Across the board tax rate...fair for all?

[LSUmiss]

I will admit I have not read through all the threads. While I can definitely see both sides, I wonder if by taxing higher earners more we are in essence saying as a society that mediocrity is all we should strive for. It is almost like people are punished for trying to earn more money. No it’s not fair. Life isn’t fair. But aren’t we a capitalist society where those of us in the US are lucky enough to have the freedom to try to change our circumstances if we don’t like them?

I am no way saying we shouldn’t all help out those less fortunate. Of course we should. But because someone succeeds, should we also punish them for their success?

In regards to the original post, yes it is a shame that one person has only $18,000 to live on after paying that flat tax. That is terrible. But there is nothing that prohibits that person from having the freedom to try to change their circumstance. I’m not saying it is easy and may not even be possible for them. What I am saying is that they at least have the freedom to try and change it.

I guess I just don’t think one person should be punished for their financial success because another person has not had the same success. If that’s the case, we would need to rethink our entire economic system and make it based more on a socialist model where everyone gets an equal piece of the cake. But that’s not the foundation of which the United States was found upon and succeeded upon.

So I guess I must be ok with a flat tax after all..

Not everyone (if not most) who are extremely wealthy are not that way b/c they just “try to earn money”. A lot of ppl just get lucky & others aren’t as fortunate. I also think it’s very misinformed to think that “nothing prohibits ppl from changing their circumstances”. There are SO many things that prohibit this...lack of opportunities and access to education being some of the very basic.

 

[LSUmiss]

Well said, everyone wants their Social Security, Medicare and most want a big military, more prisons and more border patrol. Someone has to pay for it. A big tax bill at the end of the year just means I had a good year. When you look at what you actually pay vs what your total income was before deductions, its seems pretty fair and is a lot lower than most modern countries

This! The money we pay in taxes mostly goes to things most of us want & use...roads, military, etc. But, the distraction technique is to make us believe that it only gets used to fund programs that only the lower class use. That’s actually a small portion of the money we pay.

 

[barkley]

This touches on a point I wanted to make. Aside from the low earners paying a higher percentage of their income for basic needs, they pay a higher percentage of their income on TAXES outside of income taxes.

Taxes on alcohol, cigarettes, ammunition, gasoline, food, personal property, real estate, auto licensing, hotel stays, clothing, etc, etc, etc all consume a greater percentage of income for low earners compared to high earners. And any “fair” method of income tax needs to account for that fact.

imho-alcohol, cigarettes, ammunition and hotel stays are all 'luxuries' that people can make personal choices on spending their income on or not. while clothing is taxed in Washington (since you quoted a post on it in your post) there is effectively no (non business) personal property tax here (all household goods and personal effects are exempt), food in the form of groceries are also not taxed (if you use your personal choice to purchase prepared foods or sodas then it is taxed). that leaves gasoline and real estate as the only taxed items on your list.

we are in no way a high income household so we have to make responsible choices on non essential purchases. as far as our essentials we took into consideration all the costs associated with owning a car when we purchased-mpg to lower gas expenses, type to keep vehical registration (and insurance) lower. I know plenty of people who opt for public transportation to save on these costs-their personal choice. I don't expect someone with a higher income to pay more in taxes to lower my cost of living in order for me to purchase alcohol, cigarettes, ammo or go on a vacation and I don't think I should be paying more to supplement someone else's personal choices.

Even in the top bracket, you're keeping the majority of the fruits of your additional labor. I suppose, if those people don't like it, they also have the freedom to change their economic circumstance and see what life is like in the tax brackets they feel aren't being punished... but I don't see anyone rushing to do that!

we were by no means in anything near to a top bracket (upper mid-end) but we chose several years ago to trade higher income for a lower cost of living, and MANY of our neighbors are also previously higher earning professionals from other states/areas within our state who when they ran the numbers found that they could earn less but net more by virtue of living outside higher cost areas.

 

[Gumbo4x4]

imho-alcohol, cigarettes, ammunition and hotel stays are all 'luxuries' that people can make personal choices on spending their income on or not. while clothing is taxed in Washington (since you quoted a post on it in your post) there is effectively no (non business) personal property tax here (all household goods and personal effects are exempt), food in the form of groceries are also not taxed (if you use your personal choice to purchase prepared foods or sodas then it is taxed). that leaves gasoline and real estate as the only taxed items on your list.

we are in no way a high income household so we have to make responsible choices on non essential purchases. as far as our essentials we took into consideration all the costs associated with owning a car when we purchased-mpg to lower gas expenses, type to keep vehical registration (and insurance) lower. I know plenty of people who opt for public transportation to save on these costs-their personal choice. I don't expect someone with a higher income to pay more in taxes to lower my cost of living in order for me to purchase alcohol, cigarettes, ammo or go on a vacation and I don't think I should be paying more to supplement someone else's personal choices.



we were by no means in anything near to a top bracket (upper mid-end) but we chose several years ago to trade higher income for a lower cost of living, and MANY of our neighbors are also previously higher earning professionals from other states/areas within our state who when they ran the numbers found that they could earn less but net more by virtue of living outside higher cost areas.

The problem with your rebuttal was glossing over the “etc, etc, etc”. And, the fact remains low earners expend a higher percentage of their income on “other taxes” than do higher earners. And if you expect everyone expend the same percent of their income on TOTAL taxes, the only way to make that work is to lower income taxes on those at the lower end.

 

[barkley]

The problem with your rebuttal was glossing over the “etc, etc, etc”. And, the fact remains low earners expend a higher percentage of their income on “other taxes” than do higher earners. And if you expect everyone expend the same percent of their income on TOTAL taxes, the only way to make that work is to lower income taxes on those at the lower end.

I guess i'm confused-what IS the 'etc, etc, etc' of 'other taxes' that lower income earners are required to pay based virtually on their lower income? yes there are tax breaks higher income earners can benefit from but there are also tax breaks lower income earners qualify for that are income capped. max EITC for a household with 2 kids this year is $5572. eligibility is capped at $44, 658.00 in earnings. minimum wage here is comparatively high vs. other states at $11.50 an hour so that means a f/t single income minimum wage earner would earn just less than $30,000 over a year. let's say it's a married couple with 2 kids. while I understand that it's in no way, shape or form enough for a family of 4 to get by on-the numbers are that of their aprox. $30,000 gross their 2017 federal taxes liability would be (just using standard deductions) right at about $101-less than 1% but, then they would qualify for about $4332 under EITC so their taxation goes from less than 1% to more than negative 14%.

simple math will always have, taxes or not, households/individuals with differing incomes who purchase identical items/have identical expenses paying different percentages of their incomes.

 

[Gumbo4x4]

I guess i'm confused-what IS the 'etc, etc, etc' of 'other taxes' that lower income earners are required to pay based virtually on their lower income? yes there are tax breaks higher income earners can benefit from but there are also tax breaks lower income earners qualify for that are income capped. max EITC for a household with 2 kids this year is $5572. eligibility is capped at $44, 658.00 in earnings. minimum wage here is comparatively high vs. other states at $11.50 an hour so that means a f/t single income minimum wage earner would earn just less than $30,000 over a year. let's say it's a married couple with 2 kids. while I understand that it's in no way, shape or form enough for a family of 4 to get by on-the numbers are that of their aprox. $30,000 gross their 2017 federal taxes liability would be (just using standard deductions) right at about $101-less than 1% but, then they would qualify for about $4332 under EITC so their taxation goes from less than 1% to more than negative 14%.

simple math will always have, taxes or not, households/individuals with differing incomes who purchase identical items/have identical expenses paying different percentages of their incomes.

Their status doesn’t cause them to PAY etc, etc, etc.

Their status causes etc, etc, etc to be a greater percentage of their income than higher earners.

And this isn’t an argument on current taxes, it’s based on a hypothetical flat tax. BTW, $11.50/hour is more like $23,000/year, not $30,000.

 

[barkley]

Their status doesn’t cause them to PAY etc, etc, etc.

Their status causes etc, etc, etc to be a greater percentage of their income than higher earners.

And this isn’t an argument on current taxes, it’s based on a hypothetical flat tax. BTW, $11.50/hour is more like $23,000/year, not $30,000.

sorry-addition error on the salary.

I guess my position is a true flat tax impacts taxpayers disproportionately even though the tax is proportionate. For example, let's assume a tax rate of 10%. For a household making $1,000,000, that 10% would represent $100,000 in tax. For a household making $10,000, that 10% would represent $1,000 in tax. The baseline cost of living does not change as income changes: with respect to a gallon of milk or gas, for example, the cost of that milk or gas doesn't cost less for the poor than for the wealthy. If basic expenses like food and fuel are relatively inelastic, while a flat tax may be proportionate, the effect of the tax may be disproportionate.

 

[Boardwalk Jedi]

Someone making above a certain amount doesn't have some of those options either.
Get rid of all deductions and credits for above a certain income threshold, like the pp said $20K and then do a flat tax.
But, it will never happen it is just way too complicated and gov't will never reign in their spending.

What "out of control spending" are you talking about?

 

[Mackenzie Click-Mickelson]

sorry-addition error on the salary.

I guess my position is a true flat tax impacts taxpayers disproportionately even though the tax is proportionate. For example, let's assume a tax rate of 10%. For a household making $1,000,000, that 10% would represent $100,000 in tax. For a household making $10,000, that 10% would represent $1,000 in tax. The baseline cost of living does not change as income changes: with respect to a gallon of milk or gas, for example, the cost of that milk or gas doesn't cost less for the poor than for the wealthy. If basic expenses like food and fuel are relatively inelastic, while a flat tax may be proportionate, the effect of the tax may be disproportionate.

The point being made, or at least how my mind thinks about the situation, is not in the amount the tax one would pay with the 10% but rather how much that flat tax affects one on a basic and to an extent more than basic level.

The less money you are left with after taxes the more simple things like groceries start to eat into that money left over. The more things like housing start to eat into that or insurance costs, etc.

If you look at your example someone who would have $9,000 to buy even the basic grocery like milk (and yes sales tax is added in many parts of the country, sometimes a lower tax, sometimes the same tax as everything else) while the other person is left with $900,000 to do the same thing.

It seems like for you a flat tax would mean a disadvantage to the wealthier while some are viewing a flat tax as a disadvantage to the lower income and also the middle class (just moreso to the lower income). To me that's partially why a flat tax isn't the answer if one is looking to overhaul the system.

 

[barkley]

It seems like for you a flat tax would mean a disadvantage to the wealthier while some are viewing a flat tax as a disadvantage to the lower income and also the middle class (just moreso to the lower income). To me that's partially why a flat tax isn't the answer if one is looking to overhaul the system.

I just don't see it as a cure all to lower income households and the percentage of what they spend for certain items vs. higher income households.

granted, it's been several years since I administered social service programs but I saw SO MANY get tried out, so much money spent and it always came back to the simple math that a low income doesn't go as far as a higher income. we tried programs that exempted every single penny of what was received through earned income from local, state and federal taxes, provided paid in full childcare, paid for transportation, did housing and utility assistance that capped their expenditures to 20% of their household income, continued to provide free medical and food assistance... but when it came to running the numbers a low income earner still was spending a higher percentage of their earnings vs. higher earners because we had no control over baseline cost of living (clothes, additional food b/c food stamps were never meant to cover entire need, toiletries...). unless the lower income earner could increase their earnings the minute we started pulling back on subsidies they were in the negative.

I don't know what the solution is but I don't think that it benefits a low income earner to tax them at a flat rate vs. the current system that does exempt a large percentage of their income and then provides refundable eitc (which many opt to get in the form of 'advanced eitc' so that it acts as a monthly supplement to their wages).

 

[Mackenzie Click-Mickelson]

I just don't see it as a cure all to lower income households and the percentage of what they spend for certain items vs. higher income households.

granted, it's been several years since I administered social service programs but I saw SO MANY get tried out, so much money spent and it always came back to the simple math that a low income doesn't go as far as a higher income. we tried programs that exempted every single penny of what was received through earned income from local, state and federal taxes, provided paid in full childcare, paid for transportation, did housing and utility assistance that capped their expenditures to 20% of their household income, continued to provide free medical and food assistance... but when it came to running the numbers a low income earner still was spending a higher percentage of their earnings vs. higher earners because we had no control over baseline cost of living (clothes, additional food b/c food stamps were never meant to cover entire need, toiletries...). unless the lower income earner could increase their earnings the minute we started pulling back on subsidies they were in the negative.

I don't know what the solution is but I don't think that it benefits a low income earner to tax them at a flat rate vs. the current system that does exempt a large percentage of their income and then provides refundable eitc (which many opt to get in the form of 'advanced eitc' so that it acts as a monthly supplement to their wages).

Ok now I'm confused.

PP and I as well were already saying a flax tax wasn't what we are for because of the potential impact of expenses...but you're saying the same thing above that you're not for it. Soooo I'm confused what you were commenting about then when you were talking to the other poster and your subsequent comments?

 

[barkley]

Ok now I'm confused.

PP and I as well were already saying a flax tax wasn't what we are for because of the potential impact of expenses...but you're saying the same thing above that you're not for it. Soooo I'm confused what you were commenting about then when you were talking to the other poster and your subsequent comments?

in my first post I said I didn't understand the 'etc' taxation concept but tried (though my math was a bit off) to show that a true flat income tax (vs what is in place at the fed level now) causes a low income taxpayer to pay more (10% vs 1% and loss of eitc) and they will still pay a higher percentage of their income for items vs identical purchases in a higher income home, in my second I was responding to what my opinion on a 'hypothetical flat tax' is-same position, it doesn't change the cost of living so taking more from the higher earner doesn't advantage the lower earner. in my final I restated that I don't see it as a cure all b/c I've worked in programs where low income were entirely exempted from taxation (save the sales tax in their regions) and they still paid higher percentages of their incomes vs. higher earners for identical categories of need.

 

[manning]

Way back (the 50s) my dad had a good paying job. The tax brackets were different and got into very high rates. Dad figured out how much he needed to make for us to be comfortable. When he reached that point he started to turn down overtime. He said why should he work way more for the government than himself.

If you could get those pigs in DC to become (fast chance) fiscally responsible we cold get to a flat tax.

 

[barkley]

Way back (the 50s) my dad had a good paying job. The tax brackets were different and got into very high rates. Dad figured out how much he needed to make for us to be comfortable. When he reached that point he started to turn down overtime. He said why should he work way more for the government than himself.

I did a similar thing in the 90's. my employer offered a deal for 'voluntary time off'. we could reduce our hours and get a prorated salary but would continue to receive all service credit and benefits based on our f/t salary (so full vacation/sick/floating time off and full contributions on their part to our pension plan). I mentioned it to my cpa when she was doing our taxes that year, she ran the numbers and it ended up moving our household into a lower tax bracket so the lost earnings were almost entirely recouped through tax savings. we actually ended up a good chunk of change ahead though b/c I got my schedule set for 8-2 so I no longer had to pay for afterschool care for my 2 kids.

 

[Colleen27]

we are in no way a high income household so we have to make responsible choices on non essential purchases. as far as our essentials we took into consideration all the costs associated with owning a car when we purchased-mpg to lower gas expenses, type to keep vehical registration (and insurance) lower. I know plenty of people who opt for public transportation to save on these costs-their personal choice. I don't expect someone with a higher income to pay more in taxes to lower my cost of living in order for me to purchase alcohol, cigarettes, ammo or go on a vacation and I don't think I should be paying more to supplement someone else's personal choices.

we were by no means in anything near to a top bracket (upper mid-end) but we chose several years ago to trade higher income for a lower cost of living, and MANY of our neighbors are also previously higher earning professionals from other states/areas within our state who when they ran the numbers found that they could earn less but net more by virtue of living outside higher cost areas.

For the vast majority of this country, public transit isn't sufficient to rely on as a sole/primary means of transportation. And in the places where it is, the cost of living is generally much higher than in places where you need a car to hold a job, so it is a trade-off that doesn't necessarily leave one coming out ahead. So transportation taxes aren't a clear-cut choice the way sin and hotel taxes are.

I can understand moving to a lower cost of living area to improve the standard of living, but that is about far more than income tax... In fact, most of the people I know who have done so were driven more by state and local taxes and housing costs.

Way back (the 50s) my dad had a good paying job. The tax brackets were different and got into very high rates. Dad figured out how much he needed to make for us to be comfortable. When he reached that point he started to turn down overtime. He said why should he work way more for the government than himself.

If you could get those pigs in DC to become (fast chance) fiscally responsible we cold get to a flat tax.

I could see that, in the 50s when the top bracket was 90%. It doesn't make sense to work overtime and only keep a dime of every dollar. But with a top rate in the 30s for decades now, I don't think the lessons of the 50s apply.

As far as reining in spending to support a flat tax, that's another angle that makes it hard on lower income Americans because fiscal responsibility generally emphasizes cutting programs that are particularly critical to quality of life and upward mobility for those at the bottom of the income scale (not just welfare but education funding, college aid, environmental programs, health outreach, etc.). So in addition to a big new tax bill, many would also be hit with additional expenses due to spending cuts.

 

[lifesavacation]

I did a similar thing in the 90's. my employer offered a deal for 'voluntary time off'. we could reduce our hours and get a prorated salary but would continue to receive all service credit and benefits based on our f/t salary (so full vacation/sick/floating time off and full contributions on their part to our pension plan). I mentioned it to my cpa when she was doing our taxes that year, she ran the numbers and it ended up moving our household into a lower tax bracket so the lost earnings were almost entirely recouped through tax savings. we actually ended up a good chunk of change ahead though b/c I got my schedule set for 8-2 so I no longer had to pay for afterschool care for my 2 kids.

This makes total sense. I’m constantly running the numbers on the “real” cost of things.

I once gave an employee (single mom of 4) a raise and she asked to either turn it down or lower her hours so she could still qualify for govt assistance. In that case, it doesn’t make much sense to me, though I don’t judge her when she’s just trying to take care of her family. I would want to keep moving up with periodic raises rather than limit myself.

 

[Colleen27]

I once gave an employee (single mom of 4) a raise and she asked to either turn it down or lower her hours so she could still qualify for govt assistance. In that case, it doesn’t make much sense to me, though I don’t judge her when she’s just trying to take care of her family. I would want to keep moving up with periodic raises rather than limit myself.

She was probably concerned about medical or daycare assistance. Cash and food phase out so you never lose more than you've gained in earnings, but medical has hard cutoffs and I believe childcare does as well. I've known a few families in that position with health coverage over the years, where a raise or promotion would actually cost them hundreds of dollars a month plus hundreds more in deductibles throughout the year because it put them over the cutoff and their employer-sponsored insurance cost much, much more than the new wage added to their bottom line. Or worse, the raise put them over the cutoff but the job didn't offer benefits. In some cases, it might make sense to limit oneself for a period of time (until those kids start school, for example, so the money being spent on daycare can be used for insurance premiums instead).

 

[SteveH]

Everyone should read "The Fair Tax Book" by Neal Boortz. It was written years ago, and it is a consumption tax that could work. Everyone would get a prebate check for basic necessities each month.

I really miss Neal Boortz on the radio, but I do not like the "Fair Tax" as it would create an even bigger bureaucracy then the IRS now. Can you imagine trying to track every American household in order to send them a check every single month? All the people that change addresses, get married, get divorced, have kids, move out, talk about a nightmare. That's roughly 127 million checks every single month, that's just not manageable or sustainable. The IRS would look small by comparison.

 

[rickybobby]

I really miss Neal Boortz on the radio, but I do not like the "Fair Tax" as it would create an even bigger bureaucracy then the IRS now. Can you imagine trying to track every American household in order to send them a check every single month? All the people that change addresses, get married, get divorced, have kids, move out, talk about a nightmare. That's roughly 127 million checks every single month, that's just not manageable or sustainable. The IRS would look small by comparison.

If Neal was still around, he could most likely give you an answer that would satisfy you on how this could be done.
He does still do a daily blurb each morning on WSB radio in Atlanta. Still has that sharp wit and common sense.

 

[pooh'smate]

She was probably concerned about medical or daycare assistance. Cash and food phase out so you never lose more than you've gained in earnings, but medical has hard cutoffs and I believe childcare does as well. I've known a few families in that position with health coverage over the years, where a raise or promotion would actually cost them hundreds of dollars a month plus hundreds more in deductibles throughout the year because it put them over the cutoff and their employer-sponsored insurance cost much, much more than the new wage added to their bottom line. Or worse, the raise put them over the cutoff but the job didn't offer benefits. In some cases, it might make sense to limit oneself for a period of time (until those kids start school, for example, so the money being spent on daycare can be used for insurance premiums instead).

This true. One of my friends is a single mom and she had to turn a promotion because she would have lost her child care and medical for her 2 children and the raise she would have gotten was not enough to cover what she would have had to pay. She was really disappointed but she could not have lived off the salary she would have left after she paid daycare and medical.