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Author Topic: Taxes
OpsanusTau
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quote:
Not entirely relevant if it's hard to pay or not.

The poor pay Federal Income Tax.

On the plus side, it takes about 60 seconds to do their taxes.

Thanks, Jesse.

It is always nice to see people being reminded that yes, we who make almost no money do TOO pay taxes.

And for those of you scorning the *amount* of tax we low-income folk make, try thinking about it this way:

Yes, the amount of tax I was liable for this year was Not Very Much. However, it was equal to one month's rent.
Or to two month's worth of groceries.

I would imagine that, if your monthly income is multiple thousands of dollars, it is really easy to look at an amount like three to five hundred dollars and think, "That's not even ANYthing."

It's not even really about it being "hard to pay" - it's not any harder for the poor to pay our small tax burden than for the wealthy to pay your larger one, I'm sure. But we DO pay it, and what is insignificant for you is notable for me.
I think there's some parable about a widow and two copper coins, which is sort of (but not entirely) appropriate here. [Wink]

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scifibum
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G2, I think you're missing that you can't itemize without foregoing your standard deduction, and it's really hard to come up with enough deductions to outweigh the standard deduction on 18k a year.

Pointing out that a single person can avoid paying taxes by claiming a dependent is kind of funny, though.

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munga
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quote:
Originally posted by LetterRip:
munga,

that idea has been floated for at least 10 years. I'd be surprised if there hasn't been a bill with it quite a few times before.

LetterRip

Interesting. Maybe it's time is coming. I wonder what forces can be brought to bear.....
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0rnery
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We've been trying to do away with the inheritance tax for at least as long, but guess who keeps putting the kibosh on that? Yep, same folks who want to raise the Capital Gains tax, and keep gains adjustment bills from passing. Big surprise, eh?
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Omega M.
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I heard Mike Huckabee say this on Sean Hannity's show the other day: Every tax form should have added to it a line on which you can write how much extra money you want to give to the government. That way everyone who says we need higher taxes can pay what they think is their fair share even before the laws are changed.
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KidB
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quote:
That way everyone who says we need higher taxes can pay what they think is their fair share even before the laws are changed.
If I pay my fair share, and other, wealthier people don't, do I get to write that in?
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Omega M.
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If other people don't give their fair share to charity, does it make it any less wrong for you not to give your fair share?
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OpsanusTau
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Taxes are not charity.

Taxes are a payment for a service, where the "service" in question is having the advantages of a stable, functioning society with a high standard of living.

If other people don't pay for their fair share of this service, does that mean that it's all right to withhold the advantages from them?

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Straygaldwyr
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There is no 'fair share' of charity...hence the giving is a virtue...
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Dave at Work
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quote:
If other people don't give their fair share to charity, does it make it any less wrong for you not to give your fair share?
I agree that voluntary donation of time, money, and other resources to charity is a good thing. On the other hand, I take exception to the notion that there is some "fair share" that everyone should be required to give to charity as if charity were a tax. Charity is a free expression of ones generous nature. Charity is not a requirement; if it were a requirement, it would no longer be charity.
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0rnery
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quote:
Originally posted by JoshCrow:
These stories about "ohh, taxing the rich luxuries only hurts the middle-class jobs" are a crock. If you think that rich people "not buying another yacht" is going to hurt the economy more than when the middle class has to start buying bicycles instead of cars, you're out to lunch.

If I had my druthers, there would be a salary cap somewhere between $200-300k, indexed to inflation and such. There is just nobody alive who merits having obscene riches, and no justification for creating such an imbalanced power structure that is the end-result of capitalism unleashed and untethered to the middle class.

And before anyone gets their panties in a bunch, I do believe in the free market and am not a communist. I just think capitalism needs a band-aid to get under control. Income that brings you over the salary cap should be instantly transformed into charitable donations or gov't program of your choice.

This retarded tax was repealed . Why?

First Obama wants to increase the Capital Gains Tax to 28%, (link) then he backpedals to 20%, same as Hillary. Why?

Would raising taxes help our economy, or is it just a matter of "fairness"?

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OceanRunner
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quote:
As for losing houses to the Federal government - if they can't pay taxes why wouldn't they be forced to sell their house?
Here's a question. Do any of us really own property, or do we just lease it from the government? After all, non-payment of taxes means they can reclaim your home and land... is that a) a punishment for a crime (evasion of taxes) or b) one more way we ignore the fact that we really do live in a socialist country?
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OceanRunner
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quote:
If I had my druthers, there would be a salary cap somewhere between $200-300k, indexed to inflation and such. There is just nobody alive who merits having obscene riches, and no justification for creating such an imbalanced power structure that is the end-result of capitalism unleashed and untethered to the middle class.
You don't think that would crush initiative?

I like this quote from Mellon:
quote:
Any man of energy and initiative in this country can get what he wants out of life. But when initiative is crippled by legislation or a tax system which denies him the right to a reasonable share of his earnings, then he will no longer exert himself and the country will be deprived of the energy on which its continued greatness depends.
There are people who "merit having obscene riches". The ones who have honestly earned them. They have often employed others or bettered the world along the way.
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kenmeer livermaile
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A man of ambition would work to get around such tax legislation. We need men like that;)
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Jesse
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No, OR, it's another example of the legal fact that we, as citizens and not nations unto ourselves, can only "own" land in Fee Simple.

-----------

Ornery, give me an ethical explination of why capital gains should be subject to lower taxation rates than earned income.

Me, I see no reason the two should be treated seperately.

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starLisa
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quote:
Originally posted by Jesse:
Ornery, give me an ethical explination of why capital gains should be subject to lower taxation rates than earned income.

Me, I see no reason the two should be treated seperately.

I agree. Neither one should be taxed.
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starLisa
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quote:
Originally posted by Jesse:
No, OR, it's another example of the legal fact that we, as subjects and not nations unto ourselves, can only "own" land in Fee Simple.

There, fixed that for you.
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Jesse
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You didn't "fix" anything.

Quit abusing the quotes.

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IrishTD
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quote:
This retarded tax was repealed . Why?
Did you not read the article? Here's an example

quote:
"We had to collect 10 percent luxury tax on all items that carried a price tag of more than $10,000," she said. "This actually affected middle-class customers, those who had saved up, for instance, to buy an engagement ring or an expensive watch for a once-in-a-lifetime occasion. They were the ones who hesitated and did not buy because the 10 percent tax on top of the sales tax just put them too far over the edge."

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IrishTD
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quote:
First Obama wants to increase the Capital Gains Tax to 28%, (link) then he backpedals to 20%, same as Hillary. Why?
Here's a WSJ link (opinion column, so probably a bit of bias)

Article quotes:
quote:
Critics howled this would reduce tax revenues, and they howled when Republicans cut the rate to 15% in 2003. What followed in both cases was an enormous "unlocking" effect, as investors sold more stock and assets to take advantage of the lower rate. Capital gains realizations soared to an estimated $729 billion in 2006 from $269 billion in 2002. This goosed Treasury receipts from capital gains, to an estimated $110 billion in 2006 from $49 billion in 2002.
quote:
With the economy weak, this is an especially poor time to be talking up tax hikes. A higher rate, and its devaluing of U.S. assets, would hammer U.S. competitiveness, making it harder to attract global capital. America is increasingly isolated in taxing capital gains. Many industrialized competitors publicize a lower rate, and many (Germany, Switzerland, Austria, New Zealand) have no levy at all.

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LetterRip
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Investors tend to sell when they can lock in a gain at a lower rate - so right before a tax raise is likely to increase short term capital gains tax receipts even more than after a lowering of the tax rate.

Instead of not taxing until the stock is sold, a lower rate (say 1%) that is paid annually would generate drastically more revenue; and spikes due to strategic considerations of selling when a rate either changes or is about to change would be eliminated.

quote:
. Capital gains realizations soared to an estimated $729 billion in 2006 from $269 billion in 2002. This goosed Treasury receipts from capital gains, to an estimated $110 billion in 2006 from $49 billion in 2002.
It is actually a net loss of capital gains to the treasury, since those gains would have been realized anyway at the higher rate, it just impacted the timing of the gain.

A stronger realization of gains would have happened from an increase in the capital gains rate.

LetterRip

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Jesse
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So....from a low during the post 2001 recession to a high after recovery, revenue went up even though taxes went down.

Got it.

Capital gains, realistically adjusted for inflation, should be treated just like earned income.

Pretty hard to make an argument against that if you're one of the folks who argue that investors earn their profits - even those tend to be the exact same folks who argue that there should be no capital gains taxes.

quote:
The proposal of any new law or regulation which comes from businessmen, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.
Adam Smith
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flydye45
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So Jesse,

You are speaking as if the initial income came from nowhere. In the case of margin investing, there is some truth to that; not in anywhere near a majority of cases.

I have that exact circumstance. My wife takes my taxed income and makes profits...which is AGAIN taxed.

At the very least, they need to leave the rates at the much lower rates we currently enjoy.

[ May 05, 2008, 03:28 PM: Message edited by: flydye45 ]

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Jesse
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You speak as if "earned" income is not the result of an investment in education, in housing, in food stuffs, in training, in clothing, in transportation.

"Why, I was already taxed on the cash I used to buy gas to get to work, what right have you to tax me on the income I gained while there!"

I propose no higher tax on capital gains than on other forms of income. It certainly is work to research investments, to remain informed about market trends, or about the expected performance of a company in which one has invested. There certainly is risk involved, but there is risk involved for anyone who performs labor as well.

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kenmeer livermaile
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Arguing against dogmatic free market, entrepreneurs-as-holy-cows ideologists is like arguing against a 1933 Marxist or against religion. IN fact, identical.
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Jesse
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Fly is less dogmatic than some, so I bother.

Somehow, talking to a brick wall is much less frustrating than trying to teach pigs to fly.

I don't think I thank Fly often enough for being a well constructed brick wall.

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0rnery
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quote:
Originally posted by IrishTD:
quote:
This retarded tax was repealed . Why?
Did you not read the article? Here's an example...
The question was rhetorical. The answer makes OceanRunner's point about initiative.

I'd rather have a flat tax, so yeah, make capital gains the same as that rate, whatever it ends up being.

The question about whether raising taxes would help our economy, or just a matter of "fairness", wasn't rhetorical...

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flydye45
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There is a point to your argument. The money I spend on gas is taxed twice after all (but your example is backward btw). And I do not mind a gas tax because it is predicated on money being used to maintain the highways of the Feds and State, i.e. a specific application. (I am trying very hard to avoid too many eyerolls but in this case it is particularly hard) Well, of course I mind, but less so then on capital gains.

Because of it's nature, capital gains, both as a liquidity issue and as a personal profit issue, should not be taxed as highly as normal income if at all.

I can see capital gains being taxed that way IF and only IF the person is a professional investor, in which case he is self employed and needs to file accordingly. For the majority, not so much.

I make by the sweat of my...well, sweat of something is involved $12,500. Assume $2,500 is shined off as income tax. So, my ten grand is then invested by the wife. She makes 10%, which again gets hit with another tax of equal value. I still don't find that fair. It is no different then the increase in value of your home, which remains untaxed, except that the investor is providing a useful service to the economy at least as potent as giving a neighborhood a well maintained property.

[ May 05, 2008, 08:52 PM: Message edited by: flydye45 ]

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Jesse
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I'm not talking about the gas taxes, Fly. I'm talking about the income tax you paid on the cash you used to make the investment in gasoline so that you could turn a profit by going to work that day - and that's only a small part of a lifetime of investments that enabled you to go to work that day, all paid for with income you (or your parents, or whoever) were taxed on.

Except as adjusted for inflation, I see absolutely no excuse for clintons perversion of the tax code in regard to profits made from home sales. It was a huge factor in the collapse we're now seeing, as it led to rampant speculation - in the way such artifical incentives always do.

If, instead of investing your ten grand in Bobs Nationwide Hot-Dogs Inc., you went out and bought yourself a hot-dog cart so that you had a part-time weekend job, you'd be paying income tax on your net.

Nevermind that you would get to write off depreciation of your hot-dog cart - you don't get taxed on the principal of your Bobs Nationwide Hotdogs Inc. investment when you recover it either.

Make investment of time, of money, of effort,
in real productive property you yourself own - pay higher tax on earned income.

Make an investment by loaning your money out to someone else - pay a lower rate.

That's Bush's "ownership society" for you in a nutshell - own, as long as you own a tiny piece of someone elses enterprise.

Your ability to perform labor is capital. There is no divergence, no seperation, between "labor" and "capital" in the rawest sense. There should be no difference in how the profits from either are taxed.

I don't think this needs clarification, but labor is labor, whether it's writing novels or picking beans, for purposes of this discussion.

There is also no excuse for a flat rate on capital gains when we have a progressive income tax. It's absolutely INSANE that someone whose only income came from a 12,000 dollar capital gain should pay 15% tax on it while someone who made 12,000 dollars profit on their investment of sweat, education, skills, time, what have you walks away with more back than they paid in.

No, these warped views that the "idle rich should be soaked" or the converse view that "labor" is discrete from and owing all to capital do not serve to grow our economy to its maximum potential, they do not serve to provide an equitable playing field, they do not serve to promote social mobility or meritocracy, they do not serve to promote the wisest course of investment.

If you use your dollar to aquire another dollar, or use your muscles to aquire a dollar, or use your creativity to aquire a dollar, (all of the above always apply to some wildly varying extent)and do so legally, the Government has no business artifically valuing one of these tools over another.

You should be no more "double taxed" when you are taxed on the returns from your capital investment than a ditch-digger is double-taxed when he uses post-tax income to purchase food to provide the motive energy to dig ditches - but no less so, either.

[ May 05, 2008, 09:37 PM: Message edited by: Jesse ]

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kenmeer livermaile
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"There is also no excuse for a flat rate on capital gains when we have a progressive income tax. It's absolutely INSANE that someone whose only income came from a 12,000 dollar capital gain should pay 15% tax on it while someone who made 12,000 dollars profit on their investment of sweat, education, skills, time, what have you walks away with more back than they paid in."

My crude and extremely narrow understanding of such matters is that the idle rich problem is found at the gate of inheritance. When parent transfers their earned wealth to a child who then receives income on wealth they invested no more into than surviving childhood, that creates a disparity that is potentially class-based: 'old money' versus 'new money'.

When people say the inheritance tax is a death tax, they seem to forget that the dead can't take it with them and the inheritors haven't necessarily earned their inheritance in terms of contributing to the economy.

Somehow, or such is my impression, this is conflated in the mushy mass mind w/ capital gains, period.

I would say more, but my nose is spastic this AM and my brain is disliking the consequent oxygen cutoff. But I am very interested in this and would hear more, especially as clearly expressed as Jesse has in language that turns financial terms into laymanese et vice-versa.

Fly, on service of Jesse, I thank you and your parents and mentors for being such a well-constructed set of bricks. [Wink] As a bulwark you are well-made; as a launching platform for pigs that would fly, you are wise to have posted on your wall: No Pigs Allowed.

I go now to release my flying monkeys for their morning exercise...

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Jesse
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I say the same to you that I say to everybody I know, Ken. Read Smith.

If you want to understand Lincoln, understand he read The Theory of Moral Sentiments a dozen times and An Inquiry into the Nature and Causes of the Wealth of Nations more than once. If you want to understand Bolivar, understand that he literally carried both works with him everywhere, even on the run through the mountains. If you want to know what Jefferson and Hamilton were fighting about - it was Smith.

Read Smith.

Smith is the bible, or the Constitution. Everyone quotes him, few people read him, and his words are distorted by those trying to make an appeal to an authority they do not expect anyone to investigate.

Read Smith.

We've reached this bizarre place, where christians call for killing in the name of christ, and self-described devotees of Smith call for an end to public education...although we know what Yeshua had to say about killing, few realize that Smith believed public education was absolutely neccesary.

Read Smith.

The kicker is, it's really important to read both of Smiths works if you're going to understand that Smith's "self-interest" is not a "greed is good" argument. It's a "greed IS" argument.

Read Smith.

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kenmeer livermaile
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Read Smith? I grew up on the Book of Mormon! [Wink]
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Lobo
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That is not Smith, that is Nephi, Mormon, et al.
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Colin JM0397
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A lot of the confusion seems to stem from those who intuitively understand the "income tax" to not be Constitutionally legal.
http://www.losthorizons.com/review.htm
quote:
Cracking the Code- The Fascinating Truth About Taxation In America by Peter E. Hendrickson
Lost Horizons, 2003, 232 pages, $19.95
Reviewed by Steve Thomas

Any student of liberty and of the founding of the United States has to know intuitively that the current tax code of our federal government could have never been the intention of our Founding Fathers. One can take it as a given that the Founders would be disheartened and outraged by the growth and perversion of the federal government – and the abuse of power it employs in collecting taxes from the people.

I have often wondered how much different the course of American history would be if an economist like Milton Friedman or James Buchanan – with two hundred years of hindsight – could be transported back in time to advise the Founders on Constitutional issues like taxation. Perhaps they could provide the Founders with insights that would have made the Constitution impervious to time and the “factions” that so troubled them.

In his recently published book, Cracking The Code: The Fascinating Truth About Taxation In America, libertarian author Peter Eric Hendrickson makes it perfectly clear that America’s Founders were very much aware of the dangers associated with the federal government’s power to tax. Accordingly, they established a wholly viable system of checks and balances within the Constitution to prevent the federal government from abusing its taxing power. Hendrickson also points out that the Founders actually had a renowned economist (if indirectly) advising them: a capable Scotsman by the name of Adam Smith.

The Constitution calls for direct taxes (i.e., those which are unavoidable) to be apportioned according to each state’s population. That means that federal taxes are supposed to be collected from the states proportionate to their percentage of the nation’s total population – not directly from individuals.

Even the Sixteenth Amendment, which is widely misunderstood as having established an “income” tax, actually represents only a slight modification of the tax already in place at the time of its proposal. It did not change the Constitution’s restriction on direct taxation.

Nonetheless, a widespread misunderstanding of the effects of that amendment has successfully been exploited to convince Americans that everything changed in 1913. People wrongly believe that the amendment gives the government the legal ability to take citizen’s property at will – but nothing could be further from the truth, says Hendrickson. There’s a reason why we hear all the time that it’s a ‘voluntary’ system, and it’s not because we all ‘volunteer’ to save the government the trouble of doing the paperwork.

It is Hendrickson’s contention that the only people from whom the federal government can legally demand an “income” tax are those who are direct beneficiaries of the federal government. Such parties would include federal employees, contractors and those who benefit from government licensing. In other words, if you are a private citizen who earns a salary, Hendrickson claims that you do not have to pay “income” taxes – including FICA – to the federal government.

Don’t believe him? Then go to Hendrickson’s website (www.losthorizons.com) and bear witness to the unthinkable: a letter from the IRS acknowledging that his claim of “money improperly withheld.” is valid. But don’t expect your accountant or attorney to jump on Hendrickson’s bandwagon any time soon. Their jobs – and those of millions of others – depend on your confusion and fear when it comes to the IRS and the bewildering tax code it enforces.

Cracking The Code is a product of the information age. The Internet and its search engines allowed Hendrickson to not only wade through the entire tax code, but to investigate and cross-reference its content: all 3,413,780 words of it. What Hendrickson found is that the tax code, regardless of its confusing and misleading language, is consistent with the Constitution’s original restriction on direct taxes – and that there is no legal way for the federal government to enforce an “income” tax on the labor or earnings of private citizens. Hendrickson cites clear and consistent case law throughout the book to back his claim – including a plethora from the United States Supreme Court.

Readers of Cracking The Code will undoubtedly experience a paradigm shift in their thinking as they make their way through its pages. Skepticism and doubt will slowly be replaced with certainty and conviction as Hendrickson systematically walks his readers through the law and the tax code’s maze of confusion. But it won’t come easy.

As Thomas Paine once wrote in Common Sense, “ . . . a long habit of not thinking something wrong, gives it the superficial appearance of being right, and raises at first a formidable outcry in defense of custom.” Paine’s wisdom undoubtedly applies to the sentiments most Americans have when it comes to the way income taxes are imposed upon them.

There’s no shortage of frivolous books on the market that make the claim that you can avoid taxes. Cracking The Code is not one of them. It is a judicious and thoughtful work written by an American patriot deeply dedicated to the rule of law. Hopefully, this book will find its way into the hands of concerned citizens, legal scholars and federal judges who truly believe in upholding the Constitution – and who are sympathetic to the cause of liberty.


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IrishTD
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quote:
There is also no excuse for a flat rate on capital gains when we have a progressive income tax. It's absolutely INSANE that someone whose only income came from a 12,000 dollar capital gain should pay 15% tax on it while someone who made 12,000 dollars profit on their investment of sweat, education, skills, time, what have you walks away with more back than they paid in.
For clarification (I'm guessing you do realize this) that the 15% is for long term gains (short term is still regular rates), and the cap gains are NOT indexed to inflation yet (sadly).

*****

On another point though, I wonder (and this is mostly speculation on my part) if there are some advantages to having a lower rate for long term gains -- in particular, the potential to reduce asset bubbles. If I have to pay the same amount of tax on any amount of capital gain, I may be more likely to try and buy into the hot sector (esp. if I want to recoup my tax hit) rather than ride out the bump in the road/slow period. This type of thinking by funds, individual investors, etc. could (potentially) cause a lot more bubbles...

Thoughts?

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Jesse
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I know they aren't. They should be.

________________________________________________

Treating all profit, be it profit from labor or investment as long as we treat them both the same, would actually do a lot more to discourage that behavior, as long as we adjust for inflation.

No one wants to be pushed into a higher bracket THIS year.

[ May 07, 2008, 02:50 PM: Message edited by: Jesse ]

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0rnery
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Conservative VS Liberal Economy Rx

Fostering an Environment for Wealth Creation - Jerry L. Jordan

...The resources of the industrialized world were not all endowed; most were created by entrepreneurial effort within a congenial political-economic system.

...Government wealth redistribution by way of explicit or implicit taxation lowers the incentive to create and accumulate wealth, thereby lowering the potential productive power of the economic system.

...The conclusion from examining more than 100 countries over a 20-year period was that governments with a strong commitment to economic liberty--including the freedom of exchange and the protection of private property--tended to be faster-growing and wealthier.


Index of Economic Freedom - The Heritage Foundation

...Corporate and personal taxes are moderately high and are getting relatively higher as other advanced economies reform with lower tax rates.

...Congress has been active in raising the minimum wage, which has harmed labor freedom, but inactive in lowering corporate tax rates, unlike most other advanced economies. Most alarming, America's major political parties have been unwilling to curb growing government expenditures, particularly public entitlements.


Don't punish entrepreneurs - Eric Cantor

...several members of Congress set their sights on American entrepreneurship and retirement savings. The Levin-Rangel bill would effectively raise taxes on investment partnerships by 133%, with serious consequences for job creation and economic growth.

Top Five Tax Breaks For At-Home Entrepreneurs - Maureen Farrell

...half of all businesses in the U.S. are home-based. The U.S. government encourages this kind of entrepreneurship.

The President's Small Business Agenda

...small and young companies create two thirds of the net new jobs in our economy, and they employ half of all private-sector workers. Entrepreneurship has become the path to prosperity for many Americans, including minorities and women.

...High tax rates inhibit entrepreneurial activity because they act as a tax on success, claiming a larger share of income from flourishing enterprises, while the government shares little of the risk of loss. For most entrepreneurs, taxes reduce their companies’ cash flow – the money businesses need to expand, buy more equipment, and hire more workers.

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philnotfil
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quote:
Originally posted by Omega M.:
I heard Mike Huckabee say this on Sean Hannity's show the other day: Every tax form should have added to it a line on which you can write how much extra money you want to give to the government. That way everyone who says we need higher taxes can pay what they think is their fair share even before the laws are changed.

It already does. Right after you figure out how much they owe you there is a line that asks how much of that amount you want them to send you.
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