New proposed tax on income from interest/dividends

[JPatrick]

Quote:

Originally Posted by . . . Yrs to Go I like the idea. Now lets find all those single digits. . . 1) Earmarks <1% 2) ?

When considering government waste, if you find yourself stumped after 1% for earmarks, perhaps your mission should be defending/praising the other 99%.
Heck, do a good enough job and I may volunteer myself for a tax increase.

[Gone4Good]

Quote:

Originally Posted by JPatrick When considering government waste, if you find yourself stumped after 1% for earmarks, perhaps your mission should be defending/praising the other 99%. Heck, do a good enough job and I may volunteer myself for a tax increase.

Alternatively you could find the waste.

It would be nice if someone other than me would at least try to support their positions with some facts. Or in the absence of supporting evidence, at least entertain the idea that their beliefs may not be based on the strongest of foundations (as I did here and then investigated and followed up here).

As evidence supporting my position I again reference Paul Ryan's roadmap. If there were low hanging fruit he'd have gone after that. But he didn't. Which tells you what? He's a big fan of government waste?

[bobbee25]

If you thing the only waste is earmarks, you should start watching what is going on in the real world.

[Gone4Good]

Quote:

Originally Posted by bobbee25 If you thing the only waste is earmarks, you should start watching what is going on in the real world.

Well, I don't think earmarks are the only waste. I'm quite certain the government is wasteful. But in the "real world" that I know, every politician in the past 30 years (and probably since the dawn of the Republic) has promised to cut waste. But saying you're going to cut waste without offering specifics is not a plan. It is an excuse to do nothing.

So I'm asking for the specifics that would form the basis of a plan.

[Independent]

Quote:

Originally Posted by JPatrick 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?

I believe that in the written article you quoted, the assumption was that if we only spent 8% of the money we actually got 8% of the projected jobs. If we spend the other 92% of the money, we'll get the other 92% of the projected jobs. (I don't know what the Tea Party speaker said.) I don't want to beat this one to death because I think most of these energy related spending programs could be trashed, but I'd want to replace them with something you'd like even less.

I have trouble with the single digit addition because I can't find enough single digit items. If the Tea Party participants are people who are willing to cut their own gov't benefits for the good of the cause, I might find that I want to join them. If they are simply asking for less taxes for themselves and benefit cuts for "somebody else", then they'll need to put more facts on the table.

[JPatrick]

Well ytg and independent, I'm going to let this go with the thought that the two of you are pretty much satisfied with our governments spending habits and I am not.
I guess that's why most elections have two contenders and a transaction on Wall Street requires a buyer and a seller both equally convinced that they are right.

[Disappointed]

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.

You want to put our fiscal house in order, try stop spending money we do not have for a change.

I understand that life is not fair and do not want to complain too much about my tax situation. Keep in mind that people work hard to move up the economic ladder, it is a reward for their hard work, unfortunately, when they get there, the gov't is there to tell them that they should not enjoy the fruit of their labor, they should give away their hard earned monies to less fortunate ones?

Imagine you going to your neighbors and tell them that they must give away a portion of their earnings to such and such

Somebody mentioned flat tax, 10% for the first $100,000 and 25% on the rest, no deductions allowed?

When I risk my capital in the stock market, the gov't will share my profits to the max they can but when I lose money, I can only deduct $3,000 per year and the rest to be carried over, why can't I apply them to the previous gains (from earlier years that I paid taxes on)? Those gains were taxed and gone forever.

I understand, Life is not Fair. Just want to vent a little bit.

mP

[ziggy29]

Quote:

Originally Posted by Disappointed Somebody mentioned flat tax, 10% for the first $100,000 and 25% on the rest, no deductions allowed?

That's not a flat tax -- it has two different brackets. Flatter, yes, but not flat.

A more typical flat tax proposal would be something like (for a random example) 18% on all income above $25,000 per individual; no other exemptions. Some would argue that's not truly flat since there's a zero bracket below $25K in this example, but if income is taxed, it's at one level -- and the exemption is fixed and simple, no tax code or social engineering required.

[ERD50]

Quote:

Originally Posted by . . . Yrs to Go According to the Tax Foundation report linked above, the highest government tax take was in 2000 at 33.6%. .... So it is mathematically impossible for most people to be paying half in taxes with higher income people paying more.

But since ~ half the people pay no Federal Taxes (yes, they pay other taxes), or actually get credits, then it seems like it *is* mathematically possible for most of the taxpayers (~25%) to be paying half of their income in taxes. Depends on the Fed versus 'other' bite though. But unlikely I think, due to the distribution of that top half.

Two other points:

Do any of those sources indicate historically the % that pay no Fed Taxes?

Since we are in a deficit, tax rates would be higher if we were paying as we go. Looks like ~ 25% higher in 2009, which turns a 30% rate into a 37.5% rate. I think that impacts the thinking of people here (LBYM types) - we know we will need to pay that sometime. So it adds to the 'mental taxation', even if the bill isn't here today.

-ERD50

[Texas Proud]

I have to admit... this is an old article... around 2000... but I don't think the burden has changed much...

"An enormous percentage of taxes are payed by a minority of Americans:

• The Top 1% of taxpayers pay 29% of all taxes.
• The Top 5% of taxpayers pay 50% of all taxes. "

U.S. Income Tax Burden


Now, we are not talking about the vast majority here... we are talking about 1/20th of the population paying 1/2 of the taxes...

There are a LOT of people who pay no federal income tax... and a good number of them get money back they did not pay in... I will have to look another day as I have to leave me JOB to get home!!!

[M Paquette]

Quote:

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.). Now, I can look forward to paying more taxes

Oh, hey, I figured out how to fix that. It's really simple. I don't have hardly any income, so I don't pay any income tax.

All better...

[audreyh1]

Tax Year 2007 - Federal Income Tax

Percentiles Ranked by	AGI Threshold on	Percentage of Federal
AGI	Percentiles	Personal Income Tax Paid
Top 1%	$410,096	40.42%
Top 5%	$160,041	60.63%
Top 10%	$113,018	71.22%
Top 25%	$66,532	86.59%
Top 50%	$32,879	97.11%
Bottom 50%	<$32,879	2.89%

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service
from National Taxpayers Union - Who Pays Income Taxes?

But this table doesn't give you the effective tax rate for each category - what % of the income in that category went to pay federal income taxes.

According to this table, in 2007 those lower 50% of households filing taxes are making less than $33K! And those are the folks paying almost no Federal Income taxes.

Audrey

[Independent]

Quote:

Originally Posted by JPatrick Well ytg and independent, I'm going to let this go with the thought that the two of you are pretty much satisfied with our governments spending habits and I am not. I guess that's why most elections have two contenders and a transaction on Wall Street requires a buyer and a seller both equally convinced that they are right.

I'm not sure how you got this impression. The news stories that I've seen about the Tea Parties suggested that the attendees aren't willing to make the big changes that I thnk are necessary. I'd be happy to share my ideas on controlling spending, but I'm afraid they'd get me thrown out of a Tea Party. I thought that you might have heard something more promising than I heard on the news.

[Independent]

Quote:

Originally Posted by Texas Proud I have to admit... this is an old article... around 2000... but I don't think the burden has changed much... "An enormous percentage of taxes are payed by a minority of Americans: The Top 1% of taxpayers pay 29% of all taxes. The Top 5% of taxpayers pay 50% of all taxes. " U.S. Income Tax Burden Now, we are not talking about the vast majority here... we are talking about 1/20th of the population paying 1/2 of the taxes... There are a LOT of people who pay no federal income tax... and a good number of them get money back they did not pay in... I will have to look another day as I have to leave me JOB to get home!!!

That's because the top 1%/5% get 19%/51% of the total income. I see a problem with both the taxes and the distribution of income, but I don't see how to "fix" the tax problem without fixing the income problem.

I used this source which is newer and shows all taxes, not just FIT. http://www.cbo.gov/ftpdocs/100xx/doc...006.pdfHowever,

Note that they assume that corporate income tax is paid only by capital owners. They could have used the analysis from this study http://www.cbo.gov/ftpdocs/75xx/doc7503/2006-09.pdf
"Given those values, domestic labor bears slightly more than 70 percent of the burden of the corporate income tax. The domestic owners of capital bear slightly more than 30 percent of the burden."
If they had, they would have shown lower taxes on the high income groups and higher taxes on the others.

[JPatrick]

Quote:

Originally Posted by Independent I see a problem with both the taxes and the distribution of income, but I don't see how to "fix" the tax problem without fixing the income problem. .

I've heard that distribution of income problem somewhere before.
Before you start spreading around the wealth, I'd recommend you first disarm the citizens.

[Bikerdude]

Quote:

Originally Posted by Independent I see a problem with both the taxes and the distribution of income, but I don't see how to "fix" the tax problem without fixing the income problem.

If you want income, one way to get it is to work and live on a bus route. Need more income? Work 2 jobs. Need even more income? work three jobs. Oh, and by the way, don't have two kids by the time you're 16 even though your high school will provide daycare.

If you think this is too hard, it's not, because my Grandparents and their parents did it and seemed to enjoy life at the same time.

We are wimps today.

[ERD50]

Quote:

Originally Posted by Independent That's because the top 1%/5% get 19%/51% of the total income. I see a problem with both the taxes and the distribution of income, but I don't see how to "fix" the tax problem without fixing the income problem.

Does it need 'fixing'? Consider this thought experiment:

Spend some time with a median group of the top 5% ( the ~2.5% group) of the graduating class of your average high school. I think you'll find a pretty bright, hard working and motivated group of kids. A group that understands how to achieve a goal. A group that avoids getting into trouble, because they understand that that could hurt their chances of getting into the college of their choice.

Now, spend some time with the median bottom 95% ( the ~ 47.5% group). Some might just lack mental ability, some might lack focus/motivation, or have problems at home or whatever. But something is keeping them from being in the top 5%.

So should it come as any surprise that those in the top 5% do much better than those in the bottom 95% (on average). There will be exceptions of course.

How motivating would it be to tell those top 5% - hey, we are not going to let your hard work, dedication and motivation pay off? We are going to put a 'cap' on that before you even get out of the starting gate. Because, you know, it's just not 'fair' to the other people. Seems like you are saying you are not satisfied taxing them at a higher rate, you don't even want them to have the opportunity to earn a higher rate. I thought this was the "land of opportunity"?

-ERD50

[beowulf]

This is from the LA Times:

"Last week, the figures for 2007 were quietly made available, and, as David Cay Johnston, who formerly covered tax policy for the New York Times and now teaches at Syracuse University's law school, points out, "The incomes of the top 400 American households soared to a new record high in dollars and as a share of all income in 2007, while the income tax rates they paid fell to a record low."

Between 2006 and 2007, according to the IRS, the average income of the country's 400 top taxpayers rose 31%, from $263.3 million to $344.8 million. At the same time, their effective income tax rate declined more than half a percentage point, from 17.17% in 2006 to 16.62% in 2007."


That's less then most of us earning a small percentage of those amounts pay.

The main problem in the future that I, and many others, see is that fewer and fewer people will be subject to any kind of federal tax leaving a smaller base to pay more taxes. I can only speak from my own experience, but my first full year of work was 1969. Beteen my wife and myself we earned about $11,000. Our federal tax burden (not marginal rate) in that year was 19.5% (being OCD helps in record keeping). I'm not including state taxes as we lived in NYC and they are and were really high and I know that there are far cheaper places to live. It wasn't until 1985, 26 years later, that our federal tax burden again rose to 19.7% - on an income 10 times what we earned in 1969. Of course, we did have two extra dependents by that time plus many itemized deductions, but I agree with YTG that tax burdens have steadily and continuously decreased over the years. Our current federal burden is about 20% (haven't completed our taxes yet) on the highest adjusted gross income we have ever had (and we have no dependents anymore).

All that being said, as the number of people not paying any federal taxes (except SS and Medicare) continues to grow, those earning over $100K (and probably lower as time goes by) will see their tax burden continue to grow as a percentage of income. Sure, it starts with raises for incomes over $250K, which is a tiny percentage of the population, but it will have to dip to lower levels as the government fails to raise enough revenue. I believe in a progressive income tax, but I also believe that everyone needs to pay something or they have no stake in the system. I also agree with those who said that raising taxes on small businesses kills the job engine in this country. I work for a small business and the owners are not what I would call rich.

I'm not an economist and can only draw conclusions from what I observe. I am drawn more and more to the concept of a flat tax with no exemptions (except a poverty level base) for anything. If people want to have children, that's their decision (we chose to), if they want to own a house, that's also their decision. I would also do away with all tax free income - no more muni bonds or the equivalent. No loopholes of any kind - a simple half page tax return - what did you earn, here is the tax rate, this is what you paid, this is what you owe. No speacial rates for dividends, stock transactions, etc. No Roth IRAs, no exemptions of any kind. Will it ever happen - no.

End of diatribe.

[Independent]

I was too hasty in copying numbers from the CBO report above. Since I can't edit the prior post, I'll put the correct numbers here. In 2006:

The top 1% of households received 18% of income, paid 28% of federal taxes, with an average tax rate of 32%, (on an average annual income of $1.6 million)

The top 5% of households received 31% of income, paid 44% of federal taxes, with an average tax rate of 29%, (on an average annual income of $540,000)

Those numbers assume that capital owners pay all the corporate income tax. That's a debatable assumption.

http://www.cbo.gov/ftpdocs/100xx/doc...rates_2006.pdf

[Independent]

Quote:

Originally Posted by ERD50 Does it need 'fixing'? Consider this thought experiment: Spend some time with a median group of the top 5% ( the ~2.5% group) of the graduating class of your average high school. I think you'll find a pretty bright, hard working and motivated group of kids. A group that understands how to achieve a goal. A group that avoids getting into trouble, because they understand that that could hurt their chances of getting into the college of their choice. Now, spend some time with the median bottom 95% ( the ~ 47.5% group). Some might just lack mental ability, some might lack focus/motivation, or have problems at home or whatever. But something is keeping them from being in the top 5%. So should it come as any surprise that those in the top 5% do much better than those in the bottom 95% (on average). There will be exceptions of course. How motivating would it be to tell those top 5% - hey, we are not going to let your hard work, dedication and motivation pay off? We are going to put a 'cap' on that before you even get out of the starting gate. Because, you know, it's just not 'fair' to the other people. Seems like you are saying you are not satisfied taxing them at a higher rate, you don't even want them to have the opportunity to earn a higher rate. I thought this was the "land of opportunity"? -ERD50

I see that I got three similar responses to the "fix" comment. I'll put my comments in one place. I read Texas Proud's post about 1% of taxpayers paying 29% of taxes as saying there is something "wrong" with that situation. But, he didn't include anything about the income or assets of that 1%. To me, those facts are relevant.

The topic of this thread is a tax on dividend and capital gains income (presumably on assets outside of 401ks and IRAs). Even with this tax, dividends and capital gains would be taxed at lower rates than regular labor income. But somehow you've converted this tax into a "cap" on the possible earnings of engineers and accountants, doctors and lawyers (the likely goals of your top 5%). I don't get it. Why would a HS kid see a tax on dividends and then conclude it's not worth the effort to earn $150k per year as an accountant?

We're sliding into the broader topic of graduated taxes in general. I see a wide disparity in income and wealth in the US. I think that graduated taxes beat the alternative, so I expect to see more taxes from the higher income end. As the income disparity grows, the tax disparity will grow. To me they are linked, I can't complain about the concentration of taxes while ignoring the concentration of income.

At the very top end of the spectrum, the disparity is clearly too wide to be the result of hard work, it's mostly dumb luck. Lots of the dumb luck is currently funneled through capital gains rates, which are lower than regular income rates. Is that the best tax policy? I don't like the idea of telling those bright HS kids they'll have to pay 25% on their six figure wages so hedge fund managers can pay 15% on their nine figure bonuses.