Need arguments for tax debate with friend

[5axis]

I really try to hide my econ nerd side but sometimes it gets loose.
I prefer a NST over a flat tax.
enjoy
http://www.cato.org/pubs/pas/pa-272es.html

[Jim Richards]

Originally posted by livi
Maybe I should change career, go politician instead of pediatrician.

Yes, become a politician. But remember, you have to become a pedophile first. Gay is optional.

[Jim Richards]

Originally posted by 5axis
I really try to hide my econ nerd side but sometimes it gets loose.
I prefer a NST over a flat tax.
enjoy
http://www.cato.org/pubs/pas/pa-272es.html

I'll give the Cato article a read during lunch. In the meantime, wouldn't a national sales tax discourage consumption? Would that actually slow economic growth? Just curious.

[nota]

real numbers as close to 100k as I could find on the web

Before the 2003 Act, an unmarried taxpayer with salary of $80,000, interest of $4,000,capital gains of $12,000, and dividends of $8,000 would have computed his tax as follows:

Salary $80,000

Interest $4,000

Dividends $8,000

Total $92,000

Less standard deduction (4,750)

Less personal exemption ($3,050)

Taxable ordinary income $84,200

Tax on ordinary income $19,488 [$14,868 plus 30% of the excess over $68,800]

Tax on capital gain $2,400 [20% of $12,000]

Total tax $21,888

After the Act, the computation would be as follows:

Salary $80,000

Interest $4,000

Total $84,000

Less standard deduction (4,750)

Less personal exemption (3,050))

Taxable ordinary income $76,200

Tax on ordinary income $16,082 [14,082 plus 28% of the excess over $68,000]

Tax on capital gain and dividends $3,000 [15% of $20,000]

Total tax $19,082

Tax reduction after 2003 Act $2,806 [$21,888 less $19,082]

sorry fearless leader but less that 25% plus 15% SS TAX =40%
BEFORE THE CUTS
AND
less then 20% alter

but the real money doesnot pay SS or have a big % of income in taxable funds they get capital gains and dividends now with NO TAX!!!!!!!!! the real rich are UNDER TAXED

[Superman]

Originally posted by Wayne at Pelican Parts
No, your numbers are wrong. Try instead of $15,000 in taxes, let's make that $65K on $100K. That's where it's currently at today. The effective tax rate is about 50% for those who make serious money (no, I'm not in that category yet). Then, in money-hungry states like CA, you can't spend your 50% without being taxed another 8.5% on top of that (sales tax). Buying gasoline, liquor or cigarettes with your hard-earned 50%, and it goes much higher.

So, yes, if it goes much higher than the current 65% or so that you lose in taxes, then I can see and increased level of Oprah-watching in the near future.

-Wayne

I just re-checked the IRS federal income tax schedule and sure enough, the maximum rate is 35% Not 65% Even that is laughable though, since rich folks DONT have to spend this money on food but rather reinvest it in tax shelters. Heck, if we're exaggerating here then I can use hyperbole, right? But seriously, the only income you pay taxes on is the stuff you can't shelter or deduct. Folks who handle lots of money have greater access to these tax-avoidance strategies. So, the real tax rate for high-income folks is WELL below 35%. No, you cannot add sales tax and pretend it is income tax. You know at least as well as I do that sales tax is said to be somewhat progressive because you only pay it WHEN YOU BUY STUFF.

Someone wanted to know what I mean about investing in the guy who has modest income and is motivated by things like family needs. No Paul, I don't subscribe to that lingo crap. What I meant was that I'd like to give that fellow some incentive. Let's say we apply zero income tax to the first $200k earned by a new business, and tax the next $200K at a fifteen percent rate. And provide low interest business loans and perhaps even grants. We don't need big corporations getting fatter nearly as much as we need small and medium-sized businesses. But sadly, it's the big corporations that have the clout.

Yes, there is a war on the middle class. The haves and the have-nots are getting farther apart. The middle class is shrinking. That's fact. Wayne, you probably qualify right in that pocket, but you are rather exceptional in a number of ways.

[Superman]

Originally posted by nota
but the real money doesnot pay SS or have a big % of income in taxable funds they get capital gains and dividends now with NO TAX!!!!!!!!! the real rich are UNDER TAXED

No question about this. The more you make, the less taxes you pay. Pointing at the tax rates which increase with income will fool some folks, but not anybody who can read. The people and corporations with money and power are running the show, folks. And they're good at accumulating money and power. And the theory that this provides everyone with spinoff benefits is your appeasing hand-job.

[livi]

The Swedish version of nota´s tax example would be approximately:

Salary: $80.000
Tax: $40.000

Ridiculous..

[john70t]

Reagans flat tax idea would have eliminated the shelters, and not punished the sucessfull from becoming more so.

Right now there are so many outrageous structures, that it is defacto to hide excess in shelters and show no profit.
It is good for the investment shelters, and good for the non-profits, but bad for the gov. who have to lie and shuffle everything through the "general fund". Also bad for the taxpaying voter who can't tell where his money is going.

[tc-sacto]

So exactly how does one pay no tax on capital gains and dividends?? MY turbo tax says 15% on qualified dividends and 15% on capital gains. Also, when that income was originaly earned it was taxed at whatever tax rate prior to investing.

Personlay I think capital gains should be not be taxed IF it's re-invested. Only taxed if taken as income. We can 1031 rental property, why not stocks/mutaul funds.

Also, I think no one should ever have to pay more than a third of their earned income to the government. That should be more than enough to fund the social programs for everyones use...ie roads, schools etc. Problem is that money gets misappropriated, therefore tax rates have to go higher.

[Nathans_Dad]

Originally posted by Bill Verburg
Here's a little factoid for those of you that think there isn't a war on the middle class being waged by our elected leaders. This is just a sample.
Marginal Tax on a Single individual per 2006 Federal tables

Income	               0 - 7150  - 2905    - 70351   - 94200	- 146750  - 319100

marginal tax rate	  10%	   15%	      25%	25%	   28%	     33%

SSI+Medicare	        15.30%	  15.30%     15.30%   15.30%	    0%        0%	

Total Marginal Tax rate	 25%	   30%	      40%	40%	   28%	     33%

Of course there is the standard deduction but that affects all single earners equally

So by this you mean that people who make more than the maximum income which is subject to SSI tax should continue to pay tax on that income?

[Bill Verburg]

So by this you mean that people who make more than the maximum income which is subject to SSI tax should continue to pay tax on that income?

Yes, why do you feel that those earning say $150k deserve a marginal rate less then some poor shmoo that earns $30k.

Just in case you forget, it's the first few $ that are needed to eat.

[fastpat]

Originally posted by pwd72s
Dennis nailed it...socialism and communism kills the incentive to be productive and inventive. Why bother, if the Govt. is going to take it all anyway? Thus, the "slacker" mentality. Economic freedom is a key to personal freedom as well. The Government doesn't create weath....

Socialism, communism, and fascism are litter mates; the US government is a fascist state today.

[fastpat]

Originally posted by Bill Verburg
Just in case you forget, it's the first few $ that are needed to eat.

Irrelevant. There should be no income tax at all.

[Bill Verburg]

Originally posted by fastpat
Irrelevant. There should be no income tax at all.

So we should have a complete anarchy w/ no services, military etc.?

Sounds like you should move to Iraq

[tc-sacto]

Originally posted by Bill Verburg
Here's a little factoid for those of you that think there isn't a war on the middle class being waged by our elected leaders. This is just a sample.
Marginal Tax on a Single individual per 2006 Federal tables

Income	               0 - 7150  - 2905    - 70351   - 94200	- 146750  - 319100

marginal tax rate	  10%	   15%	      25%	25%	   28%	     33%

SSI+Medicare	        15.30%	  15.30%     15.30%   15.30%	    0%        0%	

Total Marginal Tax rate	 25%	   30%	      40%	40%	   28%	     33%

Of course there is the standard deduction but that affects all single earners equally

Somewhat missleading.
not exactly accurate. you assume those earning more than the limit pay NO ss tax; not true, they pay tax on the amount up to $94,200 so the last two figures should read 32.9% and 35.3% total marginal rate.(adjusted for employers half)
(Also, if you not self employed the employer pics up half of that 15.3%.) so the first numbers would be: 17.65% and 22.65%

[Bill Verburg]

Marginal Tax

that's the one that hurts

[Nathans_Dad]

Originally posted by Bill Verburg
Yes, why do you feel that those earning say $150k deserve a marginal rate less then some poor shmoo that earns $30k.

Just in case you forget, it's the first few $ that are needed to eat.

Um, you do understand that those people who make $150k pay the full amount of SSI on that income that is below the limit don't you?

Why do you consider it a war on the middle class if those making $150k are paying more into SSI as the poor shmoo that earns $30k?

[tc-sacto]

point is the guy making $319,100 pays twice as much as the guy making $7,150, as it should be. Not evident at first glance. I think the guy making $319,100 ,(not me unfortunately ) pays plenty. Govie just needs to figure out how to spend thier share better. Not punish him for figuring out how to make it.

[Superman]

Now that's brilliant, and I wonder why nobody thought of that so far. And if we can just excuse the rich guys from taxation, then let's just excuse everyone. Let's just lower everybody's taxes. Yeah, that's it!

[Bill Verburg]

Originally posted by Nathans_Dad
Um, you do understand that those people who make $150k pay the full amount of SSI on that income that is below the limit don't you?

Why do you consider it a war on the middle class if those making $150k are paying more into SSI as the poor shmoo that earns $30k?

You don't get it, yes, everyone pays the same rate on the first doller, that is not the one that hurts. The rate at the margin is wherethe inequity sets in.

I see the right wing fanatics raving about how fair the flat tax is. I grant that a pure flat tax is fairer than what we have now, but the inequities of the current system wil be tranposed into any version of flat tax that I have seen.

You can not have it both ways

The tax at the margin is where pain is felt, if you tax the $94,000th dokller at 40%(which you do currently) then the $150,000th should be taxed at the same rate.