Shhh. If news of this gets out Republican backers will seek new ways to define wealth.
[QUOTE=Jim, fugitive slave in Huckleberry Finn]
“Yes; en I’s rich now, come to look at it. I owns mysef, en I’s wuth eight hund’d dollars. I wisht I had de money, I wouldn’ want no mo’.”
[/QUOTE]
It takes the CBO three years to figure that much, when they make these reports. How long do you think it would take to analyze all the tax returns’ deductions and credit, too?
That’s just silly.
We’re talking about income tax, not a non-existent, unconstitutional wealth tax.
I don’t care how long it takes them, quite frankly. I’m just saying that calling the EITC a negative income tax without considering other tax expenditures is not telling the whole story. We quite recently had a high-profile story of a particular high-income individual who’s tax liability was rather low compared to many middle-income households.
Why? To my mind the EITC is a government expenditure. The fact that is refundable drives this home. It’s a welfare payment for low-income households that is distributed by the IRS.
If SS payments were made as a lump sum refundable FICA tax credit you’d suddenly see lots of old people with “negative” FICA taxes too.
Of course we are. But maybe you could explain why it’s “unfair” to consider personal wealth when deciding what the income tax rates should be? That is, if income correlates strongly to wealth, and wealth is more concentrated than income, why can’t we use the wealth concentration level to determine equitable tax rates on earned income? Surely higher wealth decreases the marginal utility of additional income (or, conversely, decreases the economic impact of higher marginal rates).
EITC is no different than any other deduction or credit. It’s claimed on the same form and refunded with everything else. I think you just want to twist the numbers to reflect what you want to believe.
We recently were exposed to a cherry-picked comparison between Romney’s income tax rate and the total state and federal tax load of hypothetical middle-income households. The average income tax rate for middle-income households is about 3%, 14% for all federal taxes. The average income tax rate for Romney’s income level is about 20%, 32% for all federal taxes. Chihuahuas are smaller than cats. Do you think that means that all dogs are smaller than cats?
That’s a big if. It doesn’t work that way and I don’t anyone is seriously suggesting that it should. That’s why it’s silly.
Because ‘wealth’ has already been taxed, at least once.
People bought a service offered to them in a market. What? You don’t believe in markets or something - and how great markets are?
Are you some sort of Commie who thinks markets don’t automatically, by definition aggregate the individual choices of consumers into The Best of All Possible Worlds?
Are you saying markets only work when individual customers consider the collective impact of their individual choices? On what basis would you say an individual is able to make that judgement?
How was the individual ever to know a collectively crooked class were slicing and dicing mortgages of all quality into Weapons of Financial Mass Destruction that in-the-pocket ratings agencies certified?
Who would know finance institutions didn’t understand what they were doing?
Commie.
No - markets are not supposed to only work if individual consumers make choices in the light of magically forseeing the future. The whole superiority of markets is supposed to be that they aggregate individual choice in some magic way to get the best collective outcome.
Markets do not only work when consumers are ‘good’. What happened here is that the markets, through greed and arrogance, slit our throats through greed, incompetence and stupidity.
You cannot believe in the superiority of capitalism and blame the individual consumer for the collective outcome of his individual choice.
I really don’t want to twist anything. I think both you and I understand why the numbers are the way they are. For various reasons EITC benefits are paid out through the tax code. Just like energy-efficient appliances and home mortgage interest benefits. This is why low-income people appear to have a negative federal income tax liability when you do the simple calculations you quoted.
It has nothing to do with “what I want to believe”. The fact is that low-income families have no tax liability and in some cases negative federal income tax liability. Nobody denies this. But hopefully nobody thinks that they don’t pay any taxes at all. And when you consider that they also often have extremely low (and often negative) net worth it’s not really “unfair” that they have such low tax liability either. The average bottom-quintile family had a net worth of $4,300 in 2007 (before the recession). Almost all of this net worth is tied up in housing. Top quintile families had over $500,000, with generally only a quarter or so in housing.
We had this discussion ad nauseum before. People will disagree whether Romney’s (and Buffet’s) tax liabilities are “fair”. It generally comes down to whether you believe that investment income should be incentivized even for those individuals that wouldn’t change their behavior even if it were taxed at their earned income marginal rate.
This is really the part that interests me - for at least two reasons.
First, the idea that wealth shouldn’t be considered because it’s already been taxed at least once is a complete red herring. Every dollar I earn has already been taxed at least once as well. Every sales tax I pay is with money I’ve paid income tax one. Every property tax bill I pay is the same way. I pay my taxes, and then pay you for goods and services, and then you pay your taxes.
But more generally, when considering tax policy I think it is best to find a way to raise the required amount of revenue in the method that will cause the least harm to the overall economy. And in order to determine that it’s important to consider marginal utility, which you can’t figure without considering wealth.
They more than “appear” to have a negative effective federal income tax liability; they truly have a negative effective federal income tax liability. I don’t think you understand why effective tax rates are calculated the way they are, because you want to calculate something other than effective tax rates and call them effective tax rates.
I’m only saying that’s how it is; I never said it was unfair. In fact, I said it is fair.
I don’t believe in double taxation. Dividends are after tax profit distribution. I think most other capital gains should be taxed at the regular rate, though.
i.e. “…, to each according to his need.”?
Yeah, bad wording on my part - it certainly is a real negative income tax liability. But that’s just a result of the way EITC was structured.
[QUOTE=ABraut]
I don’t believe in double taxation. Dividends are after tax profit distribution. I think most other capital gains should be taxed at the regular rate, though.
[/QUOTE]
Agreed, minus the whole “double taxation” part. I really don’t care about double taxation - I think tax policy should be evaluated based on it’s effects not ideology.
To some extent, sure. Why not? That’s what welfare and Medicaid and needs-based student loans and all sorts of programs are for.
Although you left out the more relevant half - “From each according to his abilities”. That’s the part I’m talking about here. We have a decided that we want to provide certain government services and it only makes sense to fund them in the way that causes the least negative economic impact.
Fair enough.
Again, fair enough, but you should at least recognize that it is double taxation, with a combined marginal rate of 50%, and the effects of that. Dividends are actually taxed at a higher rate than any other income.
I don’t have a problem with social safety nets, or progressive tax structure; I have a problem with the “rich people don’t need any more money, so we should take most their money” ideology, you appeared to be promoting. Of course they can afford to pay more, but that alone is not a valid reason to take more. As you’re now saying, it should be based on real economic effects and concerns. A large part of making a decision on that basis is separating hype and propaganda from fact and reality. You have to know how something really works and what isn’t working, before you can truly fix it.
I don’t think the words you have put in my mouth are an accurate representation of my opinion. I certainly don’t think we should take most of anybody’s money. What I do think is that if you have a level of government spending it is irresponsible to advocate for reducing revenue even while the spending is going up. And that once we recognize that we need to both reduce spending and increase revenue in order to meet our budgetary obligations it makes sense to return the upper rates to Clinton-era levels because that is a tax hike that is much less likely to cause economic contraction than attempting to get it from the bottom quintiles.
I have also advocated for pushing a larger share on the burden on the upper middle class (largely by eliminating the home mortgage interest deduction). I’d also like to have some variant of the Buffett rule whereby all income over a certain level regardless of source is taxed at the top marginal rate (which it seems you might agree with). Personally I’d be OK with returning all rates to Clinton-era levels, to be quite honest, but the economic shock of that makes it less attractive until economic growth seems more robust.
On the “tax takers” side, I think it’s imperative that we reduce the scope of our social safety net to those that truly need it. Means-testing part or all of Social Security retirement benefits could be a step in this direction.
And I truly despise arguments that the poor aren’t paying enough in taxes (the old “lucky duckies” argument), as if you can get blood from a stone or that they wouldn’t gladly trade their lot in life with anybody at the top of the income scale, tax liabilities included.
Ah. There’s an excellent article on Cracked.com that responds devastatingly to many of the posts I see on the Dope from conservatives:Six Things Rich People Need To Stop Saying. You are saying Thing Number Two: “Waaaa! I have to pay higher taxes than my gardener!”
The response is simply that the rich make their money from the poor and the middle class: it is our purchases that make them wealthy. We all in this together, fella, and we all need to be taxed according to our ability to pay.
I don’t think the rhetoric you were using at the beginning of this is an accurate representation of your opinion, and I’m simply noting that difference.
I couldn’t agree more.
I like it the way it is, in general. It does need some adjustment to restore the balance, but not so much that it becomes the ‘cash cow’ it once was. FICA collection is capped because SS payouts are capped. You have to pay something in to get paid later. I forget the exact numbers, but someone who pays half of the max gets a much greater return on their money than someone who pays the max. There’s a point of diminishing returns and it gets very steep towards the top. (or very flat, depending on how you calculate/graph ‘diminishing returns’)
Could you point to any of my rhetoric (here or elsewhere) that sounds anything like “rich people don’t need any more money, so we should take most [of] their money”?
As to the rest I don’t think we’re very much in disagreement at all. Although I’m not sure of the appropriateness of throwing a Marx quote at me as if a reasonable critique of marginal tax rates is equivalent to Marxism… particularly in the same thread where you denounce hype and propaganda.
Sure. It wasn’t any one particular statement. It was that you made all your arguments in terms of “fairness” and emphasized wealth accumulation.
You made no indications that you actually hold a more moderate view. In the absence of such clarification (you made later) I got the impression that your motivations were reflected in your “stick it to the rich” rhetoric. It’s similar to the way you assumed that I was saying that the negative effective tax rate was unfair, even though I simply stated facts without any talk of fairness.
It matched my (then) understanding of your arguments, and you defended the Communist Creed when I asked if that’s what you meant. In fact, you defended the Communist Creed as a basis for determining tax structure, immediately after denouncing ideology as a basis for determining tax structure. What was that about?
I don’t really want to beat this horse, but my initial posts in this thread made no arguments about the fairness of the tax system. They addressed my perception that you felt that the current system was unfair - which you have since disabused me of. It fell in to the standard pattern where one person quotes statistics showing that the rich pay a lot of taxes and another person quotes statistics that the rich have a huge percentage of the wealth and they both assume that they are on opposite “sides” of the argument.
Because when someone accuses you of being a socialist it’s generally more effective to just point out that they are socialist too. Once you support means-tested welfare and progressive taxation you’re already down that path. Then it’s just a matter of deciding how far to go.
Everyone (except some extremists) is socialist to some extent. To be clear, I was accusing you of having extreme socialist beliefs.
I guess I will throw myself out there and say I think there are people that don’t pay any taxes at all. I mean this in the sense that you add up all federal, state, and local taxes and net with things like the earned income credit and I think some people are in a net negative position.
Just doing some quick thinking, let’s consider a married couple making a gross salary of $25,000 / year with one child and no home (no mortgage interest deduction and no property taxes). Since I am in Texas, I used Texas sales tax rates, gasoline tax rates, and no state income tax.
We know they would pay social security taxes of $1,050 (4.2% of $25,000) and Medicare taxes of $363 (1.45% of $25,000).
If we use $0.384/gallon gasoline tax rates and assume their gasoline consumption is the state average of 11.223 barrels per year, we get a gasoline tax of $181 (11.22342$0.384).
If we assume they spend 30% of their gross income on things that they pay sales tax on (which I would guess is high), they would pay sales tax of $619 ($25,000 * 30% * 8.25%).
Just quickly entering in the information into turbo tax gives me a refund on $0 in withholdings of $3,343.
Therefore, I paid a total of $2,213 in taxes and received a refund of $3,343 for a net tax payment of -$2,756.
What have I missed? I’m no expert on taxes, so I will readily admit that I might be missing something.
Property tax on a car, if they have one?
The refund seems high, as EITC caps at $3,094 for 2011, and phases out at $16k. The IRS calculator for 2011 gives me $2,570 for your test case. Maybe there is another refundable credit I’m forgetting?
I think 30% is too low for the exposure to sales tax. The numbers I see in a quick search range from 50% for middle-class families to 75% for poor families.
And your final math is wrong (net payment would be -$1,130).
In then end for your test case it ends up just about neutral depending on what exactly value we use for sales tax.
But yeah, you’re probably right that there are some households in low-tax states that end up with a negative overall tax liability in a given year (maybe on the order of $500-$1000). There’s no way it’s anywhere near the 40% commonly cited by the “lucky ducky” crowd.
There is no personal property tax in Texas (outside of real estate, obviously). There is one for businesses. My understanding is that personal property taxes are not common for most states.
The child tax credit is $1,000.
I think the opposite. If anything, I think 30% was too high. Consider that housing costs make up a very large percentage for poor people and that you don’t pay sales taxes on housing. Same goes for utility costs including gasoline. Same goes for food costs; even though poor may spend too much of their food costs on fast food, they still spend a larger percentage of their income on food of which much has no sales tax. Finally, most medical costs don’t have a sales tax component. Without putting a big value judgement on what people should spend their money on, it is almost impossible for me to believe a person could have their spending priorities so out of whack that they spend 75% of a $25,000 household income on retail items that you need to pay sales tax on.
Oops. Thanks.
Sure, I don’t think that the dollars are huge and the percentage of people in a net no tax position is certainly much less than the percentage of net no federal income tax people.
Not paying any taxes at all isn’t a huge concern for me. I support negative income tax schemes over goods-and-services welfare. I think having both is kind of dumb, though.