Bush 2005 - no more IRS, income tax

[PeachMonkey]

I do not think this would be more of a burden on the lower class because being in the lowest tax bracket they would take home more money each week and if the sales tax was set up right, there wouldn't be tax on food, rent or clothing anyways.

There already isn't sales tax on food and rent, at least everywhere I've lived. The sales taxes paid on all other items, however, would increase.

And if we want to talk about fair, a flat sales tax is a lot fairer than a tiered one based on income.

Another misconception. Current income taxes are not tiered based on income as a whole, but on *wage income*. The majority of the income of the wealthy comes from non-wage sources, and as such, is taxed less (or not at all).

Moreover, why isn't it fair for those who have best taken advantage of society's benefits to contribute more to that society? Why isn't it fair for those who have more to give more, particularly since they still have so much left over even after giving more deeply?

 

[MisterMike]

There already isn't sales tax on food and rent, at least everywhere I've lived. The sales taxes paid on all other items, however, would increase.

What types of other items do you see that the poor need that would then be out of reach for them if there was a 20% sales tax? Mind you, they would be keeping about 15% more of their wages. You said this would affect the poor but I'm kind of narrowing it down monetarily, not in the presumed cut in social services.

Another misconception. Current income taxes are not tiered based on income as a whole, but on *wage income*. The majority of the income of the wealthy comes from non-wage sources, and as such, is taxed less (or not at all).

I would disagree or perhaps you are talking about the top 2-5% in this case. It is tiered, and if you do not know how to make deductions, it will be taxed at 35%. Let's say most of the top 2-5% make a majority of their money off stocks. If you let them set for 18 months, it's no longer a short term gain. There are lots of other places to stash your cash, but by letting it stay in the system, isn't that a benefit back to society as well?

I don't think the people between the 10% and the 35% brackets are making their money off stocks. Why do they pay a higher rate of their wages?

Moreover, why isn't it fair for those who have best taken advantage of society's benefits to contribute more to that society? Why isn't it fair for those who have more to give more, particularly since they still have so much left over even after giving more deeply?

I think they are contributing more. If someone made a $million, and paid 20%, that's more than 20% on the next guy's 100k. Fair (percentage-wise), and they gave more to society. So the have-mores CAN still give more even with a flat tax. Why isn't it fair to still give more ontop of more? Because they earned it. Who are we to say who has 'so much left over' or 'too much left over'?

 

[michaeledward]

I would disagree or perhaps you are talking about the top 2-5% in this case. It is tiered, and if you do not know how to make deductions, it will be taxed at 35%. Let's say most of the top 2-5% make a majority of their money off stocks. If you let them set for 18 months, it's no longer a short term gain. There are lots of other places to stash your cash, but by letting it stay in the system, isn't that a benefit back to society as well?

I don't think the people between the 10% and the 35% brackets are making their money off stocks. Why do they pay a higher rate of their wages?

Capital Gains has very little to do with the cash flow generated from stock ownership. Companies pay dividends to share holders, regardless of how long a stock is held.

Dividends are taxed at 15%.
Dividends are not taxed as wages from labor (contribution to the economy).
The correct question is not 'Why should workers pay more than this?' but rather, 'Why is this source of income taxed less?' To which the answer is, because the Bush Administration cut this source of income, directly benefitting those who have.

The sale of a share of stock that was held for longer than 12 months (18?), is taxed at a Capital Gains rate, which is also lower than wages from labor. One of the issues with this, is that the wealth can be transferred from one generation to the next without the gain being taxed at all. As long as the share of stock is held (and not transferred), no taxes should be assessed. But when it changes hands, taxes are paid (or losses deducted). Why should the gain or loss be valued differently than wage income?

And why, when generational transferrs occur, do we allow all the gain from generation 1 to be tax free when generation 2 sells the stock?

Mike

 

[MisterMike]

Capital Gains has very little to do with the cash flow generated from stock ownership. Companies pay dividends to share holders, regardless of how long a stock is held.

Dividends are taxed at 15%.
Dividends are not taxed as wages from labor (contribution to the economy).
The correct question is not 'Why should workers pay more than this?' but rather, 'Why is this source of income taxed less?' To which the answer is, because the Bush Administration cut this source of income, directly benefitting those who have.

The sale of a share of stock that was held for longer than 12 months (18?), is taxed at a Capital Gains rate, which is also lower than wages from labor. One of the issues with this, is that the wealth can be transferred from one generation to the next without the gain being taxed at all. As long as the share of stock is held (and not transferred), no taxes should be assessed. But when it changes hands, taxes are paid (or losses deducted). Why should the gain or loss be valued differently than wage income?

And why, when generational transferrs occur, do we allow all the gain from generation 1 to be tax free when generation 2 sells the stock?

Mike

You're probably right on most of what happens to moneys in stocks. But how is this unfair? Everyone has the ability to invest and be taxed at the same rates. (Unless you are poor or don't work))

 

[rmcrobertson]

A few more embarassing realities:

a) Businesses tend to oppose sales taxes. Why? Because they believe, with some support from reality, that the higher the sales tax, the less people buy.

b) Sales taxes are identified as, "regressive," taxes because they disproportionately affect the very people least able to afford paying them--i.e. the poor, and the working class, and the lower middle class.

c) The demands to abolish income tax, as always, rest upon the fantasy that, "everything would be fine," if we just cut welfare, cut programs such as Head Start--you know, everything that, "they're," getting--and just let capital run amuck.

d) These demands are always tied to other right-wing dreams--getting rid of environmental legislation, for example--and bring out the fact that the real agenda involves letting the irresponsible do whatever the hell they please at the expense of everybody else.

e) It would be easy to get off our dependency on foreign oil....especially since Jimmy Carter explained exactly how over twenty years ago. We need to get rid of gas-guzzling cars like SUVs, and raise the old home thermostat to, say, 76 degrees in the summer and lower it to, say, 68 in the winter. We need to stop what Wendell Berry called, "our idiotic attempt to illuminate the entire outdoors." We need to get rid of many of our, "labor saving devices," and even more importantly, all the endless Christmas lights, motorized elves, etc., with which we try to fill up empty lives. We need to walk, bike, take public transport.

f) We will do none of these things. Why? Because it's easier to stamp our little feet, screw our eyes shut, and claim that reality isn't there. Because it's easier to blame, "the environmentalists." Because we refuse to engage in rational city planning, transportation planning, or anything else. Because we've always got away with it so far, and we refuse to face the facts that times have changed. Because we refuse to look at the science of these questions (global warming, anyone?); because we've systematically undercut science education because somebody might teach evolution and reason; because it's easier to act like spolied children and drunken sailors on shore leave, and simply grab what we want when we want it. And, of course, because we've built our economy around selfishness and waste.

g) But hey, keep blaming those wacky environmentalists. What have they to do with taxes? Well, our present economy, building habits, work patterns, etc., are unsustainable. And we throw enormous amounts of money at trying to pretend otherwise. So, it's a lot easier to--for example--endlessly rebuild houses in the Florida Keys that shouldn't be there in the first place, or keep extending cities into burn areas out here in California, or keep constructing freeways--which we pay for--than it is to sit down, make plans as a society, and behave like grown-ups.

h) Not going to happen any time soon. Taxes are a great alibi.

 

[michaeledward]

You're probably right on most of what happens to moneys in stocks. But how is this unfair? Everyone has the ability to invest and be taxed at the same rates. (Unless you are poor or don't work))

A 'single' laborer earning $50,000.00 per year is taxed at 27%.
A 'single' stock-holder earning $50,000.00 per year in dividends is taxed at 15%.

27% = 15% <<< that doesn't look like a true statement to me.

After drawing out living expenses, how much, and for how long, do you suppose the single laborer would have to invest to transfer his income from labor to dividend?

During this time, the stock-holder, is not laboring at all, yet continues to earn his lower-taxed dividends.

Who among our two hypothetical persons is contributing to society more?
Who among our two hypothetical persons is benefiting more?

The plan works great if you have hundreds of thousands of dollars sitting in dividend paying stock. The rest of us schmucks will get there in a couple of hundred years.

Thanks - Mike

 

[MisterMike]

A 'single' laborer earning $50,000.00 per year is taxed at 27%.
A 'single' stock-holder earning $50,000.00 per year in dividends is taxed at 15%.

27% = 15% <<< that doesn't look like a true statement to me.

Yea but you left out that the $500,000 he made in wages before the he invested it as stock money was taxed at 35%.

35% of $500,000 != 27% of $50,000

it's actually a lot more.

 

[Feisty Mouse]

I just wanted to say that this has been a very interesting thread, and I have been lurking and reading. I hope the discussions continue.

I happen to be of the opinion that a flat tax is indeed unfair.

:lurk:

 

[michaeledward]

Yea but you left out that the $500,000 he made in wages before the he invested it as stock money was taxed at 35%.

35% of $500,000 != 27% of $50,000

it's actually a lot more.

Except he never earned $500,000.00 as wages. He inherited from his grandmother the AT&T stock she had purchased in 1923 ...

Now, because grandmother died before selling the stock, there was no capital gain paid to the US Department of Revenue on all of that unrealized profit. The grandson can now value the stock at the price when the transfer occurred ... so any sales will realize a much smaller capital gain.

.... OR ....

Grandma bought the stock at $1.00 per share (yes she paid income tax on the wages used to invest).
Over the Grandma's life, the stock split three times and now is worth $51.00 per share, (the original $1.00 dollar investment is current worth $408.00)
Grandson inherits stock at $54.00 per share in 2000.
Grandson sells 1000 shares stock in 2004 at $51.00 per share, realizing a $3,000.00 LOSS, which he uses to offset the 15% dividend income tax on his $50,000.00 dividend.
Grandson spends all his time posting to Martial Talk about how eliminating the IRS is a good thing.

Ok ... I'm kidding. Actually, the Grandson owns multiple radio stations in which he hosts right-wing talkshow hosts, and contributes to conservative 'Think Tanks'.

Thanks for Playing this weeks episode of ... You Bet Your Life's Income.

Mike

 

[PeachMonkey]

Everyone has the ability to invest and be taxed at the same rates. (Unless you are poor or don't work))

Very few people are actually in the position to ever invest enough of their income that they will be able to derive significant dividend income.

Moreover, even if your statement were correct, why is it fair to tax this particular kind of income at a lower rate than wages?

 

[Cryozombie]

I know a lot of places don't...

But here in Illinios there is a Tax on food.

I dunno about rent, but I pay a couple K a year in taxes on my Mortgage.

Minnesota doesnt (or didnt, the last time I was up there) have a Sales tax on clothing. That was pretty cool.

Hey... What if they eliminated all the BS extra taxes, and ONLY taxed our incomes? Nah... Id only see 10% of my check!

 

[MisterMike]

Very few people are actually in the position to ever invest enough of their income that they will be able to derive significant dividend income.

Moreover, even if your statement were correct, why is it fair to tax this particular kind of income at a lower rate than wages?

Well, if it's only a few people I don't see what the big deal is.

I think getting into why the tax rate is fair for one thing and not for another is beyond my original intent on this thread but I'd be more upset with the rates on say, gasoline and lottery winnings.

Ever look at the amount of tax and "fees" on your telephone bill?

The gov't has it's hand in every pot you got, and it's just too much. Their programs are bloated with bureaucracy and waste and perhaps cutting taxes will make it rethink its spendthrift philosophy and lack of efficiency. Not likely though.

 

[michaeledward]

Well, if it's only a few people I don't see what the big deal is.

I think getting into why the tax rate is fair for one thing and not for another is beyond my original intent on this thread but I'd be more upset with the rates on say, gasoline and lottery winnings.

Ever look at the amount of tax and "fees" on your telephone bill?

The gov't has it's hand in every pot you got, and it's just too much. Their programs are bloated with bureaucracy and waste and perhaps cutting taxes will make it rethink its spendthrift philosophy and lack of efficiency. Not likely though.

Michael, thank you for continuing to play ...

The big deal about dividend tax rates is the stratification of society. One of the founding principles of our country is that 'All men are created equal' ... not meaning equality of goods, but rather equality of opportunity. Each of us, by our industrious behavior, have the chance to acquire and succeed. This is distinctly different than the societies we left behind in Europe, where your lineage dictated what opportunities were available to you.

When the effects of lower dividend taxes, and the elimination of the estate tax (I know, new topic) have on society, we begin to see the creation of a self-perpetuating upper class, which has most, and with every passing generation acquires more. While recognizing that our society is not a zero-sum gam, such stratification has always led to the destruction of society.

Oddly, lottery winnings are taxed as wage income - were that they were taxed as dividends.

Gasoline is a straight regressive tax, it affects lower income people more. However, if we examine the results in the economy of automobiles on whole, we may find that they have a negative effect, in which case, a higher tax would be better, to discourage the use of automobiles.

The Telephone Service in Rural America is really one of the greatest triumphs of American History. You can pick up a phone and call anyone, anywhere. Pretty cool. Back before deregulation, it made those taxes pretty easy to understand.

While I appreciate your sentiments that 'the government' (which as you know, is us) inserts itself, via taxation, into too many areas of our life. I remind you that our system of governance is based on 'Taxation with Representation'. Run for office ... I'll even send in a donation to your campaign.

I do agree, that it is painfully difficult to end a bureaucracy, (Massachusetts Turnpike Authority?). We should be able to do that more often. The premise, I guess, is that not all taxes are evil.

Mike

 

[MisterMike]

Michael, thank you for continuing to play ...

The big deal about dividend tax rates is the stratification of society. One of the founding principles of our country is that 'All men are created equal' ... not meaning equality of goods, but rather equality of opportunity. Each of us, by our industrious behavior, have the chance to acquire and succeed. This is distinctly different than the societies we left behind in Europe, where your lineage dictated what opportunities were available to you.

When the effects of lower dividend taxes, and the elimination of the estate tax (I know, new topic) have on society, we begin to see the creation of a self-perpetuating upper class, which has most, and with every passing generation acquires more. While recognizing that our society is not a zero-sum gam, such stratification has always led to the destruction of society.

OK, so the bottom line is that you think we should keep taxes high on the rich so the money can be put back into society to help the lower class still have an equal shot at "success." I think most of the taxes goes to government spending and government jobs. Not much to the social programs designed to help the lower class.

I'm just seeing way too many variables in this so to continue I'm probably going to have to pick up about 5-10 books on economics/capitalism.

 

[PeachMonkey]

I think most of the taxes goes to government spending and government jobs. Not much to the social programs designed to help the lower class.

This is a result of the choices made by elected officials, rather than the inherent nature of a tax-funded society. That "government spending" employs "government jobs" primarily to support the Pentagon and to pay interest on debt from previous government borrowing. Shifts in how those funds are spent (as well as greater equality in how they are collected) could dramatically help social programs and help all of society, not just the lower classes.

Social programs that help people survive, get healthy, become educated, and in so many other ways help people improve their lives don't just benefit those individuals. *Everyone* benefits from a more educated, healthier society. *Everyone* loses, in the end, when things become more stratified and the wealthy classes segment all benefits of society for themselves.

 

[michaeledward]

OK, so the bottom line is that you think we should keep taxes high on the rich so the money can be put back into society to help the lower class still have an equal shot at "success." I think most of the taxes goes to government spending and government jobs. Not much to the social programs designed to help the lower class.

I'm just seeing way too many variables in this so to continue I'm probably going to have to pick up about 5-10 books on economics/capitalism.

I don't think I made any statement concerning how 'high' taxes are supposed to be. Clearly, the tax changes initiated by the Bush Administration are tilted heavily to those who have more money; but the issue was pushed as a benefit for everyone.

Because society requires 'rules' to function, taxation is required to establish and enforce those rules. The rules, and the taxation should be equitable to all. I am not certain that 'equitable' and 'equal' are interchangable.

Perhaps the discussion can best continue by substituting the word 'Services' for 'Taxes': I am for lower services; I am in favor of more services. I want to cut services.

As for books about economics and capitalism; I might suggest "The Myth of Ownership", it's a good read, in favor of a balanced society; in which the authors conclude progressive taxation is not unjust.

Mike

 

[Makalakumu]

I just wanted to say that this has been a very interesting thread, and I have been lurking and reading. I hope the discussions continue.

I happen to be of the opinion that a flat tax is indeed unfair.

:lurk:

I've been out of town and have skimmed this thread. Forgive me if this has already been discussed, but what is so bad about a flat tax rate?

Has anyone ever thought about tax reform? Real tax reform? For instance, why do we need loopholes and tax brackets and automatic deductions ect. Is it possible to have one tax rate and work on running the government from that? For instance, let say I pay 10% (arbitrary figure) of my income in federal taxes. Is it too much to ask that a poor person or a rich person pay the same? Why should anyone get out of paying their fair share?

Take a look at what this has done for Ireland. They reformed their tax rate in the 90s and now MN outsources jobs to them. Meanwhile every citizen has health care, education (including post secondary), good roads, ect...

upnorthkyosa

 

[Flatlander]

It's a good start. But I believe that it's important to have some minimum threshold beneath which no taxes are paid. For those living in poverty, that little bit helps, and it doesn't take a lot extra from the higher wage earners to make up for it, in terms of percentages.

 

[michaeledward]

. . . Is it possible to have one tax rate and work on running the government from that? For instance, let say I pay 10% (arbitrary figure) of my income in federal taxes. Is it too much to ask that a poor person or a rich person pay the same? Why should anyone get out of paying their fair share? . . . .

upnorthkyosa

The discussion becomes one of defining 'fair share'. Good people can come to disagreements about what constitutes 'fair share'.

The discussion concerning a single rate tax is that it is a 'regressive tax'. This means, it affects in a more negative way those with lower incomes. If we assume a consistant 'cost of living'; the value of 'one dollar' for a person making 10,000 per year is considerably more than a person making 100,000 per year.

Person A pays $1,000.00 under the flat 10% plan.
Person B pays $10,000.00 under the flat 10% plan.

Person A now has to provide for himself and his family on $9,000.00.
Person B can provide for himself and his family on $90,000.00.

Both persons have to pay the same price for a gallon of milk, a gallon of gas and any other necessities in life. Who struggles more under the 'flat tax'?

Also, assuming that Person B in the above situation purchases a 'nicer' home, and 'nicer' car ... one of the functions of government is to protect both persons from foreign invaders. Taxes are collect to provide this protection to both citizens. Because Person B has 'more' (or 'nicer') property to be protected, the argument can be made that his portion of the taxes used to protect his property from foreign invaders should be higher?

These two discussions can be considered when thinking about taxation strategies. They are two of the reasons our Federal Income Tax has a 'Progressive Structure'.

Thanks for listening. Mike

 

[Makalakumu]

My arguments for a flat tax rate would be as follows...

1. There are already regressive taxes that come right out of our paychecks. FICA and Medicare are two of them. These taxes have income limits that weight the burden of paying toward those that can least afford it. A flat federal rate would erase these taxes and replace them with a rate that would be more affordable and more equitable for all citizens.

2. A flat tax rate would hold all citizens equally accountable for their country. It is my belief that all citizens of this country should be obligated to pay taxes. From the richest to the poorest, no one can escape their social responsability for the price of living in this country. A flat tax rate demands equal sacrifice from all citizens. For instance, a person who make $1,000,000 dollars, taxed at a 10% percent rate, would owe $100,000 dollars in taxes on that income. A large bite no matter how you cut it, but fair considering that they would not have had the opportunity to become so successful if they did not live here. At the same time, a person who makes 10,000 dollars should also be expected to give up an equal portion of their income.

3. The tax rate, under a flat tax system, would fall for the poor and rise for the rich. Comparitively, I envision the tax system of this country as a pyramid. Those in the lowest brackets pay the higher rates, while those in the higher pay the lower. This pyramid system is a regressive tax structure because the burden to the standard of living falls mostly on those with the least, while the burden to the standard of living is less for those with the most. A flat tax rate would even this out.

4. The overall tax rate for the middle class would fall. As the rich are made to pay an even rate with the poor and the middle class, enough money would roll into the government coffers that they would be able to support governmental functions at a lesser rate for the middle class. This is, in essence, a tax cut for the middle class.

5. Adjustments to the tax code would be far easier for the average citizen to understand, making the legislative process more transparent. As it stands now, the tax laws of this country fill thousands of pages. Naturally, this leads to some clever evasions by those who have influence over the legislative process. A flat tax rate with no escapes and no loopholes would make doing taxes an exercise in simple mathematics and it would make reporting on changes in the rate extremely easy in this sound byte based society.

6. Does anyone else agree with this? Can you think of other benifits? I could go on, but I have poopy diapers to change.

Respectfully

upnorthkyosa