Tax Discrimination - It's that time again

[Danoff]

So according to the US constitution, the government is supposed to treat everyone fairly under the law, but our tax system is anything but fair. And in light of the fact that those of us in the US are going through our massive payouts to the government this time of year, I thought it would be nice to put up some updated statistics about who pays what in terms of income tax.

Here's a nice link about the taxes collected for '03: http://www.taxfoundation.org/publications/show/250.html

Take a look at table 6:

1) The top 1% of earners last year paid over 1/3 of all income tax in the US.
2) The top 5% paid over half of all income tax
3) THe top 50% paid over 96% of all income tax.

That means that the lowest half of the US pays almost no income tax at all! 3% income tax rate on average (table 1). What this doesn't show is that the lowest quarter (1 in 4 people in this nation) pay negative income tax. They actually GET more back than is withheld. No that's not welfare, it's not food stamps, this is totally seperate - it's just our income tax system redistributing money from some US citizens to others.

Check table 7 and figure out where you are in terms of the rest of the US population.

I'd love to see figures like this for other countries. If anyone out there would like to dig some up and post them I'd be grateful.

 

[Dave A]

Hmmm, that's an odd system and seems pretty unfair just from your post. I would prefer that system to ours though, I pay %40 of everything I earn back in taxes. If I earn £45k in a year, £15k get's paid back in income tax and N.I.

 

[Danoff]

Hmmm, that's an odd system and seems pretty unfair just from your post. I would prefer that system to ours though, I pay %40 of everything I earn back in taxes. If I earn £45k in a year, £15k get's paid back in income tax and N.I.

Keep in mind that this our national income tax. We also have state income taxes, as well as sales tax, luxury tax, property tax, and (my favorite) sin taxes.

 

[Dave A]

Ah, that makes sense to why it seems so low then (the state income tax that is) we get all all the others but under different names, exept for sin taxes, I'm not quite sure what that is.

 

[Danoff]

Ah, that makes sense to why it seems so low then (the state income tax that is) we get all all the others but under different names, exept for sin taxes, I'm not quite sure what that is.

...just a little extra sales tax lumped on to items like booze, cigarrettes, porn, gasoline, etc. etc.

 

[Dave A]

Oh, we get extra tax on cig's and fuel, but not for porn.

 

[FoolKiller]

danoff, I hope you make sure that your deductions are set up so that as little as possible are taken out. I have mine set up that way and while my refund is small I get more in my paycheck. My wife did our taxes this year and couldn't figure out why I made more than she did and then got such a small refund compared to her.

I just figure I can do more with that excess money than the IRS can, seeing as how they give it back without interest.

Well, I e-filed yesterday and am having the refund direct deposited. I should get that back soon.


Looking at your chart, I knew things were off set unfairly but I never knew the exact numbers. I have always been aware of people who make so little that they don't even pay taxes and then getting a refund. I remember when we had the tax cuts and they were complaining because they wanted a bigger refund too. It made me want to scream. They already get welfare, now they want a "refund" from nothing?

 

[Danoff]

danoff, I hope you make sure that your deductions are set up so that as little as possible are taken out. I have mine set up that way and while my refund is small I get more in my paycheck. My wife did our taxes this year and couldn't figure out why I made more than she did and then got such a small refund compared to her.

I just figure I can do more with that excess money than the IRS can, seeing as how they give it back without interest.

Well, I e-filed yesterday and am having the refund direct deposited. I should get that back soon.


Looking at your chart, I knew things were off set unfairly but I never knew the exact numbers. I have always been aware of people who make so little that they don't even pay taxes and then getting a refund. I remember when we had the tax cuts and they were complaining because they wanted a bigger refund too. It made me want to scream. They already get welfare, now they want a "refund" from nothing?

Heh, they already get a refund from nothing - now they want a bigger one.

We got a big return this year because we're still getting a handle on the witholding strategy. As the years go by we'll tweak it so that eventually we owe a little every year. For now, though, I'll just enjoy getting (some of) my money back out of the hands of the government (without interest).

 

[Duke]

Looking at your chart, I knew things were off set unfairly but I never knew the exact numbers. I have always been aware of people who make so little that they don't even pay taxes and then getting a refund. I remember when we had the tax cuts and they were complaining because they wanted a bigger refund too. It made me want to scream. They already get welfare, now they want a "refund" from nothing?

But of course, whenever it's presented in the media, tax cuts always unfairly help the wealthy at the expense of the poor.

 

[FoolKiller]

But of course, whenever it's presented in the media, tax cuts always help the wealthy at the expense of the poor.

Yeah, I loved how a tax break across the board became "tax breaks for the rich." Talk about fuzzy math.

 

[Anderton Prime]

That time of year-a,
Tax time is here-a.
Mucho lira
Disappear-a!

But don't despair-a
Don't get discourgi
I found out how
You can write off 976-ORGY!

-Adam Sandler as "Opera Man"​

 

[Pupik]

But of course, whenever it's presented in the media, tax cuts always unfairly help the wealthy at the expense of the poor.

One arugument I heard from a discussion about this at work was; "The rich can afford accountants to search for hidden tax write-off money."

I said, "My accountant's a $30 program called Turbo Tax. Also, if you don't give anything, you can't expect to get anything back."

Hmmm, maybe that TI-34 calculator I've owned since 9th grade can be written off, as it's depreciated in value somewhat and helps me file for taxes as well.

Although, the fact the money comes back without interest, whereby the IRS will gladly tax your interest earned from savings accounts (which might pay 0.5% yearly interest on a rainy day) and US Savings Bonds...is quite the royal screwing.

 

[FoolKiller]

Although, the fact the money comes back without interest, whereby the IRS will gladly tax your interest earned from savings accounts (which might pay 0.5% yearly interest on a rainy day) and US Savings Bonds...is quite the royal screwing.

Don't forget that if you screw it up and they audit you and you owe them money they DO charge you interest. Yep, that's fair.


I should send them a bill for interest based on the Federal Reserve interest rate. Then after they refuse make a big deal about it and call teh news and make sure it gets out there. If they charge me interest they should pay me interest.

How much do you want to bet that they are doing something with your mney while they have it that does garner them interest, so they actually make money off of your refund before you get it back?

 

[Danoff]

One arugument I heard from a discussion about this at work was; "The rich can afford accountants to search for hidden tax write-off money."

This is true to a certain extent (though you can see from the numbers at the top that the rich still pay the lion's share). It creates an industry of tax professionals and billions of wasted dollars each year. The tax code needs to be swept off the table completely and replaced by something simple - people shouldn't need professional help to do their taxes... or, at least, it shouldn't be worth it to get professional help.

 

[FoolKiller]

It creates an industry of tax professionals and billions of wasted dollars each year.

You realize this is why they won't ever make a simple tax code right? Anytime they try it they will show us all how many tax professionals will be out of a job.

Tax accountants believe they have the most secure job in the world and they will fight tooth and nail to keep the tax system as complex as possible.

I like the national sales tax idea. The rich will still pay the majority of the taxes but it will be due to their chosen lifestyle and not as a punishment for success.

 

[Duke]

I actually shoot for a good sized refund each year, even though it costs me money in the short run as well as the interest on that few thousand dollars. However I have investments and my capital gains tax is hard to predict. After getting socked a few times with a big CG bill I'd rather let a few grand ride with Uncle Sam for the year rather than suddenly have to cut him a big check on April 15.

 

[Danoff]

So nobody else knows where to go for these statistics in other countries? Maybe I'll have to do some research myself.


Ok here are some facts about Canada's tax system:
http://epe.lac-bac.gc.ca/100/200/300/fraser/tax_facts_12/05TxFxch5.pdf
Table 5.3 shows that the largest portion of the tax burden ultimately
settles on the higher income groups. In 2000, the top 30% of families
earned 59.4% of all income in Canada and paid 65.7% of all taxes. The
bottom 30% earned 8.1% of all income and paid 4.3% of all taxes.
...
A Canadian family is included in the top 30% when its cash income exceeds
$63,209


% of all income tax paid by each income group
---------------Canada-----------------US
Top 30%--------65.7%--------------->84%
Bottom 30%------4.3%---------------<3.5%

It would look on the surface as though the US has a more unfair tax distribution than Canada. What's really driving these numbers is that the cutoff for the top tax bracket in Canada is lower than the US - which means a greater percentage of their population is considered "rich". The tax rates almost across the board are lower in the US than Canada.

That just means that we spend less of our citizens money here in the US than Canada, but it doesn't mean that our tax system is more fair. I'd say that these numbers suggest that the Canadian tax system is actually more fair - everyone getting screwed to a greater extent, but more equally.

This:
http://www.statcan.ca/english/studies/75-001/archive/2000/pear2000012002s2a04.pdf
shows the relative tax rates between the US and Canada.

 

[Keef]

I think it's plenty fair. In fact, I think they should add a "top .1%" bracket, you know, the people who make over, ehh, $2 million a year. Like the CEOs of Wal Mart, McDonalds, GM, Bill Gates Inc., etc. Of course, Billy boy gives away his money amost as fast as he earns it to avoid these taxes. The government could really use that money, though. I'm ont sure what for. Anyway, we should charge these rediculously rich, especially the wasteful ones, about a 40% tax rate. But then again, I still haven't gotten over the stereotype that uber-richies are greedy bastards and do nothing good with their money. The taxes should be like one of those x^2 graphs; it should charge an exponential amount as your income rises at a constant rate. They just have to find the correct exponent.

 

[Duke]

Why would that be fair? Explain. In detail.

 

[Keef]

I know it isn't fair, so the government shouldn't do it. But I feel like it would keep the poorer people from complaining about high taxes and put some of that burden onto those who have lots of money to blow. I'm not at all wealthy, so I don't know how they feel about their money. I just thought that they would care a little less about losing an amount than the rest of us. If you take half of 2 million you still have a million bucks left, but if you take half of 50,000, well, that $25,000 would hardly pay for a car and house at the same time.
The truly fair thing to do would be to tax a flat percentage across the board. If that's what they do now then stick with it; those tables just boggled my mind. If they don't maybe they should change, and if they have already and it didn't work, well, I'm out of ideas.
Did I just contradict my previous post? Well I was in one of my moods, the kind where I think irrationally. It's fun while it lasts.

 

[Duke]

Did I just contradict my previous post? Well I was in one of my moods, the kind where I think irrationally.

Now that's an understatement.

 

[FoolKiller]

The truly fair thing to do would be to tax a flat percentage across the board. If that's what they do now then stick with it;

That's the majority of my problem with taxes is that it is NOT flat percentage across the board. Poor people are paying less than 5% while the top bracket are paying somewhere in the mid 30%, maybe more.

Then the poor people get some of that money paid for by the rich in welfare checks and refunds that are more than they paid out in taxes. In essence the government took the rich people's money and then handed it to the poor people without asking.

 

[Danoff]

I know it isn't fair, so the government shouldn't do it. But I feel like it would keep the poorer people from complaining about high taxes and put some of that burden onto those who have lots of money to blow.

That's the point of this thread. All of the burden rests on people who have money. Poor people don't pay taxes (so how can they complain). The bottom 50% of this country pays almost nothing. The bottom 10% actually make money off of income taxes.

Don't you think our government has an obligation to be fair? How would you feel if there were a law that says "black people have to pay more income tax than white people". That's not fair either.

 

[Keef]

I like fairness, but sometimes it causes more problems that it solves. When they put this tax stuff on the ballot it gives us people the opportunity to choose which is best for us. They problem with that is that the government doesn't really explain things well enough for everyone to understand. Last November we had an income tax change that would make things cheaper and more efficient, but you'd only realize this if you understood what it was saying. At first glance the numbers appeared to be more expensive than the old system; that's why my mom hated this plan. My dad understood it and had to explain it to her. She would have voted no, but since she understood it she voted yes toward the cheaper system. I'm sure this misunderstanding happens to a lot of people in a lot of situations, and sometimes they end up voting the wrong way, then complaining about how it didn't work out the way they thought it would.
There isn't a way to do it to make everyone happy, so maybe that's why the government has the system it does now, to try and be fair to each section of taxpayers, instead of the whole at the same time.

 

[Danoff]

I like fairness, but sometimes it causes more problems that it solves. When they put this tax stuff on the ballot it gives us people the opportunity to choose which is best for us.

The result of that is that everyone decides everyone else should pay the taxes. The people with the fewest votes (the richest 10% or so) lose.

That's essentially everyone in the country ganging up on them and taking their lunch money.

Fairness isn't about solving problems, it's about doing what's right.

 

[Keef]

What do you think is right?

 

[Danoff]

Being fair.

 

[Keef]

What kind of system would be fair? Would it involve different income brackets, like now, a certain percentage, a scheme that would limit complaining, a static amount of money for everyone? Everyones' idea of what's fair is different--that's the problem. Only if everyone were exactly the same...:sarcastic:

 

[Danoff]

What kind of system would be fair? Would it involve different income brackets, like now, a certain percentage, a scheme that would limit complaining, a static amount of money for everyone? Everyones' idea of what's fair is different--that's the problem. Only if everyone were exactly the same...:sarcastic:

Fair is an external, objective concept. It's like justice. There is a definition of fair.

Absolutely fair - strictly speaking would be "you get what you pay for". Meaning everyone pays only for the government services that they use.

No matter who you are, "you get what you pay for and you don't get what you don't pay for" has to be a fair concept if you're thinking rationally.


However, it's almost impossible to institute what I consider absolutely fair. It just isn't pratical. I'd settle for "pretty fair" which would be basically everyone paying the same tax rate (sales tax preferable to income tax).

 

[Keef]

I never thought about the "only pay for what you use" theory. That would be fair, and would encourage conservation of resources and services. I'd be up for it. But you'd have to have some government credit account or something to keep tabs on exactly what you use. That's 280,000,000+ account records...
And why would you prefer a higher sales tax over an income tax? You would be reminded of the tax every time you bought something, instead of just once a week for the income tax.