NakedPuts Wrote: ------------------------------------------------------- > AlphaSeeker Wrote: > -------------------------------------------------- > ----- > > Please don’t make fun of the poor… I do > agree > > that we should ask them to pick up their fair > > share of the taxation tab. > > That’s funny, they think the same thing about you! Ha! How do you know? Unless you are one of them? Almost half of the country’s household don’t pay income taxes already. Shame on them… What else do they want from the supposely high-eaners who work hard/smart for their money?
AlphaSeeker Wrote: ------------------------------------------------------- > Ha! How do you know? Unless you are one of them? > > Almost half of the country’s household don’t pay > income taxes already. Shame on them… > > What else do they want from the supposely > high-eaners who work hard/smart for their money? A lot of taxes are regressive so the total tax bill as a percent of income is not wildly different for separate income classes. Yes, federal income taxes are progressive, but why would you only look at one type of tax unless you were a hack?
^^ Because Federal income tax is far larger than any other taxes in term of proceed… Size matters, doesn’t it?
It’s only slightly larger than payroll taxes. But again, if you’re concerned about what taxes households are paying, why are you only counting one type of tax? Why not look at the entire rate?
If almost half the household don’t pay income taxes, the biggest tax category, their entire rate will be signficantly lower than those who pay. Make sense? My friend?
AlphaSeeker Wrote: ------------------------------------------------------- > If almost half the household don’t pay income > taxes, the biggest tax category, their entire rate > will be signficantly lower than those who pay. > > Make sense? My friend? No it doesn’t. You don’t understand the tax code.
AlphaSeeker Wrote: ------------------------------------------------------- > If almost half the household don’t pay income > taxes, the biggest tax category, their entire rate > will be signficantly lower than those who pay. > > Make sense? My friend? Doesn’t work that way. Math Fail. You might be working hard for all your money, but you’re obviously not working smart.
naked, lbriscoe, I am amused by your personal attacks, as they showed signs of inmaturity and insecurity in the inner you… But back to the subject. Prove your statement.
Although I did take a cheap shot, briscoe certainly hasn’t made any personal attacks. He simply stated the obvious, which is that you don’t understand the tax code. Simply because 50% of households don’t pay any federal income tax does not mean the the cumulative tax burden as a percent of income is necessarily lower for these households. We’ve been over this before. They still pay payroll taxes such as MC/MA, and SS (which is a regressive tax as there is an income cap on contributions). They pay property taxes and sales taxes - which also tend to be regressive as lower income people generally consume a higher portion of their incomes out of necessity.
goes to eleven Wrote: ------------------------------------------------------- > I would LOVE to address SS and MC - talk about > sticking it to the low-earners. > > The 200 billion at labor, and over 100 billion at > ag and education are not anything to sneeze at. A > billion here and a billion there, pretty soon > we’re talking about real money. I thought these numbers looked off. Budgets Labor: $13.3B Ed: $46.7B Ag: $26B Defense: $663.7B http://en.wikipedia.org/wiki/2010_United_States_federal_budget
AlphaSeeker Wrote: ------------------------------------------------------- > naked, lbriscoe, > > I am amused by your personal attacks, as they > showed signs of inmaturity and insecurity in the > inner you… > > But back to the subject. Prove your statement. Fair point. Lbriscoe, sorry bro.
Here’s an example Lets say you are married, filing jointly with combined income of 50k per year (25k each) You live in a state with no income tax, but a 6% sales tax No children, two total dependants. You own a 100k house, have a 70k mortgage at 6% with 30 years to go. Property tax rate is 1% and you were assessed at 100k You have various other fees, charges and taxes of $400 per year (gasoline, registration, excise etc) You have no savings - all of your disposible income is spent For your taxes, you make standard deduction of $11,400, mortgage int deduction of $4200 for a taxable gross of $34,400 Using this calculator: http://www.moneychimp.com/features/tax_brackets.htm Income tax on $34,400 is $4,323. As a % of earnings, this is 8.646% You would have social security of 6.2% or $3100 on top of that. Medicare would be $725 or 1.45% Property taxes are $1000 per year Now, you net after taxes - $50,000 - $4323 - $3100 - $725 - $1000 - $400= $40,452. Now take mortgage payments out - $419.62 (6% mortgage on 100k) = $5036.28 per year. Disposable income = $40,452 - $5036.28 = $35,415.72 Sales tax on the rest = $2124.94 Total taxes: Sales tax: $2125 Income tax: $4323 Property tax: $1000 Medicare: $725 Social security: $3100 Other: $400 Total taxes: $11673 Tax rate: 23.3% I’ll work on the rich example later. Its more complicated.
1morelevel Wrote: ------------------------------------------------------- > > Disposable income = $40,452 - $5036.28 = > $35,415.72 > > Sales tax on the rest = $2124.94 > > Total taxes: > > Sales tax: $2125 > Income tax: $4323 > Property tax: $1000 > Medicare: $725 > Social security: $3100 > Other: $400 > Total taxes: $11673 > > Tax rate: 23.3% > > > I’ll work on the rich example later. Its more > complicated. Not disagreeing with you on theory, but isn’t it a bit much to assume that they spend 100% of their disposable income and that 100% of those purchases are subject to sales tax? Maybe it’s different in states with no income tax, but in NJ food and most clothing is not subject to sales tax.
I obviously made a lot of assumptions. The tax code is clearly much more complicated than this. The point is, over 62% of the taxes that this family pays is NOT income tax. So comparing the “equity” of taxes between tax brackets based solely on income taxes is clearly misrepresenting the facts.
Here’s the rich example - Now lets say we have a couple that makes 10x as much as the poor couple. Lets say they are married, filing jointly with combined “income” of 500k per year (250k each) They both work, with incomes of $100,000 each. Their investments went up in value this year. $100,000 is unrealized capital gains, $100,000 is realized capital gains, and $100,000 is in tax sheltered accounts with defered taxes. $200,000 earned income $100,000 unrealized CG $100,000 realized CG $100,000 increase in value of retirement accounts Although the tax code doesn’t define all of this as income, it is all spendable increases in net worth. You live in a state with no income tax, but a 6% sales tax No children, two total dependants. You own a 1MM house, have a 700k mortgage at 6% with 30 years to go. Property tax rate is 1% and you were assessed at 1MM You have various other fees, charges and taxes of $600 per year (gasoline, registration, excise etc) You have considerable savings: The amount doesn’t matter since there is no wealth tax but lets say this family also maxes out their 401k, so $33,000 total, contribute to two IRAs (younger than 50) for $10,000 total. They also make an annual donation to the Rich Couple Foundation, a foundation they started, of $15,000 per year. For your taxes, you make the mortgage int deduction of $42000, and deduct your 401k, IRA and donations, and have various other deductions that total 25k. (mileage, home office, entertainment, travel etc) Your taxable gross is $200,000 - $42,000 (mortgage int) - $10,000 (prop tax) - $25,000 (deductions) - $15,000 (donation) - $33,000 (401k) - $10,000 (IRA) = $65,000 taxable income Using this calculator: http://www.moneychimp.com/features/tax_brackets.htm Income tax on $65,000 is $8,913. You would have social security of or $10,354 on top of that. Medicare would be $2420 Property taxes are $10,000 per year Capital gains tax would be $15,000 (15% x 100,000) Now, you net after taxes - $500,000 - $8913 - $10354 - $2420 - $10000 - $15000= $453,313 Lets say they spend 100,000 a year subject to sales tax ($6000 total) Total taxes: Sales tax: $6,000 Income tax: $8913 Property tax: $10000 Medicare: $2420 Social security: $10354 Passive income tax: $15,000 Other: $600 Total taxes: $$53287 Tax rate: 10.65% Obviously, this is kind of an extreme example, but it points out that the poor dont pay 0% and the rich don’t all pay 50%.
Oops. made a mistake. The poor couple cant deduct their mortgage interest or property taxes. Its below the standard deduction. Revised income tax is $4953 and revised tax rate is 24.56%
The rich couple can’t spend the unrealized CGs without realizing them and paying taxes on them, so you either have to remove them from income or include them in taxable income. The increase in retirement account also cannot be spent and will be taxed eventually, so need to remove from income. That leaves them with $53,287 in taxes on income of $300,000, or 17.8%. While this is still lower than the poor couple, it much closer than your examples suggest and they have paid 10.75 x more in total taxes than the poor couple.
You are thinking about it like an accountant. Think about it like an economist. Your wealth increased. You are better off financially by $500,000.
That increase in net worth, while not taxable, is certainly spendable. For instance: Lets say you were a founder of a public company, and are since retired. You own $50MM of the company stock, and have a lender willing to lend you 50% LTV. Lets say the stock increases in value to $100MM. You can increase your borrowing from $25MM to $50MM. If you die with the stock and the loan, you completely avoided tax on the “unrealized gains” but managed to cash out $50MM. IRS definition of “income” does not represent the economic benefit accurately and is just one more way the tax code is skewed in favor of the rich.
1morelevel Wrote: ------------------------------------------------------- > That increase in net worth, while not taxable, is > certainly spendable. For instance: > > Lets say you were a founder of a public company, > and are since retired. You own $50MM of the > company stock, and have a lender willing to lend > you 50% LTV. > > Lets say the stock increases in value to $100MM. > You can increase your borrowing from $25MM to > $50MM. If you die with the stock and the loan, > you completely avoided tax on the “unrealized > gains” but managed to cash out $50MM. > > IRS definition of “income” does not represent the > economic benefit accurately and is just one more > way the tax code is skewed in favor of the rich. My estate still has to pay back the $50MM and my heirs will be taxed 50% on whatever is left. If I spent the $50MM I borrowed, paying $3MM in sales taxes along the way, there will only be $50MM left after the estate repays the loans (forgetting about interest on the loan and assuming the stuff I bought has no value) and only $25MM of that will pass to my heirs after Uncle Sam takes his cut. Don’t try to argue that the estate tax is gone either. We both know it is coming back and there is a high probability that it will be retroactive to the beginning of the year. So, I made $100MM in my life, bought $50MM worth of worthless stuff, and paid $28MM in taxes. Looks like an effective tax rate of 28% to me. Oh yeah, and my kids now own only 25% of the company that I spent my entire professional life building.