Tax question?????

[shakeybrainsurgeon]

Until I analyzed the effects of a flat tax I used to think it was a good idea. But had to change my mind when I discovered that our Nation's tax laws are designed as much to implement social policy as they are to generate income to the government.

In fact, a good argument can be made that our Federal Tax Code is more about social policy than it is about generating income for the Federal Government. Thus, if we went to a flat tax all that social engineering would be cast aside.

But; this kind of discussion, even though interesting from an academic perspective isn't really very fruitful. There are just too many different groups that would be severely hurt if a flat tax were implemented. These range from homeowners who would no longer be able to deduct their mortgage interest; to the construction industry that builds the homes; to municipalities that could no longer sell tax exempt bonds; to the investors who buy the bonds; etc. etc.

This says nothing about the effect of removing the current progressive income tax. Once everyone paid the same tax rate much of the tax burden carried by the higher income brackets would be shifted to the lower brackets.

So, it is hard to see where there would be enough votes to do anything substantial in this area.

This is off topic altogether, but you speak as though a) it is established fact that taxes should be used for social engineering and b) the higher brackets should pay the bulk of the tax burden. I fear the reverse; the present tax is getting so progressive that soon less than half the population will pay any signficant tax at all. In a democracy, this means the majority will simply vote to make the tax more and more progressive. Taxes should be about raising revenue for the common good, not just for income redistribution. IMHO of ocurse. Remember that 75 % of all taxes are paid by something like 20% of the population. This may be necessary for social stability, but whether it is 'fair" or not is another matter.

 

[Cacia]

you say some very smart things.

 

[Wildcard]

I agree 100% The bottom 15ish% get money back at tax time that they have not even paid in while some complain about a 2-3% tax cut for teh "rich". Just becouse it ammouants to 100s of 1000s of dollars becouse they pay so much anyway does not in any way mean that they should not get a break to reinvest the money, boosting the economy and bring in more taxes. The fundamental diff here is Republicans think the people are smarter than them and should have control of there money and the dems, the oposite....Either way, the goal is more taxes.

 

[Charlie99]

http://www.irs.gov/pub/irs-soi/04in06tr.xls is the IRS publication that summarized all tax returns. Things like breakout of % of total gross income and % of total income tax for bottom 50%, 75%, 90%, 95% and 99%.

The latest number are for 2004. The taxpayers with top 1% of AGI paid 37% of all income tax collected (on 19% of all income). The top 10% paid 68% of all taxes (on 44% of all income). The the top 50% of taxpayers paid over 96% of all income taxes on 87% of all income (the bottom 50% paid just 3.3% of total tax while having 13.3% of all declared income).

It's interesting to see how statistics can be stated in different ways to convey different things. If taxes were reduced equally across the board, you would hear cries about the 10% richest getting 68% of the tax cuts --- what you don't hear is that the 10% richest are currently paying 68% of all income tax.

Of course, if we looked at ALL taxes paid, including FICA and sales taxes, the numbers would come up differently, and would probably not be as progressive.

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Requisite ON-TOPIC comment ---- make decisions based upon the underlying economics and personal benefits. Rarely will a decision based primarily due to taxation reasons be a good one.

 

[Charlie99]

The bottom 15ish% get money back at tax time that they have not even paid in ......

Which IMO is good social engineering. The earned income credit and things like child care credit make jobs more attractive to those currently on welfare. Or to put it another way, it reduces the penalty for leaving the welfare system.

 

[Cacia]

My biggest gripe here is that companies don't pay the 4 % GE tax...they literally change the companies name after a few years and it seems the tax liability goes away...So..you have the honest people paying way more than their share and it breaks their backs.
http://hbe.ehawaii.gov/cogs/search.html

see if I am kidding....

Start a business in Hawaii? no thanks. Shoot, after my bench warrant for my parking crime in an unmarked spot "no singeage required" I will soon be a resident of another state, legally. I have already given my cars away, and will no longer pay Hawaii 280 dollars times three.

You cannot alienate your law abiding citizens that are paying the bulk of taxes and not expect them to defend their own economic interests.

 

[Charlie99]

My biggest gripe here is that companies don't pay the 4 % GE tax...

My minor gripe is that I have to pay GE tax on the TAT (transient accomodation tax). Only in Hawaii would they tax a tax.

But as I used to tell my employees when they griped about huge tax bills when exercising NQ stock options --- "it sure beats the alternative of not owing any".

 

[ArcticDiver]

This is off topic altogether, but you speak as though a) it is established fact that taxes should be used for social engineering and b) the higher brackets should pay the bulk of the tax burden. ....

I just reread my post. You do not correctly interpret my post. I don't mind engaging in a spirited discussion. But, you should not put words in my post that misrepresent what I said.

Explicitly:
I Did Not say that taxes "...should be used for social reasons. I Did Not use the words "...social engineering.

Go back and read my post. I merely acknowledged current reality. Also, I pointed out that regardless of what some may think the votes just aren't there to make any substantial changes in the nation's tax policy. Nor, are they likely to be in the foreseeable future.

Don't try to read my mind. Just argue the points on the basis of what is actually posted.

 

[Cacia]

tax on a tax is unconstitutitional....

oh boy...

if my son gets tutored, I pay tax on the service.

 

[shakeybrainsurgeon]

I just reread my post. You do not correctly interpret my post. I don't mind engaging in a spirited discussion. But, you should not put words in my post that misrepresent what I said.

Explicitly:
I Did Not say that taxes "...should be used for social reasons. I Did Not use the words "...social engineering.

Go back and read my post. I merely acknowledged current reality. Also, I pointed out that regardless of what some may think the votes just aren't there to make any substantial changes in the nation's tax policy. Nor, are they likely to be in the foreseeable future.

Don't try to read my mind. Just argue the points on the basis of what is actually posted.

My apologies, you are quite right, you merely stated the case about social engineering without coming out for or against it. And you are also right about the near impossibility of getting tax reform at this point. The people who are truly hurt by income tax policy are in the minority.