ok, what is our fair share?

[strider]

Apr 18, 2011 15:28:40 GMT -5 Sum Dum Gai said:

Oh, and before I get off my soapbox, could we get somebody to propose tying the tax brackets to something measurable? Just once. The federal poverty rate, some basket of goods that gauges cost of living, whatever, just pick something. They always pick some random dollar amount then get lazy about changing it. Like the AMT. When it was proposed the dollar amount chosen would only affect the upper income folks, then they left it there and inflation started pushing more and more middle class folks into paying a tax that was designed to hit the wealthy. It's not freaking rocket science.

You could do something like;
Bracket 1) $0 - federal poverty rate taxed at 0%
Bracket 2) Federal poverty rate - 3x the poverty rate taxed at 10%
Bracket 3) 3x poverty rate - 5x the poverty rate taxed at 15%
Bracket 4) 5x the poverty rate - unlimited taxed at 20%

No deductions, no credits.

There ya go, a one freaking paragraph income tax code that even a moron can figure out, that will adjust with inflation automagically. I refuse to believe that Congress is so stupid they can't come up with something workable that's clean, simple, and palatable.

Karma to ya

[Angel!]

Apr 18, 2011 11:11:50 GMT -5 TheHaitian said:

Apr 18, 2011 10:40:37 GMT -5 oped said:

No answer to my question?

Yes they did since for mose of last year they were seperated and actually went to court for visitations/child support/etc.

His w2 and other papers still have his parents address as his home address and while they are back together (for now at least), he still get child support taken out of his paycheck.

And from the court papers he does get to file with 2 of the kids per their agreement as long as he is up to date on his child support.

Just because he was able to claim exemptions for the 2 kids did not give him HOH status. His home had to be the main home for over half the year for the children. I'm guessing this wasn't the case. There are other rules for HOH also, like when cousin #3 was living with the aunt she would have needed to show that she provides more than 50% of the household costs & maintenance.

I am guessing at least 1 & maybe all 3 or these people shouldn't have filed HOH. Hopefully nothing gives them a reason to be audited (like using an address that another HOH filer uses) because then they might have bigger problems.

[runewell]

I make six figures (and donate five figures) and only pay about $6,000 in federal taxes. I believe I should be paying more than that, but I don't.

[skweet]

"ok, what is our fair share?"

This is different for every person, and based on life philosophy. The easiest way to figure out what your Personal, Ethical determination of "fair share" is, is to ask the simple question. How do you divvy up the bill at a restaurant? 1. You feel that everyone should pay for that which they ask for and consume. 2. You take the bill and divide equally among diners. 3. You determine who can most afford the dinner, demand that they pay, make plans to eat at a nicer place next time.
Your ethics and your politics may actually be in opposition, but that's, OK because it is about money, where ethics has no real place.

[TheOtherMe]

Apr 18, 2011 15:54:13 GMT -5 Angel! said:

Apr 18, 2011 11:11:50 GMT -5 TheHaitian said:

Yes they did since for mose of last year they were seperated and actually went to court for visitations/child support/etc.

His w2 and other papers still have his parents address as his home address and while they are back together (for now at least), he still get child support taken out of his paycheck.

And from the court papers he does get to file with 2 of the kids per their agreement as long as he is up to date on his child support.

Just because he was able to claim exemptions for the 2 kids did not give him HOH status. His home had to be the main home for over half the year for the children. I'm guessing this wasn't the case. There are other rules for HOH also, like when cousin #3 was living with the aunt she would have needed to show that she provides more than 50% of the household costs & maintenance.

I am guessing at least 1 & maybe all 3 or these people shouldn't have filed HOH. Hopefully nothing gives them a reason to be audited (like using an address that another HOH filer uses) because then they might have bigger problems.

I think probably 2 of these tax returns are incorrect. They can most likely expect a letter if the same address was used. Did that separate floor have a kitchen and a bathroom? If not, that cousin is not HOH.

[skweet]

[Actually, the wife has been caring for the couple's mentally retarded daughter and elderly grandma. The husband wants to throw grandma under the bus because she's too expensive to maintain, and he figures the mentally retarded daughter doesn't need an education. He wants to pass on the cost of their health care to their other children. The important thing is for him to work less and play more golf. ]
But Grandma is 65 years old, more than capable of providing a valuable day's work for an employer and has a $10MM net worth after years of investing with her husband (rest his sole). He doesn't want her thrown under a bus "literally", he just wishes he didn't have to give a far wealthier, capable worker, part of his paycheck. And retarded is an insensitive word to describe an actual handicap, and inaccurate in describing the daughter as she is simply lazy. Nobody would, really, not want to support the truly disabled, the husband is tired of supporting the daughter because like much of the welfare population, the only thing stopping them from employment is the desire to be employed.
If we were only talking about the seniors that couldn't make it without social security, or the truly disabled, then the budget would be balanced, and no discussion would be necessary. We could both show the most ridiculous hyperbolic description of each side (as our politicians are prone) but the truth is somewhere in the middle.

[ihearyou2]

How old is the OP that he is still looking for what is "fair"?

[formerexpat]

There ya go, a one freaking paragraph income tax code that even a moron can figure out,

You have too much faith in the average moron, my friend.

[morrisr2d2]

I like darkhonor's approach. But I've never understood why the tax brackets should be progressive and not flat. People shouldn't be taxed more because of their hard work. But assuming most people like the progressive idea, how about:

up to poverty - 10% (every should pay something)

poverty to 10x poverty - 15% (give people a good chance to move up the income ladder and not punish hard work)

anything over 10x poverty - 20%

[fairlycrazy23]

I never have liked the idea of taxing income/production , so I think the entire federal tax system needs to be scrapped and started it over with a national sales tax. Then every time you bought something new at retail you would be paying your fair share. The fairtax has a prebate system to cover the taxes on the necessities of life, so if you are poor or frugal you might actually have zero liability.

[2kids10horses]

I agree with fairlycrazy.

[phil5185]

The fairtax has

But the name is kinda hokey - you could ask someone if they like the fairtax and they say 'yeah dude!'. And if you ask them if they like the 'huge federal sales tax' they say 'no way'.

[Sum Dum Gai]

I'd be fine with a sales tax instead of an income tax as well. Provided it's not loaded with a bunch of BS exemptions. It does totally screw over everyone who invests in a ROTH though.

[Clifford]

All of America knows what's needed. Think back to the campaigns. Phrases like "balanced budget", "every dollar spent will be offset by a dollar saved", and "pay as you go" get candidates ushered into the White House or Congress. But once they are there they owe everyone they know and they need to buy votes for the next go-round. Then they see a big pile of money with several means to increase it (raise taxes or just print more) so they just spend away. Fixing the tax code is only half the problem.

What is our fair share? Almost any reasonable approach will do. Use Dark's, morris's, or fairlycrazy's ideas. As long as it is enough to cover what is spent.

How much should be spent?...that is the question.

[Angel!]

Apr 19, 2011 12:50:36 GMT -5 Sum Dum Gai said:

I'd be fine with a sales tax instead of an income tax as well. Provided it's not loaded with a bunch of BS exemptions. It does totally screw over everyone who invests in a ROTH though.

The govt needs to provide a rebate for everyone with post-tax savings to off-set the new sales tax. If they did this, then I would be all for fair-tax.

However, no one seems to be proposing this. Instead the fairtax website skirts the issue with statements like

How does the FairTax help seniors who have paid taxes on their retirement savings or invested in Roth IRAs?

Simply put, the FairTax is a revenue-neutral proposal, raising no more money than does the current system. The FairTax only changes where the money is raised, not the amount.

Additionally, some erroneously believe that people who have invested in Roth IRAs will never pay taxes on this money again. They may not know it, but they are paying corporate income taxes, employer payroll taxes, plus the associated compliance costs that are hidden in the price of every retail purchase they make. Under the FairTax, these hidden taxes are driven out of retail prices. And note, they can determine the amount of tax they pay through their own lifestyle choices.

This doesn't actually address the fact that someone who chose a roth instead of a standard IRA had to earn 25% more income to save the same amount of money. Yet, because of the tax law changes both have the same spending power now. People with just regular savings or investments are impacted also, their savings instantly loses spending power overnight & that is not fair, especially for something called "fairtax".

[dancinmama]

Apr 19, 2011 13:30:03 GMT -5 Angel! said:

Apr 19, 2011 12:50:36 GMT -5 Sum Dum Gai said:

I'd be fine with a sales tax instead of an income tax as well. Provided it's not loaded with a bunch of BS exemptions. It does totally screw over everyone who invests in a ROTH though.

The govt needs to provide a rebate for everyone with post-tax savings to off-set the new sales tax. If they did this, then I would be all for fair-tax.

Good luck.

And what are they going to do with all of those who have hundreds of thousands of tax free dollars in 401Ks?

[Sum Dum Gai]

And what are they going to do with all of those who have hundreds of thousands of tax free dollars in 401Ks?

They don't need to do anything, those people will be taxed on it when they spend it. Instead of save tax free and pay when you withdraw, you save tax free and pay when you spend. It moves the taxes one step out in the process, but doesn't really change much.

The people who put money in a ROTH already paid taxes before saving it though. Now they'd be taxed again when they spend it. They're getting double taxed on their money.

[dancinmama]

Apr 19, 2011 14:07:47 GMT -5 Sum Dum Gai said:

And what are they going to do with all of those who have hundreds of thousands of tax free dollars in 401Ks?

They don't need to do anything, those people will be taxed on it when they spend it. Instead of save tax free and pay when you withdraw, you save tax free and pay when you spend. It moves the taxes one step out in the process, but doesn't really change much.

The people who put money in a ROTH already paid taxes before saving it though. Now they'd be taxed again when they spend it. They're getting double taxed on their money.

Yes, but you could say the same thing about anyone that has money in a savings account.

[Sum Dum Gai]

Fair enough. It'll be one of those things where politicians will have to convince the public that it's worth the sacrifice. Personally, I think simplifying the income tax is a much easier sell.

[stats45]

I really think that we are going to have a simplifcation of the personal income tax in the next year or two. The real question to me is, are we going to have a meaningful reduction in the number of credits and deductions or a much smaller reduction.

The mortgage interest deduction and many other deductions/credits have built strong constituencies. This will make change difficult.

For a reference point, here are the recommendations of the Bowles-Simpson plan. I don't agree with all of it, but I really do think they tried to give and take. On page 30, you can see their projections of how marginal rates could be changed if certain deductions and credits are taken out of the tax system.

www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf

[qofcc]

They wouldn't be switching the tax code overnight and they could figure out a way to convert the Roth accounts back to regular IRAs over a period of time.

I think a consumption tax on all products (including food) would be appropriate along with a flat percentage of all income over a certain threshold (perhaps 2x Federal Poverty Level which would be 35K for a family of 3?). The Federal Poverty Level already includes adjustments for family size.

[Sum Dum Gai]

I think a consumption tax on all products (including food) would be appropriate along with a flat percentage of all income over a certain threshold (perhaps 2x Federal Poverty Level which would be 35K for a family of 3?). The Federal Poverty Level already includes adjustments for family size.

This I'm totally against. I don't like Uncle Sam having the power to raise both income and national sales tax simultaneously. Federally we currently have more of a spending than a revenue problem. They need to learn to live on less, while finding the fairest way possible to collect that, not come up with ways to take in more.

[stats45]

As another reference point, to replace the personal income tax, you need to come up with over $1 trillion in revenue.

I've seen projections that a Value Added Tax (for example) raises about $50 billion for each percent. This would mean that you would need about a 20% VAT to hit $1 trillion in revenue.

Also, countries that have a VAT also have income taxes (with only a couple exceptions). The VAT is used to supplement government revenues. It is also the reason that most European countries have a more regressive tax system than the United States.

[skweet]

Is it fair to pay $1.25 for a product and hide the taxes in the labor, excise and net profit that help bring product to the store shelf? OR is it better to pay $1 for the product with a 25% sales tax at the register? OR is it fair to pay $1.19 in product after being passed through various stages of Value Added, and pay the final 5% Value Added at the register? The bottom line is that the government taxes anybody (blondes, maybe) and it ultimately finds its way to everyone. I think the fact that politicians make us argue back and forth about which one of us has to pay for the other's benefit is truly unfair. They spend it all buying votes and making the government more powerful, and we are dumb and happy that it doesn't come out of our pocket, even when it does.

[qofcc]

I think a consumption tax on all products (including food) would be appropriate along with a flat percentage of all income over a certain threshold (perhaps 2x Federal Poverty Level which would be 35K for a family of 3?). The Federal Poverty Level already includes adjustments for family size.
This I'm totally against. I don't like Uncle Sam having the power to raise both income and national sales tax simultaneously. Federally we currently have more of a spending than a revenue problem. They need to learn to live on less, while finding the fairest way possible to collect that, not come up with ways to take in more.

We already have tax on purchases as well as tax on income. I'm just saying simplify it a bit. Weight the tax heavier on consumption and lighter on income instead of vice versa. And rather than a progressive tax, charge the same rate for all discretionary income. If you tax only on consumption and not on income, you penalize the people who require spending a greater percentage of their income to live. And I agree with you that they can't look at it as a blank check, but we do need to be able to ratchet taxes up and down to be able to balance a bare bones budget, although I'm not sure how that would be enforced.

[Sum Dum Gai]

We already have tax on purchases as well as tax on income.

Not at the federal level. The national sales tax wouldn't replace state and local sales tax, you do realize that right? They're talking about a national sales tax that would be in addition to any local sales taxes you already have. You're proposing a national sales tax in addition to the local sales tax, with a federal income tax as well. That's a lot of taxes. At least European countries get free higher education and medical for all their taxes. We'd be paying all those taxes and only getting what we get now. Doesn't sound like much of a deal to me.

[qofcc]

We already have tax on purchases as well as tax on income.

Not at the federal level. The national sales tax wouldn't replace state and local sales tax, you do realize that right? They're talking about a national sales tax that would be in addition to any local sales taxes you already have. You're proposing a national sales tax in addition to the local sales tax, with a federal income tax as well. That's a lot of taxes. At least European countries get free higher education and medical for all their taxes. We'd be paying all those taxes and only getting what we get now. Doesn't sound like much of a deal to me.

That's why I don't think they can do it all with a consumption tax, but an income tax that doesn't include the lower income people isn't fair to the middle class and upper income workers. With the current income tax system, the phasing out of deductions is actually a disincentive for making a higher income and we're rewarding people for being low income and having more children. It seems like they could increase the sales tax from 8% (or whatever it is in your county) to 10-15% without making things unfordable for average people, then tax discretionary income (anything over 2x or 4x the FPL) at a level rate. Take the current tax revenue, and divide it proportionally between the 2 methods.

And I'm not against the European system of taxpayer funded medical care and education. Both of those systems need to be revamped also.

[2kids10horses]

qofcc,

The FairTax, as proposed, would eliminate the Federal Income Tax, the Social Security Tax on wages, and the Medicare Tax on wages. No Federal Income Tax.

For everyone, including the poor who spend all their earnings on necessities, the government would issue a payment equal to the amount of FairTax that would be imposed on all purchases required for subsistance living. So, if the FairTax would impose $100 a month for someone to aquire basic food, shelter, and clothing, they would be issued funds equal to $100. So, if you live at the poverty level today, and pay no tax, under the FairTax, you would still pay no tax because you were paid in advance for the taxes you have to pay.

It is "fair" because every person with a Social Security number gets the prebate. Rich and poor.

If you are poor, and live at the poverty level, you pay no tax. Any spending over the poverty level, a tax is imposed.

About Roth savings accounts. The only funds that are "double taxed" are those that are actual deposits into the accounts. The earnings have not been taxed, so there is nothing to complain about there.

Regular savings accounts, non IRA accounts, are created with after tax dollars. They will also be "double taxed" since they were established with after tax dollars.

But double taxation happens today as well. Think of someone who owns stock in a corporation. The corporation earns income. It pays income tax on the profits. What's left after corporate income tax is then paid to the shareholder in the form of dividends. Guess what? Those dividends are subject to Individual Income Tax! Why, that's double taxation! Horrors!

The FairTax would eliminate all that.

[qofcc]

I realize the FairTax as proposed would eliminate income taxes in favor of taxes on purchases. I'm just saying that I don't think that's the right way to go. I think if you heavily tax purchases and do not tax income, you are creating an incentive for a black market goods and foreign purchases and retirement in foreign countries. All of these immigrants earning wages over here who send money back home to their families wouldn't be paying tax on it. People would start selling stuff out of their garages and creating service businesses that accept cash only. I do think the concept of taxing at the purchase level is good and it collects tax dollars from people who otherwise wouldn't pay taxes (tourists, etc.) but I don't think you can take it to the extreme level necessary to replace all of the income taxes.

Totally eliminating the income tax would just re-distribute the tax burden to the middle class. The wealthy spend more money than the middle class, but a much lower percentage of their earnings.

[2kids10horses]

You are worried about not taxing the illegals who send money back to their homelands under the FairTax? They don't get taxed now! They get paid in cash, they don't file income tax returns, now. At least under the FairTax, they would have to pay tax on the goods and services they consume while they are here!

I believe the FairTax rate is something like 23%. It is designed to be revenue neutral. That rate would give the government the same as what it is getting now.

Here's the kicker, it is likely that the price you will pay for new goods would be about the same as what you pay now. The "embedded taxes" of the payroll taxes and Corporate income taxes that are part of the price of the goods you buy would be removed from the cost to produce those goods. Prices of goods will fall, so that the market price of goods will be about the same under the FairTax as they were before.