Tax Plan Punts on a Loophole for the Wealthy(nytimes.com)
nytimes.com
Tax Plan Punts on a Loophole for the Wealthy
https://www.nytimes.com/2017/09/27/upshot/the-republican-tax-plans-magic-asterisk.html
118 comments
I don't disagree with you, but I'd like to see a high threshold for this tax to take effect. I'm a small time investor who is trying to take the money I've put in the market and put it towards starting up a business.
I've used my personal income which was already taxed at the state and federal level, put it into the market at my own risk, and then gets taxed again when I get gains on it. Now, because Bill Gates and Warren Buffet aren't getting taxed enough, you're hurting the small time folks.
You're creating a moat whereby the small time folks can never escape, and the folks who have already made it won't be hurt.
I've used my personal income which was already taxed at the state and federal level, put it into the market at my own risk, and then gets taxed again when I get gains on it. Now, because Bill Gates and Warren Buffet aren't getting taxed enough, you're hurting the small time folks.
You're creating a moat whereby the small time folks can never escape, and the folks who have already made it won't be hurt.
> I've used my personal income which was already taxed at the state and federal level, put it into the market at my own risk, and then gets taxed again when I get gains on it.
Except the money you originally put in is not taxed again. Only the gains are. I don't see a compelling argument as to why your gains should also be tax free.
Except the money you originally put in is not taxed again. Only the gains are. I don't see a compelling argument as to why your gains should also be tax free.
Indeed and why I said that the "standard deduction" should be higher than labor. This means people who do not use the markets as a primary source of income but rather as a tool to go from no wealth to acquiring wealth aren't paying taxes on it for reasons you've stated. Or a minimal tax.
But once you've become a successful investor over the years and have acquired more and more wealth your dividends are starting to get taxed higher and your proceeds which are now comparable to an income or possibly a primary income are becoming taxed. Because of compound interest and appreciation of capital assets you're being taxed on your new wealth.
But once you've become a successful investor over the years and have acquired more and more wealth your dividends are starting to get taxed higher and your proceeds which are now comparable to an income or possibly a primary income are becoming taxed. Because of compound interest and appreciation of capital assets you're being taxed on your new wealth.
Have you considered a small business loan?
The turkeys will absolutely never vote for that thanksgiving! And the wealthy turkeys run the show.
Do you think inheritance tax eventually captures a lot of this passive income?
Federal inheritance tax is levied on 0.2% of the US population. It doesn't apply until you leave behind about $5.45 million dollars.
If I was a politician I would leave it alone and let states deal with it. I think most people that are against the "death tax" know it won't affect them but it's the idea that income that was taxed is now being taxed again. The emotional appeal of leaving a better life for those you love, etc.
So, I'd get rid of it. It's insignificant. It accounts for about .5% of total Federal revenue. Easy sacrifice.
If I was a politician I would leave it alone and let states deal with it. I think most people that are against the "death tax" know it won't affect them but it's the idea that income that was taxed is now being taxed again. The emotional appeal of leaving a better life for those you love, etc.
So, I'd get rid of it. It's insignificant. It accounts for about .5% of total Federal revenue. Easy sacrifice.
No. 0.5% of a huge number is a still a very large number.
$4T in income tax revenue so 0.5% is $20B. That's about the size of NASA. Percentages are horrible at that.
Keep the "death" tax, and here's the thing. Due to death, the assets changed hands. That money wasn't yours. It was your parent's money, so this is the first time that you are acknowledging the income. You personally won't get taxed on it again. Same with dividends and other stock related taxes No recognized income from you personally until you get the money. That's when you get taxed, pure and simple.
Keep the "death" tax, and here's the thing. Due to death, the assets changed hands. That money wasn't yours. It was your parent's money, so this is the first time that you are acknowledging the income. You personally won't get taxed on it again. Same with dividends and other stock related taxes No recognized income from you personally until you get the money. That's when you get taxed, pure and simple.
If a person's parents already paid taxes on it when they earned it, why are they required to pay taxes on it again? It's double taxation, and it's utterly unfair.
> If a business already paid taxes on it when they earned it, why are they required to pay taxes on it again? It's double taxation, and it's utterly unfair.
> If the customer already paid taxes on it when they bought it, why business required to pay taxes on it [that income] again? It's double taxation, and it's utterly unfair.
Double taxation arguments are like mad libs you can pick any two parties in a taxed transaction and make the same argument. Pretty much every other kind of transaction is taxed. Yet the other places we tax, income and sales, generate healthy economic activity (labor, wealth, and consumption). Unlike inheritance which has little more than net 0 impact on the economy.
> If the customer already paid taxes on it when they bought it, why business required to pay taxes on it [that income] again? It's double taxation, and it's utterly unfair.
Double taxation arguments are like mad libs you can pick any two parties in a taxed transaction and make the same argument. Pretty much every other kind of transaction is taxed. Yet the other places we tax, income and sales, generate healthy economic activity (labor, wealth, and consumption). Unlike inheritance which has little more than net 0 impact on the economy.
It’s also not that useful at getting revenue, compared to costs of administration.
Gary Cohn (Trump's chief economic advisor) recently said, "Only ‘Morons’ Pay the Estate Tax" : http://nymag.com/daily/intelligencer/2017/08/gary-cohn-only-...
> This creates more consumption and investment which leads to better markets.
This is another variation on the old "rich people hoard cash" trope.
Rich people invest the money that they don't spend. They tend to invest well, meaning highly productive investments, because (naturally) wealthy people get wealthy by being good at investing.
Productive investments are good for the economy. The notion that wealthy people invest in unproductive things doesn't make any sense.
This is another variation on the old "rich people hoard cash" trope.
Rich people invest the money that they don't spend. They tend to invest well, meaning highly productive investments, because (naturally) wealthy people get wealthy by being good at investing.
Productive investments are good for the economy. The notion that wealthy people invest in unproductive things doesn't make any sense.
> because (naturally) wealthy people get wealthy by being good at investing.
[Citation needed]. There's lots of wealthy people who got funded, got lucky (some investments are good only looking back - would you like to pay me to sign a few bytes 7 years ago?), got family fund, play the right sport in the right country, etc. People can get continuously more wealthy just by owning things - at that point you can outsource the investing to someone good at it. We've got very well known examples of people who inherited fortunes, failed at investing it multiple times and are still wealthy.
[Citation needed]. There's lots of wealthy people who got funded, got lucky (some investments are good only looking back - would you like to pay me to sign a few bytes 7 years ago?), got family fund, play the right sport in the right country, etc. People can get continuously more wealthy just by owning things - at that point you can outsource the investing to someone good at it. We've got very well known examples of people who inherited fortunes, failed at investing it multiple times and are still wealthy.
> [Citation needed]
See "The Millionaire Next Door" by Stanley
It stands to reason that if wealthy people as a group are bad at investing, they'd sooner or later stop being wealthy. Then, by survivorship bias, the wealthy ones remaining were good at investing.
See "The Millionaire Next Door" by Stanley
It stands to reason that if wealthy people as a group are bad at investing, they'd sooner or later stop being wealthy. Then, by survivorship bias, the wealthy ones remaining were good at investing.
Which is why you lower the corporate tax rate. This gives companies more leverage to use the investment money they get. They can purchase assets, fund R&D, buy smaller promising companies, and hire more labor.
Right now they will use any savings to buy back stock - that's the rational thing to do and makes the investors happy. But if we tax investment income progressively then buying back stock is great for the US Treasury - someone has to sell that stock to the company buying it back and it's taxed more!
It becomes more reasonable to reinvest that money from a corporate perspective. This is what the investors will want done.
Right now they will use any savings to buy back stock - that's the rational thing to do and makes the investors happy. But if we tax investment income progressively then buying back stock is great for the US Treasury - someone has to sell that stock to the company buying it back and it's taxed more!
It becomes more reasonable to reinvest that money from a corporate perspective. This is what the investors will want done.
> Right now they will use any savings to buy back stock
It seems you imagine that isn't actual investment. Of course it is, just like anyone else buying stock is investing the money.
It seems you imagine that isn't actual investment. Of course it is, just like anyone else buying stock is investing the money.
No, actually this is not investment. It’s returning money to shareholders who may decide to invest, or they may not.
The money gets spent or invested. Not hoarded. Invested money gets spent as well. After all, companies do not sell shares unless they intend to spend the proceeds. It's the whole point.
That has little to do with money hoarding.
One aspect of wealth is that it's a capture of some local increase in human-useful efficiency. The most common use of large amounts of wealth is to buy more capital. All systems have a limit to their efficiency, and even when efficiency improvements are possible, it's often not obvious or easy to achieve them. What is easier, though, is to decrease efficiency in a neighborhood you do not own, and then use capital to provide a more efficient solution to that neighborhood's problem in a neighborhood you do own. Clearly this is bad for the greater economy, yet is a good investment for the foreseeable future for those who can afford it.
One aspect of wealth is that it's a capture of some local increase in human-useful efficiency. The most common use of large amounts of wealth is to buy more capital. All systems have a limit to their efficiency, and even when efficiency improvements are possible, it's often not obvious or easy to achieve them. What is easier, though, is to decrease efficiency in a neighborhood you do not own, and then use capital to provide a more efficient solution to that neighborhood's problem in a neighborhood you do own. Clearly this is bad for the greater economy, yet is a good investment for the foreseeable future for those who can afford it.
Productive investments are good for the economy.
Are they? Or are you defining "productive" circularly here?
If I'm wealthy and I invest in derivatives or complicated tranches, is that "productive" because it's enabling further circulation of money, or is it "productive" because I can gain more capital on it?
Given that there's an infinite supply of ever more derived tranches, I suspect that my definition of "productive" different from yours here.
Are they? Or are you defining "productive" circularly here?
If I'm wealthy and I invest in derivatives or complicated tranches, is that "productive" because it's enabling further circulation of money, or is it "productive" because I can gain more capital on it?
Given that there's an infinite supply of ever more derived tranches, I suspect that my definition of "productive" different from yours here.
Digging down into what investment is, your are providing money to a person with the expectation that he will give you more back. Somehow, that extra has to be produced.
Analogously to a flying airplane - it is producing more lift than its weight. This must be true even if you haven't the slightest idea how all the whorls of air and eddies around it are created or how they influence the airplane.
What derivatives do is they spread risk in exchange for a lower rate of return, as well as provide liquidity. This is a productive thing that financial markets provide.
Analogously to a flying airplane - it is producing more lift than its weight. This must be true even if you haven't the slightest idea how all the whorls of air and eddies around it are created or how they influence the airplane.
What derivatives do is they spread risk in exchange for a lower rate of return, as well as provide liquidity. This is a productive thing that financial markets provide.
Sure, but there's a flow rate problem: they're predominantly good at a productive skill whose fruits are taxed at a lower rate than those of people with different productive skills. Now, because most people have some stake in investment, the progressive rates could start quite high - maybe in the tens of millions - but the monetary system simply won't work forever at the trajectory its on.
> the monetary system simply won't work forever at the trajectory its on.
It can under a fiat money system (which we've had since 1914). If you or I borrow money, we have to pay it back. That's not so for the government with fiat money. It can just print more money anytime, or do the equivalent (issue more bonds), and it can do this forever.
This is why the dollar today is worth just a few cents of what it was worth in 1914. (The 1914 dollar was worth the same as the 1800 dollar.)
Check out "Monetary History of the United States" by Friedman.
It can under a fiat money system (which we've had since 1914). If you or I borrow money, we have to pay it back. That's not so for the government with fiat money. It can just print more money anytime, or do the equivalent (issue more bonds), and it can do this forever.
This is why the dollar today is worth just a few cents of what it was worth in 1914. (The 1914 dollar was worth the same as the 1800 dollar.)
Check out "Monetary History of the United States" by Friedman.
That's the Chartalist (and MMT view, I think). Friedman did make a strong case for the central bank's role like you describe to end recessions, but he was also sensitive to the fact that money was not identical to productive capacity, ie that which would produce capital gains. The concern as I understand it is that unless you did something radical like literally gave the cash to people directly, there is still the liquidity trap with the central bank's levers.
Friedman showed in MH that the stability of the money supply was greater with the "blind" operations of the market than with the enlightened levers of the Fed.
It's too bad a Wealth Tax isn't even discussed in politics anymore. Seems like it could solve a significant amount of these tax loopholes.
https://en.wikipedia.org/wiki/Wealth_tax
https://en.wikipedia.org/wiki/Wealth_tax
It just seems like the really wealthy would just keep it overseas or find other ways to hide it. Wealth is not always objective. Also, what do you do for someone who bought a house 40 years ago near SV for $80K and it is now worth $1.5M. Are you going to tax them (in addition to property tax) and force them to move? Are they your target?
Personally, I think we need to keep the inheritance tax and remove other loop holes when people are making money. For instance, there is no reason we can't get rid of like kind exchange. People are always more readily accepting to pay a tax out of part of their profits.
Personally, I think we need to keep the inheritance tax and remove other loop holes when people are making money. For instance, there is no reason we can't get rid of like kind exchange. People are always more readily accepting to pay a tax out of part of their profits.
The Netherlands has a wealth tax of about 1.2% per annum; property you live in is not taxed (via the wealth tax)
Norway has (had?) one, the problem is that the wealthy claims it brings advantages to foreign capital so it will never happen in the US.
This easiest is to tax things that cannot move away, like real estate instead of giving giant deductions.
This easiest is to tax things that cannot move away, like real estate instead of giving giant deductions.
Taxing the unimproved value of land has the additional advantage that people cannot decide to create less of it in response to the tax disincentive.
I really wish we went full Georgism back in the day.
I really wish we went full Georgism back in the day.
Churches and their congregants would never go for it. I don't know how big a share we'd lose without their revenue, but it's hard to imagine it would NOT be a serious issue.
Churches are already exempt from paying real-estate taxes on their religious buildings. And they're exempt from paying taxes on any income they get from investment, too. It's a net wash - as long as churches have exempt investment assets of some sort that fund their religious and charitable activity (and not unrelated businesses), we're not getting tax income from them either way.
I'm not sure if you understood me or if I understand you. If churches do not have to pay capital gains or property taxes now, how do they not lose ground under a Georgist system?
I think I just kind of assumed that churches and other qualified charities would not be required to pay taxes on the unimproved value of land, much like they aren't required to pay property taxes or capital gains taxes today.
This easiest is to tax things that cannot move away, like
real estate instead of giving giant deductions.
Yea, thankfully the current plan proposes removing the estate tax to make sure we don't have any sorts of progressive taxes left...
One (unsuccessful) party in the recent NZ election proposed a tax on productive assets, including land and housing but excluding financial assets which would already be taxed. It would only be levied if those assets did not produce some minimum return. This was in response to the wild property speculation that has made housing increasingly unaffordable for many people as well as stagnating productivity.
Keep reading that wikipedia article especially the "Disadvantages" section:
* Capital flight (people invest in other countries with more sane tax policies)
* recessionary effects, including job loss.
* huge burden on small business owners that are barely making a profit
* Incorrect, unequal or subjective valuation of wealth
* Disproportionate effect on seniors
* Wealth taxes had high management cost and relatively low returns.
* Capital flight (people invest in other countries with more sane tax policies)
* recessionary effects, including job loss.
* huge burden on small business owners that are barely making a profit
* Incorrect, unequal or subjective valuation of wealth
* Disproportionate effect on seniors
* Wealth taxes had high management cost and relatively low returns.
What would solve all "loopholes" is just going to a damn flat national sales tax. Period. End of story. Thank you drive through. Stop trying to mangle this demonic beast of a tax code we have now, it won't work and never has. And simply toss it.
One paragraph as the replacement.
38% or whatever agreed upon percent as a national flat sales tax. And for the bleeding hearts that will scream this hurts the poor, Sentence two: The first 5,000/year in clothing tax free, and the First 10,000/year in food tax free.
IRS? Dissolved. H&R block? Dissolved. No more audits. No more income tax. You keep your entire paycheck! No more asset seizure by the IRS. No more tax fraud. No more tax evasion.
38% or whatever agreed upon percent as a national flat sales tax. And for the bleeding hearts that will scream this hurts the poor, Sentence two: The first 5,000/year in clothing tax free, and the First 10,000/year in food tax free.
IRS? Dissolved. H&R block? Dissolved. No more audits. No more income tax. You keep your entire paycheck! No more asset seizure by the IRS. No more tax fraud. No more tax evasion.
Still a massive tax cut for the wealthy and a massive tax raise for the middle class no matter how you cut it. And still makes it easy to avoid taxes: buy your goods overseas and ship them here. Not worth it for your groceries and stuff, but for big ticket items it matters a lot.
Not to mention that the fact that we have a progressive tax system isn't the reason it's complicated. The complication is that we have tax exemptions and deductions and the like. And those are valuable tools to making things like owning a house and getting an education more affordable, as well as incentivizing certain beneficial actions like using renewable energy.
Not to mention that the fact that we have a progressive tax system isn't the reason it's complicated. The complication is that we have tax exemptions and deductions and the like. And those are valuable tools to making things like owning a house and getting an education more affordable, as well as incentivizing certain beneficial actions like using renewable energy.
So in other words, the bum down the street pays the same tax rate as the billionaire's spending up the hill?
Take your average thrifty bum. Pays X% on the totality of what they earn, minus some lump sum. And your average billionaire. Pays X% on the totality of what they spend, minus the same lump sum.
That doesn't quite seem right, unless you tax financial transactions at the same rate as groceries. It might be just me, but methinks Wall Street will have none of that.
As to not needing tax auditors, just no. You'll still need to audit companies, and their incentive will be sky high to get cash transactions and declare only some of them.
Take your average thrifty bum. Pays X% on the totality of what they earn, minus some lump sum. And your average billionaire. Pays X% on the totality of what they spend, minus the same lump sum.
That doesn't quite seem right, unless you tax financial transactions at the same rate as groceries. It might be just me, but methinks Wall Street will have none of that.
As to not needing tax auditors, just no. You'll still need to audit companies, and their incentive will be sky high to get cash transactions and declare only some of them.
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So you need to keep receipts for every hot dog you buy?
Sentence two: The first 5,000/year in clothing tax free, and the First 10,000/year in food tax free.
I like plans that take care of this with a prebate - $200-$500/mo checks for everyone. It could also be a precursor to UBI.
I like plans that take care of this with a prebate - $200-$500/mo checks for everyone. It could also be a precursor to UBI.
325M people getting $500/mo is $1.95 trillion / year. That would be the largest entitlement program in American history, and about 10.5% of GDP.
In the context of 25-50% of people losing their job to AI in the next decade or three, such an entitlement or a much bigger one might come to being.
"38% or whatever agreed upon percent as a national flat sales tax. And for the bleeding hearts that will scream this hurts the poor, Sentence two: The first 5,000/year in clothing tax free, and the First 10,000/year in food tax free."
1. It's incredibly telling of you that you call those who would (rightfully) point out that your scheme is incredibly regressive as "bleeding hearts".
2. Those deductions are nowhere near enough, especially if you have a family.
1. It's incredibly telling of you that you call those who would (rightfully) point out that your scheme is incredibly regressive as "bleeding hearts".
2. Those deductions are nowhere near enough, especially if you have a family.
Wouldn't you have a better chance of passing 0 federal taxes for anyone under 2x poverty level with a similar benefit?
> The first 5,000/year in clothing tax free
Per person? In that case, we can lower it to $1k/year.
Per person? In that case, we can lower it to $1k/year.
This seems like a good idea. :)
I've been asking this question for years - I think they are great in theory but probably hard to actually enforce.
They would also never be supported by the powers the lobby billions to congress. Nothing that negatively affects the assets of the people who give congresspeople billions will be enacted in the forseeable future.
Even if both houses switch heavily Blue/Red/Something else, lobbying touches all.
Even if both houses switch heavily Blue/Red/Something else, lobbying touches all.
How does that explain Obama's huge tax increase?
We do have wealth taxes. Two of the largest are inflation and property taxes.
If we had inflation wages would rise and it'd be a lot easier to pay down debt than it actually is.
When I was young minimum wage was $2.35, now it's $15 (in Seattle). Seems like it's rising.
It's worth pointing out that property taxes can't really be avoided in practice, cause we all need somewhere to live, and those taxes are filtering down in some form.
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That tax is worst which distorts most. Differential taxation of income and capital gains has resulted in many financial products for transforming ordinary income into capital gains - obviously non-productive "work."
Differential taxation of ordinary income and pass-through income will do the same thing. This is just bad tax policy design.
Differential taxation of ordinary income and pass-through income will do the same thing. This is just bad tax policy design.
I am rather disappointed that the mortgage rebates will remain in effect in this cut, providing an additional advantage to those who purchase and build up assets rather than rent is unnecessary.
It also looks like this cut would make it even more advantageous to use an S-corp for funneling income from contract work. Piggy-backing onto methods used to reduce top-earner's tax burden always has it's advantages for those who can exploit it, I guess.
It also looks like this cut would make it even more advantageous to use an S-corp for funneling income from contract work. Piggy-backing onto methods used to reduce top-earner's tax burden always has it's advantages for those who can exploit it, I guess.
It indirectly does do something about the mortgage interest deduction by increasing the standard deduction to $24,000 for married couples. Renters who don't itemize will benefit, and will be on an even playing field with many homeowners who won't be able to beat the $24,000 standard deduction by itemizing, even with mortgage interest. It would be better to get rid of the mortgage interest deduction entirely, but it is politically impossible at this point.
You realize that the tax deduction for mortgages lowers the cost of rent by reducing the expenses involved in maintaining a large capital investment like a rental house?
> You realize that the tax deduction for mortgages lowers the cost of rent by reducing the expenses involved in maintaining a large capital investment like a rental house
In a sense the does, but that's somewhat illusory. As with other businesses, any reasonable and necessary expenses of maintaining and managing the property being rented are deductible as business expenses for landlords; mortgage interest is, AFAIK, currently excluded from that only because, with the mortgage interest deduction, it would be double counted. Virtually no one who supports removing the mortgage interest deduction opposes the general notion of deduction of reasonable and necessary business expenses.
In a sense the does, but that's somewhat illusory. As with other businesses, any reasonable and necessary expenses of maintaining and managing the property being rented are deductible as business expenses for landlords; mortgage interest is, AFAIK, currently excluded from that only because, with the mortgage interest deduction, it would be double counted. Virtually no one who supports removing the mortgage interest deduction opposes the general notion of deduction of reasonable and necessary business expenses.
It does, but not at an even amount. The tax deductions lower the cost of operating a unit for renting, but that doesn't mean all the money saved gets translated directly to benefiting the renters.
If you got rid of mortgage interest, then almost no one could afford to buy a home.
I think that the government should guarantee housing for everyone, but the mortgage interest rebate doesn't do that. It does allow some portion of the population that couldn't afford a home be able to do so, but that doesn't hold for anyone. Why don't we instead funnel those funds into HUD and provide housing as a right either through urban development projects or through subsidizing privatized low income housing construction (possibly by eating a tax reduction via incentives)?
FYI, I'm an expatriate living in BC, Canada where housing prices are insane and almost nobody can afford to buy a home, but the economic reasons here are more specialized to the region.
FYI, I'm an expatriate living in BC, Canada where housing prices are insane and almost nobody can afford to buy a home, but the economic reasons here are more specialized to the region.
If you got rid of the mortgage interest deduction, the market clearing price of homes would fall.
(Add an income-based tax subsidy on principal payments on homes—either up front or as part of loan repayment—and you'll do a lot more to improve affordability without doing as much to encourage debt.)
(Add an income-based tax subsidy on principal payments on homes—either up front or as part of loan repayment—and you'll do a lot more to improve affordability without doing as much to encourage debt.)
I'm not so sure about the first sentence. And I'd be all for the second, but I'm even more sure that simply won't happen in this political climate.
Nice, just yesterday I asked on here how that pass-through entity tax rate is not the primary discussion, glad to see someone else noticed.
https://news.ycombinator.com/item?id=15354110
My only gripe is that this isn't just a loophole for the wealthy.
Any schmuck can make a pass through entity for $100 and do all their business through that. They might opt to be corp-to-corp contractors for every employment contract they sign.
This would be a godsend that spans all socioeconomic classes.
https://news.ycombinator.com/item?id=15354110
My only gripe is that this isn't just a loophole for the wealthy.
Any schmuck can make a pass through entity for $100 and do all their business through that. They might opt to be corp-to-corp contractors for every employment contract they sign.
This would be a godsend that spans all socioeconomic classes.
>My only gripe is that this isn't just a loophole for the wealthy.
The article addresses this - the tax rate for a married couple making ~150k or so is already 25%, so it's only people who make more than that who would be impacted by this.
The article addresses this - the tax rate for a married couple making ~150k or so is already 25%, so it's only people who make more than that who would be impacted by this.
ah nice, to not see that I must be part of the bourgeoisie oblivious to the socioeconomic woes of the underclass
finally.
finally.
Well, for one, that requires you to have $100 to spare to register. Two, it requires your employer to be willing to hire you like that.
That's AWESOME news! The more you earn the less you must pay in taxes. There's a simple explanation for this the low income people getting more services from society, than wealthy one. So it's fair share for society depends on amount of service society provides for you.
Ideal taxation system must follow normal distribution:
http://www.itl.nist.gov/div898/handbook/pmc/section5/gifs/no...
where:
x - income
f(x) - taxes
For example: $5k annual income = 0% taxes $10k - 10% taxes $75k - 150k - 35% taxes $150k - $250k - 30% $250k - $1kk - 25% $100kk - 1%
For example: $5k annual income = 0% taxes $10k - 10% taxes $75k - 150k - 35% taxes $150k - $250k - 30% $250k - $1kk - 25% $100kk - 1%
Any tax plan that promises to increase taxes for the rich, often tends to be something that ends up increasing the taxes for the rest, while the rich will have enough loopholes to pay less taxes, legally.
The 9 page Republican tax plan draft is pretty awful.
Not just awful in the sense that Trump promised that it didn't benefit rich people, which it does ("It's not good for me, believe me"). The elimination of the estate tax on the top 0.2% of estates in America is the most egregious example. The immediate write off of depreciable assets, elimination of AMT and reduction of corporate taxes largely do not apply to small businesses. In particular, the immediate expensing of depreciable assets may further serve to exacerbate irrational purchases of equipment by small businesses, potentially locking them into unprofitable business practices, while benefitting large corporations that make these specialized products (see the corn glut). No comment on whether this is moral or not, in the end it brings profits to big business at the direct expense of small business.
But its also awful in the sense that its not even close to complete or reasonable. Half of the 9 page document is just empty words and opinions that have no business being on a document meant to form the basis of our new tax code. Republican analysts have yet to make up for the optimistic 1.5 trillion dollar projected shortfall introduced by this tax reform, and the various "tricks" being discussed to bridge that gap are unpalatable at best. Clever accounting reminiscent of the practices that brought Enron to its downfall, punting the problem of shortfalls 10 years down when the debt becomes to big to ignore. Taxing of retirement plan contributions and proceeds which will be borne by middle class workers. If this is all the Republicans have to show after 2 years of bluster, I can't see any significant reform going through.
Moreover, the duplicitous wording of the document gives less reason to view the Republicans in a charitable light. The whole section on the "zero tax bracket" and dependent deduction elimination represents little to the lower class Americans it purports to help. Replacing the deduction for non child dependents with a 500 dollar tax credit is a tax increase in most cases. The unspecified increase in the child tax credit is also balanced by the loss in the $4000 deduction - there is no reason to expect an actual effective tax break of significant magnitude when the Republicans can't even give us a flat answer. The elimination of most itemized deductions perturbs me as well - give people even less of a reason to spend their money in incentivized manners, punish the middle class further? We'll see what exactly they eliminate, if its comparable to the nearly doubled standard deduction.
"Finally, the committees will work on additional measures to meaningfully reduce the tax burden on the middle-class." It's amazing how long it took them to produce a mere 9 page document, much of which contains words that impart no meaning. I've written essays in high school longer than this.
Not just awful in the sense that Trump promised that it didn't benefit rich people, which it does ("It's not good for me, believe me"). The elimination of the estate tax on the top 0.2% of estates in America is the most egregious example. The immediate write off of depreciable assets, elimination of AMT and reduction of corporate taxes largely do not apply to small businesses. In particular, the immediate expensing of depreciable assets may further serve to exacerbate irrational purchases of equipment by small businesses, potentially locking them into unprofitable business practices, while benefitting large corporations that make these specialized products (see the corn glut). No comment on whether this is moral or not, in the end it brings profits to big business at the direct expense of small business.
But its also awful in the sense that its not even close to complete or reasonable. Half of the 9 page document is just empty words and opinions that have no business being on a document meant to form the basis of our new tax code. Republican analysts have yet to make up for the optimistic 1.5 trillion dollar projected shortfall introduced by this tax reform, and the various "tricks" being discussed to bridge that gap are unpalatable at best. Clever accounting reminiscent of the practices that brought Enron to its downfall, punting the problem of shortfalls 10 years down when the debt becomes to big to ignore. Taxing of retirement plan contributions and proceeds which will be borne by middle class workers. If this is all the Republicans have to show after 2 years of bluster, I can't see any significant reform going through.
Moreover, the duplicitous wording of the document gives less reason to view the Republicans in a charitable light. The whole section on the "zero tax bracket" and dependent deduction elimination represents little to the lower class Americans it purports to help. Replacing the deduction for non child dependents with a 500 dollar tax credit is a tax increase in most cases. The unspecified increase in the child tax credit is also balanced by the loss in the $4000 deduction - there is no reason to expect an actual effective tax break of significant magnitude when the Republicans can't even give us a flat answer. The elimination of most itemized deductions perturbs me as well - give people even less of a reason to spend their money in incentivized manners, punish the middle class further? We'll see what exactly they eliminate, if its comparable to the nearly doubled standard deduction.
"Finally, the committees will work on additional measures to meaningfully reduce the tax burden on the middle-class." It's amazing how long it took them to produce a mere 9 page document, much of which contains words that impart no meaning. I've written essays in high school longer than this.
Tax cuts always have a higher impact on the wealthy because, well, they pay more taxes.
This isn’t a bad thing. That money won’t dissapear. It’ll get spent or invested (either directly or indirectly by a bank if saved).
Tax cuts are good. Stop saying they’re bad. The wealthy always find loopholes because they can afford lawyers and accountats to deduct taxes or skip taxes through offshore companies, so it’s the not-so-wealthy who have a yet bigger impact but not so directly visible.
This isn’t a bad thing. That money won’t dissapear. It’ll get spent or invested (either directly or indirectly by a bank if saved).
Tax cuts are good. Stop saying they’re bad. The wealthy always find loopholes because they can afford lawyers and accountats to deduct taxes or skip taxes through offshore companies, so it’s the not-so-wealthy who have a yet bigger impact but not so directly visible.
>That money won’t dissapear. It’ll get spent or invested (either directly or indirectly by a bank if saved).
Only in economics 101 would the bank need deposits for loans. In the real world there is no upper limit on money that wants to be invested, just a lack of feasible investment opportunities.
More fundamentally, governments want to stimulate the economy at all costs, so interest rates are near zero ("please take our money and create jobs") and plenty of attempts at subsidizing industries have been (and are still) made.
Since you can't quite force economic growth, startups etc., at least you can have money in circulation.
So, money in the bank, like money under the mattress, is bad for the economy. So, the tax cut may infact be bad from an economic perspective.
Only in economics 101 would the bank need deposits for loans. In the real world there is no upper limit on money that wants to be invested, just a lack of feasible investment opportunities.
More fundamentally, governments want to stimulate the economy at all costs, so interest rates are near zero ("please take our money and create jobs") and plenty of attempts at subsidizing industries have been (and are still) made.
Since you can't quite force economic growth, startups etc., at least you can have money in circulation.
So, money in the bank, like money under the mattress, is bad for the economy. So, the tax cut may infact be bad from an economic perspective.
>Tax cuts are good. Stop saying they’re bad.
Taken to the logical limit that would imply that we shouldn't have taxes at all. You're assuming also that taxes are being cut across the board, but it is very unclear if the middle class will experience any positive change, while there is ample evidence that the President and most of his cabinet will make out quite well personally.
Taken to the logical limit that would imply that we shouldn't have taxes at all. You're assuming also that taxes are being cut across the board, but it is very unclear if the middle class will experience any positive change, while there is ample evidence that the President and most of his cabinet will make out quite well personally.
If somehow you can have a government w/o having taxes (maybe financed by seigniorage), yes. We shouldn't have taxes at all. Taxes are a necessary evil.
We should probably stop calling them "loopholes", too. The two biggest policies that reduce a wealthy person's taxes are:
1) capital gains is lower than income
2) there are deductions for almost everything
3) tax-free retirement accounts
4) charitable deductions
The truth is that many of the above affect the middle class, too.
1) capital gains is lower than income
2) there are deductions for almost everything
3) tax-free retirement accounts
4) charitable deductions
The truth is that many of the above affect the middle class, too.
They absolutely help the middle class, too. The issue with being middle class is that you don't qualify for the "social safety net" deductions, but the other loopholes don't net you much in the way of absolute dollars—particularly given the investment (documentation) required.
Plus:
1) Middle class typically doesn't have the ability to structure income as capital gains.
2) (See above.)
3) Given modest contribution caps in retirement accounts, not a major "loophole" for the wealthy.
4) Something we should encourage at all levels.
Plus:
1) Middle class typically doesn't have the ability to structure income as capital gains.
2) (See above.)
3) Given modest contribution caps in retirement accounts, not a major "loophole" for the wealthy.
4) Something we should encourage at all levels.
2. Itemized deductions get phased out once income exceeds a certain threshold, plus you get subject to the Alternative Minimum Tax.
3. There are limits to how much can be put in them.
4. Sure, you get a tax deduction for donations to charity. But you NO LONGER HAVE THE MONEY. You gave it away. Giving money away is giving away the wealth.
3. There are limits to how much can be put in them.
4. Sure, you get a tax deduction for donations to charity. But you NO LONGER HAVE THE MONEY. You gave it away. Giving money away is giving away the wealth.
Don't tax free retirement accounts already phase out based on income and cap annual contributions?
It's obviously possible to, for example, lower the lowest bracket and leave the highest the same. This would be a tax cut with no impact on the wealthy.
Not true - it would absolutely have an impact on the wealthy, as everyone pays taxes at the lowest rate for all income up to the lowest bracket.
This is a pedantic splitting of hairs. It would be an insignificant change to the most wealthy.
The magnitude of the impact, however, would be much different between the two.
The issue is that it won't necessarily get spent, saving rate goes up with income which produces less currency circulation. The whole idea of trickle down economics just needs to go away.
If there's going to be government intervention in the economy (and there's going to be government intervention in the economy) then supply side economics works great in environments where there isn't enough investment.
That said, we don't live in one of those environments. We've probably had too much investment for the last 104 years or so...
That said, we don't live in one of those environments. We've probably had too much investment for the last 104 years or so...
What do you think happens to the money that gets saved? People aren't stuffing it into a mattress. It still circulates.
It circulates but it doesn't circulate locally and it doesn't circulate quickly. The earnings of people with lower incomes tends to get reinvested directly into their local community. Higher income earners will pass their money off to a bank which may reinvest it into a local business but is as likely to invest it overseas.
Even if that's true, does it matter? Whether a dollar saved is spent locally, or saved in the bank and loaned locally, or saved in the bank and loaned to some other community, or wire transferred to family in Mexico ,or invested in a factory in Indonesia, some local community benefits.
The wealthy don't need to find loopholes, they are constructed by our lawmakers. An uneven playing field is damaging to the free market.
This is a bad thing. That money won't disappear. It'll get spent or invested (either directly or indirectly by a bank if saved)
Tax cuts are bad. Stop saying they're good. The wealthy have money to affect political decisions because they can afford lobbyists, so it's the not-so-wealthy who have a marginalized impact.
This is a bad thing. That money won't disappear. It'll get spent or invested (either directly or indirectly by a bank if saved)
Tax cuts are bad. Stop saying they're good. The wealthy have money to affect political decisions because they can afford lobbyists, so it's the not-so-wealthy who have a marginalized impact.
Seriously your argument is that the wealthy spend money? You know who spends money even better? The government, the government literally spends all the money. By your argument we should be giving as much money to the government as possible as they will spend, or invest it.
No the wealthy don't spend money - that's the problem. They take the money and move it offshore or into a tax shelter and it gets invested and sits.
Compare to someone who's poor - they spend most of their take-home pay on daily needs that spur the economy.
Cutting taxes for the rich only gives them more money - trickle-down theory has been proven to not work, and in fact the biggest net return for governments is to simply hand out cash (qualified as welfare/food stamps or unqualified like universal income) - that gets the government like 1.7x the amount handed out in tax receipts inbound as the cash passes through the economy.
Compare to someone who's poor - they spend most of their take-home pay on daily needs that spur the economy.
Cutting taxes for the rich only gives them more money - trickle-down theory has been proven to not work, and in fact the biggest net return for governments is to simply hand out cash (qualified as welfare/food stamps or unqualified like universal income) - that gets the government like 1.7x the amount handed out in tax receipts inbound as the cash passes through the economy.
It’ll get spent or invested (either directly or indirectly by a bank if saved).
Ah, the ol' "trickle down economics" trope that refuses to die. I've been waiting since the Reagan administration to see it actually work as advertised.
Tax cuts are good. Stop saying they’re bad.
If only saying it made it true. The current proposal doesn't look to benefit me, a household making well into six figures. Guess we'll have to work harder to make the >$400K needed to benefit from the latest "reform" proposal. That, or start funneling all of our income through an LLC. Meanwhile, at the bottom end, the taxes go up from 10% to 12%.
Tax cuts are good if you're incredibly rich (and not just mildly rich like me). For the vast majority of us, it won't benefit us at all.
Ah, the ol' "trickle down economics" trope that refuses to die. I've been waiting since the Reagan administration to see it actually work as advertised.
Tax cuts are good. Stop saying they’re bad.
If only saying it made it true. The current proposal doesn't look to benefit me, a household making well into six figures. Guess we'll have to work harder to make the >$400K needed to benefit from the latest "reform" proposal. That, or start funneling all of our income through an LLC. Meanwhile, at the bottom end, the taxes go up from 10% to 12%.
Tax cuts are good if you're incredibly rich (and not just mildly rich like me). For the vast majority of us, it won't benefit us at all.
"Tax cuts always have a higher impact on the wealthy because, well, they pay more taxes."
They also get the most income and wealth.
"This isn’t a bad thing. That money won’t dissapear. It’ll get spent or invested (either directly or indirectly by a bank if saved)."
Maybe. But that also doesn't mean it'll be used for something good for society, rather than Uber for Dogs.
"Tax cuts are good."
Tax cuts are a thing. By themselves, they are neither good nor bad. How they're applied is the difference. If a tax cut causes government revenues to drop to the point where they can no longer properly fund public schools, it's not the wealthy that are going to be hurt by it.
They also get the most income and wealth.
"This isn’t a bad thing. That money won’t dissapear. It’ll get spent or invested (either directly or indirectly by a bank if saved)."
Maybe. But that also doesn't mean it'll be used for something good for society, rather than Uber for Dogs.
"Tax cuts are good."
Tax cuts are a thing. By themselves, they are neither good nor bad. How they're applied is the difference. If a tax cut causes government revenues to drop to the point where they can no longer properly fund public schools, it's not the wealthy that are going to be hurt by it.
> Tax cuts are good. Stop saying they’re bad.
Except that tax cuts basically mean the government has less money to pay for things. I suppose if you don't rely on government for anything (like infrastructure to run your business) then that's good. Otherwise it is bad.
Except that tax cuts basically mean the government has less money to pay for things. I suppose if you don't rely on government for anything (like infrastructure to run your business) then that's good. Otherwise it is bad.
well, most of the federal spending goes to maintaining our welfare and warfare state. Contrary to common myth, infrastructure cost is a tiny fraction of the federal budget.
I've always been more concerned with how effectively it's spent.
If you are concerned that your engine doesn't run efficiently, simply cutting the fuel to it doesn't actually fix any problems.
The government is a huge entity that does some very important things and wastes a lot of money (some of which being pork that it seems every party indulges in), simply assuming that cutting off the cash flow is going to improve anything is wishful thinking I think.
You know certain things will be funded (like the military) but a lot of basic services to the needy always seem to be on the chopping block despite costing a fraction of the budget (food stamps, nutritional assistance to pregnant mothers, etc).
The government is a huge entity that does some very important things and wastes a lot of money (some of which being pork that it seems every party indulges in), simply assuming that cutting off the cash flow is going to improve anything is wishful thinking I think.
You know certain things will be funded (like the military) but a lot of basic services to the needy always seem to be on the chopping block despite costing a fraction of the budget (food stamps, nutritional assistance to pregnant mothers, etc).
> If you are concerned that your engine doesn't run efficiently, simply cutting the fuel to it doesn't actually fix any problems.
Since you're using a ridiculous analogy here, one can easily point to CAFE standards that have dramatically increased the efficiency of cars over the past 20 years by doing exactly what you're describing - cutting the fuel...
Since you're using a ridiculous analogy here, one can easily point to CAFE standards that have dramatically increased the efficiency of cars over the past 20 years by doing exactly what you're describing - cutting the fuel...
No, their analogy was pretty spot on. Yours is ignoring a huge amount.
Well, as the cost of fuel goes up people are incentivized to purchase more fuel efficient vehicles. When the supply isn't unlimited you have to be more careful about how it's used.
In my lifetime I've never seen a government program cut costs or gain efficiency. At the point something like that happens I'll be much more open to government programs. In the current environment both in terms of bloat and political hostility, it's really hard to see any benefit.
Rather than worry about throwing more tax money at the problem, why not focus on how much better things would be if the department was 10% more efficient?
In my lifetime I've never seen a government program cut costs or gain efficiency. At the point something like that happens I'll be much more open to government programs. In the current environment both in terms of bloat and political hostility, it's really hard to see any benefit.
Rather than worry about throwing more tax money at the problem, why not focus on how much better things would be if the department was 10% more efficient?
I'm not disagreeing about efficiencies, I'm saying the way to do it is actually do the work rather than simply slash the funding and assume that the correct efficiencies will be implemented. I think that is what is irresponsible.
Can you point to any specifics about what is inefficient? I'm not doubting that it is the case, but when you say you've never seen it is that because its never happened right in front of you or you've looked hard for it and it just isn't there? I'm not trying to be a jerk, but I think we all have a tendency to criticize things we don't understand as well as we would like to think and I try to resist that urge unless I actually know a lot of details. After being a developer for a few years, I'm a lot less likely to criticize some piece of software or code someone else has written until I actually analyze it myself and try to improve it, often times I find there are reasons for a lot of the corners that were cut or hacks that were implemented. Not always, but as often as not I can't actually improve something as much as I would have initially assumed.
Can you point to any specifics about what is inefficient? I'm not doubting that it is the case, but when you say you've never seen it is that because its never happened right in front of you or you've looked hard for it and it just isn't there? I'm not trying to be a jerk, but I think we all have a tendency to criticize things we don't understand as well as we would like to think and I try to resist that urge unless I actually know a lot of details. After being a developer for a few years, I'm a lot less likely to criticize some piece of software or code someone else has written until I actually analyze it myself and try to improve it, often times I find there are reasons for a lot of the corners that were cut or hacks that were implemented. Not always, but as often as not I can't actually improve something as much as I would have initially assumed.
The sibling analogy doesn't really hold -- comparing the government to an engine has the inherent assumption that you're in control of it. I don't believe that's been the case in the United States for some number of decades. A better analogy might be to compare it to a runaway train on a downgrade.
All this fatalism is wrong, nonsense propaganda. The "wealthy" in plain fact are often killed with survivors exiled en masse. I know tons of bitter Maryland and DC former wealthy who were punished for collusion with our very own state and exiled to our little patch of North American pizza cheese hell to remember. I know world bankers who work with now assassinated Russian billionaires.
You obviously have no comparative data, relevant associates or historical acumen whatsoever. Dare to say something exceedingly smart, discerning and not wish fulfilling. Noise obscures any possible policy signal. All "old saw" claims of "what everyone knows" only subtract from value creation, good planning and sound accounting. That will remain true tomorrow and 10 years from now.
Stay away from needy or greedy cheerleaders spewing nonsense. Just wait and some dummy will a wave a flag next.
You obviously have no comparative data, relevant associates or historical acumen whatsoever. Dare to say something exceedingly smart, discerning and not wish fulfilling. Noise obscures any possible policy signal. All "old saw" claims of "what everyone knows" only subtract from value creation, good planning and sound accounting. That will remain true tomorrow and 10 years from now.
Stay away from needy or greedy cheerleaders spewing nonsense. Just wait and some dummy will a wave a flag next.
Any tax reform that does not address the fact that investment income is taxed more or less flat compared to labor which is taxed progressively is missing a huge opportunity to tackle income inequality and making the wealthy "pay their fair share".
- Lower the corporate tax rate significantly. This creates more value in companies and possibly a larger labor pool.
- Install a progressive tax system on capital gains similar (larger standard deduction than labor) to how labor is currently taxed. Investors are making more on companies that pay lower taxes now. If investment is your sole source of income you'll actually be paying your "fair share" now.
- Lower taxes on working people who spend most of their income. This creates more consumption and investment which leads to better markets.