US Income Tax system choice poll

[haha]

Surprising to see option 4 hanging in there so far. I've always thought the current US tax system is discriminatory against higher income bracket folks. Why should they be penalized by higher tax rate for making more money? In effect, they are paying (much) more to get into public museums, National Parks, etc..

A lot of people on this board pay very little or no income tax, in spite of having plenty money to spend. One member I think said he had not had to pay taxes in 25 years or so. And this person has two homes, so he is not exactly hurting. No wonder they don't want any change.

Overall I would prefer a consumption tax, but if it ever happens, it will be an add-on to the income tax, not a replacement so we are likely to be worse off as usual.

The real winners in our system are those who don't work, never worked, and have no intention of ever working, though they consume plenty thanks to those who do work.

Ha

 

[youbet]

I still prefer the UK system as it has the appearance of being fairer.

How do you justify referring to the UK tax system as "fairer" with that hefty 20% VAT? The VAT seems so regressive with the poor paying it at 20% as well as the ultra-wealthy. Perhaps they have some way of reimbursing the poor the VAT they paid during the year?

 

[scrabbler1]

The Bush tax cuts from the last decade included no offsetting, so-called "base-broadening" measures. So whenever I hear someone propose a "lower the rates and broaden the base," I get annoyed. I think we should simply leave the rates alone or raise them back to the early Clinton levels AND get rid of some of the deductions and credits.

 

[youbet]

The real winners in our system are those who don't work, never worked, and have no intention of ever working, though they consume plenty thanks to those who do work.

Ha

There is something to be said for that outlook. While I don't regret (much) having worked long and hard for many years for what my family has today, I do have moments where I wonder. For example, a college buddy, a when-the-urge-hits writer, who has seemed to live a decent life economically without ever seeming to "work." A smart guy (Mensa, high GPA, high test scores, etc.) he always seems to be on top of ways to have the essentials of life bestowed on him from a combination of of gov't, private institutional and individual sources. This never seems to involve "work." I'm always amazed. He says America is a wonderful place. I always buy the beer.

I admit there may be more to his efforts to make a living that I readily detect. Having spent a life working long hours in factories, my idea of "work" is framed by a pretty narrow definition.

This is a wonderful place for the fit and clever who wish to avoid time in harness.

 

[robnplunder]

You could also ask if it is fair that high income earners make more money than low income earners. I'm not sure the higher income is always fully earned by the recipient. What I mean by that is that high income earners (for example me) are often born into families that value education, in places where there is good infrastructure and there are good job opportunities. Those are advantages that they have from day-1 that they didn't really earn. So to what extent do I deserve a $200k salary? Have I worked harder than the guy who picks fruit and vegetables in the field year-round? It is probably just as fair that I earn that salary as that I pay an effective 25% income tax compared to the farm laborer's effective 7% tax.

Or maybe not. Like I say, yours is a good question that doesn't have a simple, absolute answer.

There are plenty of high income earners who weren't born with silver spoon in their mouth, myself included. There are millions of things that's unfair besides being born into poor family (which I was born into). Anyway, what's that got to do with tax rate?

 

[F4mandolin]

There are plenty of high income earners who weren't born with silver spoon in their mouth, myself included. There are millions of things that's unfair besides being born into poor family (which I was born into). Anyway, what's that got to do with tax rate?

They were responding to someone saying it wasn't fair for well off people to pay more taxes.

 

[scrinch]

There are plenty of high income earners who weren't born with silver spoon in their mouth, myself included. There are millions of things that's unfair besides being born into poor family (which I was born into). Anyway, what's that got to do with tax rate?

It's easy to not recognize the advantages of being born in most places in the US that have good, free primary and secondary education, a good transportation infrastructure, reasonably fair laws that are generally enforced, a class system that allows (encourages) upward mobility, a first world economy with all its opportunities, where parents can read and write and value getting ahead within the system, etc. The majority of the people I see every day were not born with those advantages, and despite being very hard workers, they earn less than 10 percent of the US median income. I don't call these advantages a "silver spoon" but I'm trying to recognize they are "unearned" or "unfair" economic advantages we have enjoyed.

What does this have to do with tax rates? Maybe nothing. I just thought you were trying to talk about "fair" or "just" allocation of the tax burden in your post, and I was commenting about why it might be okay for the fortunate, even if they don't recognize themselves as such, to pay a higher proportion the income tax burden. But I recognize that "fair" is a concept that we each get to define within our own sphere of concern, so a discussion of a "fair" allocation of taxes may not lead down a productive path here.

 

[theOAP]

How do you justify referring to the UK tax system as "fairer" with that hefty 20% VAT? The VAT seems so regressive with the poor paying it at 20% as well as the ultra-wealthy. Perhaps they have some way of reimbursing the poor the VAT they paid during the year?

Not a cop-out, but the word "appearance of a fairer system" was carefully selected in my statement. I doubt any tax system is seen as fair by 100% of the population who may pay into it. Someone will always be unhappy.

Generally, there is no way any individual taxpayer can reclaim VAT paid. VAT is seen as a way for all members of the population to contribute to national funding. Charging VAT on all purchases by all members of the population and its fairness based on income levels leads to a discussion more aligned to the distribution of tax revenues collected, and in this case it would have to do with state issued benefits available to the poorer section of the population only. (And yes, it therefore becomes a bit of a merry-go-round.) This leads to a political discussion of governments role in society and the opposing views found there, and is (arguably) a different topic than a discussion of the tax system itself.

VAT is paid by all. The argument against VAT will always be the proportion of available income paid for the tax. In the UK, those with little income pay little or, more likely, no income tax (most benefits are tax free). As ones income increases, they progressively fall into the various income tax bands and pay additional tax accordingly. The tax bands are noticeably more severe for that purpose.

Personally, I don't think the average US taxpayer with a strong past experience of, and a dependence on, deductions could find the UK system easily acceptable.

 

[Gatordoc50]

I like the current system but with fewer deductions. I'd get rid of retirement accounts, both DB and DC and take away the tax free status of health benefits, etc. The end result would probably be a bracket system in the 5 to 15% range. This would put everyone on equal footing.

 

[Jack_Pine]

Good point

or not.

 

[Jack_Pine]

A lot of people on this board pay very little or no income tax, in spite of having plenty money to spend. One member I think said he had not had to pay taxes in 25 years or so. And this person has two homes, so he is not exactly hurting. No wonder they don't want any change.

Overall I would prefer a consumption tax, but if it ever happens, it will be an add-on to the income tax, not a replacement so we are likely to be worse off as usual.

The real winners in our system are those who don't work, never worked, and have no intention of ever working, though they consume plenty thanks to those who do work.

Ha

Agreed.

 

[BTravlin]

I say we first get the federal government out of a bazillion areas of our life where it has no business being and thereby drastically reduce the tax revenues needed. We can then more easily simplify the tax system and make it more fair.

 

[Ronstar]

I voted flat rate. Simpler is better - get rid of deductions and credits. Also think that a national sales tax could be better than a flat income tax.

 

[travelover]

I'm for any scheme that allows me to pay minimal taxes while socking it to others.

 

[pb4uski]

It's easy to not recognize the advantages of being born in most places in the US that have good, free primary and secondary education, a good transportation infrastructure, reasonably fair laws that are generally enforced, a class system that allows (encourages) upward mobility, a first world economy with all its opportunities, where parents can read and write and value getting ahead within the system, etc. The majority of the people I see every day were not born with those advantages, and despite being very hard workers, they earn less than 10 percent of the US median income. I don't call these advantages a "silver spoon" but I'm trying to recognize they are "unearned" or "unfair" economic advantages we have enjoyed.....

I hear your point, but on the other hand the public education system I went through had a broad mix of rich kids, middle income kids and poor kids and we all had the same books, same teachers, etc. There was an equal mix of kids across all incomes that took advantage of the opportunity in front of them and did well, or didn't and let the opportunity pass them by. Some of the poor kids went on to do spectacularly in life and some of the rich kids were spectacular failures. I concede that wealth improves one's chances of success but IMO given the many cases of poor kids succeeding and rich kids failing I conclude that the system that I grew up in was a fair meritocracy.

 

[ERD50]

It's easy to not recognize the advantages of being born in most places in the US that have good, free primary and secondary education, a good transportation infrastructure, reasonably fair laws that are generally enforced, .... I'm trying to recognize they are "unearned" or "unfair" economic advantages we have enjoyed.

I understand that some are born into more advantageous conditions than others. I'm not so sure about labeling the successes of people born into those situations as "unearned" or "unfair".

Is Micheal Jordon's or Pavorati's success "unearned" or "unfair"? They could not have succeeded if they were not born with certain advantages that most others do not have. Would you buy a CD of me singing, or pay to watch me throw a ball in the general direction of a hoop 10 feet off the ground? Now that would be unfair to you!

I'm trying to understand what your statement means - what actions should we take? I guess it isn't 'fair' that my kids got attention from their parents, were encouraged to go to college and get degrees that will help them in life? We shouldn't do that? I think it would be unfair for you to keep me from doing that. What do you suggest? Do we have everyone play musical chairs with their kids once a year so every kid has an average experience? Would that be 'fair'? Would it result in a better society?

-ERD50

 

[ziggy29]

I understand that some are born into more advantageous conditions than others. I'm not so sure about labeling the successes of people born into those situations as "unearned" or "unfair".

Some people standing on third base actually hit a triple to get there. Some people on third base were born there and recognize their good fortune to be there. Unfortunately, some people were born on third base but act like they hit a triple to get there -- and have little sympathy for those who have not even made it to first base. I have a lot of respect for the first two groups; the third, not always so much.

 

[ERD50]

Some people standing on third base actually hit a triple to get there. Some people on third base were born there and recognize their good fortune to be there. Unfortunately, some people were born on third base but act like they hit a triple to get there -- and have little sympathy for those who have not even made it to first base. I have a lot of respect for the first two groups; the third, not always so much.

Agree. But not everyone born on third base acts like they hit a triple to get there - I'm not sure how this is relevant overall. As far as respect, I'll put it this way.

Highest Respect: The disadvantaged person that rises above it to do even more than they likely would have achieved under the circumstances. The advantaged person who utilizes/leverages those advantages to do even more than they likely could have achieved w/o those advantages.

Medium Respect: Anyone who puts forth some reasonable effort - that effort may result in success or it may not, there are no guarantees. The advantaged person (on average) will likely end up higher up the chain due to their advantages than the less advantaged. That might not seem 'fair', but what to do?

Lowest/No/Negative Respect: The advantaged that under-performs and just sucks up the advantages they were born with. The disadvantage who doesn't even try to succeed, and just sucks up whatever they can take from others.

-ERD50

 

[F4mandolin]

Some people standing on third base actually hit a triple to get there. Some people on third base were born there and recognize their good fortune to be there. Unfortunately, some people were born on third base but act like they hit a triple to get there -- and have little sympathy for those who have not even made it to first base. I have a lot of respect for the first two groups; the third, not always so much.

Another good point.

Even this thread keeps reminding me how people believe things in a certain way, and won't/can't see things in another persons way. I guess I keep coming back to wondering about how so many people in this country are either Dems or Reps and will not budge an inch in being sympathetic to how the other side sees things. They KNOW they are right....and the other people are wrong. They point out how the other side did all those horrible things wrong.....while forgetting that their own side did pretty well all those same things (or comparable) wrong as well. But back to taxes....as has been pointed out.....what is fair? We can't seem to agree even on that.

 

[Danmar]

I'd be happy with a much simplified but still progressive system.

Agree. It's the deductions that complicate things. In Canada there aren't as many deductions. We use tax credits more which seem fairer to me. other big difference is that the US taxes worldwide income even if you don't reside in the US. Finally, estate taxes are the other seemingly unfair, although very progressive, tax which us snowbirds need to organize around.

 

[frayne]

Although I have been retired for eight years now, I do tax prep work during tax season and have worked for Block and last couple of years doing the volunteer thing thru IRS/VITA.

I would love to see a flat tax with no credits or deductions whatsoever and the Feds could give back to the states as needed to cover what is now the EITC. I don't see the tax system ever changing for the better as too many lobbying groups want to keep it as confusing and convoluted as possible. With a straight forward tax system, look at all the tax companies, CPAs, tax attorneys, etc. taking a big pay cut. Not to mention the IRS being reduced by a bunch. Just don't ever see it happening.

 

[pb4uski]

...I would love to see a flat tax with no credits or deductions whatsoever ...

Totally agree on the no credits or deductions - except I think rates should be progressive rather than flat unless there was some level of income that isn't subject to tax (which I think is common to most of the flat tax proposals).

If I were King it would be just Form 1040, line 22 * a rate table with rates with the same degree of progressiveness as we have today designed to be revenue neutral.

 

[MichaelB]

Thanks for the interesting discussion

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