I Despise the USA Tax System SO Much

[Raygun99]

jkern: At a different level TAX system has a social engineering twist. When people marry/divorce/have children/don't have children--- because it has tax consequences..That's now a politician's tool too.

 

[clobber]

our Politicians get to choose winners and losers. Another issue I have is the relatively high cost.

Right, our tax system is now the incentive system. I dont like that either.

Yes the cost is very high, but I'm not sure everyone understands that. I think many people are more (falsely) pleasantly surprised when the discover they thought they were going to pay 22-24% federal taxes (marginal rate) and then Turbo Tax tells them the they actually only paid 14% (effective tax rate).

Most people don't every even make the calculation you did. They have no idea how much is really withheld for SS and Medicare. They also typically have thought they "need" the mortgage interest deduction to pay less taxes - not realizing that 1) It really just effectively lowers your mortgage rate slightly and 2) is countered by the fact you will be paying property taxes

 

[clobber]

I'm on a tear today. Here is a recently released, very long, very technical paper about minimum taxes - including AMT.

My favorite quote so far:

I'm sure no one cares, but I provided the wrong link. This is the correct one.

 

[Rustic23]

My personal peeve is the "corporate income tax". Sold to the public as if there is a Mr. Exon or Mr. Tesla that looks at their income and pays a percentage to the government. When in reality, they treat income tax as an expense and like any other expense in business it must be gotten from the customer and then passed on the the government. This allows politicians the ability to tell the people I for raising rich corporations taxes not yours.

 

[statsman]

Tax Foundation estimates ~31% itemized before TCJA, it is down under 14% now. I guess >80% are most basic and low income?

https://taxfoundation.org/standard-deduction-itemized-deductions-current-law-2019/

I guess it depends. For us, we would be itemizing under the old tax system because of high property tax bills and medical expenses (under-65 medical, Medicare Parts B/D IRMAA'd, OOP costs). With TCJA, we won't. I figure we'll be out about $300-400 under TCJA even with the lower tax rates. One on SS. One with a pension.

 

[USGrant1962]

My personal peeve is the "corporate income tax". Sold to the public as if there is a Mr. Exon or Mr. Tesla that looks at their income and pays a percentage to the government. When in reality, they treat income tax as an expense and like any other expense in business it must be gotten from the customer and then passed on the the government. This allows politicians the ability to tell the people I for raising rich corporations taxes not yours.

Yup. The purpose of corporate income taxes is to hide the cost of government from the voters. All corps do is collect it on behalf of the government - from owners, employees, or customers. There is no other source of money.

 

[MichaelB]

Codswollop. Corporations engage in economic activity, and taxing them is no different than taxing others that engage in similar activity. There is no reason to assume that if corporations were not taxed the savings would be passed along to employees or consumers.

 

[SevenUp]

There is no reason to assume that if corporations were not taxed the savings would be passed along to...consumers.

Sure there is, if a corporation believes it could now make more profit by increased sales at somewhat lower prices.

Employee pay is a somewhat different situation.

And we're talking assumptions, not proven facts....

 

[Gumby]

Sure there is, if a corporation believes it could now make more profit by increased sales at somewhat lower prices.

Employee pay is a somewhat different situation.

And we're talking assumptions, not proven facts....

If all their competitors get the same tax break, they will likely be in no better relative position than they were before.

 

[SevenUp]

If all their competitors get the same tax break, they will likely be in no better relative position than they were before.

True, but absent collusion one could still expect a decrease in consumers' prices if the market is at all efficient.

 

[Gumby]

True, but absent collusion one could still expect a decrease in consumers' prices if the market is at all efficient.

Take it from someone who spent years enforcing the antitrust laws - there is plenty of price fixing and market allocation going on. Nobody really wants to compete when they can all make more money if they don't.

 

[SevenUp]

Take it from someone who spent years enforcing the antitrust laws - there is plenty of price fixing and market allocation going on. Nobody really wants to compete when they can all make more money if they don't.

Yes, but we don't have to pay $1000 for a loaf of bread so some competition does exist.

 

[RxMan]

I’d certainly be interested in a simplified tax structure. It seems excessively complicated right now.

My wife is finishing up a masters of accounting degree in a few weeks. She’s joining an industry developed to deal with these complicated tax laws. It’s sad that this is our reality.

My real complaint is the lack of ability to accurately plan for the future. Tax laws will inevitably change in the future and if I want to plan for an eventual retirement it’s difficult to try and predict what my future tax burden will be or where I should keep my savings to minimize that burden going forward.

I end up with a blended strategy spreading our savings around in the attempt to structure a portfolio that limits tax liability in the future. It’s very difficult to do and one new law could create enough change to render any plan moot.

 

[ERD50]

My personal peeve is the "corporate income tax". Sold to the public as if there is a Mr. Exon or Mr. Tesla that looks at their income and pays a percentage to the government. When in reality, they treat income tax as an expense and like any other expense in business it must be gotten from the customer and then passed on the the government. This allows politicians the ability to tell the people I for raising rich corporations taxes not yours.

Yup. The purpose of corporate income taxes is to hide the cost of government from the voters. All corps do is collect it on behalf of the government - from owners, employees, or customers. There is no other source of money.

Yes. It is a shell game, playing on the emotional side of people who don't understand the consequences.

There is no reason to assume that if corporations were not taxed the savings would be passed along to employees or consumers. ...

Sure there is, if a corporation believes it could now make more profit by increased sales at somewhat lower prices.
...

Yes to SevenUp - it is the greed of the corporation that will motivate them to lower prices. If they don't their competitors will, and their competitors will get their business and their profits. So those greedy SOBs will lower the price - how dare they!

Take it from someone who spent years enforcing the antitrust laws - there is plenty of price fixing and market allocation going on. Nobody really wants to compete when they can all make more money if they don't.

Yes, but we don't have to pay $1000 for a loaf of bread so some competition does exist.

Again, yes to SevenUp. Sure, there are cases of collusion and price fixing, and they should be dealt with by our legal system. But if this was so widespread, we'd see those $1,000 loaves of bread and we sure wouldn't see sub $2.00 gas in this day and age.

I guess price fixing is OK when the government does it? Subsidies and minimum wage are examples of price fixing.

-ERD50

 

[Gumby]

Thank God we have someone who will be a champion for big business. Finally, they can dry their tears and stop trembling in the corner.

 

[ERD50]

Thank God we have someone who will be a champion for big business. Finally, they can dry their tears and stop trembling in the corner.

You misunderstand. This is about helping the little guy. And about what's right, regardless of who is the recipient.

Taxing corporations hurts the little guy. Many of the same people who are in favor of a progressive rate income tax want to see more corporate taxation. But that corp tax becomes part of the product cost, and everyone pays the same price at the cash register, rich or poor - it's a flat tax on the consumer.

A lower/zero corp tax also makes US companies more competitive, which means more jobs, for all, the little guy too.

-ERD50

 

[Aerides]

You misunderstand. This is about helping the little guy. And about what's right, regardless of who is the recipient.

Taxing corporations hurts the little guy. Many of the same people who are in favor of a progressive rate income tax want to see more corporate taxation. But that corp tax becomes part of the product cost, and everyone pays the same price at the cash register, rich or poor - it's a flat tax on the consumer.

A lower/zero corp tax also makes US companies more competitive, which means more jobs, for all, the little guy too.

-ERD50

But doesn't that assume that lowering corporate tax will result in lower prices and better jobs/wages? Didn't we just recently lower the corporate tax rates and see exactly that....not happen?

 

[scrabbler1]

But doesn't that assume that lowering corporate tax will result in lower prices and better jobs/wages? Didn't we just recently lower the corporate tax rates and see exactly that....not happen?

A lower corporate tax rate will also help a company's profits, which will help its investors in the form of higher stock prices and higher stock dividends. The investors and top management will do well, not necessarily the employees or consumers.

 

[ERD50]

But doesn't that assume that lowering corporate tax will result in lower prices and better jobs/wages? Didn't we just recently lower the corporate tax rates and see exactly that....not happen?

You posed it as question ("Didn't we"?). Can you present some evidence to turn it into an assertion?

It can also be difficult to separate one cause/effect from others in the marketplace. There's always a lot going on.

But if corporations have such power, why is gas not still $5.00/gallon? Did they forget they are supposed to keep it as profits when their cost of production goes down? That's a lot of money left on the table - maybe it really doesn't work that way?

It sure makes sense to me that in a competitive market, one supplier will cut their price if their costs go down, to attract more business and therefore make more money overall (same profit amount at the lower price with more volume). Others will follow, or they lose volume (and profits) to their competitor. So the "greedy" will cut prices.

Again, assuming a competitive market (which most are). If the market isn't competitive, it should be looked into. I was all in favor of breaking up Microsoft when they were in court (and before), as they were clearly using their dominance on one area to shut out competition in others. Not good for the consumer.

-ERD50

 

[aiken]

Try making sense of tax laws related to MLP taxation (K-1's, etc). I guarantee you there isn't anyone in the IRS who has a clue either.

 

[Gumby]

Yes, but we don't have to pay $1000 for a loaf of bread so some competition does exist.

Bad example. We don't have $1000 a loaf bread because no one will pay that much. Collusion among producers does not change the demand curve. As the price of a product goes up, people will demand less of it. Eventually, they will demand none of it if the price is too high. Then no one makes any money.

What price fixing and market allocation actually do is shift the supply curve up and to the left, so that the market clearing price is higher and the amount supplied is lower than it would be in a competitive market. So, for example, in the presence of collusive behavior, you might expect to see a loaf of bread cost $3.50 rather than $3.00. But you won't see a $1000 loaf.

In simple terms, the goal is to squeeze out as many golden eggs as you can without killing the goose.

 

[SevenUp]

In simple terms, the goal is to squeeze out as many golden eggs as you can without killing the goose.

People who perceive "all business is bad" will see collusion where it doesn't exist. People who perceive "all business is good" will overlook collusion where it does exist.

As with much in life, reality is somewhere in between.

One person may opine "if corporate taxes are eliminated, prices will drop." Another may opine "if corporate taxes are eliminated, prices will not drop." I lean toward the former, but have little expectation that we will have a chance to test these competing theories.

 

[Cobra9777]

But doesn't that assume that lowering corporate tax will result in lower prices and better jobs/wages? Didn't we just recently lower the corporate tax rates and see exactly that....not happen?

+1

My former Mega publicly announced that 100% of the benefit from the TCJA would go to shareholders in the form of increased dividends and stock buy-backs. From what I've read, their competitors did the same.

No price drop for customers. No increased wages for workers. No new capital expenditures. No new jobs. No increase in R&D. 100% passed on to shareholders.

This was not just my old Mega and their competitors, which I still follow closely. In May of 2019, the Congressional Research Service published an analysis of the effects of the TCJA, which confirmed what everybody already knew...

Much of these funds, the data indicate, has been used for a record-breaking amount of stock buybacks, with $1 trillion announced by the end of 2018.

It's hard for me to understand how that helped "the little guy."

 

[Rustic23]

So we should applaud politicians for increasing corporate taxes because if they lowered them the corporations would not lower their prices. Well they definitely won’t if we don’t try, and a tax system that is honest is another winner! IMHO