New proposed tax on income from interest/dividends

[JPatrick]

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Originally Posted by Bikerdude I agree with this, it's the at the State level now that employee benefit cuts need to be made. But another problem is the feds pushing unfunded mandates down to the States and the States doing the same to the localities. My taxes (total) have gone through the roof since 1980 as I assume, have most others.

BINGO!
And I fear we are only in the 6th inning of this one..

[bobbee25]

Seems like every day we hear how they are spending a million here, a billion there, nothing to do with entitlements or running the country. Last week it was 2 billion to help fight obesity, ... 33 czars each receiving 100 - 200K, plus offices, staff, medical and other related expenses,... the list goes on and on. It all adds up to an enormous amount. But if there is a cut back it will in Medicare, SS, and the like.

[Gone4Good]

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Originally Posted by eridanus Instead of whining about taxes, let's hear some solutions.

Queue crickets . . . chirp, chirp, chirp.

[FIREd]

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Originally Posted by . . . Yrs to Go Queue crickets . . . chirp, chirp, chirp.

Crickets? Is that the solution you propose?

[JPatrick]

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Originally Posted by FIREdreamer Crickets? Is that the solution you propose?

Crickets make good bait.....How about a string of Cricket Bait Shops owned by the taxpayers and operated by politicians during their free time..and let's make lots of free time available.

[Gone4Good]

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Originally Posted by FIREdreamer Crickets? Is that the solution you propose?

Sure, why not. It makes about as much sense as claiming taxes are out of control when rates are lower than any time in living memory.

But I forgot, there is a plan out there to balance the budget. It's Paul Ryan's Roadmap for America's Future. Which at least has the virtue of being intellectually honest about what he wants to see done. And that plan includes . . .

1) Privatizing social security for everyone under 55 - similar to what George W tried to do
2) Medicare would be replaced by a voucher system for those under 55 (in case you didn't notice, if you're under 55 you should probably vote more). Recipients would get a voucher toward purchasing private health insurance. The value of the voucher is indexed to grow at the average of CPI and a health cost index, so it is designed to lose purchasing power over time.
3) Freeze all non-defense discretionary spending at 2009 levels for 10 years
4) Eliminate taxes on capital gains, dividends and interest
5) Replace the existing tax rates with a 10% tax up to $100K and 25% above that amount.

The CBO gives the plan the thumbs up from a budget perspective, although they for some strange reason* didn't score the tax provisions of the bill. Instead they say . . .

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The proposal would make significant changes to the tax system. However, as specified by your staff, for this analysis total federal tax revenues are assumed to equal those under CBO’s alternative fiscal scenario (which is one interpretation of what it would mean to continue current fiscal policy) until they reach 19 percent of gross domestic product (GDP) in 2030, and to remain at that share of GDP thereafter.

So they propose a massive overhaul to the tax code but tell CBO to use rates under existing law (which are scheduled to increase significantly). OK. At least we're being halfway honest, which is halfway better than what we usually get.


* The "strange" reason for not scoring the tax provisions is almost certainly because the CBO doesn't use the preferred "dynamic" scoring method which treats all tax cuts as revenue enhancing.

[Bikerdude]

Unfortunately, I have the dubious honor of living in the #1 State.

The Tax Foundation - America Celebrates Tax Freedom Day®

[Gone4Good]

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Originally Posted by Bikerdude The Tax Foundation - America Celebrates Tax Freedom Day®

Interesting how Tax Freedom Day calculated using taxes actually paid arrives in 2010 on the earliest date since 1967.

[Bikerdude]

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Originally Posted by . . . Yrs to Go Interesting how Tax Freedom Day calculated using taxes actually paid arrives in 2010 on the earliest date since 1967.

"This shift has been driven by two factors: the recession has reduced tax collections even faster than it has reduced income; and the stimulus package, a.k.a. HR 1, the American Recovery and Reinvestment Act of 2009, includes large temporary tax cuts for 2009 and 2010. Nevertheless, in 2009, Americans will pay more in taxes than they will spend on food, clothing and housing combined."

quote from The Tax Foundation.

[Gone4Good]

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Originally Posted by Bikerdude "This shift has been driven by two factors: the recession has reduced tax collections even faster than it has reduced income; and the stimulus package, a.k.a. HR 1, the American Recovery and Reinvestment Act of 2009, includes large temporary tax cuts for 2009 and 2010. Nevertheless, in 2009, Americans will pay more in taxes than they will spend on food, clothing and housing combined." quote from The Tax Foundation.

Yes. I saw that. Whatever the reasons, it doesn't change the fact that people are paying less in taxes in 2009 relative to their income than at any time since 1967 according to the Tax Foundation. That doesn't exactly jibe with the popular narrative that we're suddenly living under some kind of socialist oppression.

Meanwhile federal spending is also elevated because of the recession and the American Recovery and Reinvestment Act but I haven't heard anyone mention that as an excuse.

[Bikerdude]

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Originally Posted by . . . Yrs to Go Yes. I saw that. Whatever the reasons, it doesn't change the fact that people are paying less in taxes in 2009 relative to their income than at any time since 1967 according to the Tax Foundation. That doesn't exactly jibe with the popular narrative that we're suddenly living under some kind of socialist oppression. Meanwhile federal spending is also elevated because of the recession and the American Recovery and Reinvestment Act but I haven't heard anyone mention that as an excuse.

Dude,

“Nevertheless, in 2009, Americans will pay more in taxes than they will spend on food, clothing and housing combined."

[Gone4Good]

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Originally Posted by Bikerdude Dude, “Nevertheless, in 2009, Americans will pay more in taxes than they will spend on food, clothing and housing combined."

Yes, and apparently we have since at least 1967 (which according to my calendar includes the 1980's when all was rainbows and unicorns). So old news, right?

[Bikerdude]

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Originally Posted by . . . Yrs to Go Yes, and apparently we have since at least 1967 according to the Tax Foundation? So in other words, old news, right?

And I thought all you needed was a bi-focal adjustment chart.

[Disappointed]

This is depressing. My effective tax rate for my Fed Tx for 2009 = 28.31%, my State Tx for 2009 = 9.6% (source = Turbo Tax). Add the two together and about 38% of my income goes to Fed+State. Almost all income are from my W2, not much investment income. Haven't figured out percentages of others (sales tax, property tax, other payroll taxes, etc.).

Now, I can look forward to paying more taxes

Our government, Fed and State keep spending money they don't have. The city that I live in is also running a deficit but is looking to buy more land for open space (a new park). I am wondering if these government officials are running their own personal finance the same way, borrow, spend, borrow, spend, borrow, spend, oh and lets tax the s... out of those rich people.

mP

[MasterBlaster]

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Originally Posted by Disappointed This is depressing. My effective tax rate for my Fed Tx for 2009 = 28.31%, my State Tx for 2009 = 9.6% (source = Turbo Tax). Add the two together and about 38% of my income goes to Fed+State. Almost all income are from my W2, not much investment income. Haven't figured out percentages of others (sales tax, property tax, other payroll taxes, etc.).

I suspect that when all is totaled you are giving half for taxes. Your case is not all that atypical. Higher income people pay even more.

And yet people keep saying that we aren't taxed very much.

How much do they want ? Do they want it all ?

How high do taxes have to go before people say - Hey I'm not gonna play this game anymore.

[ziggy29]

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Originally Posted by MasterBlaster And yet people keep saying that we aren't taxed very much. How much do they want ? Do they want it all ?

Sure they do, as long as it's other people who are taxed more, and as long as "the rich" is defined as anyone who makes *more* than me, with brackets adjusted annually depending on my AGI....

[FUEGO]

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Originally Posted by MasterBlaster How high do taxes have to go before people say - Hey I'm not gonna play this game anymore.

I suspect many already have. Those at the lowest income brackets who receive significant wealth distribution payments in the form of public assistance, welfare, medicaid, refundable tax credits. etc have a large disincentive to make a whole lot more money.

For me, I have basically given up on pursuing a high paying career. The net increase in pay after taxes isn't worth the sacrifices I would have to make. And I imagine the future holds worse conditions for higher bracket workers (we are at a historical low right now it seems). But hey to each their own!

[Gone4Good]

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Originally Posted by MasterBlaster And yet people keep saying that we aren't taxed very much.

My point isn't that taxes are great and we should all pay more. I certainly agree we should look for ways to reduce government spending and spend the money we must as wisely as possible. In fact, spending cuts and benefit reductions are absolutely essential to long-run fiscal health. But so too are tax increases.

What I'm mostly arguing against is this notion that suddenly we're living under a repressively socialist tax regime that is out of bounds by historic norms. By any objective measure . . . whether looking at actual tax rates, or tax receipts as a percentage of GDP, or the report from the Tax Foundation (which attempts to capture all taxes) . . . taxes are lower today than they have been in a long, long time.

If you look at taxes as a % of GDP, they were at the lowest level since 1950 this past year. Of course that is related to the recession. But even if you look at the bubble peak in 2007 tax receipts were 18.5% of GDP a full 210bp lower than the prior peak. Peak bubble taxes of 2007 were roughly equal to the 30 year average of 18.2%.

The anti-tax hysteria and the "socialist" hyperbole, which is completely at odds with any objective fact, does not make putting our fiscal house in order any easier . . . and could eventually lead to disaster.

[MasterBlaster]

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By any objective measure . . . whether looking at actual tax rates, or tax receipts as a percentage of GDP, or the report from the Tax Foundation . . . taxes are lower today than they have been in a long, long time

Again - what you post is just not true when you look at total taxation. Who cares who you pay the taxes to. It's the total taxation level that matters. Big deal that federal rates came down for a few years. All that money (and more) got sucked up at the state and local level.

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The anti-tax hysteria ...

Hysteria is not the right word, there is a natural reaction to ever increasing taxation.

[ziggy29]

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Originally Posted by MasterBlaster Again - what you post is just not true when you look at total taxation. Who cares who you pay the taxes to. It's the total taxation level that matters. Big deal that federal rates came down for a few years. All that money (and more) got sucked up at the state and local level.

And the time bomb is still ticking on unfunded/underfunded retirement liabilities for state and local public sector employees.