Tax empathy

[susanb]

Is it possible to feel empathy for people (or consider their tax burden fair) who pay much less/more than you in pay taxes?

Two examples from people I know:

Example A:  A woman who complained to me last weekend that she will "only" receive a 2k refund for her EITC.  Her two children both receive state health insurance.  She was gifted a home by her father about 10 years ago, nothing fancy, but a nice SFH. 

Example B: Another woman told me her fiance will pay around 700k in taxes this year.  He is self employed with no employees.  He does some sort of marketing and they live in a 10,000 square foot house, complete with a wine cellar, movie theater and gym. 

These are extreme examples, for sure, but it is easy to look at Example A and say that her family is taking so much more than she and her spouse are contributing.  It is also easy to look at Example B and say that he is "lucky" to pay such high taxes because he makes so much money.  Finally, it is easy (for me at least) to think that people with incomes/tax burdens similar to one's own are paying plenty, and I would venture to guess that both of the people mentioned feel similarly.

Do you think that people with tax burdens/incomes wildly different from your own are paying enough?  Do you ever think that you, or people with incomes/tax burdens similar to your own, are not paying enough?

[tractor]

My biggest issue is with those who pay very little, yet receive so much back. I don't mind that they don't have to pay much because I know the tax rates are income based. What I do mind are all the excess payments that people expect to fund their lifestyle, often well above their means.

Mrs. Tractor and I are paying about $24,000 in taxes this year. It sucks, but I try to convince myself it's for the greater good. I need to get them finished, just don't want to!

[Deleted]

My issue is : what is fair?

It is a moving target and everyone seems to change the description as they see fit. How much does one have to pay or how little? Who get to decide?

Either way some people will get pissed and cry it is unfair;you will never be able to make everyone happy.

Look at the whole tax debate/fiasco on the rich happening in France right now. High court deemed it unconstitutional, he is trying to go at it another way.

[Deleted]

Apr 10, 2013 6:06:50 GMT -5 tractor said:

My biggest issue is with those who pay very little, yet receive so much back.

I think the EIC is a BAD idea.  It's a good deal for employers, who can pay crap wages and have other taxpayers even it out; I'd rather just pay higher prices and not have it made up in the form of tax dollars filtered through an expensive bureaucracy.  It's also been a windfall for tax preparation firms; they prepare these returns for free because they rake in so much money on interest from their "tax refund anticipation loans".  I think it also removes any sense of personal stake in government spending from EIC recipients.  I believe EVERYONE should pay income taxes, even if it's $5. 

DH and I paid $66K last year between Federal and State. Mind-boggling.  Just mind-boggling.

[Rocky Mtn Saver]

Apr 10, 2013 8:36:06 GMT -5 @athena53 said:

Apr 10, 2013 6:06:50 GMT -5 tractor said:

My biggest issue is with those who pay very little, yet receive so much back.

I think the EIC is a BAD idea.  It's a good deal for employers, who can pay crap wages and have other taxpayers even it out; I'd rather just pay higher prices and not have it made up in the form of tax dollars filtered through an expensive bureaucracy.  It's also been a windfall for tax preparation firms; they prepare these returns for free because they rake in so much money on interest from their "tax refund anticipation loans".  I think it also removes any sense of personal stake in government spending from EIC recipients.  I believe EVERYONE should pay income taxes, even if it's $5. 

DH and I paid $66K last year between Federal and State. Mind-boggling.  Just mind-boggling.

I agree about the EIC being a questionable venture at best. 

However, with regards to the highlighted portion," Refund Anticipation Loans" are generally not offered any more.  Just FYI. 

[jeffreymo]

I empathize with both extremes of the middle class.  Those on the lower end are being pushed from the lower to middle class and losing subsidies because at this new income level they should immediately be able to survive without the help they had the year prior.  On the higher end there are people working their butts off to earn high incomes only to be told by politicians that they are rich and aren't paying their fair share - essentially being told - get back down to the middle class where you belong.

[Deleted]

DH and I paid $90k in Federal taxes alone in 2011 and I expect to do the same in 2012. We also paid German and state taxes. We also have over $200k in "carry forwards", write offs we couldn't use because of our income. We'll be able to use them over the next several years since DH retired.

As Phil says paying a lot of taxes (generally) means you made a lot of money, and that's a good thing.

But is it "fair" to charge somebody a lot of taxes who isn't using much in the way of services just because they have money? That seems like a weird logic.

I'm not complaining BTW. I'm truly grateful that while we have worked hard to get where we are, we're also healthy and have been lucky too.

But we're getting even  , with the substantial drop in our income due to retiring, I doubt we're going to be paying much in taxes for the next few years as we burn through those carry forwards!

[Deleted]

I was pretty mad at the taxes we pay a few days ago.  We pay a lot and right now I don't agree with a lot of the ways our state and the federal government is being run.  It's hard to pay into a system we think is dysfunctional. Especially since every time we turn around our taxes are being raised because that's where we fall on the income spectrum.

My beef is people who think they pay income taxes but really don't.

[haapai]

I can remember the day when I encountered two married lawyers whose tax bill exceeded my annual income.  They'd maxed every retirement account but what they couldn't defer was very heavily taxed.  They were also getting hit with wash rules on some day trading that they'd been doing. 

I was gobsmacked.  My taxes that year were enough to repaint the lines on the parking lot outside the post office.  They were paying enough to repave it. 

What I remember most was feeling like I wasn't pulling nearly as much weight.  After that experience, I began to understand why so many well-paid professionals were spending so much time in that CPA office. 

[Deleted]

Apr 10, 2013 10:15:53 GMT -5 haapai said:

What I remember most was feeling like I wasn't pulling nearly as much weight.  After that experience, I began to understand why so many well-paid professionals were spending so much time in that CPA office. 

Yep-  one of the big mistakes governments make in taxing the "wealthy" is assuming they'll just sit there and pay the extra taxes.  No, they won't.  Some countries such as the UK have found that their citizens become citizens of other countries so they aren't taxed as British subjects.  I believe right now there are wealthy French citizens applying for Belgian citizenship.  Typically, there are many legal ways to evade new taxes if you have the resources to find out about them and put them into action.  This group does.

[garion2003]

I routinely see returns where people pay more in taxes than I gross in a year. I have empathy but not sympathy

if they had my expenses they'd be golden. If I had their expenses I'd be bankrupt.

Lifestyle creep is real!

[Deleted]

I'm pretty sure I lack empathy on this one.

For the woman with the EITC, that falls into the category of I feel kind of bad for people who unwittingly disclose how precarious their finances are.  To me, there is a difference between having a low income/struggling to get by and not realizing that your circumstance is not the norm.  I can empathize with the low income part, but the other provokes something closer to pity.

And "my fiance has to pay $700k in taxes" is a straight up humblebrag.  Unless you are their accountant, I can't see past the tackiness to get anywhere close to empathy.

But I'm not a very nice person, so that could also be some of it.

[thyme4change]

I do try to imagine how many families I support with my tax payment.  Given that the average amount of assistance is pretty low, I think I do a pretty good job helping several families.     Although I know that most of my contributions go to other things.


In example A - it seems like she has a pretty decent life.  A single family home, health care, and income.  Is she fussing about her lack of government assistance?  

[susanb]

Apr 10, 2013 11:45:57 GMT -5 @craftysarah said:

And "my fiance has to pay $700k in taxes" is a straight up humblebrag.  Unless you are their accountant, I can't see past the tackiness to get anywhere close to empathy.

But I'm not a very nice person, so that could also be some of it.

I get what you are saying, but she immigrated here from China fairly recently.  She is working on understanding American culture, but it takes time.  In her culture, talking directly about money is pretty normal and expected (according to nearly all of the students I have encountered from mainland China). 

[Deleted]

Apr 10, 2013 12:04:30 GMT -5 susanb said:

Apr 10, 2013 11:45:57 GMT -5 @craftysarah said:

And "my fiance has to pay $700k in taxes" is a straight up humblebrag.  Unless you are their accountant, I can't see past the tackiness to get anywhere close to empathy.

But I'm not a very nice person, so that could also be some of it.

I get what you are saying, but she immigrated here from China fairly recently.  She is working on understanding American culture, but it takes time.  In her culture, talking directly about money is pretty normal and expected (according to nearly all of the students I have encountered from mainland China). 

Tell her that making that kind of money is reserved for US natural born citizens, only.

[susanb]

Apr 10, 2013 11:49:20 GMT -5 thyme4change said:

I do try to imagine how many families I support with my tax payment.  Given that the average amount of assistance is pretty low, I think I do a pretty good job helping several families.     Although I know that most of my contributions go to other things.


In example A - it seems like she has a pretty decent life.  A single family home, health care, and income.  Is she fussing about her lack of government assistance?  

She told me that she doesn't understand why so many of her friends get bigger refunds than she does. 

I think that is a pretty normal response to taxes.  It seems like most people can't understand why others get more or pay less, which sort of makes sense since our tax code is so confusing and convoluted.  I don't know how many times people in RL or on message boards complain about poor people and rich people not paying enough taxes, and I think part of the reason for that is that nearly everyone identifies themselves as middle class, and seems to think that the middle class is paying more than enough in taxes. 

[susanb]

Apr 10, 2013 12:06:36 GMT -5 ArchietheDragon said:

Apr 10, 2013 12:04:30 GMT -5 susanb said:

I get what you are saying, but she immigrated here from China fairly recently.  She is working on understanding American culture, but it takes time.  In her culture, talking directly about money is pretty normal and expected (according to nearly all of the students I have encountered from mainland China). 

Tell her that making that kind of money is reserved for US natural born citizens, only.

Good thing her fiance was born here.  She will have to wear a scarlet letter for the rest of her life in the Chinese community for marrying him, but at least it can be made of gold!

[Deleted]

Apr 10, 2013 12:10:00 GMT -5 susanb said:

Apr 10, 2013 12:06:36 GMT -5 ArchietheDragon said:

Tell her that making that kind of money is reserved for US natural born citizens, only.

Good thing her fiance was born here.  She will have to wear a scarlet letter for the rest of her life in the Chinese community for marrying him, but at least it can be made of gold!

A US citizen marrying a Commie>??!?!   What next?

[haapai]

deleted by author. 

[The Captain]

It tells me there are wayyyy to many out there who are taking more from society than they contribute.  The fact that these ranks continue to grow can be partially attributed to the current economic conditions. 

However, when you have 1 in 5 tax filers claiming the EITC that indicates to me that we are supporting way too many who have children but are incapable of fully providing for them.  When these people talk about taking vacations with the money, sorry but I get pissed off.  I'm not working my ass off so your sorry underperforming self can take a vacation.

www.unh.edu/news/releases/2012/dec/lw11carsey.cfm

money.cnn.com/2012/04/12/pf/taxes/earned-income-tax-credit/index.htm

The following study by the Federal Reserve bank also supports the conclusions that the EITC is spent in many cases on nondurables (consumber electronics etc. ) vehicles and trips (see summary paragraphs) the vehicles - ok I guess for work but trips? TV's? Really?  The most damning thing was the summary statistics table 1 which showed the average number of children for non EITC income tax filers was .52 but for the EITC filers is was 1.97.  So working people who can afford their children apparently breed less than those who need to be subsidized because they can't seem to figure out that it takes money to raise a child.
www.chicagofed.org/digital_assets/publications/economic_perspectives/2008/ep_2qtr2008_part2_goodman_etal.pdf

Go ahead and cling to the sunshine and rainbows belief that the EITC is all that stands between starvation and the street.  The reality is that is goes to make peoples lives more comfortable by taking tax dollars from the most productive and giving them to the least productive to breed.

[souldoubt]

In my opinion no one should have a negative income tax rate.  Federal income taxes last I saw (I think for 2010 or 2011) were roughly half of what the feds brought in for the year for revenue.  No skin in the game just isn't right.  I think it's one of many ways people become accustomed to having their lifestyle supported while not having much of a drive, having kids they can't afford, etc.  

[tskeeter]

Apr 10, 2013 12:50:49 GMT -5 souldoubt said:

In my opinion no one should have a negative income tax rate.  Federal income taxes last I saw (I think for 2010 or 2011) were roughly half of what the feds brought in for the year for revenue.  No skin in the game just isn't right.  I think it's one of many ways people become accustomed to having their lifestyle supported while not having much of a drive, having kids they can't afford, etc.  

[Phoenix84]

Well, I think the whole EITC thing is a total farce.  There's no way people should be getting back more than they paid in taxes.  That has got to go.  Furthermore I think way too many people pay no income tax.  In my opinion, only the bottom 10-15% of taxpayers should be paying nothing in federal taxes, and  none of that percentage should be getting any money back.  We shouldn't be in this situation where almost 50% pay nothing in federal income tax and worse, many get money back they never paid in. 

Other than that, I don't know.  Personally I think my tax burden has been relatively fair.  I could probably afford to pay some more but I can't say I really want to.  But a lot of my money goes to tax.  I paid about $10,000 in federal tax, and quite a bit more whn you start including social security and medicare, state tax, sales tax, and various government fees.  I haven't run the numbers, but I'd wager my total tax burden is probably about 33%, if not higher.  That's more than enough if you ask me. 

[Deleted]

I don't like the way the EITC operates. I am not necessarily for withdrawing all support from demographics that get it, and to some degree understand the issues which led them to do it his way, but ultimately I wish it was much more transparent. People should realize they aren't actually paying taxes and that it isn't 'their money' they are getting back...

I also would rather pay higher prices to compensate or higher wages instead...

[Rocky Mtn Saver]

Apr 10, 2013 16:24:59 GMT -5 Phoenix84 said:

Well, I think the whole EITC thing is a total farce.  There's no way people should be getting back more than they paid in taxes.  That has got to go.

Other than that, I don't know.  Personally I think my tax burden has been relatively fair. 

Agreed on both counts. I have no problem with lower-income people paying less or zero, but not in gaining large sums of money from tax filing.

[Deleted]

I also wish there was a realistic way to make a calculator which showed you how much you GET in services used per year... Not sure how to do that?

[973beachbum]

Apr 10, 2013 12:44:25 GMT -5 The Captain said:

It tells me there are wayyyy to many out there who are taking more from society than they contribute.  The fact that these ranks continue to grow can be partially attributed to the current economic conditions. 

However, when you have 1 in 5 tax filers claiming the EITC that indicates to me that we are supporting way too many who have children but are incapable of fully providing for them.  When these people talk about taking vacations with the money, sorry but I get pissed off.  I'm not working my ass off so your sorry underperforming self can take a vacation.

www.unh.edu/news/releases/2012/dec/lw11carsey.cfm

money.cnn.com/2012/04/12/pf/taxes/earned-income-tax-credit/index.htm

The following study by the Federal Reserve bank also supports the conclusions that the EITC is spent in many cases on nondurables (consumber electronics etc. ) vehicles and trips (see summary paragraphs) the vehicles - ok I guess for work but trips? TV's? Really?  The most damning thing was the summary statistics table 1 which showed the average number of children for non EITC income tax filers was .52 but for the EITC filers is was 1.97.  So working people who can afford their children apparently breed less than those who need to be subsidized because they can't seem to figure out that it takes money to raise a child.
www.chicagofed.org/digital_assets/publications/economic_perspectives/2008/ep_2qtr2008_part2_goodman_etal.pdf

Go ahead and cling to the sunshine and rainbows belief that the EITC is all that stands between starvation and the street.  The reality is that is goes to make peoples lives more comfortable by taking tax dollars from the most productive and giving them to the least productive to breed.

It is very hard for a person without children to qualify for the EITC. The person or couple without kids would have to be almost destitute living in a gutter. Where the people who don't get the EITC includes everyone else including all the people who although they have low income it isn't low enough to qualify for the EITC unless you have kids.

[The Captain]

Beachbum - that is my point exactly.  The pool of non EITC people included both low and high wage earners.  Across the entire non EITC pool the average child per filer was far less than the EITC subset. 

Maybe this will demonstrate it better:

www.statista.com/statistics/241530/birth-rate-by-family-income-in-the-us/

[haapai]

Sorry captain, that new data set doesn't mean much to me unless you first define family and then make sure that you're looking at people that are close to the same age.

There are a whole lot of non-breeders and empty nesters skewing things. 

[973beachbum]

Apr 10, 2013 17:09:21 GMT -5 The Captain said:

Beachbum - that is my point exactly.  The pool of non EITC people included both low and high wage earners.  Across the entire non EITC pool the average child per filer was far less than the EITC subset. 

Maybe this will demonstrate it better:

www.statista.com/statistics/241530/birth-rate-by-family-income-in-the-us/

My point is the general pop filings includes all the seniors and regular people that don't have kids.  The EITC is made up of almost all filers with kids.  Of course they are going to have more kids per filer.  It would be like comparing number of kids for people who are parents of a child in your local school system vs all the rest of the town's residents.  One group includes people of all stages of life and the other is made of people with kids.

I think if you can get into the stats people generally have kids by the time they are 25.  Generally speaking 25 year olds have less money than than older people.   I am absolutly not saying people should have kids before they are really able to take care of them!  I just think when you really look at the stats on incomes of people with children and people without it isn't much of a surprise who has more kids the middle aged and seniors, or the 20 somethings.