US Income Tax system choice poll

[F4mandolin]

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Originally Posted by robnplunder Surprising to see option 4 hanging in there so far. I've always thought the current US tax system is discriminatory against higher income bracket folks. Why should they be penalized by higher tax rate for making more money? In effect, they are paying (much) more to get into public museums, National Parks, etc..

I'm all for reducing the higher tax rates.....as long as the deductions are given the heave-ho. That's why I like the UK system......the taxes are taken out before you get paid....period.....you basically don't/won't get them back. But if everybody is paying a set limit with no exceptions (easier said than done) then everybody should be able to pay less. That could be another thread....how much could everybody pay less if there were no deductions?

[scrinch]

+1 on the current progressive system, but without the carve outs. But phasing out carve outs will be painful. You think the dislocations with Obamacare are making people scream, wait until you take away their home mortgage deduction and 401k/IRA income exclusion!

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Surprising to see option 4 hanging in there so far. I've always thought the current US tax system is discriminatory against higher income bracket folks. Why should they be penalized by higher tax rate for making more money?

Good question. Political question too. You could also ask if it is fair that high income earners make more money than low income earners. I'm not sure the higher income is always fully earned by the recipient. What I mean by that is that high income earners (for example me) are often born into families that value education, in places where there is good infrastructure and there are good job opportunities. Those are advantages that they have from day-1 that they didn't really earn. So to what extent do I deserve a $200k salary? Have I worked harder than the guy who picks fruit and vegetables in the field year-round? It is probably just as fair that I earn that salary as that I pay an effective 25% income tax compared to the farm laborer's effective 7% tax.

Or maybe not. Like I say, yours is a good question that doesn't have a simple, absolute answer.

[F4mandolin]

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Originally Posted by scrinch Good question. Political question too. You could also ask if it is fair that high income earners make more money than low income earners. I'm not sure the higher income is always fully earned by the recipient. What I mean by that is that high income earners (for example me) are often born into families that value education, in places where there is good infrastructure and there are good job opportunities. Those are advantages that they have from day-1 that they didn't really earn. So to what extent do I deserve a $200k salary? Have I worked harder than the guy who picks fruit and vegetables in the field year-round? It is probably just as fair that I earn that salary as that I pay an effective 25% income tax compared to the farm laborer's effective 7% tax. Or maybe not. Like I say, yours is a good question that doesn't have a simple, absolute answer.

Good point

[HFWR]

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Originally Posted by galeno I'm not a USA person but I know a bit about fiscal policy. Ideally, a government should tax what is undesirable and subsidize what is desirable. The problem starts when you and I think opposite things are desirable and vice versa. Good luck USAmericans. Both of our countries are getting to the point of being ungovernable.

A simple "you earned that much, you owe this much" system, or a national sales tax.

In my utopia, taxes would be set so that government operations are funded. We should get out of the business of trying to manipulate behavior with taxes and subsidies, as it creates too many opportunities for malfeasance...

I agree with the last sentence...

[Theduckguru]

My real federal tax rate has been less than 9% for the last 10 years, so I certainly am not in favor of a flat 15% rate.

You might enjoy reading this recent opinion.

PIMCO | Investment Outlook - Scrooge McDucks

[haha]

Quote:

Originally Posted by robnplunder Surprising to see option 4 hanging in there so far. I've always thought the current US tax system is discriminatory against higher income bracket folks. Why should they be penalized by higher tax rate for making more money? In effect, they are paying (much) more to get into public museums, National Parks, etc..

A lot of people on this board pay very little or no income tax, in spite of having plenty money to spend. One member I think said he had not had to pay taxes in 25 years or so. And this person has two homes, so he is not exactly hurting. No wonder they don't want any change.

Overall I would prefer a consumption tax, but if it ever happens, it will be an add-on to the income tax, not a replacement so we are likely to be worse off as usual.

The real winners in our system are those who don't work, never worked, and have no intention of ever working, though they consume plenty thanks to those who do work.

Ha

[youbet]

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Originally Posted by theOAP I still prefer the UK system as it has the appearance of being fairer.

How do you justify referring to the UK tax system as "fairer" with that hefty 20% VAT? The VAT seems so regressive with the poor paying it at 20% as well as the ultra-wealthy. Perhaps they have some way of reimbursing the poor the VAT they paid during the year?

[scrabbler1]

The Bush tax cuts from the last decade included no offsetting, so-called "base-broadening" measures. So whenever I hear someone propose a "lower the rates and broaden the base," I get annoyed. I think we should simply leave the rates alone or raise them back to the early Clinton levels AND get rid of some of the deductions and credits.

[youbet]

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Originally Posted by haha The real winners in our system are those who don't work, never worked, and have no intention of ever working, though they consume plenty thanks to those who do work. Ha

There is something to be said for that outlook. While I don't regret (much) having worked long and hard for many years for what my family has today, I do have moments where I wonder. For example, a college buddy, a when-the-urge-hits writer, who has seemed to live a decent life economically without ever seeming to "work." A smart guy (Mensa, high GPA, high test scores, etc.) he always seems to be on top of ways to have the essentials of life bestowed on him from a combination of of gov't, private institutional and individual sources. This never seems to involve "work." I'm always amazed. He says America is a wonderful place. I always buy the beer.

I admit there may be more to his efforts to make a living that I readily detect. Having spent a life working long hours in factories, my idea of "work" is framed by a pretty narrow definition.

This is a wonderful place for the fit and clever who wish to avoid time in harness.

[robnplunder]

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Originally Posted by scrinch You could also ask if it is fair that high income earners make more money than low income earners. I'm not sure the higher income is always fully earned by the recipient. What I mean by that is that high income earners (for example me) are often born into families that value education, in places where there is good infrastructure and there are good job opportunities. Those are advantages that they have from day-1 that they didn't really earn. So to what extent do I deserve a $200k salary? Have I worked harder than the guy who picks fruit and vegetables in the field year-round? It is probably just as fair that I earn that salary as that I pay an effective 25% income tax compared to the farm laborer's effective 7% tax. Or maybe not. Like I say, yours is a good question that doesn't have a simple, absolute answer.

There are plenty of high income earners who weren't born with silver spoon in their mouth, myself included. There are millions of things that's unfair besides being born into poor family (which I was born into). Anyway, what's that got to do with tax rate?

[F4mandolin]

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Originally Posted by robnplunder There are plenty of high income earners who weren't born with silver spoon in their mouth, myself included. There are millions of things that's unfair besides being born into poor family (which I was born into). Anyway, what's that got to do with tax rate?

They were responding to someone saying it wasn't fair for well off people to pay more taxes.

[scrinch]

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Originally Posted by robnplunder There are plenty of high income earners who weren't born with silver spoon in their mouth, myself included. There are millions of things that's unfair besides being born into poor family (which I was born into). Anyway, what's that got to do with tax rate?

It's easy to not recognize the advantages of being born in most places in the US that have good, free primary and secondary education, a good transportation infrastructure, reasonably fair laws that are generally enforced, a class system that allows (encourages) upward mobility, a first world economy with all its opportunities, where parents can read and write and value getting ahead within the system, etc. The majority of the people I see every day were not born with those advantages, and despite being very hard workers, they earn less than 10 percent of the US median income. I don't call these advantages a "silver spoon" but I'm trying to recognize they are "unearned" or "unfair" economic advantages we have enjoyed.

What does this have to do with tax rates? Maybe nothing. I just thought you were trying to talk about "fair" or "just" allocation of the tax burden in your post, and I was commenting about why it might be okay for the fortunate, even if they don't recognize themselves as such, to pay a higher proportion the income tax burden. But I recognize that "fair" is a concept that we each get to define within our own sphere of concern, so a discussion of a "fair" allocation of taxes may not lead down a productive path here.

[theOAP]

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Originally Posted by youbet How do you justify referring to the UK tax system as "fairer" with that hefty 20% VAT? The VAT seems so regressive with the poor paying it at 20% as well as the ultra-wealthy. Perhaps they have some way of reimbursing the poor the VAT they paid during the year?

Not a cop-out, but the word "appearance of a fairer system" was carefully selected in my statement. I doubt any tax system is seen as fair by 100% of the population who may pay into it. Someone will always be unhappy.

Generally, there is no way any individual taxpayer can reclaim VAT paid. VAT is seen as a way for all members of the population to contribute to national funding. Charging VAT on all purchases by all members of the population and its fairness based on income levels leads to a discussion more aligned to the distribution of tax revenues collected, and in this case it would have to do with state issued benefits available to the poorer section of the population only. (And yes, it therefore becomes a bit of a merry-go-round.) This leads to a political discussion of governments role in society and the opposing views found there, and is (arguably) a different topic than a discussion of the tax system itself.

VAT is paid by all. The argument against VAT will always be the proportion of available income paid for the tax. In the UK, those with little income pay little or, more likely, no income tax (most benefits are tax free). As ones income increases, they progressively fall into the various income tax bands and pay additional tax accordingly. The tax bands are noticeably more severe for that purpose.

Personally, I don't think the average US taxpayer with a strong past experience of, and a dependence on, deductions could find the UK system easily acceptable.

[Gatordoc50]

I like the current system but with fewer deductions. I'd get rid of retirement accounts, both DB and DC and take away the tax free status of health benefits, etc. The end result would probably be a bracket system in the 5 to 15% range. This would put everyone on equal footing.

[Jack_Pine]

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Originally Posted by F4mandolin Good point

or not.

[Jack_Pine]

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Originally Posted by haha A lot of people on this board pay very little or no income tax, in spite of having plenty money to spend. One member I think said he had not had to pay taxes in 25 years or so. And this person has two homes, so he is not exactly hurting. No wonder they don't want any change. Overall I would prefer a consumption tax, but if it ever happens, it will be an add-on to the income tax, not a replacement so we are likely to be worse off as usual. The real winners in our system are those who don't work, never worked, and have no intention of ever working, though they consume plenty thanks to those who do work. Ha

Agreed.

[BTravlin]

I say we first get the federal government out of a bazillion areas of our life where it has no business being and thereby drastically reduce the tax revenues needed. We can then more easily simplify the tax system and make it more fair.

[Ronstar]

I voted flat rate. Simpler is better - get rid of deductions and credits. Also think that a national sales tax could be better than a flat income tax.

[travelover]

I'm for any scheme that allows me to pay minimal taxes while socking it to others.

[pb4uski]

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Originally Posted by scrinch It's easy to not recognize the advantages of being born in most places in the US that have good, free primary and secondary education, a good transportation infrastructure, reasonably fair laws that are generally enforced, a class system that allows (encourages) upward mobility, a first world economy with all its opportunities, where parents can read and write and value getting ahead within the system, etc. The majority of the people I see every day were not born with those advantages, and despite being very hard workers, they earn less than 10 percent of the US median income. I don't call these advantages a "silver spoon" but I'm trying to recognize they are "unearned" or "unfair" economic advantages we have enjoyed.....

I hear your point, but on the other hand the public education system I went through had a broad mix of rich kids, middle income kids and poor kids and we all had the same books, same teachers, etc. There was an equal mix of kids across all incomes that took advantage of the opportunity in front of them and did well, or didn't and let the opportunity pass them by. Some of the poor kids went on to do spectacularly in life and some of the rich kids were spectacular failures. I concede that wealth improves one's chances of success but IMO given the many cases of poor kids succeeding and rich kids failing I conclude that the system that I grew up in was a fair meritocracy.