The "tax the rich" folks are funny.

runnerboy70 wrote:

https://www.wsj.com/articles/top-20-of-americans-will-pay-87-of-income-tax-1523007001

As we discussed on another thread, this is ONLY federal income tax and doesn't take account of all the other taxes the government uses to raise revenue.

Income tax provides less than half the tax revenue total.

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Libertarian Capitalist wrote:

The top 1% already pays something like 40% of all taxes and the top 10% almost all taxes. The rich already pay more than their share.

So why tax the poor at all?

There's a lot of economic technicalities that are 'wrong' with the tax the rich argument.

But ultimately - why the hell do we tax poor people? For example people who get paid by the government and are financially struggling. Getting away from the technicalities of it, the philosophy of that just doesn't make sense.

The answer to your question - why the hell do we tax poor people? - is that in the US we don't, or we don't all that much. At least not when it comes to income earned through wages and salaries. The US tax code makes poor people with low earnings theoretically liable for income tax on paper, but in reality not so much. US income tax allows for persons and families with the lowest incomes to avoid taxes easily by simply using the standard deduction.

Standard deductions ensure that all taxpayers have at least some income that is not subject to federal income tax. Standard deductions generally increase each year due to inflation. You have the option of claiming the standard deduction or itemizing your deductions. However, you can never claim both in the same year. You will find that many states that impose an income tax will also allow you to claim a similar type of deduction on your state income tax return.

The amount of your standard deduction depends on the filing status you qualify for. In 2020 for example, single taxpayers and married taxpayers who file separate returns can claim a $12,400 standard deduction. Married couples filing jointly can claim an amount that's twice as large, $24,800, and taxpayers filing as "head of household" (single individuals with dependents) can claim a standard deduction of $18,650.

The US official poverty levels are currently $12,880 for individuals; $17,420 for a family of 2; $21,960 for a family of 3 and $26,500 for a family of 4. So most poor people whose individual or household earnings are at or below the poverty rate threshold will owe no income taxes; and if they do owe taxes, it's only on a very small part of their income. For example, a single person whose earnings match the poverty rate will be liable to pay federal income taxes on $480, meaning an IRS bill of $48. But a couple would have to earn nearly $3K above above the poverty level to owe any federal income tax.

Moreover, there are various tax credits that low-income people in the US can take advantage of so they pay no taxes. Some of these cause persons who pay no federal income taxes to be eligible for tax "refunds" from the US Treasury. This especially true of families with children.

The federal 2021 American Rescue Plan passed in response to the COVID-19 pandemic expanded the federal child tax credits to more people, and changed their nature from just credits against income to direct cash payments:

It also offered the tax break to more low-income households and turned the benefit into a monthly income stream. Parents can get up to $250 or $300 a month per child (again, depending on age).

The first installment of payments, issued July 15, reached families with more than 59 million children, according to the U.S. Department of the Treasury. That’s about 80% of all kids in the U.S., according to the Columbia analysis.

Of course poor people who don't earn any money, or earn their money under the table, don't pay any income tax. Similarly, people who receive cash payments via SSI and SSDI, along with seniors who get regular Social Security payments, do not pay any income tax on those (and usually other) sources of income if their total income means they are living at near poverty level.

Other kinds of federal, state and local government benefits, as well as benefits from charities, with monetary value that are available to poor and low-income people in the US - such as Medicaid, Medicare, Obamacare subsidies, food stamps, free food banks, WIC, housing subsidies, reduced rents through various programs, free special municipal transport for seniors and persons with disabilities, special discounts for certain disadvantaged groups, donations of goods and services from charities - are not counted as income for tax purposes.

There's a lot of unfairness baked into the US income tax code. But the notion that the US generally makes poor people pay income tax is a myth.

It is unbelievable that people are so far afield on this issue. The rich is not even really the 1% top earners, it is more like the 1/10 of 1% that are getting away with it. Remember the Panama Papers? There were basically no consequences with that, we all just shrugged our shoulders. When we do not tax the wealthiest incomes or corporations the tax burden just shifts to us. Yeah poor people don't pay much because they don't got none (if you multiply something by zero you still get zero). So who has to pick up the slack? The middle class, which explains why as the rich have paid less, ordinary people pay more. We have less money and income while they get richer. Inequality has ballooned as the tax system has been redesigned. The rich are getting richer and the consequence is fewer middle class people. If you tax corporations less, there is no evidence that it leads to innovation and more jobs. Just look at corporate profits. The IMF even has concluded as much, and they are far from a bunch of Marxists. In short, "tax the rich" does not mean you.

The RAND Corporation found that the past 40 years have "transferred" $47 trillion from the working class to the superrich. The share of wealth of the top 1/10 of 1% has doubled in that time. Guess how our taxes changed during that time.

The biggest growth period in American history was the 50s and 60s when wealth grew for the wealthy at about the same rate as the rest of us. You could have one income that supported a family, and without a college degree. The tax rates on the rich and corporations were so much more than they are today. The idea that we need to lessen the tax burden on billionaires and corporations because it will help the rest of us is absurd. If you actually think that, you've been duped.

1.

https://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm

2.

https://www.rand.org/pubs/working_papers/WRA516-1.html

Oops. In the sentence in my earlier post that says:

But a couple would have to earn nearly $3K above above the poverty level to owe any federal income tax.

It should say "more than $7K above the poverty level" instead of "nearly $3K above the poverty level"

But not all personal income is taxed at the same rates the way your comment - "people who make tons of $ are just going to have pay a percent like everyone else, which mean they pay more dollars" - suggests. As a person's regular earnings go up and exceed certain levels, the income above those levels is taxed at higher and higher rates. There are currently 7 different laddered federal income tax brackets. The lowest federal tax rate paid on regular income is currently 10%; the highest tax rate is 37%.

However, since 2013 there's also an additional federal 3.8% income tax levied on a lot of people with higher (but far from the highest) incomes that was put in place to pay for Obamacare. This means the effective rates for income in the higher tax brackets are more than the tax tables say.

The highest federal individual income tax rate in US history was in 1944-51, when the tax paid on income in the top bracket (which was then anything over $200K, equivalent to $2.4 million today) was 94%. In 1952-53 it was 92%, then 91% from 1954-63. In 1964, it was dropped to 77%, then to 70% from 1965-81 - when Ronald Reagan became POTUS and the top rate was radically reduced to 50%. Now it's 37%.

Some investment income such as interest and some dividends are taxed at the same rates as regular earned income. "Qualified" dividends and capital gains are taxed at special lower rates, which benefit those who are wealthy enough to have investments that earn such dividends and which can result in capital gains when the investments are sold.

There have always been many ways for the rich in general to reduce their federal income taxes, and for rich people in particular fields with undue influence over federal tax policy such as real estate investors to dodge them entirely, as the example of Donald J. Trump shows.

But the federal Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) - aka the federal COVID-19 stimulus bill and relief act - that Congress passed in early 2020 increased the ability of wealthy individuals and corporations of all kinds to use charitable donations to lower or eliminate their federal tax liability by expanding the deductibility of charitable contributions to incentivize charitable giving during the pandemic.

Prior to the CARES Act, taxpayers who itemize were limited to deducting certain charitable contributions to 60% of their adjusted gross income (AGI), and corporations to 10%. But under the CARES Act, taxpayers who itemize can deduct certain charitable contributions up to 100% of their AGI - and corporations up to 25%.

The Consolidated Appropriations Act (the “CAA”), which was passed by Congress on December 27, 2020, extended the CARES Act provisions for 2021.

One of the problems with the USA's tax policy regarding charitable giving that the CARES Act made even more egregiously unfair is that qualified charities are very diverse, so all tax-deductible gifts don't benefit society to the same degree. At all. Whilst I'm all for cultural institutions, and find the history of high fashion interesting and worth preserving, to my mind it's reasonable to argue that a charitable, tax-deductible gift to the Metropolitan Museum's Costume Institute might be of less society-wide benefit and merit than a charitable, tax-deductible gift of the same amount to a food bank, a charity that funds research into diseases and their cures/treatments, an organization that provides support to victims of domestic violence or sex crimes, or an organization that provides academic scholarships to poor kids.

Significantly, the CARES Act that greatly benefitted rich individual taxpayers as well as corporations and establishment orgs with charitable status was voted in by members of both parties in the the US Congress with hardly any public debate. Moreover, House leaders finagled things so that the House vote was by voice only rather than being recorded as House votes customarily are.

Reforming the US income tax system so the wealthy pay their fair share requires massive changes in policy, and going up against a lot of powerful groups that have a vested interest in keeping in place the complicated kind of tax code the US has currently- such the leaders and legislators of both the Democratic and Republican parties, the USA's vast army of tax lawyers and management consultants, the accounting profession, the real estate industry, corporate America and the entire non-profit sector of the American economy, amongst others. Unfortunately, it's a bit more complicated than just saying, "Do the math!"

It's pretty amazing how low IQ your reasoning is, leaving out the other side.

People should also pay in what they *get out* of society. They have roads, educated population, police force, etc that all create a prime environment to create products and sell them to people. Most of these things are public tax supported. If they weren't, they would have a market. If there wasn't a legal system and a police force, how are they gonna protect their earnings?

You realize rich people in 1300 AD had to hire small private armies to protect them and their wealth.

Tatar... wrote:

runnerboy70 wrote:

https://www.wsj.com/articles/top-20-of-americans-will-pay-87-of-income-tax-1523007001

As we discussed on another thread, this is ONLY federal income tax and doesn't take account of all the other taxes the government uses to raise revenue.

Income tax provides less than half the tax revenue total.

Income taxes are the single largest source of tax revenue ..Rich people buy yachts and Ferraris and other big items and pay far more sales tax. Everyone pays the same amount into social security taxes. What are you talking about?

Here's my response.

As for the Met Gala situation, I wouldn't object to eliminating all charitable deductions. However this could be a huge impact to charities who do charitable work better than the government does charitable work.

I don't understand how you want to change the tax code to fix the home owners with no mortgage issue. Do you want to make homeowners pay more taxes?

Social Security is capped but so are the benefits. People say the tax is regressive but so is the benefit,

Sales Tax? What do you suggest we do? Charge a higher sales tax for rich people. Sales taxes vary based upon the state and item. In many states items that are considered necessities (i.e. food, certain clothing) are not taxed. I don't agree with your implication that rich people are avoiding sales tax because they don't spend enough. I would think rich people pay more in hotel taxes than poor people.

Tatar... wrote:

1) Home owners without a mortgage are able to live off less income as they have less outgoings whereas renters have to keep up with the ever increasing market and so will pay more tax as they seek income to do this.

2) Social security is capped. It doesn't matter is you earn $150K or $2M it's for the same amount.

3) Sales tax are regressive as lower the income the high percentage of it you need to spend to survive so a greater percentage is taken up with tax.

Just a few...

Let me help you dispell some of your socialist notions.

1) Homeowners have saved money for a down payment in order to be able to afford a home. They also take on the risk of an asset that could be damaged or could go down in value. A renter has no risk and can walk away anytime with only a deposit to lose. Also if you want to whine about rising rent blame the government for causing inflation. For most of American history home prices and rent were very stable on a long term basis. The housing bubbles the government has inflated is what has driven the significant increases.

2) I could earn way more on the money I give to social security if I invested it like the rest of my money the government doesn't steal than I will ever get back from social security. Not to mention SS is a ponzi scheme. If you are under 40 there is 0 chance you get the benefits people get now. There will have to be an increase in age to get benefits, decrease of benefits, means test, devaluation of the dollar, or all of the above to keep SS solvent.

3) Rich people generally spend more thus pay more in sales tax. Don't know if you realize this but the only federal tax that was legal in the US pre-Woodrow Wilson were sales taxes and tariffs. The gains in the middle and lower classes were far greater pre income tax than they are now. I couldn't find data going back too far but the amount of wealth in the bottom 90% of Americans has steadily decreased since the 80's from about 35% to around 25%. So higher taxes benefitting the poorer Americans? Not playing out that way in reality, especially since nearly half of all Americans have no or negative net worth.

Just like to see some common sense. Met Gala isn't primarily a charitable event, it's obviously an evening's entertainment with the added bonus of being an accountant's dream. Call them out on the BS.

Make rent payments tax deductible for tenants and make up for it by taxing properties as an asset and tax second properties at a higher rate. Include a value floor obviously.

Roll it into income tax or abolish the cap.

Reduce sales taxes on most items to zero and to make up for it increase tax on asset purchases like second homes, gold and silver and currency. Also a carbon tax.

We are beyond needing to tax the rich; dust off the guillotines.

Mountain High wrote:

Do not tax highly business’s

Business’s create jobs and when you tax then too much they look overseas for cheaper labor.

Do you understand how apostrophes are used?

+1

And all prisoners should work every day to repay society for their crimes.

Taxes are way too complicated. Just because the "rich" get taxed at a higher rate doesn't mean they pay it. There are so many loopholes, designed primarily for the "rich" to avoid taxes. This is why Mr. Trump pays less in taxes than I do.

Question to somebody who knows more than I, why can't paying taxes be simplified? Same rate, for everybody regardless of income with ZERO loopholes for write-offs? So whatever you owe, you pay. Flat-rate. Something like 15%.

1) It's wrong as a renter you could be working longer hours and liable for more tax while your home-owning neighbor can sit at home doing half hours and paying zero. Home owners are by every definition wealthier than renters and taxes should reflect this.

2) SS is going to fail, you are correct, anybody below even 45 won't get the same benefits as today. That's a consequence of there being a large, wealthy retired and near-retired population and a small, less wealthy younger working population supporting them.

3) Sales taxes are regressive. It's not the amount of tax paid that makes it progressive it's the percent of your income it takes up. You are not spending all your income are you? You've even said you invest some of it. If you cut your income by a quarter how much could you save then? You'd be saving less and spending more of your income. More spend = more tax.

X-Runner wrote:

Mountain High wrote:

Tax “rich” individuals

Do not tax highly business’s

That’s the big difference. Business’s create jobs and when you tax then too much they look overseas for cheaper labor. In contrast I don’t care how much you tax a billionaire. They don’t need all that money.

How are these businesses going to look overseas for restaurant workers and truck drivers?

So two jobs out of thousands. Anyways much of food these restaurants serve food that is being produced overseas. Why because it’s cheaper. Also what are those truck drivers hauling? Junk from China. It’s surely not being produced in the USA.

Again we need to differentiate between rich individuals whom drive three Lamborghini’s from being taxed highly and manufacturing companies that create American jobs.