New proposed tax on income from interest/dividends

[ziggy29]

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]

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]

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]

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.

The anti-tax hysteria ...

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

 

[ziggy29]

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.

 

[Gone4Good]

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.

Now I understand. People way overestimate the amount they pay in taxes. It's like the fruitless conversations we have regarding the rate of inflation. Everyone is convinced that inflation is higher than it is because they only focus on the products with rising prices.

According to the Tax Foundation report linked above, the highest government tax take was in 2000 at 33.6%. That 33.6% includes individual income taxes, social security taxes, sales & excise taxes, property taxes, corporate income taxes, other taxes, and estate & gift taxes. So it is mathematically impossible for most people to be paying half in taxes with higher income people paying more.

 

[MasterBlaster]

Well lets see half the people pay next to nothing in taxes. So you throw them in to dilute the burden.

I'm done with you. You just don't get it.

 

[Gone4Good]

Again - what you post is just not true when you look at total taxation.

Please post a source for this claim. I understand this is how you feel. But I'd like to see the data behind it. I've been very transparent in supporting my claims with sources and linking to them where appropriate. Meanwhile I'm confronted with vague claims that are not supported by actual data.

 

[Gone4Good]

Well lets see half the people pay next to nothing in taxes. So you throw them in to dilute the burden.

I'm done with you. You just don't get it.

So half the people don't pay taxes and yet taxes are too high . . . you're right I don't get it.

But maybe if you'd provide some data to support any of your assertions it would help.

 

[ziggy29]

So half the people don't pay taxes and yet taxes are too high . . . you're right I don't get it.

What you're missing, IMO, is that the tax increases almost certainly will NOT fall on the group that isn't already paying these taxes.

All we need is for 51% of the people to become "undertaxed" and they can stay undertaxed by continuing to stick the other 49% with the entire bill, whether by direct initiative at the state/local level or by voting for representatives and executives who would do the same. Two wolves and a sheep deciding on what to have for lunch.

 

[Gone4Good]

What you're missing, IMO, is that the tax increases almost certainly will NOT fall on the group that isn't already paying these taxes.

All we need is for 51% of the people to become "undertaxed" and they can stay undertaxed by continuing to stick the other 49% with the entire bill, whether by direct initiative at the state/local level or by voting for representatives and executives who would do the same. Two wolves and a sheep deciding on what to have for lunch.

Yes. That is a concern I share. Everyone but the truly destitute should help pay for the government they voted for.

But somehow I don't think the disagreement here has been because people want to raise taxes on low/middle income folks.

In fact, it looks to me that many of the people populating these TEA party rallies fall into the category of people paying next to nothing in taxes. Strange in deed.

 

[JPatrick]

In fact, it looks to me that many of the people populating these TEA party rallies fall into the category of people paying next to nothing in taxes. Strange in deed.

I'd love to hear what science you used to determine that little gem.

I've been to a teaparty and I damn sure pay a boat load of taxes.

 

[Gone4Good]

I'd love to hear what science you used to determine that little gem.

I've been to a teaparty and I damn sure pay a boat load of taxes.

About as much science as has been offered up on the other side of this discussion, so it fits perfectly in this thread.

It is simply an observation, based on no fact that I'm aware of, and is admittedly biased by nature. I'd very much like to see data on this, but none is available that I know of.

 

[JPatrick]

. I'd very much like to see data on this, but none is available that I know of.

You are not looking very hard, but I'll admit, it is always easier to just make it up as you go

 

[Gone4Good]

You are not looking very hard

So then post a link.

 

[JPatrick]

.

In fact, it looks to me that many of the people populating these TEA party rallies fall into the category of people paying next to nothing in taxes. Strange in deed.

Obviously, no link exists that provides income tax data on teaparty attendees. I welcome you to do a google search for "teaparty demographics." Using your demonstrated sterotyping powers you'll gain some valuable insight on who these strange folks are.
Step two might be to push away from the computer and turn off the late night comics and actually attend an event. Some of the observations you could have made at the two events I attended was the parking lot full of newer vehicles. A very long list of speakers with titles like MD, JD, business owner, college professor, and military vets. No, I didn't see their tax returns, but I'd bet they pay their share. Perhaps the best evidence to be had was the fact that the overwhelming message there was "we don't want more taxes to pay for Washington's reckless spending.

It is simply an observation, based on no fact that I'm aware of, and is admittedly biased by nature. I'd very much like to see data on this, but none is available that I know of.
An observation, based on no facts, influenced by unknown biases...Got a link?

 

[Gone4Good]

Perhaps the best evidence to be had was the fact that the overwhelming message there was "we don't want more taxes to pay for Washington's reckless spending.

Nevermind. Got it myself. . . .

It turns out they're wealthier than I thought, but not so much so to change my mind. According to the poll two-thirds earn less than $75K (or at least that's what they told pollsters). They don't have other relevant demographic information but if you assume the normal married couple with two kids, our $75K earning TEA Partier will pay a whopping $3,700 in federal income taxes (4.95%). Cry me a river.

As a point of comparison, our defense budget for 2010 is ~700B. That's about $2,300 per person and $9K for a family of 4.

 

[Independent]

Obviously, no link exists that provides income tax data on teaparty attendees. I welcome you to do a google search for "teaparty demographics." Using your demonstrated sterotyping powers you'll gain some valuable insight on who these strange folks are.
Step two might be to push away from the computer and turn off the late night comics and actually attend an event. Some of the observations you could have made at the two events I attended was the parking lot full of newer vehicles. A very long list of speakers with titles like MD, JD, business owner, college professor, and military vets. No, I didn't see their tax returns, but I'd bet they pay their share. Perhaps the best evidence to be had was the fact that the overwhelming message there was "we don't want more taxes to pay for Washington's reckless spending.

At the two events you attended, was the focus on taxes or spending? Were there any explicit recommendations for cutting spending?

I'm asking because the impression I get from the news is a lot of people who are complaining about taxes, but aren't willing to give up any gov't programs that might benefit them. That could be a case where the news story doesn't reflect the reality.

 

[Bikerdude]

Look. YTG is correct in that your marginal tax rate is not your net tax rate. It is however what your next dollar would be taxed at and therefore acts as a dis-incentive to earn more when rates get too high. YTG is also correct that the tax charts show a reduction in overall tax burden in 2009. However, this is an average of Fed and all the States tax burden. Some States tax much more than others and that detail is not summed to the whole. It also includes a temporary tax reduction as part of the stimulus and other actions that will not last. It will be interesting to see the 2011 total tax burden as it will surely go up. That's what has me worried, they take the same amount as food, housing and clothing from me now and they can't pay the bills, what's next!

The problem is that even at these tax rates (average 30% of total income) we are still running a gigantic deficit with no end of spending in sight, just new taxes on the other guy. If the “other” guy is a small business owner he has two choices to keep his income stable: 1.) raise prices (that’s a tax on all of us) 2.) layoff or cut back someone’s hours. That impacts the rest of us, as now there are even less people to take up the tax burden. We need to get serious on spending cuts but Congress simply does not have the will. We have to show them the way and it’s called the door!

 

[JPatrick]

At the two events you attended, was the focus on taxes or spending? Were there any explicit recommendations for cutting spending?

I'm asking because the impression I get from the news is a lot of people who are complaining about taxes, but aren't willing to give up any gov't programs that might benefit them. That could be a case where the news story doesn't reflect the reality.

Well the events were not about forming policy or drafting a platform. These were gatherings of people upset in general about how our government was operating, fiscally speaking.
The speakers hit on the stimulus bill pointing out many earmarks that did little or nothing to stimulate the economy, but did raise the deficit. I guess the explicit recommendation for cutting spending was to stop spending on stupid stuff.
Health care came up of course, and most of the thoughts followed GOP recommendations.
I recall one speaker who was bashing the weatherization plan for homes, stating that it cost 30K per home and provided almost no new jobs.
Just yesterday this came out..
Energy Department IG Says Weatherization Program A Bust
The New York Times reports, "President Obama's plan to create jobs and rein in energy costs through a steep increase in money for weatherizing the homes of low-income Americans has so far borne little fruit, with many of the biggest states meeting less than 2 percent of their three-year goals to date," according to a report by Department of Energy inspector general Gregory H. Friedman. In the report, Friedman "called the lack of progress 'alarming,'" and said "the program for the most part has neither saved energy nor put people to work." Friedman also remarked, "The job creation impact of what was considered to be one of the department's most 'shovel ready' projects has not materialized."

 

[bobbee25]

I like this theory, tax them not me, and let's tax them some more so I can have more.
The secret is in manipulating your finances so that you don't become one of them.

(I just hope that after they have drained them, they don't lower the criteria and I become one of them.)

 

[Independent]

Well the events were not about forming policy or drafting a platform. These were gatherings of people upset in general about how our government was operating, fiscally speaking.
The speakers hit on the stimulus bill pointing out many earmarks that did little or nothing to stimulate the economy, but did raise the deficit. I guess the explicit recommendation for cutting spending was to stop spending on stupid stuff.
Health care came up of course, and most of the thoughts followed GOP recommendations.
I recall one speaker who was bashing the weatherization plan for homes, stating that it cost 30K per home and provided almost no new jobs.
Just yesterday this came out..
Energy Department IG Says Weatherization Program A Bust
The New York Times reports, "President Obama's plan to create jobs and rein in energy costs through a steep increase in money for weatherizing the homes of low-income Americans has so far borne little fruit, with many of the biggest states meeting less than 2 percent of their three-year goals to date," according to a report by Department of Energy inspector general Gregory H. Friedman. In the report, Friedman "called the lack of progress 'alarming,'" and said "the program for the most part has neither saved energy nor put people to work." Friedman also remarked, "The job creation impact of what was considered to be one of the department's most 'shovel ready' projects has not materialized."

That's my concern. I don't think we can balance the federal budget by cutting "stupid stuff". I think we need to cut the SS and Medicare benefits that some people in the audience (or their parents) are getting. We also need to cut the one earmark out of a hundred that happens to impact this group of Partiers. Maybe the audience would vote for those cuts - that would be a good result of the Tea Parties.

When it comes to cutting gov't benefits, I think the most common belief is "Don't cut me and don't cut thee, cut the guy behind the tree."

(Regarding the weatherization article, the issue is that the program isn't spending money "As a result, as of mid-February, one year into the stimulus plan, less than 8 percent of the money had been disbursed, the inspector general said. " That's bad for "stimulus", it means that hardly any jobs have been created, but it's good for the deficit.)

 

[Gone4Good]

That's my concern. I don't think we can balance the federal budget by cutting "stupid stuff".

We can't. But the idea that we can solve our fiscal problems by eliminating waste and "stupid stuff" is representitive of the fantasy land thinking that passes for political discourse these days. It's like John McCain endlessly campaiging against earmarks. He's absolutely right. We should get rid of the earmark process. But it is also mostly irrelevant to the bigger picture. Earmarks typically account for less than 1% of total spending. But people think that if we just got rid of them or "eliminated waste" we'd go a long way to fixing the problem . . . and it just ain't so.

If you want to see what's required to balance the budget without increasing taxes scroll up this thread to my summary of Paul Ryan's Roadmap (and that still doesn't balance the budget until around 2040).

 

[JPatrick]

That's my concern. I don't think we can balance the federal budget by cutting "stupid stuff". I think we need to cut the SS and Medicare benefits that some people in the audience (or their parents) are getting. We also need to cut the one earmark out of a hundred that happens to impact this group of Partiers. Maybe the audience would vote for those cuts - that would be a good result of the Tea Parties.

When it comes to cutting gov't benefits, I think the most common belief is "Don't cut me and don't cut thee, cut the guy behind the tree."

(Regarding the weatherization article, the issue is that the program isn't spending money "As a result, as of mid-February, one year into the stimulus plan, less than 8 percent of the money had been disbursed, the inspector general said. " That's bad for "stimulus", it means that hardly any jobs have been created, but it's good for the deficit.)

The issue on the weatherization was that it was costing 30 to40K to do each house with no job creation to speak of. Now if they spend the other 92% of the money the same way, it simply multiplies the stupid factor.

As to earmarks, everyone agrees that the practice is bad, yet nobody does anything. As you and others say, it's not enough to solve the problem. Just today I heard a member of congress say that tort reform is only a 15 billion part of the healthcare problem, therefore, it does not need to be addressed. Should we maybe give our lawmakers a crash course in single digit addition? Like 2%+ 4%+ 2%+ 7% and pretty soon you get a large percent.
If you ask the folks on this forum if you should get a job at the 7/11 because your 150K pension can't support you in retirement, what are they going to say??
Probably something like--Before you go looking for more money why don't you get your current spending under control. You might find you are quite well off...Think we could tell the guvmint that?

 

[Gone4Good]

Should we maybe give our lawmakers a crash course in single digit addition? Like 2%+ 4%+ 2%+ 7% and pretty soon you get a large percent.

I like the idea. Now lets find all those single digits. . .

1) Earmarks <1%
2) ?