@engineer,
A simple "flat tax" alone would tilt the system even greater, yes. However, there have been several varying ideas on how we should incoporate a flat tax system to include only one tax exemption, a family expenses exemption. A recent proposal has said that a family a four would have an exemption of $30,000 due to the cost of living, which is a higher exemption than these people are currently receiving. The flat tax would also close exemptions that the rich often use, such as deductions for charitable donations. Some proposals also include extending the flat tax to include all forms of income and not only wages. That would include capital gains and inheritance. A flat tax system that operated as such would "level the playing field." Over 40 foriegn countries have adopted this tax policy and have experienced tremendous financial gains, increased nominal GDP, and increased government revenue from income tax. This sounds like a better policy than what we currently have.
But if the flat tax is not something you would support, a friend of mine discussed completely removing the income tax and IRS and only having a consumer tax, in which all purchased goods and services would incur a 20ish% consumer tax. Things may cost more to purchase but everyone would have 10-38% of their paychecks. His argument for this is that there could never be tax evasion as tax would be collected from each business transaction and essentially, we the consumer, would dictate how much we pay in taxes with regards to how much we choose to spend. What are your thoughts?
@Phoenix32890,
The "small sum on dividends from investments" was her profit. It is subject to capital gains tax even though she held on to the investments rather than selling them. Obviously, you didn't do her taxes.
Quote:In the United States of America, individuals and corporations pay income tax on the net total of all their capital gains just as they do on other sorts of income. "Long term" capital gains are generally taxed at a preferential rate in comparison to ordinary income (26 U.S.C. ยง1(h)). The amount an investor is taxed depends on both his or her tax bracket, and the amount of time the investment was held before being sold. Short-term capital gains are taxed at the investor's ordinary income tax rate and are defined as investments held for a year or less before being sold. Long-term capital gains, which are gains on dispositions of assets held for more than one year, are taxed at a lower rate than short-term gains. In 2003, this rate was reduced to 15%, and to 5% for individuals in the lowest two income tax brackets. The reduced 15% tax rate on qualified dividends and long term capital gains, previously scheduled to expire in 2008, was extended through 2010 as a result of the Tax Increase Prevention and Reconciliation Act of 2005 signed into law by President George W. Bush. This was extended through 2012 in legislation passed by Congress and signed by President Barack Obama on Dec 17, 2010. (emphasis added)
Source
Dividends on investments are taxed as capital gains. Get over it.
@Phoenix32890,
Phoenix32890 wrote:
I assume that the reference was to INCOME taxes. After all paying sales taxes is optional, and not tied to income. If you don't buy it, you don't pay taxes on it. Food bought in the supermarket is not taxed.
Food bought here is taxed at a lower rate. Food bought in my mother's home state of Alabama is taxes at full rate (11%). It's also disingenuous to say buying things is optional. In any modern society people buy and sell items instead of making and growing everything themselves.
It's really convenient to focus on just income taxes when you want to bemoan the high taxes the rich pay. For most Americans, income tax is one of the smallest taxes they pay with social security and sales taxes being significantly higher. Any discussion of taxes that omits those is clearly going to come to some biased conclusions (which is why pundits like to omit them.)
Sales tax and excise taxes are regressive, too. The state and federal fuel taxes that people pay when they tank up so they can drive to and from work are the same for wealthy people as they are for poor people--and there is no good reason to assume that wealthy people burn more gas going to and from work than do poor people. Sales taxes are the same for both groups, too. A poor family which buys a washing machine contributes to the economy as much as a wealthy family does--it is unlikely that the wealthy family is going to buy more than one washing machine. Yet the sales tax paid on a durable good such as a washing machine is the same for both families, but it represents a far greater proportion of the disposable income of a poor family than it does for a wealthy one.
@Phoenix32890,
Old money usually doesn't buy new cars (you lose 40% to 60% of the purchase price just by driving it off the lot). When they buy used cars, they're going to be looking for something with a prospect of long life--so no compacts, no sports cars, and very likely no American made cars, unless they can get it really, really cheap.
Maseratis are purchased by people who want a status symbol, not a car.
A consumption tax is the better way to fund government services
@Phoenix32890,
My father's family are (were) old money. Even if old money buys new, they do as you say--they buy cars which are both high in potential resale value and which have a record of a high reliability over the long term.
@IRFRANK,
IRFRANK wrote:
I really have a hard time understanding the tea party. Today I was driving down the interstate and passed a fairly new RV towing a full size pickup truck. The truck was flying a large 'Don't tread on me' flag. Driving down the govt built interstate in a vehicle that gets 8 mpg complaining about paying taxes. It takes a lot of nerve. Life is hard for those tea partners.
I guess most others can't understand them anymore either.
http://www.rasmussenreports.com/public_content/politics/general_politics/january_2013/just_8_now_say_they_are_tea_party_members
Quote:Monday, January 07, 2013
Views of the Tea Party movement are at their lowest point ever, with voters for the first time evenly divided when asked to match the views of the average Tea Party member against those of the average member of Congress. Only eight percent (8%) now say they are members of the Tea Party, down from a high of 24% in April 2010 just after passage of the national health care law.
Cycloptichorn
I am old family no money.
@Phoenix32890,
Setanta is correct about the taxes on your mom's dividends. However, it may well be that your mom had other deductions and tax credits (earned income tax credit?) that wiped out the relatively small capital gains tax on her dividends.
@Phoenix32890,
Phoenix32890 wrote:
Quote: The reduced 15% tax rate on qualified dividends and long term capital gains, previously scheduled to expire in 2008, was extended through 2010 as a result of the Tax Increase Prevention and Reconciliation Act of 2005 signed into law by President George W. Bush. This was extended through 2012 in legislation passed by Congress and signed by President Barack Obama on Dec 17, 2010. (emphasis added)
Set- I am not questioning that. What you are saying is absolutely right. What I am saying is that if a person's adjusted gross income, minus deductions and exemptions, are below a certain level, he pays no tax. There are many of the working poor, the non-working poor, as well as retired people, who fall into the category of not having to pay income tax.
No income tax, perhaps. They pay plenty in SS and Medicare taxes, sales taxes, property and other local and state taxes. There isn't a person in America today who completely escapes taxation.
Cycloptichorn
I believe spitfire made an important point earlier about the rising costs of government pension programs generally, whether for Social security, military pensions or those of civilian government employees (or the even richer pensions with which our legislators reward themselves.
An issue underlying all of our current arguments about whether we are taxing too much or too little or spending too much or too little, is the fact of our fast-changing demography. Our birth rates are falling and our population is ageing: the ratio of folks receiving pension benefits to those working and contributing, through their taxes, to paying for them is rising. This, plus, as some would argue, the enervating effects of excessive social welfare programs and inflexible labor regulation, is what is behing the unfolding crisis in Europe.
The U.S. has the same problems, though to lesser degrees. However recent trends indicate we are fast "catching up" with these diseases.
The basic facts of social safety nets, and all that attends them, is that the people are assured eneumerated benefits by their government without any attendant conditions that there will really be enough money to deliver on these promises. These are called "entitlements" and are quickly perceived as guarantees by their bebeficiaries without any explicit obligation on their (or anyone else's) part to pay for them.
As a result we are living with fairly inexprable projections of the economic unsustainability of both medicare and social security - their crises are about 15 and 25 years away respecively, and the corrections reqired to avoid these crises grow rapidly with each passing year of inaction. Most self-styled progressives call for increased taxes on "the rich" to pay for them. However, even the fairly high tax increrases advocated by the current Administration (and evaded in the fiscal cliff deal) fall very far short of the truly huge increases required to eliminated these predictable crises.
We appear to be paralyzed in a dilemma in which neither party acknowledges (or talks about) the whole problem, each preferring to focus on some self-affirming part of it. Democrats talk about preserving our existing entitlements and sustaining "necessary" spending, when they know that this can't be done. Republicans talk about entitlement reform while evading the real truths behing what that means.
The lessons of history suggest that this will be resolved by a calamity sufficient to cause everyone to lower their expectations - i.e. to become desperate enough to "accept" far less than they have. It's a very painful process, and we can see it unfolding now in Greece, and the process is well known ... denial, anger, bargainning and finally the loss of hope and acceptance.
The real truth behind your 'progressive' tax plan is that it soon runs out of other peoples money.
This shortfall is followed by severe cut backs and then the dumbmasses begin to riot in the streets.
Democracy is mob rule and it sucks!
