Tax Discrimination - It's that time again

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I was just referring to then numbers above.
So what % would a flat tax have to be to equal that?

Hard to know for sure, but it looks like about 20% would do it. It can be combined with a voucher system to stay "progressive". For example, you institute a flat tax of 20% on all sales and give everyone $5,000 for free every year. I mean the IRS cuts everyone a check for $5,000 at tax time. This means your first $25k of expenses are untaxed ($5k*5=25k). So someone who makes $50k per year pays zero sales tax if they spend half of their paycheck (keep in mind, no income tax). Someone who makes $30k profits, and someone who makes $100k and spends half pays an effective sales tax rate of 10%. That is they pay 20% on 50k of expenses, but get $5k back at the end of the year. Someone who makes $1.5M and spends $700k would pay approximately $135k in taxes (700*.2-5) for an effective tax rate of 19.2%.

It would indeed create a black market for sales tax, but it would eliminate the black market for income tax, so I think it's a wash.
 
Hard to know for sure, but it looks like about 20% would do it. It can be combined with a voucher system to stay "progressive". For example, you institute a flat tax of 20% on all sales and give everyone $5,000 for free every year. I mean the IRS cuts everyone a check for $5,000 at tax time. This means your first $25k of expenses are untaxed ($5k*5=25k). So someone who makes $50k per year pays zero sales tax if they spend half of their paycheck (keep in mind, no income tax). Someone who makes $30k profits, and someone who makes $100k and spends half pays an effective sales tax rate of 10%. That is they pay 20% on 50k of expenses, but get $5k back at the end of the year. Someone who makes $1.5M and spends $700k would pay approximately $135k in taxes (700*.2-5) for an effective tax rate of 19.2%.

It would indeed create a black market for sales tax, but it would eliminate the black market for income tax, so I think it's a wash.
I actually think a lot of people would love something like that.
A lot of lower income families already believe they are paying 25-50% in taxes. (they're not good with maths, I know)
The current system is so complicated many people have no idea they are getting paid taxes, that their refund is greater than all the taxes they pay over the year.
 
Not sure if this is the right thread so pardon if it's not.

I was just approved to do package delivery with Uber and I have some questions regarding taxes. Up to this point my taxes have been really easy every year (single, no kids, no house) so I'm feeling a bit overwhelmed with this 1099 "independent contractor" stuff. What is the best way to figure out how much money I should set aside to cover taxes? I hear it's best to pay them quarterly, so it would be nice to be able to just set up a separate bank account and throw whatever percentage from every deposit I get from Uber in there and not have to worry about it.

Anyone have experience with self employment 1099 stuff?
 
@R1600Turbo - because you will need to cover both the Federal Income tax and the Self-employment tax, the percentage will be considerable. It will also get impacted by your other earnings (W-2 wages or other types of income), so its hard to give a general percent that would work for everyone. However, depending upon the level of your self-employment earnings and the level of any other earnings, I would think that the percentage needed would be between 25% and 35% of your "net" self-employment earnings ("net" self-employment earnings equals Gross self-employment income less allowable business deductions (deductible vehicle expenses and the like)). The lower percentage if your self-employment earnings are in the $5k-$10k per year range, but you might reach the higher percentage if your self-employment earnings were over $40k. I am assuming that your Uber earnings are supplemental to your other W-2 earnings, if this is not the case, and your Uber earnings will be your entire earnings the percentages would need to be adjusted downwards for the standard deduction and your personal exemption.
 
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The ACA has added a tax form for the last few years to the already long list of tax forms that I have to keep track of - proof of health insurance. Why am I sending the government proof that I obtained health insurance? It's beyond ridiculous. If I don't have health insurance they'll fine me, presumably for my own good. In the meantime now I have to hand over even more personal information to the US government if I don't want to pay tax penalties.

I hate our tax code.
 
Total 2016 Budget: $3.9T
Total 2016 Tax revenue: 3.3T
Total Revenue from Income Tax: $1.5T (not including SS, corporate tax, etc.)
Percentage of Revenue from Income Tax: 45%
Total Income Tax Needed for Balanced Budget (assuming no change in spending or revenue allocation): $1.76T
Number of Adults in the US: ~245.3M
Number of Taxpayers in the US: ~139M

Tax Liability Per Adult: $7174 (Down from last year!)
or
Tax Liability Per Taxpayer: $12,661 (Down from last year!)

So, if you think retirees and homeless should pay their fair share of taxes, your number is $7174. If you paid less than that you're not pulling your weight. If you think retirees and homeless should not pay their fair share of taxes, your number is $12,661, if you paid less than that (by yourself, not jointly), you're not pulling your weight. If you're married the numbers are $14,348 and $25,332 jointly.

If you're single, you need to make approximately $56k per year before the government takes $7174 in federal taxes. If you're single, you need to make approximately $78k/year before the government taxes $12,661. Make less than that and your fair share is being covered by someone making more than you. More than that and you're probably covering others.

For married people, the numbers are twice that. So if you want to claim that you're paying your fair share you may need to be making approx $160k/year as a couple.


Sources:
https://en.wikipedia.org/wiki/United_States_federal_budget
http://calcnexus.com/federal-tax-calculator.php
 
So you're saying my wife and I are paying more than my fair share? Figures. Guess that's why I got hit with a huge tax bill this year despite both of us claiming 0 on our W2's. The state of Utah apparently wanted more of my money too.

I live for the day we get a flat percentage across the board for taxes. If everyone paid 20% of their income or whatever, there'd probably be less inequality when it comes to taxes. Or you know, the government could stop trying to spend a ton of money on god knows what and just let me spend my money where I want to.

And I'm still waiting to see my tax cut hit my paycheck.
 
So you're saying my wife and I are paying more than my fair share? Figures. Guess that's why I got hit with a huge tax bill this year despite both of us claiming 0 on our W2's. The state of Utah apparently wanted more of my money too.

I live for the day we get a flat percentage across the board for taxes. If everyone paid 20% of their income or whatever, there'd probably be less inequality when it comes to taxes. Or you know, the government could stop trying to spend a ton of money on god knows what and just let me spend my money where I want to.

And I'm still waiting to see my tax cut hit my paycheck.

The fun part is how non-linearly it ramps up. For a married couple you have to hit 112k (more if you exempt certain adults) to pay your fair share (that's super rough because deductions, 401k, etc.). But if you make $250k as a married couple, calculate out how much you paid in income tax and you'll probably find that you're hitting several multiples of your fair share. Depending on how you cut it, you might be covering 5 or more people's fair share easily. You don't have to be uber rich to pay $50k in federal taxes in a year, which covers as many as 7 adults (covers them for the purpose of balancing the budget).
 
My tax person ran the numbers, it looks like mine go down a lot. I qualify for the child tax credit now (used to phase out due to income restrictions), which all by itself is about $500/month off my tax bill.
 
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Total 2017 Budget: $4T
Total 2017 Tax revenue: 3.3T
Total Revenue from Income Tax: $1.6T (not including SS, corporate tax, etc.)
Percentage of Revenue from Income Tax: 48%
Total Income Tax Needed for Balanced Budget (assuming no change in spending or revenue allocation): $1.9T
Number of Adults in the US: ~252M
Number of Taxpayers in the US: ~141M

Tax Liability Per Adult: $7539 (Up from last year)
or
Tax Liability Per Taxpayer: $13,475 (Up from last year)

So, if you think retirees and homeless should pay their fair share of taxes, your number is $7539. If you paid less than that you're not pulling your weight. If you think retirees and homeless should not pay their fair share of taxes, your number is $13,475, if you paid less than that (by yourself, not jointly), you're not pulling your weight. If you're married the numbers are $15,078 and $26,950 jointly.

If you're single, you need to make approximately $50k per year before the government takes $7539 in federal taxes. If you're single, you need to make approximately $75k/year before the government taxes $13,475. Make less than that and your fair share is being covered by someone making more than you. More than that and you're probably covering others.

For married people, the numbers are twice that. So if you want to claim that you're paying your fair share you may need to be making approx $147k/year as a couple.


Sources:
https://en.wikipedia.org/wiki/United_States_federal_budget
http://calcnexus.com/federal-tax-calculator.php
 
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And just like that, I'm paying more than my fair share. Thanks Obam...errr Trump.
 
As far as the trump tax cut is concerned, I'll report that I itemized my deductions this year, but that many of my friends who have itemized since forever used the standard deduction (which is a major step in the right direction for the tax code). I think that I'm in a vanishingly small number of tax filers who will itemize. It looks like the expectation is that only 10% of filers will itemize this year (down from 30%), and that's fantastic news for the tax system and for freedom in general.

My personal total effective federal income tax rate dropped by 5% this year from 25% in 2017 to 20% in 2018 despite income going up. That's entirely due to the Trump tax reform which fixed AMT and got me qualifying for child tax credits. This is in spite of me taking a hit on SALT deductions.
 
I really hope no-one is hoping to do away with progressive taxes unless they are proposing massively flattening the income inequality curve at the same time?

Want the poor to pay more tax? Simple. Pay them more and they will pay more tax. Want the rich to pay less tax? Simple, pay them less and they will pay less tax.

Income inequality (which leads to wealth inequality) is one of the planet's greatest social ills. It gets worse every year as the poorest are caught in the race to the bottom and the richest swept along in the race to the top. A good illustration is the CEO of my company. His equivalent in 1980 earned about 25x the average salary of his employees - a very handsome wage indeed. However, the CEO today earns 350x the average salary. It is disgusting the way governments have allowed free market capitalism to endlessly shift cash and wealth from the poor to the rich. The great depression was the last time there was any significant movement the other way around.
 
I really hope no-one is hoping to do away with progressive taxes unless they are proposing massively flattening the income inequality curve at the same time?

Want the poor to pay more tax? Simple. Pay them more and they will pay more tax. Want the rich to pay less tax? Simple, pay them less and they will pay less tax.

Income inequality (which leads to wealth inequality) is one of the planet's greatest social ills. It gets worse every year as the poorest are caught in the race to the bottom and the richest swept along in the race to the top.

You think the poor (in capitalist nations) are worse off today than... when? And I don't mean relatively, relatively is total nonsense, I mean absolutely.

The problem with a "progressive" tax is that it removes an important democratic signal. When the bottom 48% (or whatever it is now in the US) don't pay any federal income tax at all, what incentive do they have to vote for someone who, for example, wants to balance the budget, or cut back on government spending in general, or even end a single program. The big payoff is reduced taxes right? What incentive does our poor have to vote against foreign wars? Foreign wars keep some of them employed. What incentive do they have not to raise taxes on someone else? You need everyone paying tax. Because if they don't, they vote unsustainably. Beyond just a utilitarian need, you also need them all paying tax because it is a basic human right that people be treated equally under the law. In other words, it's wrong to charge some people more for the same product.

A "flat tax" of course is progressive, because the more income you make the more tax you pay in absolute dollars, actually now that I think about it, I should add a flat tax to my running calculations. A flat tax at least solves some of the problems I outlined above, but it doesn't solve the basic moral problem. I like the flat tax concept a lot better than the one we have now (were the bottom 48% or whatever of income earners pay zero federal income tax, and the top 10% pay 70% of all income tax revenue). It comes pretty close to perfect.

The fairest way to allocate tax is to pay for what you use (fee-based). And short of that, it would be to divide the cost up and assume that everyone uses the same amount (which is what I calculated above).
 
Total 2017 Budget: $4T
Total 2017 Tax revenue: 3.3T
Total Revenue from Income Tax: $1.6T (not including SS, corporate tax, etc.)
Percentage of Revenue from Income Tax: 48%
Total Income Tax Needed for Balanced Budget (assuming no change in spending or revenue allocation): $1.9T
Number of Adults in the US: ~252M
Number of Taxpayers in the US: ~141M

Tax Liability Per Adult: $7539 (Up from last year)
or
Tax Liability Per Taxpayer: $13,475 (Up from last year)

So, if you think retirees and homeless should pay their fair share of taxes, your number is $7539. If you paid less than that you're not pulling your weight. If you think retirees and homeless should not pay their fair share of taxes, your number is $13,475, if you paid less than that (by yourself, not jointly), you're not pulling your weight. If you're married the numbers are $15,078 and $26,950 jointly.

If you're single, you need to make approximately $50k per year before the government takes $7539 in federal taxes. If you're single, you need to make approximately $75k/year before the government taxes $13,475. Make less than that and your fair share is being covered by someone making more than you. More than that and you're probably covering others.

For married people, the numbers are twice that. So if you want to claim that you're paying your fair share you may need to be making approx $147k/year as a couple.


Sources:
https://en.wikipedia.org/wiki/United_States_federal_budget
http://calcnexus.com/federal-tax-calculator.php

Total personal income reported in 2017: ~$11T (based on eyeballing 2016 data)
Total income tax needed for balanced budget (assuming no change in spending or revenue allocation): $1.9T
Effective flat tax rate: 17.2%

Compared to the numbers I posted above, the flat tax rate would be $8636 (for $50k of earnings).

Sources:
I'm not sure which of these numbers to believe. I'm going for the worse of the two and adjusting it by the year-over-year adjustment of the one with later data.
https://www.statista.com/statistics/216756/us-personal-income/
https://taxfoundation.org/summary-latest-federal-income-tax-data-2018-update/
 
Total personal income reported in 2017: ~$11T (based on eyeballing 2016 data)
Total income tax needed for balanced budget (assuming no change in spending or revenue allocation): $1.9T
Effective flat tax rate: 17.2%

Compared to the numbers I posted above, the flat tax rate would be $8636 (for $50k of earnings).

Sources:
I'm not sure which of these numbers to believe. I'm going for the worse of the two and adjusting it by the year-over-year adjustment of the one with later data.
https://www.statista.com/statistics/216756/us-personal-income/
https://taxfoundation.org/summary-latest-federal-income-tax-data-2018-update/
With a flat tax rate the lower paid people in society will need to be paid a lot more in order to afford the flat rate tax. That will be a tricky problem to solve.
 
With a flat tax rate the lower paid people in society will need to be paid a lot more in order to afford the flat rate tax. That will be a tricky problem to solve.

The increased capital available to the top earners being reinvested would allow for higher salaries further down the pyramid, assuming you believe in the benevolence of "big business" to reinvest profits but also, that depends on exactly what percentage the flat rate is; if it was 40-50% across the board then yeah, low earners would struggle but if it was 10-12.5% or even upwards of 20% it should be affordable.

The country I live in, Slovakia, had a flat tax rate of 19% from 2003 until about 2014 but now does have a secondary, higher tax bracket of 25% for earnings above €34,000 (US$39,000).
 
The increased capital available to the top earners being reinvested would allow for higher salaries further down the pyramid, assuming you believe in the benevolence of "big business" to reinvest profits but also, that depends on exactly what percentage the flat rate is; if it was 40-50% across the board then yeah, low earners would struggle but if it was 10-12.5% or even upwards of 20% it should be affordable.

The country I live in, Slovakia, had a flat tax rate of 19% from 2003 until about 2014 but now does have a secondary, higher tax bracket of 25% for earnings above €34,000 (US$39,000).
10-20% on people who are paying very little to no income tax isn't affordable if they are barely making ends meet as it is. In Canada I believe about 1/3 of taxpayers pay no federal or provincial income tax so having to pay tax when you don't pay tax now will definitely be a financial burden. Not saying I disagree with a flat tax but it will impose a hardship on lower income tax households and individuals depending on the cut off point.
 
While it would be a bit harder on lower income folks, it seems like a fairer way to do taxes. That way everyone pays the same rate regardless of how much they make. Also, do away with deductions and a complicated tax code and for good measure disband the IRS.
 
While it would be a bit harder on lower income folks, it seems like a fairer way to do taxes. That way everyone pays the same rate regardless of how much they make. Also, do away with deductions and a complicated tax code and for good measure disband the IRS.
"A bit harder"

It would be utterly crushing for millions of people.
 
"A bit harder"

It would be utterly crushing for millions of people.

Would it though?

Still, if you're going to tax people you need to tax everyone. The only fair way to do it is to tax them at the same rate.
 
Would it though?

Still, if you're going to tax people you need to tax everyone. The only fair way to do it is to tax them at the same rate.
Yes it would. Someone 'just' getting by today in a system where a huge portion of their earnings is not taxed are no longer going to just get by when suddenly they are paying more tax. I think we forget or ignore just how poor some people are.

As I said in an earlier post - if we want the poorer members of society to pay more tax then we need to pay them more.
 
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