Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 04-11-2010, 10:33 AM   #21
Moderator Emeritus
laurence's Avatar
 
Join Date: Feb 2005
Location: San Diego
Posts: 5,234
My degree in Econ is now 11 years old, but I remember we had a senior seminar class on taxes and the effect of cuts/raises in tax rates on revenue was clearly dependent on the current marginal rate. The graph was an upside down "U" with significantly higher revenue if cutting from say, a 70% marginal rate to 60% but revenue starting to decrease again once it reached a certain marginal rate floor (it was somewhere in the high 30% range, I believe).

Now as far as the half that don't pay income taxes being a transient group, well, the retired group is in that category for a decade or more (they hope - beats being dead!), and I don't think many people vote for policy based on their possible place in life 10-20 years from now, they vote on how they feel now! What's that saying, "If you are young and not liberal, you have no heart..." so the fact that people go in and out of that group is debatable, but not really relevant to the point of tax policy affecting behavior.
__________________

__________________
laurence is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-11-2010, 10:41 AM   #22
Full time employment: Posting here.
flyfishnevada's Avatar
 
Join Date: Jan 2010
Location: Smith
Posts: 743
Quote:
Originally Posted by IndependentlyPoor View Post
Here is some data I was able to get together. The tax reductions mentioned in flyfish's quotes are marked in yellow.
1 The Kennedy cuts
2 The Regan cuts
3 The Bush cuts
Data from
http://www.taxpolicycenter.org/taxfa...historical.xls
www.google.comhttp://www.taxfoundation.org/files/fed_individual_rate_history-20091231.xls
This data doesn't go all the way back to the 20s. Sorry
Attachment 8757
I'll let folks draw their own conclusions. But what about that pesky 91/92 Clinton tax increase?
I believe the 91/92 increase was Bush (the father). He took office in 1989 and left in 1993. Remember, "Read my lips"? Clinton likely won due to that increase and Republicans jumping ship to vote for Ross Perot.

Tax increases can produce more revenue, but usually only in the short term. The effects of the higher taxes erode the revenues over time. In this case, we had a sustained growth period due to the dot com industries. Money was being made, lots of money, and taxes were being paid. You can also see that revenues then decreased sharply in 1999/2000 after the bust (I'm sure many of us remember that), but began to rise again after the Bush tax cuts.

You can also plainly see on that chart that the tax increase in the 50's led to a mild decline in revenue, during what was a growth period in the economy. Lots of veterans getting jobs, buying homes, having children, buying televisions, cars, etc. The decline in the late 40's probably has more to do with the end of world war II and the transition from a war time economy to the cold war and consumption economy of the 50's. The war time tax increases were pumped back into the economy immediately and in huge amounts to build and supply the war effort. They were not used for social programs, welfare, and other programs that tend to reduce the tax base by removing the money from the free market.
__________________

__________________
flyfishnevada is offline   Reply With Quote
Old 04-11-2010, 11:17 AM   #23
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,109
Quote:
Originally Posted by lets-retire View Post
Almost anything would be better than the system we currently have. You can have your taxes done by three or four "experts" and each come up with different results. There is a problem with that. The system needs to be much simpler.
I do my son's taxes for him and it really is as simple as it can be, but in his first year of working after college I ran his return through both Turbo Tax and TaxAct and was amazed to find a $35 difference. Turns out his wages were very low but he still contributed to his 401(k) and TaxAct spotted a $35 tax credit for low wage earners that contribute to 401(k)'s that Turbo Tax missed.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 04-11-2010, 11:47 AM   #24
Thinks s/he gets paid by the post
 
Join Date: Jun 2006
Posts: 1,666
Quote:
Originally Posted by flyfishnevada View Post
Tax increases can produce more revenue, but usually only in the short term. The effects of the higher taxes erode the revenues over time. In this case, we had a sustained growth period due to the dot com industries. Money was being made, lots of money, and taxes were being paid. You can also see that revenues then decreased sharply in 1999/2000 after the bust (I'm sure many of us remember that), but began to rise again after the Bush tax cuts.
In general, I feel there is a 'sweet spot' for maximizing tax revenues.
However, you seem to be picking and choosing your correlations. Other than a general correlation, I see no evidence.
For example, you state that in the 90s, even though we had a tax increase, we had sustained growth do to the dot.com bubble.
You then attribute the rise in the 2000's to the Bush tax cuts. But couldn't it also be due to the housing bubble?

And your "Always" qualifier certainly doesn't work. For example, what would happen to tax revenues if you lowered taxes all the way to zero? Obviously there would be none.

As I see it, the question is: where is that sweet spot? Surely it is less than 90%, but likewise I am sure it is above 10%.

As for a type of 'fair tax'. I am all for it. Simplify taxes to the point where you can fill them out on a post card and I suspect you well get fewer people trying to dodge taxes.
__________________
"We do not inherit the earth from our ancestors, we borrow it from our children.
(Ancient Indian Proverb)"
Zathras is offline   Reply With Quote
Old 04-11-2010, 12:03 PM   #25
Thinks s/he gets paid by the post
IndependentlyPoor's Avatar
 
Join Date: Jul 2009
Location: Austin
Posts: 1,142
Quote:
Originally Posted by flyfishnevada View Post
The war time tax increases were pumped back into the economy immediately and in huge amounts to build and supply the war effort. They were not used for social programs, welfare, and other programs that tend to reduce the tax base by removing the money from the free market.
You are right about the "read my lips" tax increase. One of my senior moment there.

I don't get your distinction between stimulative wartime spending and social programs that remove money from the free market. The government's tax revenues all get spent, and I don't think it makes much difference to the economy if that spending comes in the form of missiles or food stamps... literally guns or butter. It all goes back into the economy.
__________________
Start by admitting
from cradle to tomb
it isn't that long a stay.
IndependentlyPoor is offline   Reply With Quote
Old 04-11-2010, 12:21 PM   #26
Moderator Emeritus
CuppaJoe's Avatar
 
Join Date: Jun 2007
Location: At The Cafe
Posts: 6,866
Quote:
Originally Posted by audreyh1 View Post
It amazes me that people seem to remain convinced that there is some huge fixed portion of the US population (that is - the same individuals) that does not pay taxes year after year and therefore votes to keep it that way.

I suspect "this group" is more likely a breakdown of:

1. Young people, people just getting started in careers, students, part-time workers: most of these folks will likely go on to earning more money and pay Federal Income Taxes (FIT). They have a lifetime of taxpaying ahead of them.

2. Seniors - probably a big chunk of the non-tax paying crowd as these folks tend to have lower incomes. A lot of seniors get by on pretty darn low income - especially if they are only living off of social security. A lot of these folks probably paid federal taxes for several decades and would feel pretty incensed by others claiming they are "free-loaders" whatever you think of SS and Medicare.

3. The recently unemployed and underemployed. The "47% pay no FIT" article mentions that in 2007, then number was lower - 38%. So that means 9% can be directly attributed to people whose income dropped due to the recession. You would hope for most of these folks this is a temporary situation And until 2 years ago these folks WERE paying FITs. To be mad at them now due to the economy seems pretty harsh.

4. Families. Families with children get HUGE tax breaks in this country - deductions AND credits. Whether a good idea or not, that is how the tax code is currently written. I can see how this might make some people mad and seem inappropriate and maybe the room for the biggest gripe is with this group. However, for most families, these tax breaks do not last all their lives, but rather for a couple of decades.

So, I suspect if you back out the above groups, you are probably left with a fairly small "permanent" non-FIT-paying group. And whether or not they religiously vote to keep themselves that way is still a debatable question.

Audrey
This bears repeating in its entirety.
__________________
CuppaJoe is offline   Reply With Quote
Old 04-11-2010, 04:09 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,484
Quote:
Originally Posted by IndependentlyPoor View Post
You are right about the "read my lips" tax increase. One of my senior moment there.
There was a Clinton tax increase in 1993 - about 0.5% GDP. It's there on your chart.

For some reason the 1991 Bush I change is marked as a tax reduction? I suppose it dropped the top rate slightly, but increased other taxes.

There was a Reagan tax increase in 1982. It rescinded some of the large tax cuts from the year before (1981). It increased taxes 0.8% GDP. I only see one bar on the chart, not two.

Audrey
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 04-11-2010, 05:09 PM   #28
Recycles dryer sheets
winger's Avatar
 
Join Date: Jan 2007
Posts: 251
If everyone paid taxes? Everyone DOES pay taxes. Maybe not the same ones that you pay. Last I noticed there are city taxes, county taxes, state taxes. The list is long, and I seriously doubt anyone in the US avoids them all. Isn't there even a death tax?
__________________
winger is offline   Reply With Quote
Old 04-11-2010, 06:53 PM   #29
Full time employment: Posting here.
flyfishnevada's Avatar
 
Join Date: Jan 2010
Location: Smith
Posts: 743
Quote:
Originally Posted by IndependentlyPoor View Post
I don't get your distinction between stimulative wartime spending and social programs that remove money from the free market. The government's tax revenues all get spent, and I don't think it makes much difference to the economy if that spending comes in the form of missiles or food stamps... literally guns or butter. It all goes back into the economy.
There might be a small difference. Now that I think about it the jump is probably due to the preceding Depression. Suddenly, a lot more people had jobs in 1941.
__________________
flyfishnevada is offline   Reply With Quote
Old 04-11-2010, 10:55 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by audreyh1 View Post
4. Families. Families with children get HUGE tax breaks in this country - deductions AND credits.
Just sitting here reviewing my son's tax return. Family of five. Don't see any HUGE (as you put it) deductions and credits. What are you thinking of?
__________________
youbet is offline   Reply With Quote
Old 04-12-2010, 11:22 AM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,284
Quote:
Originally Posted by audreyh1

It amazes me that people seem to remain convinced that there is some huge fixed portion of the US population (that is - the same individuals) that does not pay taxes year after year and therefore votes to keep it that way.

I suspect "this group" is more likely a breakdown of:

1. Young people, etc ....

So, I suspect if you back out the above groups, you are probably left with a fairly small "permanent" non-FIT-paying group.

Quote:
Originally Posted by CuppaJoe View Post
This bears repeating in its entirety.
OK (and ignoring the claims of lack of upward mobility in the US), but is it really that important whether they are 'permanent' or not? We can't predict the future, so if we are currently in a group that benefits from 'taxing the guy behind the tree', I suspect that many will cheer that tax policy when a politician mentions it. Even if later on, they become (or were earlier) the guy behind the tree.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 04-12-2010, 11:38 AM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,484
Quote:
Originally Posted by ERD50 View Post
OK (and ignoring the claims of lack of upward mobility in the US), but is it really that important whether they are 'permanent' or not? We can't predict the future, so if we are currently in a group that benefits from 'taxing the guy behind the tree', I suspect that many will cheer that tax policy when a politician mentions it. Even if later on, they become (or were earlier) the guy behind the tree.

-ERD50
Yes, I think it does. Because expectations of higher future taxes can serve as a restraint on people who perhaps don't carry as much of the burden today.

You could say that there is still the senior population who is past their highest paying tax days, and this group perhaps presents the biggest threat as they are active voters and receive a lot of government-funded benefits.

But I notice that the tea-party groups seem to be full of screaming seniors. And lots of seniors I know seem to be quite fiscally conservative and grumble about taxes and government debt even though they pay little or nothing in FIT. So it's not clear to me that this group is going to uniformly vote according to how much they pay in taxes.

Audrey
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 04-12-2010, 11:44 AM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by IndependentlyPoor View Post

Do you truly believe this?
Look at the record capital gains taxes collected under the Bush tax cuts, and there's your answer............
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 04-12-2010, 11:53 AM   #34
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by audreyh1 View Post
But I notice that the tea-party groups seem to be full of screaming seniors. And lots of seniors I know seem to be quite fiscally conservative and grumble about taxes and government debt even though they pay little or nothing in FIT. So it's not clear to me that this group is going to uniformly vote according to how much they pay in taxes.
I think there are largely two kinds of advocacy groups among seniors. One is trying to protect the benefits they are currently receiving from being cut. The other sees that our present course (spend, spend, spend) seems to be financially screwing their kids and grandkids, whom they would like to see have a better life than they had.

Obviously there are more than these two extremes and it's possible to want to strike a balance between these two concerns, but in terms of activism there aren't too many "radical centrists."
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 04-12-2010, 11:56 AM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by audreyh1 View Post
But I notice that the tea-party groups seem to be full of screaming seniors. And lots of seniors I know seem to be quite fiscally conservative and grumble about taxes and government debt even though they pay little or nothing in FIT. So it's not clear to me that this group is going to uniformly vote according to how much they pay in taxes.Audrey
I have been to three Tea Party rallies and they have been free of incident. However, the media will focus on those that involve shouting matches in order to sell ads............
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 04-12-2010, 11:56 AM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,484
Quote:
Originally Posted by ziggy29 View Post
I think there are largely two kinds of advocacy groups among seniors. One is trying to protect the benefits they are currently receiving from being cut. The other sees that our present course (spend, spend, spend) seems to be financially screwing their kids and grandkids, whom they would like to see have a better life than they had.

Obviously there are more than these two extremes and it's possible to want to strike a balance between these two concerns, but in terms of activism there aren't too many "radical centrists."
I think it's also worth noting that seniors as a group have been in about the same situation in terms of taxes and benefits for many decades. Yet the US has gone through various cycles of rising and falling government spending.

Audrey
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 04-12-2010, 11:58 AM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,484
Quote:
Originally Posted by FinanceDude View Post
I have been to three Tea Party rallies and they have been free of incident. However, the media will focus on those that involve shouting matches in order to sell ads............
More specifically the representation at the town hall meetings of last summer which definitely involved a concerted campaign of shouting. And an amazing number of the shouters appeared to be seniors.

Audrey
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 04-12-2010, 12:46 PM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,284
Quote:
Originally Posted by audreyh1 View Post
Yes, I think it does. Because expectations of higher future taxes can serve as a restraint on people who perhaps don't carry as much of the burden today.
I agree that is an influence. How strong it is/isn't I couldn't begin to guess.
Quote:
You could say that there is still the senior population who is past their highest paying tax days, and this group perhaps presents the biggest threat as they are active voters and receive a lot of government-funded benefits.
ziggy's post #34 was my feeling also. Personally, I am concerned for future generations, and I really should be paying more FIT than I have in some recent years.

Quote:
But I notice that the tea-party groups seem to be full of screaming seniors.
Please don't tell me you came to this conclusion based on what the media presented.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 04-12-2010, 02:02 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by audreyh1 View Post
More specifically the representation at the town hall meetings of last summer which definitely involved a concerted campaign of shouting. And an amazing number of the shouters appeared to be seniors.

Audrey
Do those seniors have the right to complain? Obviously, they are upset about something..........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 04-12-2010, 03:35 PM   #40
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 196
Quote:
Originally Posted by laurence View Post
My degree in Econ is now 11 years old, but I remember we had a senior seminar class on taxes and the effect of cuts/raises in tax rates on revenue was clearly dependent on the current marginal rate. The graph was an upside down "U" with significantly higher revenue if cutting from say, a 70% marginal rate to 60% but revenue starting to decrease again once it reached a certain marginal rate floor (it was somewhere in the high 30% range, I believe).

I'm pretty sure that you're talking about the Laffer curve, sketched on a napkin over lunch by Arthur Laffer, sitting across from Dick Cheney, and was then used by Reagan to argue for a reduction in taxes to create more revenue. So far as I recall, it's never been verified empirically as to effect at different rates, but is logically consistant overall.

My econ degree is also close to a decade out of date, so take with salt...
__________________

__________________
seabourne is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Get Paid to Play tangomonster Other topics 5 05-22-2008 08:08 AM
Yes, we paid off our mortgage bssc FIRE and Money 21 10-24-2007 01:29 PM
What is the most you have paid for Golf? Dog Life after FIRE 24 06-28-2007 07:48 PM
Federal Income Taxes - How Much Paid GMueller FIRE and Money 24 03-01-2007 03:10 PM
Taxes paid on Tips modhatter FIRE and Money 5 02-13-2006 10:27 AM

 

 
All times are GMT -6. The time now is 01:45 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.