The Nature of Taxes

[Jesda]

I was endeavoring to construct a hypothetical example wherein an "unfair" redistributive tax would somehow save all of society from imminent destruction (however improbable and wacky that fictional situation might be).

If you're just going to make up things that will never happen in the real world, then I'm going to ask you to formulate a response that takes into consideration my marriage to Amanda Leigh Moore.

She's crazy in the sack.

[HashiriyaS14]

If you're just going to make up things that will never happen in the real world, then I'm going to ask you to formulate a response that takes into consideration my marriage to Amanda Leigh Moore.

She's crazy in the sack.

LOL

Ok, how's this. Unless you approve a redistributive tax wherein all Thai gentlemen over 200lbs have to tithe 30% of their (gross) earnings to me (both cash and pad thai accepted), then Mandy will never hop on your rod again.

Honestly, I'd say that'd be a pretty fair trade. I think she's worth the 30%.

[smockers83]

I never said that we would have to or should tax the successful more. The tax policy I would like to see put in place would keep taxes the same, but reduced slightly for middle income America. Not because they haven't been successful or anything, their wages have been essentially flat since 1990 and inflation has significantly deteriorated their wage. If inflation was 3% each year and you were given a 3% raise each year, you didn't get a raise at all. That isn't the case with everyone as inflation has outpaced wage increases at times, particularly in middle income America. So I feel their taxes should be lowered slightly or given back as rebates.

Some of the money to help those people could even come from the taxes we currently pay without adding taxes. Put more limits on welfare and get the people on it back in the workforce with the money freed up, unless they're on it for illness/disability reasons. Just pull money out of the welfare system that you intend to replace by investing in the people, if I'm making sense to you all.

[szh]

should tax the successful more.

BTW, we already do! Even with a flat tax percentage, we would continue to do so!

The problem is that people conveniently forget that when taxes are based on percentage, the person making more actually does pay more in absolute dollars in taxes. And does not get the same benefits in return, by the way (no extra voting rights, no extra schools for kids, or road improvements in front of their house, no better response from fire-fighters, etc., etc., etc.)!

We sugar-coat taxes as a percentage - even in flat tax proposals - to make it more palatable and feel less guilty about it! My problem is that we then take the additional steps and say "oh, the rich can afford it, so let's tax them at a higher percentage!"

That is where the unfairness occurs!

BTW, in many other taxes and fees and things, we do not make people pay more ... based on their income. Think about these:

- Should you pay more in property tax than your neighbor if you make more money, even if your houses are identical?

- Is your car excise tax based on your income?

- Is your sales tax percentage higher or lower than somebody else who makes more or less than you do?

- Your fishing license does not cost more based on your income!

Etc, etc., etc.

The fact is that we have become so inured to using percentage as a means of calculating personal income tax, that we are not likely to change that at all. So, all my (and others) flat tax proposals are still based on percentages - but I think that people opposed to flat tax don't realize that or "get it".

My suggestion: create a threshold to accommodate the "poor" (even if I think this is somewhat unfair, but I will play along with the libbies here) and then charge a flat tax on everything about that. No deductions (even for mortgage or number of kids, etc. ... those are choices, not privileges), no loopholes, including capital gains, etc.

For a hypothetical calculation, keep a floor of, oh, let's say $30,000 (change this to suit, if you think it needs to be different, or even add in a few thousand per dependent like we do today - I disagree with this, but I'll go along) and make the flat tax percentage be 20% (change that if you think it needs to be different) on everything above that.

Then - taxes could be done with a simple calculator (imagine the savings on tax professionals and the IRS alone!):

1. A person making $ 30,000 a year pays $ 0.2. A person making $ 40,000 a year pays $ 2,000.3. A person making $ 75,000 a year pays $ 9,000.4. A person making $ 100,000 a year pays $ 14,000.5. A person making $ 250,000 a year pays $ 44,000.6. A person making $ 500,000 a year pays $ 94,000.7. A person making $ 1,000,000 a year pays $ $ 194,000.

And so on.

Fair? I believe so!! Totally!!

Z

P.S. I have posted statistics from a site in other posts here, about the actual total tax revenue collected from the people who pay taxes. Not surprisingly, the large portion of taxes is, indeed, already paid by the so-called "rich".

[smockers83]

The problem is that people conveniently forget that when taxes are based on percentage, the person making more actually does pay more in absolute dollars in taxes.

Yes, this is true. Even with a proportional tax system (flat tax rate), the person making more will pay more in terms of dollars. However, each person in that society has the same tax burden. Its the same as a sales tax. If you purchase less, you'll pay less sales tax. If you purchase more, you'll pay more sales tax. However, each person paid the same amount in respect to how much they purchased. If you wanted to base fairness on dollar amounts, you would have to have a regressive system in that the poor have a much higher tax burden than the rich.

What you just proposed is a progressive tax system, just like we currently have now, even though its a flat rate. Do the calculations and you'll see for each increase in income, the effective tax rate increases as well (the tax rate will never, ever reach 20% in this scenario). So how is it any different or more fair?

[szh]

What you just proposed is a progressive tax system, just like we currently have now, even though its a flat rate. Do the calculations and you'll see for each increase in income, the effective tax rate increases as well. So how is it any different or more fair?

Oh, don't get me wrong. Personally, I don't think it is fair to have that poverty threshold (said so in the original post too) ... I am merely accommodating the usual response of "we gotta help the poor" that seems to get triggered by a flat tax proposal. My suggestion is a compromise between the "flat tax percentage for all" and "bracketed percentage increases against the rich".

Clearly, the most "fair" would be if everyone paid the same absolute amount per person, but that would be impossible to make happen.

Z

[AZhitman]

Z, you're brilliant.

If ever border-hopping Brown Guy brought what you bring to the table, I'd say OPEN THEM BORDERS!!!



Just pickin' on ya Z.

[szh]

Z, you're brilliant.

If ever border-hopping Brown Guy brought what you bring to the table, I'd say OPEN THEM BORDERS!!!



Just pickin' on ya Z.

Z

[HashiriyaS14]

My suggestion is a compromise between the "flat tax percentage for all" and "bracketed percentage increases against the rich".

Don't most realistic "flat tax" scenarios involve a considerable drop in tax revenue relative to what we receive now? Would they require a serious cut in spending?

This is an honest question, not a rhetorical one.

[szh]

Don't most realistic "flat tax" scenarios involve a considerable drop in tax revenue relative to what we receive now? Would they require a serious cut in spending?

This is an honest question, not a rhetorical one.

Actually, no! In most of the proposals, the numbers stay about the same. Personally, my actual tax would go up very slightly (if you used the numbers I showed in my hypothetical suggestion). And, there is some reason to believe (in certain calculations) that the numbers might even go up some ... which can be corrected by appropriately adjusting the percentage chosen as the flat rate.

Z

[audtatious]

While I am against additional taxing on the rich, the whole Obama plan does give me a giggle. Why? Cost of living.

Let's compare a relative red-state location against a blue-state location. In Jeffersonville, IN (which is simply across the river from Louisville, KY) the cost of living is FAR less than the national average. If I compare Jeffersonville to Los Angeles, LA is 97% more expensive and housing is 443% more expensive than Jeffersonville (San Diego is 86%/337% and Newark is 32%/96%). With that being the case, the Obama tax increase will punish the blue states FAR more than it will the red states.

While it sux for you Z because you are there, I kinda call it justice served. Indirectly, those who want to punish the rich are also punishing themselves.

[smockers83]

Don't most realistic "flat tax" scenarios involve a considerable drop in tax revenue relative to what we receive now? Would they require a serious cut in spending?

This is an honest question, not a rhetorical one.

Russia imposed a flat tax system and saw revenues from income tax rise 25% the first year, 24% the second, and 15% in the third.

[smockers83]

Oh, don't get me wrong. Personally, I don't think it is fair to have that poverty threshold (said so in the original post too)

I agree with you, I just wanted to make sure you understood that it wasn't a true flat tax system, but a hybrid if you will. Which you do, so

[szh]

Russia imposed a flat tax system and saw revenues from income tax rise 25% the first year, 24% the second, and 15% in the third.

Interesting! I was not aware of this. Was the drop because they adjusted the actual rate in use (annually) to make it more equitable?

Z

[smockers83]

That's a good question and something that would have to be looked at. Those are just statistics that I pulled off of Wikipedia.

[HashiriyaS14]

Russia imposed a flat tax system and saw revenues from income tax rise 25% the first year, 24% the second, and 15% in the third.

That's very interesting.

Surely there's a study done, most likely by Steve Forbes or a supporter, that details what the impact would be on each tax bracket's obligation and on national tax revenues as a whole if we moved to a flat system.

Again, I'm too lazy to find it personally.

[szh]

Another bumpable thread.

Z