I’ve read through every post, now let me put some numbers with your arguments to help you all: The U.S. had 2.1 trillion in revenue and 3.5 trillion in expenses for the 2009 budget. This is the problem I have with politics; the truth is the victim. Every President since LBJ has ran a total budget deficit for every term they were in Office except Clinton. Democrats spend on social/other programs creating deficits; Republicans cut taxes so much that they don’t have enough to cover expenses creating deficits. What makes you think a Republican is going to change anything? We need real change, we need a constitutional amendment forcing each Administration to Balance their budget over a period of 2 years.
starbuk Wrote: ------------------------------------------------------- > here is the real problem you treehuggers: > > something like 45% of people PAY ZERO TAXES. I think what you’re referring to is one portion (fed income tax) of the total tax bill (also social security, medicare, state taxes and fees, property taxes, sales tax, cigarette tax, gas tax, etc). If you look at the total tax bill (not just one portion), everyone’s total rate should be something in the neighborhood of 15-25%. We already have a relatively flat tax overall, because although the fed income tax is fairly progressive, many of the other taxes you pay are regressive.
naturallight Wrote: ------------------------------------------------------- > starbuk Wrote: > -------------------------------------------------- > ----- > > here is the real problem you treehuggers: > > > > something like 45% of people PAY ZERO TAXES. > > > I think what you’re referring to is one portion > (fed income tax) of the total tax bill (also > social security, medicare, state taxes and fees, > property taxes, sales tax, cigarette tax, gas tax, > etc). > > If you look at the total tax bill (not just one > portion), everyone’s total rate should be > something in the neighborhood of 15-25%. We > already have a relatively flat tax overall, > because although the fed income tax is fairly > progressive, many of the other taxes you pay are > regressive. I would save my breath…its pointless arguing with GlenBeck fanboys.
naturallight Wrote: ------------------------------------------------------- > starbuk Wrote: > -------------------------------------------------- > ----- > > here is the real problem you treehuggers: > > > > something like 45% of people PAY ZERO TAXES. > > > I think what you’re referring to is one portion > (fed income tax) of the total tax bill (also > social security, medicare, state taxes and fees, > property taxes, sales tax, cigarette tax, gas tax, > etc). > > If you look at the total tax bill (not just one > portion), everyone’s total rate should be > something in the neighborhood of 15-25%. We > already have a relatively flat tax overall, > because although the fed income tax is fairly > progressive, many of the other taxes you pay are > regressive. I would save my breath…its pointless arguing with GlenBeck fanboys.
This was just too good… Read it like 5 seconds ago in my nightly reading: CFA Level III Curriculum, Volume 3, Reading 23, Page 75- “According to economic theory, taxes distort economic activity by reducing the equilibrium quantities of goods and services exchanged. A decrease in total societal income and efficiency is the cost of redistributing wealth to the least well-off. As a result, investors often look with skepticism on governments that impose high overall tax burdens. Sound tax policy involves simple, transparent, and rarely altered tax rates; low marginal tax rates; and a very broad tax base.” Not that this totally applies anymore to where this thread has wandered. But I thought it was a funny coincidence that it would be in my reading tonight.
I think that the idea of “investors often look with skepticism on governments that impose high overall tax burdens” is primarily a US-centric point of view. In other places I’ve lived, people don’t bitch and complain nearly as much. What I find amazing though, is that Bush managed to destroy the budget during an expansion… what was the plan going to be when a recession hit?
libor.plus1 Wrote: ------------------------------------------------------- > what > was the plan going to be when a recession hit? You mean his $787 billion bailout of banks, pushed by his henchman Paulson.
former trader Wrote: ------------------------------------------------------- > libor.plus1 Wrote: > -------------------------------------------------- > ----- > > what > > was the plan going to be when a recession hit? > > > You mean his $787 billion bailout of banks, pushed > by his henchman Paulson. Not that I agreed with the bank bailout, but at least the government is getting its money back from the majority of the institutions. I find it amazing that the 787bn stimulus pack hasn’t received more news.
Well, here’s what I’ll say about the tax rates–higher taxes definitely discourage the additional effort required to make more money, which hurts production. In 2010, I’ll be over the $200k mark, and part of me is incredibly discouraged by US tax law (not just tax rates) as the tax law is incredibly restrictive to US citizens. High taxes also encourage tax avoidance and tax evasion. As has been pointed out probably many times, in the early 1920s, the top marginal rate was cut from the 70% range down to the 20% range, and the reduction in tax evasion actually increased tax revenues to government. Tax law is so restrictive in the US (the IRS has literally thought of everything!) that I’ve contacted an offshore lawyer to discuss setting up overseas accounts to avoid some of this absurd taxation. Literally, with state and federal taxes, I’ll be paying about 50% of my earnings in taxes, which severely reduces my ability to invest in additional construction projects, projects that create jobs. So instead of creating jobs, that money will be going to service US debt. It should also be pointed out that the rich don’t pay taxes–somone earning $300,000 is a high wage earner, but it’s the person with $50 million who is rich, and rich people legally avoid taxes by investing in tax-deferred real estate, investments that are subject to a 15% capital gains rate, tax-exempt municipal bonds, and offshore accounts. Billionaire Ross Perot said in 1992 that he paid something like a 1% effective tax rate the prior year.
^ nice post, kkent.
Not exactly on point but I think it’s somewhat enlightening. “During World War II (from 1940 to 1945), the size of the U.S. economy roughly doubled – the fastest period of growth in U.S. history. And during this era, the top tax rate soared to 91 percent, and the bottom rate to 18 percent – again, the highest in U.S. history. In 1944, federal taxes reached 21.7 percent of the GDP – again, the highest in U.S. history. The U.S. emerged from World War II as the world’s only economic superpower. From 1947 to 1973, it experienced phenomenally high growth; the GDP grew at an average of 3.4 percent a year. The top tax rate remained between 88 and 91 percent until 1964; afterwards, the rate was reduced to 70 percent, still stratospheric by today’s standards. The economy slowed down after 1973, for reasons that economists are still debating. But what is not debatable is that taxes started falling for the rich in 1978 (with a capital gains tax cut). Reagan accelerated these cuts with a vengeance: the top income tax rate was slashed from 70 to 28 percent. Bush and Clinton raised them somewhat, to 39.6 percent today. But that is still roughly half of what it was during the 50s and 60s. And growth since 1973? It has remained stuck in low gear, dropping from 3.4 to 2.5 percent a year. Individual worker productivity has taken an even more severe hit, dropping from 2.8 percent in the postwar years to about 1 percent after 1973. Some point to the Reagan expansion (that is, the upturn in the business cycle that occurred between 1983 and 1989) as proof that low taxes result in boom times, but this claim is easily disproven. Reagan’s expansion averaged 3.6 percent annual growth; earlier postwar expansions averaged 4.5 percent. Correlation is not causation, of course, but the point is that lower top rates on the rich have done nothing to revive the extraordinary growth of the postwar years.”
BizBanker Wrote: ------------------------------------------------------- > Right. Defense spending = jobs. > Welfare spending/food stamps = food created by a > magic particle reconstuction device that requires > no labor, capital, investment. Good point BizBanker, even if I don’t agree with everything you have said this is a really good point. I am really glad I lurk on this forum… Both parties spend to much!!
“Tax law is so restrictive in the US (the IRS has literally thought of everything!) that I’ve contacted an offshore lawyer to discuss setting up overseas accounts to avoid some of this absurd taxation. Literally, with state and federal taxes, I’ll be paying about 50% of my earnings in taxes” KKent, can you show me how you come up with over 50% in taxes, looks to me that even if you claimed no deductions (not even the standard deduction) your total effective tax rate would be ~36%. With just basic deductions, that number is significantly lower. Based on 200k income 25.56% Federal Taxes (51,116.75/200,000) 5.62% State Tax (used VA rates, even less if you live in MD 11,243/200,000) 1.45% Medicare 3.31% Social Security (SS capped at $6621.60 in 2010)
^Maybe bonus? Aren’t bonuses taxed at very high rates? I wouldn’t know cause I’ve never received one. 
Fair Tax. Problem solved.
topher Wrote: ------------------------------------------------------- > ^Maybe bonus? Aren’t bonuses taxed at very high > rates? I wouldn’t know cause I’ve never received > one. Performance based bonuses are withheld at very high rates, but taxed at ordinary income rates.
swe30 Wrote: ------------------------------------------------------- > Not exactly on point but I think it’s somewhat > enlightening. > > “During World War II (from 1940 to 1945), the size > of the U.S. economy roughly doubled – the fastest > period of growth in U.S. history. And during this > era, the top tax rate soared to 91 percent, and > the bottom rate to 18 percent – again, the > highest in U.S. history. In 1944, federal taxes > reached 21.7 percent of the GDP – again, the > highest in U.S. history. > > The U.S. emerged from World War II as the world’s > only economic superpower. From 1947 to 1973, it > experienced phenomenally high growth; the GDP grew > at an average of 3.4 percent a year. The top tax > rate remained between 88 and 91 percent until > 1964; afterwards, the rate was reduced to 70 > percent, still stratospheric by today’s standards. > > > The economy slowed down after 1973, for reasons > that economists are still debating. But what is > not debatable is that taxes started falling for > the rich in 1978 (with a capital gains tax cut). > Reagan accelerated these cuts with a vengeance: > the top income tax rate was slashed from 70 to 28 > percent. Bush and Clinton raised them somewhat, to > 39.6 percent today. But that is still roughly half > of what it was during the 50s and 60s. > > And growth since 1973? It has remained stuck in > low gear, dropping from 3.4 to 2.5 percent a year. > Individual worker productivity has taken an even > more severe hit, dropping from 2.8 percent in the > postwar years to about 1 percent after 1973. Some > point to the Reagan expansion (that is, the upturn > in the business cycle that occurred between 1983 > and 1989) as proof that low taxes result in boom > times, but this claim is easily disproven. > Reagan’s expansion averaged 3.6 percent annual > growth; earlier postwar expansions averaged 4.5 > percent. Correlation is not causation, of course, > but the point is that lower top rates on the rich > have done nothing to revive the extraordinary > growth of the postwar years.” This is an absurd comparison. Of course there was a huge economic expansion during World War II–the entire nation was mobilized to defend its very existence. Unemployment was effectively zero. You’re also missing the basic mathematic issue called marginal utility; economies can’t expand and current Chinese levels forever. Also, the 1970s were bogged down by oil crises, war, and high levels of inflation. Your comparisons are totally invalid.
NOVADCA Wrote: ------------------------------------------------------- > “Tax law is so restrictive in the US (the IRS has > literally thought of everything!) that I’ve > contacted an offshore lawyer to discuss setting up > overseas accounts to avoid some of this absurd > taxation. Literally, with state and federal taxes, > I’ll be paying about 50% of my earnings in taxes” > > KKent, can you show me how you come up with over > 50% in taxes, looks to me that even if you claimed > no deductions (not even the standard deduction) > your total effective tax rate would be ~36%. With > just basic deductions, that number is > significantly lower. > > Based on 200k income > > 25.56% Federal Taxes (51,116.75/200,000) > 5.62% State Tax (used VA rates, even less if you > live in MD 11,243/200,000) > 1.45% Medicare > 3.31% Social Security (SS capped at $6621.60 in > 2010) Ok, then add self-employment taxes and you are at 43.5%. Raise the tax rate in 2011 to 39.6% and all of a sudden, my income tax bill is around 47%, state and federal. Start adding in absurd property tax rates in my district on my investments and I’m forced to shell out MORE THAN 50% of the cash I earn back to the government. “Well, property taxes don’t count–that’s the cost of doing business.” Well, when I make $xxx,xxx and then get a huge property tax bill, that comes right out my pocket. That doesn’t come out of some nebulous, intangible bank account in the netherworld. It sure feels like it’s a tax on my productivity–and at the very least, it’s money taken out of optimum productivity. And you talk about “just basic deductions”. Brother, I’m not married and don’t have kids. $5,000 standard deduction is meaningless as a % when you’re getting well in excess of $200,000. And I don’t own a home. As a single, childless renter, I’m the lowest form of human life, according to the IRS. And I’m not even adding in the employment taxes that I will have to pay for my employee(s) of 7.65% per employee–that comes right out of my pocket! RIGHT out of my pocket. The gov’t PUNISHES me when I add a laborer to the tax base! But like I said, it’s not even the tax rates, it’s the restrictiveness of the tax code–small business owners are audited at much higher rates than individual tax payers, for example. Again, the gov’t punishes producers and employers in this nation. And the U.S. even taxes your foreign income if you are a US citizen. It is the law of the land that ALL income earned, foreign and domestic, is taxable. I believe Barrons just released a study that said the cost of compliance with the US tax code is more than $300 billion per year to the private economy. If this is what you believe is a just tax system, then I really don’t know what to say.
kkent: strawman much? The basic point is that we did just fine with far higher tax rates.
swe30 Wrote: ------------------------------------------------------- > kkent: strawman much? > > The basic point is that we did just fine with far > higher tax rates. Yes, it’s a strawman to point to World War II as an example of productivity with high taxes. What about the roaring 20s compared to the punitive tax policy of the 1930s that resulted in nothing but a lost decade of stagnation?