What else can they take away?

[Midpack]

Giving all our money to the "gummit" (even said for effect) seemed a little far afield, but OK, I was wrong - no biggie. Carry on...

 

[Koolau]

I suppose it does become political to an extent because we are no longer speaking of personal strategies (e.g., the 4% rule or our own AA) or what we spend our money on (budgets). Instead, we are arguing about what is "fair" or "right" or "good" or even "equal". These value judgements nearly always lead to politics (or religion).

I think the reason such "political" discussions get out of hand is that those of us who disagree begin to assign moral values to our arguments. If there were some way to argue the actual merits of certain strategies (e.g., how DO we solve the health care crisis?) we wouldn't go off track as often. If we start with the assumption that ALL of us (well, 97%) want adequate, affordable health care for all, maybe we could argue about how to get there. Unfortunately, the problem is so complex, we fall back on our personal opinions of "right and wrong". If we disagree, we make the assumption that the other person is "wrong" or even "evil" instead of that s/he has a different opinion of how to get to the same place.

Oh well, I do love bacon YMMV

 

[photoguy]

Like I said, what one thinks should be provided free by the government and what is fair are his personal opinions, so do not foist your fair share concept on someone else.

Well this is a discussion board and part of what make discussions interesting is the ability to talk about different viewpoints. Even ones that we disagree with. It would be very boring if everyone had the exact same opinion.

That example in Boglehead was hypothetical and heavily relied on many deductions and the mathematics practically screamed "torture". To get to a 15% tax rate the couple had a $44000 401k contribution on a 190k salary, $12000 mortgage interest deduction, maximum capital loss carried forward, $8000 charitable donation, and tuition credits etc.

None of the deductions are particularly esoteric or rare. And I as said, my personal tax returns are not hypothetical and I'm paying relatively low tax rates (~20% including federal, state, property, payroll).

they cited examples that entailed a fair bit more taxes paid, even for people with much lower income than the couple with the hypothetical 200k income.

Sure I have no doubt that many people pay more in taxes at the same income level.
I think this is part of the problem that because of so many deductions you can have people with very high income paying low rates. This goes back to the motivation in the article posted by the OP (cap deductions for high income earners) and also various ideas discussed in the media before the election.

this thread seems to be drifting away from having much to do with FIRE and it's NOT even the FIRE Related Political Topics forum, this is FIRE and Money.

I think the original thread title of "What else can they take away?" puts the topic more in the Fire & Politics arena than Fire and Money.

I keep hearing this response to voluntary donations to the Feds, that 'everyone needs to do it', no one can make a difference on their own.

But how come it doesn't work that way with other voluntary donations? Most of us have donated to Red Cross, Salvation Army, Heifer and/or others, and we didn't need a law that forced the majority to donate to that same charity. How's that work?

That's a good question. But if you went and asked those voluntary organizations would they say that donations were sufficient to meet their needs? I know this isn't really fair because nobody says their budget is enough. Realistically though, people don't have positive attitudes toward the government and I think voluntary donations would be way too low.

So, the percent of people that do not pay federal income taxes due to IEC and other credits IS close to 50%...

The quote I was responding to ("those of us left in the 50% who actually still pay taxes") didn't distinguish between the various types of taxes. Money is fungible so does it really matter what bucket it goes into as long as they are filled?

I suppose it does become political to an extent because we are no longer speaking of personal strategies (e.g., the 4% rule or our own AA) or what we spend our money on (budgets). Instead, we are arguing about what is "fair" or "right" or "good" or even "equal". These value judgements nearly always lead to politics (or religion).

Good point. When I said "fair" I was speaking about my personal feelings and I certainly don't expect everyone to agree with me. And I don't think worse of anybody if they draw their own "fairness line" at a different point.

 

[bondi688]

Well this is a discussion board and part of what make discussions interesting is the ability to talk about different viewpoints. Even ones that we disagree with. It would be very boring if everyone had the exact same opinion.

Good point. When I said "fair" I was speaking about my personal feelings and I certainly don't expect everyone to agree with me. And I don't think worse of anybody if they draw their own "fairness line" at a different point.

That was exactly my point. You are certainly entitled to your own value system and opinions, and to tell everyone your preference, particularly in a discussion board such as this. I was just objecting to the adding the judgement "fair" to your comment. Like you yourself say, it is your personal feeling and judgement, and until you said directly just now, adding that evaluation to your opinion without qualification implies others who have a different take are unfair.

 

[photoguy]

Actually I am saying that I think certain policies are fair/equitable/reasonable and others are not. My belief is much stronger than a preference and it is a judgement call. There's simply no way to have a discussion about this if we don't advocate for or against certain positions. We need a term to label what we see as a desirable policy and "fair" seems as good as any.

What I expect to happen is for folks to say I disagree with you (or agree as case may be) and say i think alternative X,Y,Z is fairer/better/superior policy and here's why. What I don't expect is for folks to take it as a personal attack because we disagree on what policy we think is best.

 

[bUU]

That's all fine-and-good, photoguy, but in the end, it is quite difficult to see happen in reality. The pursuit of FI can be undertaken devoid of morality, aiming for whatever is best for one's self and one's own - period. That's a valid perspective which people are entitled to hold to. On the other hand, many folks temper the pursuit of FI by discounting the value of actions that might serve them well, personally, but only at the expense of something vital - in effect, their humanity. Given that, the only way to achieve the manner of interchange you described is to establish a general consensus that the practices of Scrooge and Gandhi, and of everyone in between, are equal in regard.

 

[Jay_Gatsby]

Is that better or worse than being called "headcount?"

There's also the companion word when you have an open position - "backfill". To me that word evokes the image of a backhoe filling a hole in the ground. I'll let you guess what (or who) is in the hole.

 

[Texas Proud]

None of the deductions are particularly esoteric or rare. And I as said, my personal tax returns are not hypothetical and I'm paying relatively low tax rates (~20% including federal, state, property, payroll).

Just the little that I see for the example, it is not that typical...

What income level do you have to get this 20% I know that my boss pays about 27% just in federal taxes... I, on the other hand pay close to 6% due to deductions and education credits... (it will go up to about 13% when I lose some of these credits)..

Sure I have no doubt that many people pay more in taxes at the same income level.
I think this is part of the problem that because of so many deductions you can have people with very high income paying low rates. This goes back to the motivation in the article posted by the OP (cap deductions for high income earners) and also various ideas discussed in the media before the election.

One of the problems that I see with people that talk about how someone who makes big money pays 'little' taxes... is that the gvmt thought that giving these breaks were a good investment.... again, as an example I will use my boss.... he spent money on research so he could get a research credit... but guess what? The AMT got in the way... he has over $60K of credits that he can not use... so he stopped doing this kind of research... because he can not use this tax break, people are no longer working...

Also, itemized deductions ARE capped for high income earners... the example given had them reducing their taxable income prior to it even becoming 'wages'.... that is a whole different ballgame than capping deductions...

The quote I was responding to ("those of us left in the 50% who actually still pay taxes") didn't distinguish between the various types of taxes. Money is fungible so does it really matter what bucket it goes into as long as they are filled?

When most people say 'taxes', they are talking about income taxes... and for gvmt accounting, yes it does matter which bucket it goes into...

 

[pb4uski]

.....The quote I was responding to ("those of us left in the 50% who actually still pay taxes") didn't distinguish between the various types of taxes. Money is fungible so does it really matter what bucket it goes into as long as they are filled?....

I think it is very different. IMO SS "taxes" are more premiums to a government mandated life insurance/disability insurance/retirement pension program than a tax. If you die, your dependents get benefit payments; if you become disabled, you get benefit payments; if you live to retirement age, you and your spouse get pension benefits. One way or another you get something for what you contributed (and it may be much more or much less than what you contributed, depending on your circumstances, so it has an insurance angle to it in that risks are pooled).

With income taxes the "benefits" are much less direct and much more shared (national defense, infrastructure, etc).

 

[photoguy]

Just the little that I see for the example, it is not that typical...

What income level do you have to get this 20% I know that my boss pays about 27% just in federal taxes... I, on the other hand pay close to 6% due to deductions and education credits... (it will go up to about 13% when I lose some of these credits)..

I agree it's probably not the typically case, but I don't think it's that rare either. Just imagine all of the two income couples in CA with a huge mortgage and property tax deduction and also maxing out their 401ks. It would be even easier states like WA.

I also suspect that once you get into the very wealthy segments, it becomes relative easy because of the low rates on investment gains/income.

One of the problems that I see with people that talk about how someone who makes big money pays 'little' taxes... is that the gvmt thought that giving these breaks were a good investment....

I think many of these deductions are good investments in the sense they are popular, but I'm not sure that folks are always better off in the long run. For example, does increased funding for student loans help make a college education affordable? or it does it simply lead to price inflation?

When most people say 'taxes', they are talking about income taxes... and for gvmt accounting, yes it does matter which bucket it goes into...

I think when people say 'taxes' they mean anything they have to pay to the government (i.e., income, property, sales, payroll). Otherwise we wouldn't need the term "income tax".

The statement has much less impact if we say 50% paid no federal income tax but still paid payroll, property, and sales taxes.

 

[photoguy]

I think it is very different. IMO SS "taxes" are more premiums to a government mandated life insurance/disability insurance/retirement pension program than a tax. If you die, your dependents get benefit payments; if you become disabled, you get benefit payments; if you live to retirement age, you and your spouse get pension benefits. One way or another you get something for what you contributed (and it may be much more or much less than what you contributed, depending on your circumstances, so it has an insurance angle to it in that risks are pooled).

With income taxes the "benefits" are much less direct and much more shared (national defense, infrastructure, etc).

I view compulsory payments to the government as a tax (isn't that the definition of tax?). But there's definitely an insurance aspect to SS as you state. However I believe it's more accurate to view it as a social welfare program. Your payments under SS are only loosely tied to the benefits and folks with lower income have much higher payouts.

 

[photoguy]

That's all fine-and-good, photoguy, but in the end, it is quite difficult to see happen in reality. The pursuit of FI can be undertaken devoid of morality, aiming for whatever is best for one's self and one's own - period. That's a valid perspective which people are entitled to hold to. On the other hand, many folks temper the pursuit of FI by discounting the value of actions that might serve them well, personally, but only at the expense of something vital - in effect, their humanity. Given that, the only way to achieve the manner of interchange you described is to establish a general consensus that the practices of Scrooge and Gandhi, and of everyone in between, are equal in regard.

I'm not sure I'm following you here, can you rephrase?

Also, I'm not trying to reach a consensus on anything but merely have an interesting discussion with alternate points of view.

 

[pb4uski]

I view compulsory payments to the government as a tax (isn't that the definition of tax?). But there's definitely an insurance aspect to SS as you state. However I believe it's more accurate to view it as a social welfare program. Your payments under SS are only loosely tied to the benefits and folks with lower income have much higher payouts.

While there certainly is a social welfare aspect to SS, we'll have to agree to disagree on whether it is predominately an insurance/pension program or a social welfare program.

I would definitely not agree with the last part - folks with lower income have lower payouts and folks with higher income have higher payouts. It is true that lower income folks get higher payouts relative to their contributions, but their absolute payouts are definitely lower than higher wage earners.

 

[bUU]

That's all fine-and-good, photoguy, but in the end, it is quite difficult to see happen in reality. ...

I'm not sure I'm following you here, can you rephrase?

I'm not sure how to phrase it differently. It's about the feasibility of what you suggested... about what stands in the way of it.

 

[FANOFJESUS]

I think we are in the early stages of the government raising money right now they are looking at income. One day they will also look at assets too. Something like you have $xxxxxxx at your brokerage you don't need your full social security.

 

[Jay_Gatsby]

I think we are in the early stages of the government raising money right now they are looking at income. One day they will also look at assets too. Something like you have $xxxxxxx at your brokerage you don't need your full social security.

Very unlikely to happen, but I can see the Government scaling back on tax-deferred and tax-free oriented accounts for high-income folks. Likewise, the Government may raise the cap gains tax from the now-20% to 22% or even 25%. It will still be significantly lower than the income tax rate, so the argument will be that those receiving cap gains won't really feel it.

 

[Gatordoc50]

I think we are in the early stages of the government raising money right now they are looking at income. One day they will also look at assets too. Something like you have $xxxxxxx at your brokerage you don't need your full social security.

I wonder if they ever look at functioning arms, legs, and a decent IQ as assets.

 

[GandK]

I wonder if they ever look at functioning arms, legs, and a decent IQ as assets.

+1

 

[Gatordoc50]

I wonder if they ever look at functioning arms, legs, and a decent IQ as assets.

Let me expand on that. Rather than only looking at what those who have worked and earned and saved, do we ever consider earning potential? If there any 20 year olds out there who want to trade their youth for my money, I would strongly consider it. But why would they do that when they can keep their youth and have my money to boot? I want to help those less fortunate, but I don't consider someone with a strong back and brains less fortunate.

 

[Independent]

But there's definitely an insurance aspect to SS as you state. However I believe it's more accurate to view it as a social welfare program. Your payments under SS are only loosely tied to the benefits and folks with lower income have much higher payouts.

While there certainly is a social welfare aspect to SS, we'll have to agree to disagree on whether it is predominately an insurance/pension program or a social welfare program.

I would definitely not agree with the last part - folks with lower income have lower payouts and folks with higher income have higher payouts. It is true that lower income folks get higher payouts relative to their contributions, but their absolute payouts are definitely lower than higher wage earners.

I think I have a different view than either of these.

The old age portion of Social Security is an income transfer program. The gov't takes money from current workers and gives it to retired workers.

The benefit to current workers is that they know their parents and grandparents and other old people have some amount of basic income. Moynihan said that the benefit of SS is that your mother-in-law doesn't live with you. That's my view.

37 year-old workers may hope that 30 years from now their kids and grandkids will do the same for them. But there is no guarantee, especially no guarantee regarding a particular formula. The only thing they know for sure is that they are paying taxes today and some older people are getting benefits today.

 

[marko]

I think I have a different view than either of these.

The old age portion of Social Security is an income transfer program. The gov't takes money from current workers and gives it to retired workers.

The benefit to current workers is that they know their parents and grandparents and other old people have some amount of basic income. Moynihan said that the benefit of SS is that your mother-in-law doesn't live with you. That's my view.

37 year-old workers may hope that 30 years from now their kids and grandkids will do the same for them. But there is no guarantee, especially no guarantee regarding a particular formula. The only thing they know for sure is that they are paying taxes today and some older people are getting benefits today.

But wasn't that the social contract made 75 years ago? "you pay for grandma and the grand-kids'll pay for you"? Suddenly this has become some horrific [-]socialist plot[/-] redistribution scheme!

I personally agree with the position that it is/was a bad idea from the beginning, but we all signed up for it, deliberately or otherwise, AND we were told to do our retirement planning around it!

I also remember being told 45 years ago: "don't worry about it kid, when it's time for you to collect, it'll be long, long gone...it won't last another 15 years from now (1968)", but here I am one year away from SS!

 

[Gatordoc50]

If the purpose of SS is to provide for basic necessities, then the pay outs should be equal for all and thus the contributions should be equal for all. A higher wage earner would then meet his obligation sooner than the lower wage earner. The higher wage earner will then have more for consumption or investing or charity or to spend on his family. All of which benefit society by providing employment for others. Looking at it this way, it is easy to see that his excess contributions are a tax, collected by the federal government to spend inefficiently, robbing the local community of local dollars.