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Old 04-14-2012, 02:06 PM   #21
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My bottom line is a little different than yours: In a democracy, we get the government we deserve. As long as the electorate continues to act like a group of infants, we'll get politicians who pander to infants.
I tend to think of the H.L. Mencken quote here: "Under democracy one party always devotes its chief energies to trying to prove that the other party is unfit to rule—and both commonly succeed, and are right."
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Old 04-15-2012, 12:47 AM   #22
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I tend to think of the H.L. Mencken quote here: "Under democracy one party always devotes its chief energies to trying to prove that the other party is unfit to rule—and both commonly succeed, and are right."
+1
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Old 04-15-2012, 09:22 AM   #23
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CBS Sunday Morning had a story on tax cheating this morning. They said only 85% of taxes due are paid and that collecting the other 15% would help reduce the deficit. So far so good.

Then one of the experts concludes we should hire more IRS agents to collect the other 15%. How about we simplify the tax code so the average citizen can understand their taxes, and then use all the IRS agents who could be freed up from interpreting the current 5,300 pages, to spend time on more collections. Jeezzzzz...
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Old 04-15-2012, 09:39 AM   #24
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CBS Sunday Morning had a story on tax cheating this morning. They said only 85% of taxes due are paid and that collecting the other 15% would help reduce the deficit. So far so good.

Then one of the experts concludes we should hire more IRS agents to collect the other 15%. How about we simplify the tax code so the average citizen can understand their taxes, and then use all the IRS agents who could be freed up from interpreting the current 5,300 pages, to spend time on more collections. Jeezzzzz...
Or, don't watch current event shows on tv.

Nice avatar...
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Old 04-15-2012, 10:13 AM   #25
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Originally Posted by Midpack View Post
CBS Sunday Morning had a story on tax cheating this morning. They said only 85% of taxes due are paid and that collecting the other 15% would help reduce the deficit. So far so good.

Then one of the experts concludes we should hire more IRS agents to collect the other 15%. How about we simplify the tax code so the average citizen can understand their taxes, and then use all the IRS agents who could be freed up from interpreting the current 5,300 pages, to spend time on more collections. Jeezzzzz...
Agreed.

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Or, don't watch current event shows on tv.
Yep, the 'head in the sand' approach is always a good one. I think Midpacks suggestion has a lot of merit, and the information appears to be factual, not just trumped up for excitement like so many news items.

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Nice avatar...
Agreed.


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Old 04-15-2012, 10:17 AM   #26
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Yep, the 'head in the sand' approach is always a good one. I think Midpacks suggestion has a lot of merit, and the information appears to be factual, not just trumped up for excitement like so many news items.

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I neither said nor implied head in the sand.
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Old 04-15-2012, 01:48 PM   #27
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What about the 48% that's claimed to pay no federal income tax? I would think that that would cover at least everyone making under $30K/year.
If you're comparing to the chart in the OP, note that it includes Medicare and SS taxes. Your 48% applies only to federal income tax.
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Old 04-15-2012, 02:12 PM   #28
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Not so. If you have tax software try creating a return for a single person earning under $30k. A quick look back at my young son's tax returns and in 2009 he earned ~$28k and paid $2.5k in Fed Income tax.
I don't think your single son is a good example. I think of low income families with dependents and mortgages (often exceeds standard deduction).

I've heard the 47% pay no FIT, so I had to look further.

And note the number who pay no FIT has increased dramatically since the recent recession (I did not find a chart that went past 2007, but we know what the current numbers are).
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Yet the vast majority of the people who owe no federal income taxes fall into one of three categories (see Figure 4):
  • Approximately 61 percent are working people who pay payroll taxes. As noted above, even the low-income households in this group pay substantial federal income taxes over time. The main options to force these people to pay federal income tax in years when their incomes are low include cutting the EITC or the Child Tax Credit, which would tend to reduce work incentives and increase child poverty and welfare use, and lowering the standard deduction or personal exemption, which could tax many low-income working families into, or deeper into, poverty.
  • An additional 22 percent of people who did not pay federal income taxes in 2009 are people aged 65 or older who have modest incomes (and do not have earnings). The main option to make these individuals pay federal income tax would be to subject their Social Security benefits to taxation despite their limited income.
  • The remaining 17 percent includes students, people with disabilities or illnesses, the long-term unemployed, and other people with very low taxable incomes. To make these people pay federal income taxes, policymakers would have to tax disability, veterans’, and similar benefits or make full-time students and the long-term jobless individuals borrow (or draw from any available savings) to pay taxes on their meager incomes.
Misconceptions and Realities About Who Pays Taxes — Center on Budget and Policy Priorities
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Old 04-15-2012, 04:07 PM   #29
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CBS Sunday Morning had a story on tax cheating this morning. They said only 85% of taxes due are paid and that collecting the other 15% would help reduce the deficit. So far so good.

Then one of the experts concludes we should hire more IRS agents to collect the other 15%. How about we simplify the tax code so the average citizen can understand their taxes, and then use all the IRS agents who could be freed up from interpreting the current 5,300 pages, to spend time on more collections. Jeezzzzz...
Simplifying might help, but I think most of the under-collection is in the good old fashioned cash economy. Every year we have income that the IRS wouldn't know about if we didn't claim it. It comes in the form of 1099s that don't get filed and rental income that isn't reported to anyone. I know plenty of folks who run cash businesses or do cash work on the side. Simplifying the code won't capture any of this if it isn't already being reported.

I also think this is one of those things like "waste fraud and abuse" that gets everyone excited because it seems like a painless way to make our fiscal troubles go away. The problem is, every year politicians claim to go after these things and they never seem to generate any real cash.
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Old 04-15-2012, 04:25 PM   #30
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Simplifying might help, but I think most of the under-collection is in the good old fashioned cash economy. Every year we have income that the IRS wouldn't know about if we didn't claim it. It comes in the form of 1099s that don't get filed and rental income that isn't reported to anyone. I know plenty of folks who run cash businesses or do cash work on the side. Simplifying the code won't capture any of this if it isn't already being reported.

I also think this is one of those things like "waste fraud and abuse" that gets everyone excited because it seems like a painless way to make our fiscal troubles go away. The problem is, every year politicians claim to go after these things and they never seem to generate any real cash.
Fiscal troubles wasn't my central point...but OK.
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Old 04-15-2012, 04:32 PM   #31
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Real tax code simplification would have an additional effect, difficult to measure but of incredible potential, which would be to redirect America's best and brightest away from tax avoidance schemes and allow them to contribute to the economy in a more productive manner.
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Old 04-15-2012, 04:37 PM   #32
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I don't think your single son is a good example. I think of low income families with dependents and mortgages (often exceeds standard deduction).

I've heard the 47% pay no FIT, so I had to look further.
Thank you. I was responding to the statement "I would think that that would cover at least everyone making under $30K/year."

Your post is excellent and shows clearly the demographics of those who pay no federal income taxes.
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Old 04-15-2012, 04:39 PM   #33
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Real tax code simplification would have an additional effect, difficult to measure but of incredible potential, which would be to redirect America's best and brightest away from tax avoidance schemes and allow them to contribute to the economy in a more productive manner.
Feeling a bit Pollyanna today.
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Old 04-15-2012, 05:29 PM   #34
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Real tax code simplification would have an additional effect, difficult to measure but of incredible potential, which would be to redirect America's best and brightest away from tax avoidance schemes and allow them to contribute to the economy in a more productive manner.
DW and I have filed our Federal and State returns. All eighty pages with required worksheets. Schedules A, B, D, 8949, 1116, et cetera, et cetera, and so forth... Our effective Federal tax rate comes to 0.53%. Yah, a half of one percent. Gosh, I feel ever so productive.
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Old 04-15-2012, 05:31 PM   #35
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Simplifying might help, but I think most of the under-collection is in the good old fashioned cash economy. Every year we have income that the IRS wouldn't know about if we didn't claim it. It comes in the form of 1099s that don't get filed and rental income that isn't reported to anyone. I know plenty of folks who run cash businesses or do cash work on the side. Simplifying the code won't capture any of this if it isn't already being reported.

I also think this is one of those things like "waste fraud and abuse" that gets everyone excited because it seems like a painless way to make our fiscal troubles go away. The problem is, every year politicians claim to go after these things and they never seem to generate any real cash.
I think the point of the post is that if we had a simpler code we could free up some of the agents who are currently arguing with taxpayers about labor income vs. capital income (for example), and they could look for ways to capture the completely unreported income.

I'll agree that closing loopholes is one of those things that politicians love to talk about when they are talking to ordinary voters, but creating new loopholes (or keeping the IRS from looking too closely) is more popular when they are looking for campaign contributions.
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Old 04-15-2012, 05:41 PM   #36
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I'll agree that closing loopholes is one of those things that politicians love to talk about when they are talking to ordinary voters, but creating new loopholes (or keeping the IRS from looking too closely) is more popular when they are looking for campaign contributions.
Voters are bought off with loopholes too, they just don't call them that. They're called mortgage interest and charitable giving deductions or child-care credits and dependent exemptions. People love them and woe upon any politician who wants to take them away. They're not loopholes though. Loopholes are tax breaks that other people get.
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Old 04-16-2012, 08:12 AM   #37
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Real tax code simplification would have an additional effect, difficult to measure but of incredible potential, which would be to redirect America's best and brightest away from tax avoidance schemes and allow them to contribute to the economy in a more productive manner.
+1!
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Old 04-16-2012, 08:12 AM   #38
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DW and I have filed our Federal and State returns. All eighty pages with required worksheets. Schedules A, B, D, 8949, 1116, et cetera, et cetera, and so forth... Our effective Federal tax rate comes to 0.53%. Yah, a half of one percent. Gosh, I feel ever so productive.
Well done!

While yours is an excellent example of the effort needed to file a tax return, what I really had in mind was something like this
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Barclays’ controversial tax planning business will come under fresh scrutiny in a US court this week over whether a transaction designed by the bank cost the US government more than $1bn in lost tax receipts. The US Internal Revenue Service claims that complex, cross-border deals Barclays structured for several mid-tier banks in the last decade were an abusive tax shelter that exploited loopholes between US and UK tax laws. Barclays’ tax deals face US scrutiny - FT.com
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Old 04-16-2012, 08:17 AM   #39
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Voters are bought off with loopholes too, they just don't call them that. They're called mortgage interest and charitable giving deductions or child-care credits and dependent exemptions. People love them and woe upon any politician who wants to take them away. They're not loopholes though. Loopholes are tax breaks that other people get.
But where does it end? No question in my mind federal income taxes have become far too complex.
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Old 04-16-2012, 08:39 AM   #40
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My view: The really, really rich have always been able to dodge the tax man. They just have options that the rest of us don't have.

"Residing" in tax favorable countries, getting the corporation to own that jet/house in France/trip to Rio/etc, keeping that income $10 under the $1MM mark and so on.

Until recently, the US has been somwhat immune from the 'eat the rich' mentality but in Europe it has been a fruitless game for decades. (remember the old term: "tax exiles"?)

Going after "the rich" is a waste of time and only makes for good political theater.

Cut all the loopholes you want. Reform the tax code. Bring the tax rate to 50%! It won't matter.

Is it fair? No. But, as it has always been, it will be you and I who pay the 'fair share'.
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