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Is the federal tax code 'fair'

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Mike

I don't think you ever can achieve a system of taxation that's universally agreed to be fair. The closest, IMHO, is a flat income tax, without exemptions or deductions.  What appeals to me most about that approach is that everyone has some skin in the game...and hopefully an interest in what the government is up to.

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Patallaire

The only merit of a flat income tax resides in the proposal that all people pay it on all earned income. When people discuss taxes they always discuss percentages, a 10% flat tax on $50,000 is $5,000 a 10% flat tax on $500,000 is $50,000, which would you rather have in the coffers? So while percentages look fair, it is actual dollar's that make the world go around.  SO with those example in mind I am positive that the flat tax amount would be more in line with current tax rates and that 20% would be closer to the real number which would burden the low income people as actual dollars would be much higher then they pay now. Then the protests would revert  to a structured plan and the cycle would repeat, people would realize the real dollars they are paying, not the "Fair Percentages."  A universal sales tax would also need to be equally high, as it is in Europe and they still have an income tax, and would really be a burden on the low income population who don't have discretionary income, like to buy a motorcycle, so everything they spent on necessities  would carry a tax burden, as they do in Europe {VAT} tax.  Oftentimes, as a previous poster pointed out, resulting in double taxation. Taxing Estates at 100%  would be a dis-incentive for creating wealth, why would someone build a business, take risks, hire employees, invest in the stock market, etc.  only to have it confiscated by the government at death, where does that make any sense?  The government is a wealth transfer agent, they produce nothing, expand as they wish, so providing them more fun money in any form will only make them bigger and transfer more money to them to take care of us.  You can see how well they are doing now.  

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realshelby

A lot of what you write I agree with. Except for the sales tax, which I am all in for. 

 

Low income persons will pay the exact same percentage as Bill Gates. Zero exceptions make it plain to figure and easy to enforce.  That is why it WILL work. As you say, start making adjustments and it all goes back to the "what is good for me I want to make law" routine. 

 

What is overlooked is that low income persons are already getting free food, housing, subsidies. They are not "buying" all that much. So, my sales tax really isn't the burden some see it as for these people. 

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Patallaire

Yes, using a sales tax as a transfer of wealth mechanism everyone would pay the same amount as Bill Gates, so it is a regressive tax, that is, income doesn't matter, a 25% tax on a $40,000 car would be $10,000, chump change for Bill Gates, a burden for someone with much less income.  Defining low income people as people with food stamps would really be a disservice to those lower middle class people who are not on food stamps, maybe make $100,000 have children in college, two cars, mortgage payments, medical expense, food expenses, live in a high state income and real estate tax state, and are just getting by on their income.  That $10,000 sales tax would be 10% of their gross. A burden, not bourn by the likes of Bill Gates. Additionally a sales tax would promote an underground economy, and would possibly be regressive for the economy.

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Skywagon

I spent the early years of my life as a CPA...…...some several decades ago.  I left that profession behind in the 80's.  What I remember from business's and public that used my company is...… If I'm paying more than anyone else it is too much.  If I can find a way out, show me...including some very bad tax dodges in the 70's and 80's.

 

The system is unlikely ever going to be a flat tax regardless of %.  What is fair?  Don't know, but I can tell you some things that aren't....  Inheritance.  The money has already been taxed.  When you are eligible for social security and you earn too much you are basically taxed on the very social security which was a tax in the first place....  Deductions and offsets so high they offset net income to zero and therefore no tax paid...Selling of used hard goods like cars, boats, motorcycles....tax already paid....lower tax on capital gains and yes I actually really like this one but still income.....stock gain/losses ( max deduction on stock loss is $3k/year with no limit on gain tax)...also can not use carry over losses to offset gain.  There are many but the stock one and tax on SS really bug me.  I had some really hefty stock losses in one year.  I will be deducting$3000/yr way past my lifetime, but Uncle Sam will collect on all my gains this year and every year.

 

What would I do...everybody pays some.  Eliminate retax on SS, inheritance, balance losses and gains. As Terry points out low income isn't buying much as many programs available (44% of US pay nothing).  The top 10% pay 70% of all taxes.  What is top 10....I suspect many on this board are in that bracket at $138K/annual combined incomes.CUT SPENDING to offset.  We need to get out of the idea in government money is an endless supply of do whatever we want we can just tax or print more.

 

I wrote earlier I retired after a long corporate career on April 01. I cant take SS I earning because it will all go up in tax.  I get nothing net if I take it. It's very frustrating now to see how much tax I will pay in retirement while 44% pay nothing.  OK Rant over, think I'll go fishing tomorrow.

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realshelby
17 hours ago, Patallaire said:

 Defining low income people as people with food stamps would really be a disservice to those lower middle class people who are not on food stamps, maybe make $100,000 have children in college, two cars, mortgage payments, medical expense, food expenses, live in a high state income and real estate tax state, and are just getting by on their income.  That $10,000 sales tax would be 10% of their gross. A burden, not bourn by the likes of Bill Gates. Additionally a sales tax would promote an underground economy, and would possibly be regressive for the economy.

$100,000? Sorry, but if one has a bunch of kids, still has a high mortgage payment when they are in college, just getting by, then I have no pity. A flat sales tax would be better for them too. This is NOT what I consider a low income family. Workers in service industries, retail stores are the ones that often fit the low income description by today's standards. Make enough money to get buy, but barely. The ones that make $15,000 a year are not going to survive without assistance anyway, to be quite blunt. I don't know what the Federal tax percentage would be. Most states have either high property tax, or income tax. The point of my flat sales tax isn't about that, there will be other taxes you will pay. I am talking ONLY about trading a flat sales tax for Federal Income Tax. 

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Patallaire

At $15,000 they would be among the 48% who pay no income tax, so you would be and are subsidizing them with your taxes.  Having no pity for a reality is a suggestion that you are not aware of how the real world works, or make a lot of money and $100,000 is chump change.   In NY City as an example, a $100,000 income with the parameters I outlined  is very real and is just getting by.  In any big city it is the same, you can't possibly  believe that $100,000 is a large income in places like California where State income taxes are 10.3%, sales taxes are in excess of 10% add Federal income taxes ,social security and Medicare, and real estate taxes and the inherent fixed wealth transfer is  at 50% or greater add mortgage payments, car insurance, maintenance, food, cable, cell phone, kids activities and clothes,  medical insurance, gasoline, life etc. real estate acquisition costs, I would ask that you have a conversation with them  to encourage them to share their ability to save for their future and ask them to see their cash flow, then share with that person your position of no pity, but before you do, do the math with them  and I might suggest you stand back.     That would be the first assumptive distortion. A flat sales tax would really be a tax on the lower income tax brackets  whose consumptions are based on needs not wants, like motorcycles or Shelby's.  That regressive tax would cause a fire storm among the lower income class that would distort the idealistic purpose of it as you propose it. When they figured out that Bill Gates was paying the same sales tax that they were paying it would undo the idealism.  If I am to pay other taxes, where  do you think they would stop and what would they be based on, income, assets, home size, cars, bikes? What would not bring the wealth transfer back to the original number,  when just the payment capture and obligations would be different to the government?  Also, you are then empowering, demanding that all business owners are the tax collectors and transfer agents to the government on a weekly or monthly basis. If you had tax based on consumptions how would you fund Social Security and Medicare?  Add that to something else to bring the wealth transfers up higher? Remember, the government produces nothing, it is a redistribution vehicle, it needs an inordinate amount of money to feed its wants.  

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realshelby
1 hour ago, Patallaire said:

  Having no pity for a reality is a suggestion that you are not aware of how the real world works, or make a lot of money and $100,000 is chump change.  

Remember, this isn't a forum for personal attacks. 

 

I am sure I have a good grasp on the details you presented. And equally sure the flat sales tax will work. I probably paid a lot more in Federal income tax last year than some might guess. But that does not cloud what I see as a good path forward for this country. I am truly in favor of making a change in how this country works. And by works I mean you earn a living. That you pay taxes to promote the country taking care of you. And that you pay your bills. Which is our biggest enemy. Both on a personal level and the spending of those in control of this country. Our national debt is real. 

 

As for the $100,000 income, I would live below my means. Like I have done all my life. If that means living in a mobile home and driving a 15 year old car, no problem. If I have 3 kids, a mortgage, $20,000 in credit card bills, pay for private schooling because they teach my agenda, and cannot make ends meet on $100,000 per year, then I am doing something I shouldn't be. Including having that many kids. 

 

This is getting away from the Federal Income Tax. We need a tax that is simple, cannot be loopholed. Just because we have a flat sales tax, that would NOT mean there are not other taxes. Or that there would not be subsidies paid for those that need/deserve it. I think the public already knows there are many "rich" people that pay little, none, or a lot less percentage wise than they do. Instead of writing how something cannot work, think about what could happen to make it work! That is what this thread/Full Throttle forum is about!

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Patallaire

If you took it as a personal attack, it was not meant to be.  If we add additional taxes, we are right back where we started.  You are aware of the financial realities of managing your money, not many people are.  They will live at or above their income. I see it all the time, it is what I do for a living. It matters not what the income level is, it is always a spending problem, some it fostered on everyone by rapidly rising taxes and fees{a hidden tax}. The tax percentage argument is really a false narrative, it should be looked at as how many real dollars have I paid into the IRS vs. you, not percentage of income. You can't spend percentages only real dollars.  If we had solutions that would work, we wouldn't be jawing about it on the forum, we would be in office getting castigated by our constituents for not getting it done the way they think it should be done. A flat tax will ignite the same class discussions that you are seeing on the percentage argument.  In the meantime we discuss our differing viewpoints as both emotional responses and facts real or distorted. If you think also that every small business owner would want to collect the flat tax and have the discipline to not mix it into their daily receipts that is a distortion and it plagues NY State, they keep it for as long as they can, the records need constant auditing and thus it creates an additional level of government, pensions, medical vacations, etc.  that needs to be fed with additional tax dollars, just to create the illusion of checks and balances.   I think the current system works fine, maybe some tweaks, but not a remake.

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