mustard View Post
Say the feds do the math and a flat income tax of 27% for all Americans who have an income is needed to balance the budget (I know the number would be higher, it's the concept I am curious about).
What counts as income; rentals, interest, dividends, inheritance, capital gains, stock options, farm sales, etc.?

Most flat tax proposals are offered in the name of simplicity, that's a red herring. once you've sifted through all the rules to find out what your real taxable income was, looking up the tax you owe is the simplest part of filling out the forms.
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Old 05-26-2011, 03:36 PM
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Depends on your definition of 'flat'. If it means everybody pays the same amount, the vast majority of people couldn't afford to pay off their share of the debt. If you mean a flat rate, it's pretty close to flat already. The arguments over the small percentage differentials is pointless. If you mean everybody has to actually pay, or at least owe at flat percentage rate, it's because the rich own the politicians, and they don't like to pay any taxes at all.
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Old 05-26-2011, 03:38 PM
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Depends on your definition of 'flat'. If it means everybody pays the same amount, the vast majority of people couldn't afford to pay off their share of the debt. If you mean a flat rate, it's pretty close to flat already. The arguments over the small percentage differentials is pointless. If you mean everybody has to actually pay, or at least owe at flat percentage rate, it's because the rich own the politicians, and they don't like to pay any taxes at all.
The OP makes it clear he's talking about rate.
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Old 05-26-2011, 03:42 PM
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The OP makes it clear he's talking about rate.
I understand that. I was pointing out why I don't think that a 'flat' rate is an important factor in how taxes are collected.
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Old 05-26-2011, 03:51 PM
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Imagine the US collect $10/year and needs that to run. Whatever tax system you propose the government needs $10.

You have a 10%, 20%, 30% and 50% rate.

So, one group pays $1/year, the next pays $2/year then $3 and $5.

For a flat tax to work you need to make everyone pay 25% (or $2.50 each).

A 150% increase on the poorest people.

A 25% increase for the next bunch.

A 17% decrease on the next.

A 50% decrease on the last bracket.

The way it currently works (loosely speaking) you will find 85% of the population in the first two brackets, 10% in the next and 5% in the last (I made those numbers up to illustrate the idea).

So, most of the population gets nailed with higher taxes and some few gain.

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Old 05-26-2011, 04:07 PM
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Looking at your title, it depends on your meaning of the word 'work'.

Could we do it in a revenue-neutral, or even more-rev-to-the-government way? Sure, just fiddle with the rate until you get it right.

Does this mean that Congress would lose their main source of controlling people's behavior? Yup. Can't encourage homeownership, can't encourage charitable deductions, can't discourage smoking (through S-CHIP... unless you're not talking about those taxes), can't discourage tanning to fund that crazy Obamacare, etc. In short, the Democrats would be screwed.

Also, I assume you're going to not include payroll taxes in this discussion?

There's clearly something to be said about widening the tax base, making those who cry most often for more government actually have to pay for it. If the bottom half of the income groups are only paying something like 4 or 5% of the Federal government, it creates huge incentives for the majority to clamor for more services, which it's pretty clear we can't afford as a nation.
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Old 05-26-2011, 04:11 PM
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What would the flat tax % need to be if there was a deductible of, say $40k? I'm not in favor of a flat tax but I'm interested in knowing what the numbers would be.
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Old 05-26-2011, 04:16 PM
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For the benefit of making a small segment of the population slightly more comfortable, you get the negative of making a large segment of your population go bankrupt.




That dog don't hunt.
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Old 05-26-2011, 04:18 PM
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What would the flat tax % need to be if there was a deductible of, say $40k? I'm not in favor of a flat tax but I'm interested in knowing what the numbers would be.
Here's one primitive calculator. Doesn't include an option for standard deductions, but at least it's something.

http://www.freedomworks.org/scrapthecode/calculator.php
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Old 05-26-2011, 04:28 PM
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Originally Posted by Mr Smashy View Post
Also, I assume you're going to not include payroll taxes in this discussion?

There's clearly something to be said about widening the tax base, making those who cry most often for more government actually have to pay for it. If the bottom half of the income groups are only paying something like 4 or 5% of the Federal government, it creates huge incentives for the majority to clamor for more services, which it's pretty clear we can't afford as a nation.
Of course you're excluding payroll taxes here, which are strongly REGRESSIVE, since you pay SS and medicare taxes on the first dime of income with no deduction, and your contributions max out at a fairly low rate. If you really want a "flat tax", you could just end the maximum for social security and medicare taxes, instead of exempting the rich.

I'm sure, Smashy, you've seen Warren Buffet's article where he computed the total amount of all taxes that his secretary paid, and the total amount of all taxes that he paid, and found that his secretary paid a higher percentage of her income in taxes than he did. Still want to complain about how the poor don't pay taxes?
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Old 05-26-2011, 04:28 PM
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Here's one primitive calculator. Doesn't include an option for standard deductions, but at least it's something.

http://www.freedomworks.org/scrapthecode/calculator.php
That doesn't answer my question (it assumes a 17% rate) but I can see that I was being somewhat ambiguous. What would the tax % have to be for it to be revenue neutral with a $40k deductible?

I think that site illustrates Robot Arm's point: figuring out how much you pay is hard not because of the tax rate but because you need to determine what's taxable.

Last edited by Deeg; 05-26-2011 at 04:29 PM.
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Old 05-26-2011, 04:40 PM
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If you agree in principle that the rich should contribute more taxes than poor, what is your issue? Graduated tax brackets aren't difficult, we have computers nowadays that can do it all in an instant. What problem does a flat tax rates solve?
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Old 05-26-2011, 04:45 PM
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I can't wait to hear the howling when you try to raise the capital gains tax from 15% to 27%.

That is what you had in mind, right?
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Old 05-26-2011, 04:47 PM
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There's clearly something to be said about widening the tax base, making those who cry most often for more government actually have to pay for it. If the bottom half of the income groups are only paying something like 4 or 5% of the Federal government, it creates huge incentives for the majority to clamor for more services, which it's pretty clear we can't afford as a nation.
I agree but you are aiming at the wrong people.

Corporate welfare amounts to about $125 billion/year.

Quote:
The Federal Government alone shells out $125 billion a year in corporate welfare, this in the midst of one of the more robust economic periods in the nation's history.

<snip>

That makes the Federal Government America's biggest sugar daddy, dispensing a range of giveaways from tax abatements to price supports for sugar itself. Companies get government money to advertise their products; to help build new plants, offices and stores; and to train their workers. They sell their goods to foreign buyers that make the acquisitions with tax dollars supplied by the U.S. government; engage in foreign transactions that are insured by the government; and are excused from paying a portion of their income tax if they sell products overseas. They pocket lucrative government contracts to carry out ordinary business operations, and government grants to conduct research that will improve their profit margins. They are extended partial tax immunity if they locate in certain geographical areas, and they may write off as business expenses some of the perks enjoyed by their top executives.

SOURCE: http://www.time.com/time/magazine/ar...989508,00.html
Hell, we recently gave Wall Street how many hundreds of billions in bailouts with tax payer money?

They paid it back you might say? Yeah, they paid it back with...wait for it...tax payer money (they took the bailout money, borrowed money from the government at exceptionally low interest rates backed by junk securities, bought government debt which paid out at a substantially higher rate than they borrowed the money for essentially paying the government back with its own money and pocketing the difference).

Never ceases to amaze me how some people are freaked over a non-existent Welfare Queen driving her Cadillac on your hard earned dime while the people they presumably support are the ones robbing them.

But hey, don't let facts get in the way of your preconceived notions.

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Old 05-26-2011, 04:51 PM
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Of course you're excluding payroll taxes here, which are strongly REGRESSIVE, since you pay SS and medicare taxes on the first dime of income with no deduction, and your contributions max out at a fairly low rate. If you really want a "flat tax", you could just end the maximum for social security and medicare taxes, instead of exempting the rich.

I'm sure, Smashy, you've seen Warren Buffet's article where he computed the total amount of all taxes that his secretary paid, and the total amount of all taxes that he paid, and found that his secretary paid a higher percentage of her income in taxes than he did. Still want to complain about how the poor don't pay taxes?
Of course I've seen the article. Obviously, he pays a lower rate because he's structured most of his income in the form of Berkshire Hathaway dividends. I'm on record here saying that dividend income ought to be taxed at marginal rates (as are some pretty smart right wingers, like Samuelson. Maybe you didn't know that, but no worries, my mission to educate never ends.

Just an aside, when you say

Quote:
since you pay SS and medicare taxes on the first dime of income with no deduction, and your contributions max out at a fairly low rate.
You are wrong. No worries though, let me help you get smarter. Medicare taxes have no ceiling

Quote:
In addition to the Social Security tax, the employee must have withholdings for the Medicare tax of 1.45% of every dollar of salary or wages. The employer must also pay a Medicare tax of 1.45% on every dollar of every employee’s salary or wages.
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Old 05-26-2011, 04:52 PM
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Originally Posted by Mean Mr. Mustard View Post
Say the feds do the math and a flat income tax of 27% for all Americans who have an income is needed to balance the budget (I know the number would be higher, it's the concept I am curious about).

The full time college student who works part time and earns $8000 owes $2160.

The single parent who works full time and earns $31,000 owes $8370 in income tax.

The physician who earns $245,000 owes $66,150.

And the NBA player who earns $2.6 million owes $702.000.

Is there an argument that this is unfair in any way?

I don;t get the whole idea of how a "flat" tax is in any whay more fair or easy than a graduated/progressive tax system. One could have a graduated/progressive tax system with no deductions that would also be filable on a postcard.

Anyway every "flat tax' system I have seen (that are revenue nuetral, those which depend upon a massive reductions in budgets don't count) are very biased towards the rich, as Ravenman sez. In general, the middle class would get screwed. Often this is done by not taxing anything but "earned income", but it can also be acheived by lowering the rates on the rich and thus increasing the rates on the middle class.

I do not see why taxing the rich less and the middle class more is "fair".
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Old 05-26-2011, 04:58 PM
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Whack, while I'm glad you're posting links that bolster your argument (unlike so many who just spout off the latest Kos claptrap, uncritically), maybe you could find an article more recent than 13 years old?

To be clear, I'm not in favor of what you call corporate welfare, or anything really that distorts the market. Sugar, ethanol subsidies, and the like just end up costing taxpayers in the end, either through higher taxes or higher prices.

As for the Welfare Queen comment you seem to think I made, you'll have to provide a cite.... perhaps not one from 1998 LOL.
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Old 05-26-2011, 04:58 PM
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So why can't the kid working at a McDonalds structure his income as McDonalds dividends? Because there's one set of tax rules for the rich, and another for everyone else, of course.

So your dream utopia of a flax tax is already here! Oh wait, the wealthy already in actual fact, pay a LOWER percentage of their total income as total taxes. So in order to actually create a flat tax we'd need to raise taxes on the rich!

See, your problem, and the problem of your kind, is that you focus on tax rates. Forget tax rates. Let's focus on actual total tax payments of all kinds, and divide that by actual total income of all kinds.
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Old 05-26-2011, 05:01 PM
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Plus, imagine the massive unemployment it would cause when all the brilliant tax accountants and tax lawyers, whose sole purpose is to calculate taxes and interpret our extremely complicated tax laws, lose their jobs!
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Old 05-26-2011, 05:05 PM
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Plus, imagine the massive unemployment it would cause when all the brilliant tax accountants and tax lawyers, whose sole purpose is to calculate taxes and interpret our extremely complicated tax laws, lose their jobs!
Have you read some of those "flat tax" systems?
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Old 05-26-2011, 05:26 PM
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Whack, while I'm glad you're posting links that bolster your argument (unlike so many who just spout off the latest Kos claptrap, uncritically), maybe you could find an article more recent than 13 years old?

To be clear, I'm not in favor of what you call corporate welfare, or anything really that distorts the market. Sugar, ethanol subsidies, and the like just end up costing taxpayers in the end, either through higher taxes or higher prices.

As for the Welfare Queen comment you seem to think I made, you'll have to provide a cite.... perhaps not one from 1998 LOL.
Hard to find current numbers.

I found this from the CATO Institute:

Quote:
Overall, the Bush administration has proposed a very modest reduction in “corporate welfare” subsidies in its fiscal year 2003 budget. The budget includes $86 billion in corporate welfare for FY2003, down 7 percent from $93 billion in FY2002, according to Cato Institute estimates.

SOURCE: http://www.cato.org/pubs/tbb/tbb-0205-7.pdf (PDF)
Dated I know but we recently just saw Congress refusing to end oil subsidies despite oil companies recording record or near record profits.

I am also unsure on just what they are counting as a corporate subsidy and what we would probably count as a subsidy (many are indirect...e.g. the government decides to build a new road which also happens to service your new warehouse). And of course it is the CATO Institute which is business friendly so I think we can safely say this is a minimum (I have found many cites that claim higher amounts but most seem to have an agenda so not comfortable quoting them...I'll have to look for more later).

Certainly looking at the landscape today I see many instances of entitlement programs being slashed and then the government (often state governments) turning around and handing new tax breaks to various businesses. I do not see a ground swell in the people at the bottom getting "more" at the expense of the rich.

As for the Welfare Queen it seems implied by your comment about those at the bottom being interested in getting more. I suppose that is true insofar as everyone wants "more" but the implication is a bunch of lazy peoplel not paying their fair share and bilking hard working Americans out of their hard earned money.

There probably are some of those people but in the past the US has had unemployment rates as low as 4% in 2000 which is darn near full employment (there is no such thing as 0% unemployment). This indicates people want to work and will work when they can rather than kick back and collect welfare.

Whether a poor person pays their "full" share for the education of a child is debatable. Perhaps you think they should (I do not know). We have notable posters here who have made good and are doing well who were raised in poverty. Their parent(s) did not pay their "fair share" but their kids have done well.

I call it a good investment. Others might see it as people taking from them. YMMV
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Old 05-26-2011, 05:33 PM
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So why can't the kid working at a McDonalds structure his income as McDonalds dividends? Because there's one set of tax rules for the rich, and another for everyone else, of course.

So your dream utopia of a flax tax is already here! Oh wait, the wealthy already in actual fact, pay a LOWER percentage of their total income as total taxes. So in order to actually create a flat tax we'd need to raise taxes on the rich!

See, your problem, and the problem of your kind, is that you focus on tax rates. Forget tax rates. Let's focus on actual total tax payments of all kinds, and divide that by actual total income of all kinds.
Yes, I notice that all these calls for "fairness" want to equalize ordinary income rates. There's never any call to equalize rates between different forms of income.

The income tax rate ranges from 10% up to 33%. Anyone with an annual income of over $34,000 is paying at least a 25% rate.

Long term capital gains rates max out at 15%. The long term rates on income earned through real estate, collectibles, or small business stock also are lower than ordinary income rates. Corporate tax rates are lower than ordinary income tax rates. Qualified stock dividend rates are lower than ordinary income rates.

But somehow in all of the calls for "fairness" nobody suggests that we treat all these things as ordinary income and tax them at the same rates.
  #35  
Old 05-26-2011, 06:19 PM
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Dated I know but we recently just saw Congress refusing to end oil subsidies despite oil companies recording record or near record profits.

I am also unsure on just what they are counting as a corporate subsidy and what we would probably count as a subsidy (many are indirect...e.g. the government decides to build a new road which also happens to service your new warehouse). And of course it is the CATO Institute which is business friendly so I think we can safely say this is a minimum (I have found many cites that claim higher amounts but most seem to have an agenda so not comfortable quoting them...I'll have to look for more later).

Certainly looking at the landscape today I see many instances of entitlement programs being slashed and then the government (often state governments) turning around and handing new tax breaks to various businesses. I do not see a ground swell in the people at the bottom getting "more" at the expense of the rich.

As for the Welfare Queen it seems implied by your comment about those at the bottom being interested in getting more. I suppose that is true insofar as everyone wants "more" but the implication is a bunch of lazy peoplel not paying their fair share and bilking hard working Americans out of their hard earned money.
A reasonable reply. Let me respond.

I'm not sure I'd call the tax cuts that oil companies enjoy (credit for drilling places, LIFO account methodologies, etc) corporate welfare per se, but I agree, they have no place in a time of fiscal trainwrecks (made worse by both parties, to be sure, in different ways). To call them corporate welfare or government handouts, you'd first have to assume that all money first belongs to the government - not that idealistic socialism is unknown on this board, but there you go.

My comment about the lower half (*half*, mind you.... not necessarily welfare queens) paying more of their 'fair share' (whoops, liberal wording there, sorry) comes from this realization: anything not paid for, anything given, isn't valued as much and eventually gets taken for granted. Anyone with kids knows this. With the system we have now (and God forbid if it gets more 'progressive'), you end up incentivizing the lower half to demand ever more government services. I'm not talking about WIC or AFDC, I'm talking about higher education, about free healthcare, about services that the middle class use and come to expect... all paid for by a someone else. It's an unhealthy arrangement.

The state tax breaks for business are usually (always?) because they are competing against other states to get business to relo there. Virginia just did this with Hilton and Northrop Grumman, crushing DC and Maryland (yes!). It creates a race to the bottom of sorts, but I'd prefer that kind of State Business Development to lobbyists in back rooms pledging PAC dollars to get a sweetheart rule in some obscure bill.
  #36  
Old 05-26-2011, 06:22 PM
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So why can't the kid working at a McDonalds structure his income as McDonalds dividends? Because there's one set of tax rules for the rich, and another for everyone else, of course.
I'm not sure what planet you live on, Lemur, but there's one set of *everything* for the rich and another set for everyone else. Rich people don't travel like us, live in homes like us, vacation like us, etc.

If you don't like it, feel free to become rich.
  #37  
Old 05-26-2011, 06:29 PM
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Originally Posted by Mr Smashy View Post
I'm not sure what planet you live on, Lemur, but there's one set of *everything* for the rich and another set for everyone else. Rich people don't travel like us, live in homes like us, vacation like us, etc.

If you don't like it, feel free to become rich.
Or tell Congress to change the tax laws. I wonder which one poor voters might find more attainable. There are a lot of them, you know.
  #38  
Old 05-26-2011, 07:03 PM
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If you don't like it, feel free to become rich.
Wow, is this the new "if you don't like something about America, then find another country to live in!"?
  #39  
Old 05-26-2011, 07:11 PM
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Wow, is this the new "if you don't like something about America, then find another country to live in!"?
Don't be silly. It's not new.
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Old 05-26-2011, 07:16 PM
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So why can't the kid working at a McDonalds structure his income as McDonalds dividends? Because there's one set of tax rules for the rich, and another for everyone else, of course.
The rich are not like you and me. For one thing, they have a lot more money.
  #41  
Old 05-26-2011, 08:06 PM
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I'm not sure what planet you live on, Lemur, but there's one set of *everything* for the rich and another set for everyone else. Rich people don't travel like us, live in homes like us, vacation like us, etc.

If you don't like it, feel free to become rich.
As you point out, the rich already have plenty of advantages. So why do they need preferential tax rates?
  #42  
Old 05-26-2011, 08:40 PM
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Indeed, if the taxes are so onerous for the rich, they do have the option of refusing to accept any more money.
  #43  
Old 05-26-2011, 08:45 PM
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It may be "fair" in some people's view to have a single tax rate, but I don't see the results as desirable.
This is my view. Life isn't fair, rich people tell poor people that all the time. Goose, gander, and all that.
  #44  
Old 05-26-2011, 09:02 PM
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Here's one primitive calculator. Doesn't include an option for standard deductions, but at least it's something.

http://www.freedomworks.org/scrapthecode/calculator.php
No it's not "something", it's one of the dumbest sites I have ever seen. A flat tax is one with a single tax rate. Once you figure out what your income is, looking up your tax in a table is easy even if it there are graduated rates.

What's hard is determining your income. If you own a rental property to you just add count all the rent as Income? of course not, you deduct the cost of improvements, and depreciation of the building, and a bunch of other stuff. For companies with employees, and capital equipment, and accounts receivable, and other actual real world things there is a lot of work that needs to be done to get at that figure you plug into that inane calculator.
  #45  
Old 05-26-2011, 09:04 PM
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The basic idea would have to be like this:
1) Income up to $A is not taxed.
2) Income after $B is taxed at the flat-tax amount of X%
3) From $A to $B, the tax rate increases linearly from 0% to X% but cumulative (think calculus)

So lets assume A is 20K, B is 50K and X is 30%
$0 - $20,000 no tax
$30,000 tax = $500
$40,000 tax = $2000
$50,000 tax = $4500
$50,000+ tax = $4500 + 0.3(salary - 50000) eg $100,000 has tax of $19,500

Last edited by Saint Cad; 05-26-2011 at 09:05 PM.
  #46  
Old 05-26-2011, 09:16 PM
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The basic idea would have to be like this:
1) Income up to $A is not taxed.
2) Income after $B is taxed at the flat-tax amount of X%
3) From $A to $B, the tax rate increases linearly from 0% to X% but cumulative (think calculus)

So lets assume A is 20K, B is 50K and X is 30%
$0 - $20,000 no tax
$30,000 tax = $500
$40,000 tax = $2000
$50,000 tax = $4500
$50,000+ tax = $4500 + 0.3(salary - 50000) eg $100,000 has tax of $19,500

Unfortunately, that's less than a third of what the actual figures would have to be. Good idea, tho.
  #47  
Old 05-26-2011, 09:32 PM
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Cecil Adams on the "flat tax":

"Do the rich pay very little tax? Wouldn't a flat tax be fairer?"
  #48  
Old 05-26-2011, 09:36 PM
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Unfortunately, that's less than a third of what the actual figures would have to be. Good idea, tho.
I just came up with the numbers to illustrate the point. Real tax-rate grows asymptotically to the nominal tax-rate so let's say we think it's "fair" to charge the rich 40% of their income and due to the gradual rise of the tax rate we start it earlier. We now have A=10K, B=50K and X=40. The rich would pay $8000 plus 40% of their income over $50K. $100,000 would pay $28000 in taxes and $200,000 would pay $68,000 in taxes.
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Old 05-26-2011, 09:38 PM
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Great cite!

"The flat-tax scam is more of the same. Nobody's sure what the actual flat-tax rate would be, but let's suppose it was 20 percent. Based on the 1992 returns, if this inane proposal were implemented, taxes on everybody making $200,000-plus will go down and those on everybody else will go up. Malcolm Forbes Jr., one of the richest men in America, was the leading backer of the flat tax during the 1996 presidential campaign. Now do you see why?"
  #50  
Old 05-27-2011, 12:38 AM
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Originally Posted by Saint Cad View Post
The basic idea would have to be like this:
1) Income up to $A is not taxed.
2) Income after $B is taxed at the flat-tax amount of X%
3) From $A to $B, the tax rate increases linearly from 0% to X% but cumulative (think calculus)

So lets assume A is 20K, B is 50K and X is 30%
$0 - $20,000 no tax
$30,000 tax = $500
$40,000 tax = $2000
$50,000 tax = $4500
$50,000+ tax = $4500 + 0.3(salary - 50000) eg $100,000 has tax of $19,500
Maybe I'm not grasping your idea. But aren't you basically describing the existing tax rate system?

A person in the 35% bracket doesn't pay 35% of all of his income. He pays 35% of his income above $373,651. His income below $373,651 is taxed at a lower rate.
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