TIL: No more worrying about tax brackets

[scrabbler1]

Tax simplification and tax fairness can work in opposite directions. I look at my federal and state income tax returns and see how my state taxes dividends and cap gains like ordinary income while the feds tax them differently. But the feds have that somewhat annoying worksheet I have to complete in order to figure out the taxes due on each portion of my income before adding them up, while everything is added together in one blob on the state return. One is fairer, perhaps, but is hardly simpler, while the other is far simpler but is it fairer?


Another thing I have noticed, specifically about tax rates and tax brackets, is that the 0% tax bracket for qualified dividends and LTCG is not always 0%. A few years ago, I was updating my tax spreadsheet to include some extra QDs and expected my federal taxes due to be unchanged. Instead, they went up slightly, because the higher AGI slightly lowered the medical expense deduction in Schedule A and slightly raised my taxes due. So the 0% tax "bracket" wasn't exactly 0% but slightly greater than 0%. Interesting.....

 

[ERD50]

"Taxes are what we pay for civilized society...."

-- Justice Oliver Wendell Homes, Jr., dissenting in Compania General de Tabacos de Filipinas v. Collector of Internal Revenue, 275 U.S. 87, 100 (1927).

While I certainly agree that we need to pay some taxes to maintain/promote a civilized society (police, fire, infrastructure, safety nets, etc), there's nothing about that quote that infers the taxes we do pay are going to that end (sure some are, but so much is wasted/misdirected). I don't see how that quote can be used to justify our current tax code.

I'm pretty sure some awful dictators also charge their citizens taxes, while they run the country into the ground. Can they use that quote to justify their existence?

-ERD50

 

[haha]

I'm pretty sure some awful dictators also charge their citizens taxes, while they run the country into the ground. Can they use that quote to justify their existence?

-ERD50

Sure. 95% of what people say is merely to justify something or other of personal importance, no matter how lofty they may try to make it sound.

Ha

 

[AllDone]

I live in a part of the world where most find a way to pay little or no taxes...either they hide from the tax man or they pay him off. The impact on society is immense. Unmaintained government properties, govt employees who have to look for "alternate" income, woefully inadequate infrastructure, very weak rule of law (see item #2), police who require that you pay them to come investigate a theft (another #2), etc.

No one likes paying taxes, but when you can see what low taxes can lead to, it illustrates OWH Jr's point and puts the taxes in a different light. Now taxes seem like they really are buying a greater degree of civilization.

I just discussed this with a Finnish woman who had lived in Mexico for a few years before moving to the California. She said that after living in Mexico, she'll never complain about taxes again.

 

[pb4uski]

Yes, after one lives or spends a lot of time abroad in some countries you really come to appreciate the rule of law that exists in the US.

 

[dixonge]

Yes, after one lives or spends a lot of time abroad in some countries you really come to appreciate the rule of law that exists in the US.

Every country has positives and negatives. After having spent the better part of the last three years mainly in Mexico, I have found that just because other countries do things differently doesn't necessarily make them better or worse -- just different. Also, taxation doesn't necessarily correlate with 'rule of law.'

 

[papadad111]

Every country has positives and negatives. After having spent the better part of the last three years mainly in Mexico, I have found that just because other countries do things differently doesn't necessarily make them better or worse -- just different. Also, taxation doesn't necessarily correlate with 'rule of law.'

+1. Totally agree having spent 25 years all over the world. I've lived in places where the tax rate is higher. Collections are more successful and the rule of law stronger and yet misappropriation still occurs.
To think misappropriation doesn't occur everywhere plain ignorant. It's a global phenomenon. Lest we forget why we dumped tea in the Boston harbor, fought a war, and left the monarchy behind some 240 years ago ...

 

[scrinch]

Also, taxation doesn't necessarily correlate with 'rule of law.'

True, but the point is that lack of tax revenue does correlate with the lack of rule of law. If the judge doesn't get paid enough to eat and send his kids to school, then he will look for alternate sources of income, and the sources he has under his control are called the plaintiff and the defendant. It's a way of life here. Ditto police, ditto military, ditto tax collector, ditto teachers. Trust me, it's not just "different" when you find yourself in court and you're not the guy with the most money.

I agree that any reasonable tax cuts in the US are not going to lead to this situation. I'm just saying that taxes in and of themselves are not evil. In the right doses, they're just what the doctor ordered.

 

[dixonge]

True, but the point is that lack of tax revenue does correlate with the lack of rule of law. If the judge doesn't get paid enough to eat and send his kids to school, then he will look for alternate sources of income, and the sources he has under his control are called the plaintiff and the defendant. It's a way of life here. Ditto police, ditto military, ditto tax collector, ditto teachers. Trust me, it's not just "different" when you find yourself in court and you're not the guy with the most money.

I agree that any reasonable tax cuts in the US are not going to lead to this situation. I'm just saying that taxes in and of themselves are not evil. In the right doses, they're just what the doctor ordered.

One thing that I have paid a lot more attention to lately is the concept of corruption. We often hear that 'underdeveloped' countries are corrupt, and it is often stated in comparison with developed countries. We tend to have this mindset that *we* are above all of that. And yet when you look at it, what you find is that the corruption is prevalent here too, just in different forms.

Last year I ended up paying my first mordida (bribe) to a Mexican policeman, about $70US worth. But was that any worse than the $125 ticket I was given by a policeman in Texas for something I absolutely didn't do? The main difference is that the Texas policeman lied through his teeth in front of the municipal judge. The judge sided with him, unsurprisingly. The benefit was to the city, which filters down to the cop. There may have also been a quota involved, again benefitting the cop's job security and/or salary.

Which is more corrupt?

Would Mexico City cops truly come out as more corrupt when compared to the abuses seen in Chicago and New York in recent years?

Having said all that, Mexico will probably need to fix their tax system in order to remove their dependency on oil, cartel drug money and funds being wired back home from workers in the U.S. But that doesn't mean that the U.S. tax system is just fine. It's not like we've been taking care of our own infrastructure up here lately...