Whats Fair When it Comes to Taxes?

[mlmpetert]

So this thread is inspired by Herman Cain’s 999 but isn’t necessarily about it. Its also inspired by the occupy Wall Street guys who have several messages, one of them being paying for one’s “fair share”. With both the occupy movement and Cain’s 999 plan we have seen a lot of philosophical thought with regards to what different people think is fair when it comes to paying taxes. Cable news, articles online and blogs offer their opinion as what they deem fair or just but they don’t really get any counter point or devil’s advocate type opinion because all too often they are directing their message at a base that is all ready set to agree with them.

I have never heard so much thought and talk centered around taxes in my life! I think this is one of the most important debates or talks people and politicians can have because its routed in thoughts around prosperity, fairness, equality, and personal & social responsibitly. So whats thewarpath's opinion on equality?

my thoughts:

With regards to taxes I believe they are a necessary evil. I hate them but not because I don’t appreciate the things they provide, but because I view the progressive and incentive laden system as intrinsically unfair and overly complicated. I studied some tax while in school and something that shaped me tax ideology was stumbling on a particular part of the Hobby Loss Rules. Without getting into much detail the Hobby Loss Rules try to prevent people from taking income deductions on what the IRS determines is more hobby then actually business. The rules are pretty straight forward; however, if your hobby/business happens to be breading, showing, training or racing horses the rules are much more laxed. In my experience the only people who bread, show, train or race horses, and therefore benefit by doing so, are rich.

In recent weeks or months we have been reminded that 47% of households pay no federal income taxes. Many are quick to point out that even those who may not pay federal income taxes still pay taxes via payroll taxes at 15.3%. The problem with that line of thought is that payroll taxes are forced savings that are held for your direct benefit later in life. In the case of SS the amount you end up getting when retired is directly related to how much you were forced to save during your working lifetime.

About 15% of ”taxpaying” households pay absolutely zero in combined federal income and payroll taxes. While half of these people are seniors that do not work and are therefore not subject to any payroll tax, the other half are people who make less then 20k a year and have at least 1 kid. A portion of these poorest families actually pay a negative tax as they get money back in excess of any income withholding and payroll tax paid during the tax year. Also worth noting is that many people receive benefits unrelated to tax deductions, credits and refunds. Welfare, food stamps and housing vouchers are some of the more substantial benefits available for the lowest income earners.

With all that said I personally believe that everyone who earns money should pay taxes. I also think everyone should pay the same percentage in taxes, which is absolutely not regressive as some say, its proportional. Don’t worry under a completely proportional tax system the rich still pay more in taxes. I do not understand (although im open to consideration) why some people should pay a different percentage in tax then others. I will say that while I like flat tax plans and hybrid flat/fair tax plans like Cain’s, I do think “passive income” should also be taxed the same as “earned income” under a proportional system, so things like capital gains and qualified dividends would be taxed like everything else. As much as the estate tax sounds like a “king’s tax” I would be up for taxing estates but only at the same equal rate as all other income. Im undecided on SS.

I do feel that its society’s responsibility to help and I have compassion for the 7% percent or so of families that currently pay zero or a negative amount in combined income and payroll taxes, as well as those in very hard but slightly better situations. I think additional benefits should be available to people who need them although instead of just giving them money in the form of a yearly refund check to spend on anything they want I think the benefits should be more controlled and have a focus on eliminating generational poverty.

So my thoughts are everyone should pay taxes at a equal rate on all and any income. I also think business should pay taxes in the same fashion. This all comes from a fairness and equality standpoint.

What are you thoughts? Should some people pay a higher percentage in taxes than others? Should everyone pay the same? Should people only pay based on what they consume? Is it okay that we all benefit for services that only 50% pay for while the remaining 35% only pay for direct future benefits to themselves and with 15% paying nothing at all? Is it okay that the 15% who pay nothing at all are giving tax refunds paid by everyone else to do with whatever they like?

[over the mountain]

i agree with most of what you said.

after looking into welfare, medicair medicaid i came to the conclusion that you are better off getting medicaid, welfare, unemployment, section 8, food stamps while working an under the table job like a drug dealer, house cleaner, dish washer, cook, etc.

the people who work for 22 to 40k a year are getting screwed. you make just enough not to qualify for any assistance, have to actually wake up and work a shit job while getting shitted on, have to pay taxes, find a way to pay rent and provide helthcare for your family.

anybody who makes less than 40k should work under the table jobs and qualify for all types of govt assistance. if you got paid 20k a year to clean houses 15 hours a week plus all that govt assistance youd probably end up making 40k plus and you wouldnt have to worry about ever being evicted or getting large medical bills and have all the free time in the world to watch murray and the price is right.

my lady currently works a part time under the table job, i wish she would collect unemployment and welfare, food stamps etc but she has too much pride. .. well, pride dont pay your cell phone bill does it honey pie?

what i dont agree with you on is i think rich people have way to many tax loopholes that they can make 10 mil a year but their taxable income is like 83k. i just reviewed a business owners tax returns, he made 113k and NONE OF IT WAS TAXABLE! WTF! he got money back.

[mlmpetert]

Originally Posted by over the mountain

my lady currently works a part time under the table job, i wish she would collect unemployment and welfare, food stamps etc but she has too much pride. .. well, pride dont pay your cell phone bill does it honey pie?

what i dont agree with you on is i think rich people have way to many tax loopholes that they can make 10 mil a year but their taxable income is like 83k. i just reviewed a business owners tax returns, he made 113k and NONE OF IT WAS TAXABLE! WTF! he got money back.

Yeah you need to talk some sense into her! Maybe you could guilt trick her with something like “Do you think a person who accepts handouts should be looked down upon, or should a kid still be proud of his mom because she’s on welfare? Maybe I just think people can still be proud of the things they accomplish regardless of the circumstance they are in or the opportunities they are offered…..”

I also agree that we have too many loopholes or what i call incentives and i think everyone should pay the same percent. So if that number happens to be 9% a guy making 10 mill will be paying 900k in taxes and the guy making 113k will be paying 10k in taxes. If Warren Buffet make 100 million via capital gains he pays 9 million in taxes which would be more in dollar terms but equal in percentage terms as his security making 50k paying $4,500 in tax. No loopholes or incentives for anything except charity.

[firstdown]

Originally Posted by over the mountain

i agree with most of what you said.

after looking into welfare, medicair medicaid i came to the conclusion that you are better off getting medicaid, welfare, unemployment, section 8, food stamps while working an under the table job like a drug dealer, house cleaner, dish washer, cook, etc.

the people who work for 22 to 40k a year are getting screwed. you make just enough not to qualify for any assistance, have to actually wake up and work a shit job while getting shitted on, have to pay taxes, find a way to pay rent and provide helthcare for your family.

anybody who makes less than 40k should work under the table jobs and qualify for all types of govt assistance. if you got paid 20k a year to clean houses 15 hours a week plus all that govt assistance youd probably end up making 40k plus and you wouldnt have to worry about ever being evicted or getting large medical bills and have all the free time in the world to watch murray and the price is right.

my lady currently works a part time under the table job, i wish she would collect unemployment and welfare, food stamps etc but she has too much pride. .. well, pride dont pay your cell phone bill does it honey pie?

what i dont agree with you on is i think rich people have way to many tax loopholes that they can make 10 mil a year but their taxable income is like 83k. i just reviewed a business owners tax returns, he made 113k and NONE OF IT WAS TAXABLE! WTF! he got money back.

For that to be true he lost his ass over the year. When I first started my business the business might have made 80k one yr but after I paid everyone and all the bills I made nothing. So I owed no taxes.

[firstdown]

Originally Posted by over the mountain

i agree with most of what you said.

after looking into welfare, medicair medicaid i came to the conclusion that you are better off getting medicaid, welfare, unemployment, section 8, food stamps while working an under the table job like a drug dealer, house cleaner, dish washer, cook, etc.

the people who work for 22 to 40k a year are getting screwed. you make just enough not to qualify for any assistance, have to actually wake up and work a shit job while getting shitted on, have to pay taxes, find a way to pay rent and provide helthcare for your family.

anybody who makes less than 40k should work under the table jobs and qualify for all types of govt assistance. if you got paid 20k a year to clean houses 15 hours a week plus all that govt assistance youd probably end up making 40k plus and you wouldnt have to worry about ever being evicted or getting large medical bills and have all the free time in the world to watch murray and the price is right.

my lady currently works a part time under the table job, i wish she would collect unemployment and welfare, food stamps etc but she has too much pride. .. well, pride dont pay your cell phone bill does it honey pie?

what i dont agree with you on is i think rich people have way to many tax loopholes that they can make 10 mil a year but their taxable income is like 83k. i just reviewed a business owners tax returns, he made 113k and NONE OF IT WAS TAXABLE! WTF! he got money back.

So your point is the tax payers should subsidies her cell phone bill.

[saden1]

No one likes the IRS, including me, but we all have to do what we must. It's funny you posted this thread today because I just got a letter today from the IRS saying I owe them 25K in back taxes from 2009 on top of a 5K in penalty for unreported income. Of course what these mother fckers don't realize is they've already collected taxes on said income and all I have to do is file an amended Schedule D. It's a pain in the ass but what isn't these days?

Bottom line is a lot of people want simplicity these days but they also want the ability to do some deductions and take tax breaks. I dont know how you simplify that. Shiit, I want more deductions not a simpler process.

Anyways, I got to go dig-up my records and settle this matter before the 90 days they've given me and avoid having wages garnished.

[mlmpetert]

Originally Posted by firstdown

So your point is the tax payers should subsidies her cell phone bill.

Well its already being done for others:

snopes.com: Free Cell Phones for Welfare Recipients

Should a person with a mortgage and real-estate taxes be subsidized by tax payers by being able to itemizing and deduct many of the costs associated with that purchase?

[mlmpetert]

Originally Posted by saden1

No one likes the IRS, including me, but we all have to do what we must.

Bottom line is a lot of people want simplicity these days but they also want the ability to do some deductions and take tax breaks. I dont know how you simplify that. Shiit, I want more deductions not a simpler process.

The only thing i love more then a deduction is a credit, and if its refundable im really smitten. But I would be happy with having a simple incentive free tax code as long as it was fair. Fair to me means everyone pays the same percentage on all their income (earned or otherwise) less charitable donations.

In your opinion would it be fair to treat everyone equally and charge them the same percentage? Do you think its currently fair that only half of us pay federal income taxes?

[firstdown]

I actually don't have a problem with a progressive tax but I think everyone should have to pay some taxes.

[firstdown]

Originally Posted by mlmpetert

Well its already being done for others:

snopes.com: Free Cell Phones for Welfare Recipients

Should a person with a mortgage and real-estate taxes be subsidized by tax payers by being able to itemizing and deduct many of the costs associated with that purchase?

Yes, because I own a home and getting ready to build a new one.

[hooskins]

I think the real question is the balance of having a closely knit society which values the free-market VS. the rising income/wealth disparity between the top and bottom of society(rising tide lifting boats unequally). At what point society so far apart in terms of socio-economic status that the society really isn't "one" anymore? Are taxes somewhat of an answer and if so, to what extend until we start moving towards big govt/socialism(sure some will say we are already there). If we are already there or we shouldn't try to correct this, what is it to be American? Are we all really equal with the same rights if life is a race and people starting in the "back" never will be able to catch up?

[JoeRedskin]

Taxes are simply the overhead we pay for living in a society that (1) is subject to the rule of law; (2) operates under an essentially free market capitalist system; and (3) recognizes the interdependence of citizens within that society.

There have been many "tax the rich" threads/discussions before and I am not going to rehash the research but, for all the loopholes, the top 10% of income earners pay about 50% of the federal government's income. Those may not be the right percentages, but you get the gist. A small minority of individuals is subsidizing the funding that benefits us all.

I got no problem with a progessive tax system. The more you benefit from a system that promotes and protects your ability to create and retain wealth the higher proportion of your created and protected wealth you should pay. With a flat tax rate, the underlying assumption is that we all benefit equally from the taxes collected i.e. a person making 25,000K receives a value of approximately 10% from the government performing its function as does a person who makes 250,000 and a person making 2,500,000. I would humbly suggest, however, that a person making 250,000 or 2,500,000 receives a significantly higher proportional benefit from living in a society ruled by laws and supporting a free market economy than the the guy making 25K. There is a reason that the US has one of the highest ratios of millionaires per capita - it's a good, safe place to become rich and that should be worth a proportionally higher premium than being safely poor.

With all that said, I think it's a rough balance. When does "paying overhead" in proportion to your ability to accumulate and retain wealth become straight up "wealth redistribution" - I'm just not sure. I'm okay with the system in place - I think it needs some tweaking but, in general, everybody's paying taxes of some form or another (sales tax, licensing fees, etc.) and those that make the most, pay the most.

The biggest problem is that for the last 20 years we have spent vastly beyond our means and somehow that deficit needs to be made up.

[JoeRedskin]

Found the chart I had posted once before somewhere: The Tax Foundation - Summary of Latest Federal Individual Income Tax Data

Essentially, in 2010, the top 1% of income earners (those making over ~354K) pay ~38% of all income taxes collected (based on the total number of tax returns filed and adjusted gross income). The top 5% (those making over ~169K) pay ~58% of all income taxes.

From the same site:
"•The largest corporations pay the lion’s share of taxes. In 2008, the 1,937 largest companies were responsible for 68 percent of corporate tax revenue
•The overall effective corporate income tax rate on the worldwide income of U.S. corporations is between 32.1 and 33 percent, which is close to the statutory rate of 35 percent."

[724Skinsfan]

What about everyone paying the same percentage from their income minus a basic living cost? Set the basic living cost at the current poverty level, which is around $22k. So if you earn $35k then you'll be taxed on only $13k.

[saden1]

Originally Posted by mlmpetert

The only thing i love more then a deduction is a credit, and if its refundable im really smitten. But I would be happy with having a simple incentive free tax code as long as it was fair. Fair to me means everyone pays the same percentage on all their income (earned or otherwise) less charitable donations.

In your opinion would it be fair to treat everyone equally and charge them the same percentage? Do you think its currently fair that only half of us pay federal income taxes?

Who told you life is fair? If it was fair we would all be well off, there wouldn't be children that go to sleep hungry at night or homeless veterans, or fund managers who pay 15% CGT on the hard earned money of others.

Get over your pursuit of perfection and fairness and start seeking sensibility and practicality. It doesn't seem fair to me to have the local grocery bagger pay $4 for a loaf of bread and 15% on their income tax and for the CEO of the grocery store to also pays $4 for a loaf of bread and 15% on their income tax. On the surface it looks pretty fair but while the CEO wipes his ass with $100 bills and is unable to notice a measly $4 the grocery store clerk will.

The cost of rent/mortgage and consumable goods are high and unless you want to live like a caveman someone making 30k can barely survive in this country. Bottom line is the clerk will consume most of his income on all the things one need to live a decent life while the CEO can't spend enough to on his neighborhood for eternity. As such they shouldn't be treated the same in matter of taxation.

Some will say, well, why should the CEO have to subsidize other people...to these people I say who is subsidizing the CEO and why shouldn't they pay more considering they benefit the most?