Taxes: What Democrats Don't Want You To Know!

Scully

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kbluck said:
By "flat tax" do you mean retaining a graduated tax rate with elimination of deductions and credits, or literally all income levels pay an identical percentage?
Level percentage against all pay scales. Now I would also agree that below a certain income level shouldn't pay anything at all, so it wouldn't cover everyone.

kbluck said:
Do you agree that converting to a truly flat taxation scheme while maintaining revenue neutrality will as a practical matter shift additional tax burden down onto the middle class, more or less defined as the middle three quintiles? Do you think that's a good thing?

--- Kevin
I'm not sure if I fully agree with that premise, but I wouldn't object to a flat tax if that was the end result. I think a flat tax, with no deductions/exemptions, would reduce everyones taxes. The flat tax should probably also apply to businesses, but I'd haven't really thought about that side of it yet.

Brian
 

kbluck

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Well, I guess we'll just have to wait and see whether Bush takes the bull by the horns in his next term. I say not, quite the contrary. I think Bush, given the luxury of a friendly Congress, will accomodate every Republican member special-interest whim in exchange for passing his own pet programs, which as history has already shown are not cheap.

Let's check back in 2008 and compare notes, eh?

Its been a fascinating discussion, but now I have to get to work on a retaining wall. Thanks for the debate.

--- Kevin
 

Scully

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kbluck said:
Well, I guess we'll just have to wait and see whether Bush takes the bull by the horns in his next term. I say not, quite the contrary. I think Bush, given the luxury of a friendly Congress, will accomodate every Republican member special-interest whim in exchange for passing his own pet programs, which as history has already shown are not cheap.
This is my biggest concern right now. I hope I'm right on this one, but we'll see.


kbluck said:
Its been a fascinating discussion, but now I have to get to work on a retaining wall. Thanks for the debate.
--- Kevin
Always a pleasure. Good luck with the wall.

Brian
 

purdyrc

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kbluck said:
By "flat tax" do you mean retaining a graduated tax rate with elimination of deductions and credits, or literally all income levels pay an identical percentage?

Do you agree that converting to a truly flat taxation scheme while maintaining revenue neutrality will as a practical matter shift additional tax burden down onto the middle class, more or less defined as the middle three quintiles? Do you think that's a good thing?

--- Kevin
How about a flat tax where everyone pays the same rate (15%)?

- Rick
 

CPangracs

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purdyrc said:
How about a flat tax where everyone pays the same rate (15%)?

- Rick
I hope that includes the people making ANY income, and not just for certain income brackets! I would support a flat tax of 15% - this would make my tax time so easy.

;)
 

kbluck

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purdyrc said:
How about a flat tax where everyone pays the same rate (15%)?
Wow! You guys are harsh!

Under current tax law, the entire top quintile (roughly, households earning > $80,000) pays an effective rate of about 15%. You've just handed a massive tax increase to everybody in America earning < $80,000 per year. You've doubled the tax obligation of the fourth quintile (roughly 50k-80k) and more than quadrupled it for the median earners at about 40k. I won't even get into the lowest earners; the numbers are of Boston Tea Party oppressiveness.

On a positive note, you've awarded a significant tax cut to the top 5% (>150k) who will see their income taxes slashed by about 20%. And you boosted overall Federal revenues by about 50%. That will certainly close the deficit!

To maintain revenue neutrality, a flat rate of about 10% is about right. That still represents a tax hike on the lower 80% of Americans, though, just not quite so much; only about an 80% increase on the 50k-80k bracket. You've cut the taxes of the top 1% in half, though.

This is what I mean when I say that a true flat tax will shift much of the tax burden down onto the middle class. Is this really what you want?

--- Kevin
 
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The Doctor

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Let's get away from an income tax completely.

A national sales tax or VAT is preferable:

1) The ultra-rich (or drug dealers for that matter) tend to not have easily taxable incomes, but they do buy goods and services.

2) The IRS would no longer be poking its nose into our business.

3) It would not have to be regressive. Basic needs could be taxed at a lower rate than "luxuries". You Libs out there should love that aspect; the opportunity for social engineering could actually be increased.

4) By rewarding income and savings instead of borrowing and consumption - our individual savings rate and debt accumulation should actually improve.
 

Scully

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kbluck said:
To maintain revenue neutrality, a flat rate of about 10% is about right. That still represents a tax hike on the lower 80% of Americans, though, just not quite so much; only about an 80% increase on the 50k-80k bracket. You've cut the taxes of the top 1% in half, though.
I'm not so sure your math is correct here Kevin, I fall into the 50k-80k bracket and even after all the deductions I get (2 kids, etc.) I'm still paying more than 10% of my salary to the federal government as income tax. Of course, this is just my experience and I have no numbers but my own to back it up.

kbluck said:
This is what I mean when I say that a true flat tax will shift much of the tax burden down onto the middle class. Is this really what you want?
--- Kevin
Yes...that is "tax fairness" as Democrats like to say.

Take care,
Brian
 

Scully

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The Doctor said:
Let's get away from an income tax completely.

A national sales tax or VAT is preferable:

1) The ultra-rich (or drug dealers for that matter) tend to not have easily taxable incomes, but they do buy goods and services.

2) The IRS would no longer be poking its nose into our business.

3) It would not have to be regressive. Basic needs could be taxed at a lower rate than "luxuries". You Libs out there should love that aspect; the opportunity for social engineering could actually be increased.

4) By rewarding income and savings instead of borrowing and consumption - our individual savings rate and debt accumulation should actually improve.
This is an interesting idea, but I haven't really looked at it too closely. This would probably be better than our current system.

Brian
 

purdyrc

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kbluck said:
Wow! You guys are harsh!

Under current tax law, the entire top quintile (roughly, households earning > $80,000) pays an effective rate of about 15%. You've just handed a massive tax increase to everybody in America earning < $80,000 per year. You've doubled the tax obligation of the fourth quintile (roughly 50k-80k) and more than quadrupled it for the median earners at about 40k. I won't even get into the lowest earners; the numbers are of Boston Tea Party oppressiveness.

On a positive note, you've awarded a significant tax cut to the top 5% (>150k) who will see their income taxes slashed by about 20%. And you boosted overall Federal revenues by about 50%. That will certainly close the deficit!

To maintain revenue neutrality, a flat rate of about 10% is about right. That still represents a tax hike on the lower 80% of Americans, though, just not quite so much; only about an 80% increase on the 50k-80k bracket. You've cut the taxes of the top 1% in half, though.

This is what I mean when I say that a true flat tax will shift much of the tax burden down onto the middle class. Is this really what you want?

--- Kevin
I pulled the 15% out of the air. I'm in the 18% bracket myself, so I'm not sure how moving me to the 15% would be an increase.

As for the top earners in the country, I was under the impression that these people routinely paid anywhere between 1 and 5 percent in income tax each year, not 20%.

- Rick
 

The Doctor

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Rick,

There's a difference between the "ultra rich" and top wage earners. Theresa Heinz Kerry paid a 12.5% effective tax rate; I paid 23%...I'll bet you that dollar you owe me, she made a lot more money than me. ;)

An income tax will always hit the upper middle class far harder than it hits the "fat cats". The ultra-rich can afford to be Democrats.

Doc
 

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The Doctor said:
Rick,

There's a difference between the "ultra rich" and top wage earners. Theresa Heinz Kerry paid a 12.5% effective tax rate; I paid 23%...I'll bet you that dollar you owe me, she made a lot more money than me. ;)

An income tax will always hit the upper middle class far harder than it hits the "fat cats". The ultra-rich can afford to be Democrats.

Doc
But isn't that a problem of the many holes in the rules?
And at least here in Germany these are set up by the more right wing parties and these have ideas similar to waht I know of the republican party's...
 

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Scully said:
I'm not so sure your math is correct here Kevin, I fall into the 50k-80k bracket and even after all the deductions I get (2 kids, etc.) I'm still paying more than 10% of my salary to the federal government as income tax.
Of course I can't speak to individual situations such as yours. However, it is a fact that the 4th quintile of which you are a part, collectively speaking, paid an effective income tax rate of around 7%. You can verify this with that link to the CBO you yourself posted. If you are paying more, it could be because you happen to fall near the top of the quintile, or it could be that you don't happen to fall into some of the "priveleged" categories that get the good deductions, or some other combination thereof.

Note that this only speaks to the individual income tax. Overall Federal taxation, including FICA and whatnot, adds up to a bit under 20% for your quintile. Yes! That's right! Most people of your income level and lower actually do *not* pay the bulk of their Federal tax burden to the income tax, but rather FICA and other such "flat" taxes.

--- Kevin
 

kbluck

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purdyrc said:
I pulled the 15% out of the air. I'm in the 18% bracket myself, so I'm not sure how moving me to the 15% would be an increase.
Don't confuse your marginal tax rate (also known as "tax bracket") with your effective tax rate after exemptions, deductions, and credits.

--- Kevin
 

The Doctor

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mr_clark said:
But isn't that a problem of the many holes in the rules?
And at least here in Germany these are set up by the more right wing parties and these have ideas similar to waht I know of the republican party's...
There are many loopholes in the tax code - placed there by both parties. We would be far better off with a flatter, less 'loopholed' system. Unfotunately, for every loophole there is a constituency.
 

kbluck

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The Doctor said:
Let's get away from an income tax completely.

A national sales tax or VAT is preferable:

3) It would not have to be regressive. Basic needs could be taxed at a lower rate than "luxuries". You Libs out there should love that aspect; the opportunity for social engineering could actually be increased.

It would of course depend entirely on how it was structured.

The poor tend to spend higher percentages of their income. On average, the poor end spends about 110% of their annual income, while the rich typically spend <80%. Not counting Mike Tyson, of course.

Also, the poor tend to spend on goods, while the rich tend to buy services, which most often are not taxable under current rules.

Lastly, no matter how you structure it, you are effectively levying a tax on millions of families that are right now too poor to pay income tax.

Any plan has winners and losers. In general, flat tax schemes, including sales taxes which are just a variation of flat tax, the losers tend to be the lower and middle classes.

Here's an idea I got, IIRC, from Ayn Rand's associate Nathaniel Branden: a credit tax. Levy a tax on all forms of lending and credit. This serves several purposes. It is a completely voluntary tax; nobody *has* to borrow money. The ability to borrow money is entirely attributable to the government's rule of law, since without a strong court system to enforce contracts nobody could safely extend credit. The rich tend to borrow much more than the poor. Although the tax is voluntary, few are likely to stop borrowing, because certain things like running businesses and buying houses would be nearly impossible without credit. And, of course, it might put a damper on American's continuing untenable assumption of consumer debt.

I think its a fairer idea than flat income tax or sales tax.

Realistically, though, I think the baby is divided most fairly with a graduated progressive income tax with absolutely no exemptions, deductions, or credits. It would probably require a constitutional amendment to enforce that, though.

--- Kevin
 

The Doctor

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kbluck said:
Don't confuse your marginal tax rate (also known as "tax bracket") with your effective tax rate after exemptions, deductions, and credits.

--- Kevin
I'm not - my effective income tax rate is 23%, my marginal is 33% and I'm not rich, nor do I have beau coup priveledged deductions. I'm just a typical 45 yr. old white collar professional!
 

purdyrc

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kbluck said:
Don't confuse your marginal tax rate (also known as "tax bracket") with your effective tax rate after exemptions, deductions, and credits.

--- Kevin
That's probably what I'm doing. But I like FICA and Medicare taxes and think that they are worthwhile. I guess what I'm arguing for is a flat tax (including all of these Federal taxes as well as income tax) that equals 15%. This will increase revenue and actually lower the tax rate for me and most other Americans won't it?

- Rick
 

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purdyrc said:
I guess what I'm arguing for is a flat tax (including all of these Federal taxes as well as income tax) that equals 15%. This will increase revenue and actually lower the tax rate for me and most other Americans won't it?

- Rick
I don't know your exact situation, so I can't say what it will do to you. I want to emphasize that every individual situation is different, and nothing I've said here may apply to specific individuals. I can only speak meaningfully about the collective impact on selected groups of millions of households.

If you're proposing the elimination of FICA and Medicare tax along with the existing income tax, then you will be cutting taxes for most American households greater than the median of about $45k and raising them on most households below that. However, you will also be cutting total revenues by about 25%, roughly doubling the current budget deficit. You'll need a flat tax rate in the 18-20% range to reach revenue-neutrality if you get rid of FICA/Medicare. That would raise overall taxes on about 70% of American households.

--- Kevin
 

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Or we could just start cutting spending, and not worry about overhauling the system for awhile. Bush was very close to losing my vote over his spend now, pay later...
 
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