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Author Topic: Are you paying your fair share?
G2
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Rasmussen has a poll, let's take a gander. The question is, “Do you pay your fair share of income taxes?”

Overall:
About right amount 50%
More than fair share 43%
Less than fair share 1%

Breaking it down by income:
Under 50K
About right amount 57%
More than fair share 36%
Less than fair share 2%

50K-100K
About right amount 52%
More than fair share 46%
Less than fair share 1%

Over 100K
About right amount 32%
More than fair share 66%
Less than fair share 0%

Let's talk about the under 50K crowd. The AP reports:
quote:
About 47 percent will pay no federal income taxes at all for 2009.

<snip>

The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.

Nearly half pay no federal taxes and the bottom 40% of American wage earners, both of which certainly fall within that under 50K group, are making a profit from the income tax structure we currently have and still more than a third think they are paying more than their share. Un-freaking-believable.

Now, some of these guys may be thinking about state income taxes but it's hard to see them whining about over-taxation when they're making a profit off the federal tax scheme. Cry G2 a river.

Is that 50K number a coincidence? No. In 2007, the median annual household income in the US was $50,233.00 according to the Census Bureau. A couple with two kids making slightly over $50,000 can now achieve zero federal tax liability while the bottom 40% makes money. See how it all fits together?

Mark Steyn, via Ed Morrisey asks what should be the obvious question:
quote:
If 51 percent can vote themselves government lollipops from the other 49 percent, soon 60 percent will be shaking down the remaining 40 percent, and then 70 percent will be sticking it to the remaining 30 percent. How low can it go?

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Viking_Longship
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No I'm not.
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DonaldD
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quote:
If 51 percent can vote themselves government lollipops from the other 49 percent, soon 60 percent will be shaking down the remaining 40 percent, and then 70 percent will be sticking it to the remaining 30 percent. How low can it go?
This seems to assume that, if given the chance, the majority at the 'bottom' will increasingly stick it to the shrinking minority at the 'top'. Which ignores that the majority has had this ability for longer than the G2 machine has been functioning, yet the rates in that period of time have fluctuated to both the benefit and the detriment of the upper minority.
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Wayward Son
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Remember that the top 50 percent of those who file tax returns make over 87 percent of the income (AGI) in the United States. At least, they did back in 2005. Might be more now. [Wink]

Consider how thin income is distributed to those in the bottom 50 percent (less than 13 percent of the taxable income). Consider how much of that can be taxed. Consider how much of that money is spent on necessities, like food, housing and clothing.

The amount of income "redistributed" to the bottom 40 percent is such a small fraction of the total income that the top 50 percent makes that it is silly to even worry about it. What does all that money the bottom 40 percent receive cover? A month or two rent on an apartment? A new coat and pants? This is "sticking it" to the rich?

Regardless of what method of taxation we use, the top 50 percent will continue to pay at least 87 percent of the taxes in this nation as long as they make 87 percent of the income. And they will still feel they are paying too much taxes, because the bottom 50 percent only pay about 4 percent. Boo-hoo.

This survey is not about reality, it is about perception of reality. And the top 15 percent (those making over 100K a year) do not have a firm grasp of the reality of the situation.

[Edited to correct percentages--initially read the wrong section. [Embarrassed] ]

[ April 12, 2010, 11:01 AM: Message edited by: Wayward Son ]

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Sauurman
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Well as someone who made 47K Gross last year I know I am *NOT* paying my fair share. Between deductions and credits I ended up having a negative income tax. IE - I got more money back from the government then I paid in income taxes.
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scifibum
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Don't forget your FICA taxes.
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Pyrtolin
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quote:
Originally posted by Sauurman:
Well as someone who made 47K Gross last year I know I am *NOT* paying my fair share. Between deductions and credits I ended up having a negative income tax. IE - I got more money back from the government then I paid in income taxes.

Here's the question you should be looking at- how did your change in net worth over the past year compare to overall economic growth? Did you gain or loose ground, comparatively?
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Pyrtolin
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quote:
Originally posted by Wayward Son:
Remember that the top 50 percent of those who file tax returns make over 87 percent of the income (AGI) in the United States. At least, they did back in 2005. Might be more now. [Wink]

Consider how thin income is distributed to those in the bottom 50 percent (less than 13 percent of the taxable income). Consider how much of that can be taxed. Consider how much of that money is spent on necessities, like food, housing and clothing.

And that's only looking at income, which is somewhat transitory- if you look at accumulated wealth, the numbers grow even ore stark, with more than 50% of it in the top 5-10% of the population (and that share of total wealth growing as the lower shares shrink)

These are just income based- but they help drive the overall point home-
http://www.tax.com/taxcom/features.nsf/Articles/0DEC0EAA7E4D7A2B852576CD00714692?OpenDocument
http://www.perrspectives.com/blog/archives/001766.htm
http://www.articlesandanswers.com/IncomeMobility.htm

The income of one small segment of our population is growing like crazy (while seeing their effective tax rate drop significantly), while the rest are, at best treading water as they transfer wealth up to those top few.

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G2
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quote:
Originally posted by DonaldD:
quote:
If 51 percent can vote themselves government lollipops from the other 49 percent, soon 60 percent will be shaking down the remaining 40 percent, and then 70 percent will be sticking it to the remaining 30 percent. How low can it go?
This seems to assume that, if given the chance, the majority at the 'bottom' will increasingly stick it to the shrinking minority at the 'top'. Which ignores that the majority has had this ability for longer than the G2 machine has been functioning, yet the rates in that period of time have fluctuated to both the benefit and the detriment of the upper minority.
What you're implying is not really accurate. Sure, they've had the ability to implement these things but it's not really been done. Until now.
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Gaoics79
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quote:
The income of one small segment of our population is growing like crazy (while seeing their effective tax rate drop significantly), while the rest are, at best treading water as they transfer wealth up to those top few.
What do you mean by "transfer wealth". Is this to say that in order for one person to be richer, others below him must be poorer? When Bill Gates makes $1,000,000, does that come out of the pockets of everyone else beneath him?
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Pyrtolin
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quote:
Originally posted by jasonr:
quote:
The income of one small segment of our population is growing like crazy (while seeing their effective tax rate drop significantly), while the rest are, at best treading water as they transfer wealth up to those top few.
What do you mean by "transfer wealth". Is this to say that in order for one person to be richer, others below him must be poorer? When Bill Gates makes $1,000,000, does that come out of the pockets of everyone else beneath him?
To some degree- in as much as the people under him are doing the labor, but he's likely receiving the lion's share of the profit for that labor.

But the bulk of the transfer takes place as shown in this model: Say it costs $10/day to survive and you have two people- one earning $70/week and one earning $700/week. At the end of the week, the first guy has $0 left, while the second has $630. Without and compounding effects, that's a systemic transfer of $630 toward the second guy.

If you want to factor taxes and a little more of a margin in, let's say the earnings are $100 and $1000, and the first guy's effective tax rate (after all grading has been properly factored in)is 10%, while the second guy's is 15%. So after taxes and expenses, the first has $20 left over, while the second has $780- so while the second guy did in fact pay 15/16ths of the taxes while only making 10/11ths of the income, he actually walked away with 39/40ths of the total profits for the week.

That's where the real upward transfer kicks in. Despite having a nominally higher tax rate and even paying a significantly higher total share of taxes- in the final he's paying a trivial marginal value and walking away with a disproportionately large share of the total value generated. Account for investment returns after that, and the gap grows even more quickly.

And while that gap slows a little if you account for higher costs of living that usually come with higher income levels, they don't close it completely, and are more than counterbalanced by the fact that in the real world, you're often looking at more than a single order of magnitude difference between the average earners and the small fraction that holds the vast majority of the wealth and continues to increase that share.

Back to Bill- through enjoying a lower marginal tax burden, he's free to put most of that million into investments that pull more money to it, while those under him who feel a higher burden are forced to spend more of their income on base needs and may even need to trade off on those needs rather than having any significant leeway to invest their earnings.

To point toward real world changes: If he was making that $1M in 1990 and one of his workers was making 50K, he would now be making about $4M, while that worker wouldn't have even broken 70K. And with the overall costs of living keeping pace with that worker's income, the worker is not retaining any additional wealth for that increase, while Bill is retaining all but a trivial amount of his, plus the returns on all intervening investments.

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DonaldD
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quote:
Originally posted by G2:
What you're implying is not really accurate. Sure, they've had the ability to implement these things but it's not really been done. Until now.

Here's a link (linkie) showing you that rates for the highest income percentiles have generally been dropping since 1960, but did also rebound during certain periods. In fact, if you look to the earliest periods shown, it is clear that the lowest 99% were really sticking it to the rest back in the day, at a rate not even comprehensible today. Your 50, 60 and 70% are really small potatoes compared to back in the day.
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Colin JM0397
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It helps to agree on a common definition of fair. So far we have about 4 different ideas here backing the various posts. The reason those on the various "sides" can never agree is because they are not even speaking the same language.

Fair to those on the right is paying your share and being left alone. Financial fairness, in other words.

Fair to those on the left has to do with social justice, income distribution, and such. Social fairness, in other words.

Two very different things.

--------------------------------

On a side note, I am baffled how after getting married we owe more this year than we individually did last year. Is this what they call the marriage penalty?

Of course, we have to pay back those damn $400 "rebates", but we owe another $600 or so more back ($1400 total federal, in other words).

I did not get a raise, and she only got about 4%, and we both had refunds around $500+ last year.
[Confused]

[ April 12, 2010, 05:33 PM: Message edited by: Colin JM0397 ]

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Wayward Son
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quote:
On a side note, I am baffled how after getting married we owe more this year than we individually did last year. Is this what they call the marriage penalty?
You found it! With only one spouse working, the taxes on married couples is beneficial. But with two incomes, there is that "penalty."

When I got married, we had the same rude awakening. Fortunately, there is a provision in the tax code (or at least there was 15 years ago) that if your taxes suddenly jump, you don't get penalized for not taking out enough in payroll deductions. Otherwise I would have been fit to be tied!

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Funean
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This was the first year since my daughter was born that I didn't qualify for the earned income tax credit. I work part time to be available for my kids, and since I can't marry my partner, I qualified as a "single parent" making less than the cutoff (which was something like $34K for 2009). With the marriage penalty and both of us no longer counted as "single parents" the IRS would taking quite a bit in taxes from us, as my partner is a high earner. As it is, we've been using our tax refunds (between the two of us, close to $11K every year till now) to pay tuition at the school we send our children to since the local school we pay for with our real estate taxes is in the bottom quintile in a state already not known for its outstanding schools. The tax code is ridiculous and ought to be redone from the bottom up.
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LetterRip
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Wayward Son,

quote:
You found it! With only one spouse working, the taxes on married couples is beneficial. But with two incomes, there is that "penalty."
Actually they can choose to file jointly or singly, filing singly it should be the same as previous years all else being equal.

Colin,

See, above for your taxes.

http://finance.yahoo.com/taxes/article/101901/filing_status_makes_a_difference_in_your_tax_bill

quote:

Fair to those on the right is paying your share and being left alone. Financial fairness, in other words.

Fair to those on the left has to do with social justice, income distribution, and such. Social fairness, in other words.

actually many aren't for either definition of fair.

For instance fair to me is that taxes are proportionate to the extent the resources that your income source consumed and to the burden on society that your behaviour has - ie if you own stock/run a business - then the federally provided roads, the federally provided education of your employees, the regulatory environment, the military provided international stability, all contribute to your income much more significantly than they do to an individual.

LetterRip

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Wayward Son
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quote:
Fair to those on the right is paying your share and being left alone. Financial fairness, in other words.
I'm not quite sure what would constitute "fairness" for the Right, though.

I did an analysis of income percentage to tax percentage a while ago. It turned out that only two groups paid a significantly different percentage of taxes compared to their percentage of total US income: the bottom 50 percent and the top 1 percent.

The bottom 50 percent earned about 13.0 percent of the total gross income reported to the IRS by everyone, but they accounted for only 3.9 percent of the total taxes paid. About a 9 percent difference.

The top 1 percent earned about 20.8 percent of the total gross income reported, but they accounted for 37.4 percent of the total taxes paid. About a 17 percent difference.

But everyone else--51 percent to 2 percent--paid fairly close to their expected amount:

Top 2-5 percent: earned 14.5%, paid 17.0% (2.5% diff).
Top 6-10 percent: earned 10.7%, paid 12.9% (2.1% diff).
Top 11-25 percent: earned 21.1%, paid 16.7% (4.3% diff).
Top 26-50 percent: earned 19.9%, paid 12.1% (7.8% diff).

So 40 of the top 50 percent are paying less taxes than their share of income. And 9 of the top 10 percent are paying only about 2 percent more than their share of income.

Considering that most basic necessities are covered by the time you reach the top 25 percent, a couple of percentage points more seems trival.

So I'm not quite sure what would be considered "fair." [Confused]

[ April 12, 2010, 06:03 PM: Message edited by: Wayward Son ]

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cherrypoptart
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I doubt I am paying my "fair" share by the definition of most people, but since I am heartfelt in my belief that our government already has too much money that it not only completely wastes but squanders in harmful, counter-productive ways, I feel it is my patriotic duty to pay as little as I legally can.

The question shouldn't be about if you are paying your fair share but instead about the government taking more than its fair share and wasting a lot of what it does take, and often not only wasting it but using it for evil such as rewarding political contributors with taxpayer dollars in what really looks a lot like bribery being made profitable. Contributors pay a few hundred thousand to a campaign and then get tens of millions back from the taxpayers. After a while, you wonder if you wouldn't be doing more good by paying less.

But to answer the question, I'm one of those evil people that don't usually pay federal income taxes, and I've specifically worked with my investment professional to make it that way. I pay a lot for property taxes, but I guess that doesn't count, though I feel it counts more because we have a greater say and effect on how local taxes are spent and there are fewer middlemen to siphon off our hard-earned money and harder for them to get away with sending it down various ratholes, at least theoretically.

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Greg Davidson
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I like this thread, not as much of the usual quarreling (yet?).

I believe that many people "taxes" with payroll deductions, which lumps in federal taxes, state taxes, social security, medicare, state disability, as well as health insurance costs that are deducted from their paycheck. Consequently, if you are earning 50K, "taxes" can seem like a lot.

I have been thinking about some of the political arguments we keep having here, and one fundamental difference I see is the relative importance of wealth vs. the relative importance of responsibility to people. I am a big believer in property rights, because of the pernicious effects when those are not respected. But at the same time, if I had to weigh the personal importance of "stuff" vs. the importance of relationships with (and responsibilities to) people, at some point more "stuff" becomes just a fetish, whereas at no point does the value of relationships/responsibilities diminish. So I don't object to very wealthy people having a "stuff" fetish, but I don't feel that their arguments about +/- 5% of their taxes has a substantial moral component - instead, it just sounds like people mad because they want more stuff (remember, this is all talking about the wealthy - more than one home, recreational boats, foreign vacations, etc.).

Since I believe that progressive taxation is Constitutional, I don't have an ethical problem with taxation, and thus the concerns for me are mostly practical - what will be the adverse effects of certain levels of taxation vs. what are the adverse affects of different levels of revenues. I believe that I am slightly under-taxed (which should be fixed in a year or two), and I believe that as incomes go from 6-figure to 7-figure or more that the people are substantially under-taxed.

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Sauurman
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quote:
Don't forget your FICA taxes.
Yeah not including payroll taxes just income taxes. In *theory* [LOL] SS and the rest go for specific things that will be around when I retire.

quote:
Here's the question you should be looking at- how did your change in net worth over the past year compare to overall economic growth? Did you gain or loose ground, comparatively?
Gained some ground. Slightly less debt but vehicles depreciated more. My 401k is a bit larger then this time last year.
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DonaldD
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Without knowing what you mean by "a bit" it sounds like you almost certainly lost ground, comparatively.
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Colin JM0397
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LR, strangely I ran it through Turbo tax all three ways (perhaps that's my problem - not doing it myself), and individually we still owe. Granted, the "rebates" are about 1/2 of what each of us owes, yet we still owe.

I did bump my W4 withholdings one last year, yet hers was about the same - I can't think that accounts for almost a 1k swing, but it might.

I wasn't irritated enough to investigate why. I'm sure come this week when we actually have to pay, I'll look further into it.

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msquared
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Colin

Did either of you have a kid turn 17 last year? There is the $1,000 per kid tax credit that is only good up to the age of 16. The year the kid turns 17 it goes away.

We got caught in that last year.

msquared

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Colin JM0397
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Greg - your point is partially valid, but you're also relying on the rich, spend-happy playboy/girl mental image of the very rich.

That is true for some, but just as many also have a valid gripe over those few percentage points. That could be capital investment money, which can and does go to jobs creation for the rest of us.

On that note, we can even make the argument that those spend-happy types are contributing just as much to the yacht builders, keeping their personal chef employed, having a staff for their stables, and their spending helping keep others afloat.

I suppose the base discussion there is around who is better positioned to insert money back into the economy in order to "help" the economy?

The invisible hand of the market, or the government (through taxation and redistribution)? The left/right paradigm is quite obvious, but still doesn't answer it.

I'll argue neither because our "problems" that need "fixed" are not economic - they are psychological, or even spiritual if you can handle that description.

Regardless of 'ism, our system is based on the idea of scarcity, which is not accurate. In other words, there is not enough money, land, food, housing, etc. to go around, so we must compete for what we can get.

We can go round and round on this left-right argument, but until we shift the discussion we get no where… IMO, that’s the way the powers that be want it. It suits them to have us arguing amongst ourselves and not bothering them too much.

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Colin JM0397
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m2 - no kids for either of us. I keep trying to declare our cats dependents, but apparently, to the chagrin of those at PETA, they have yet to achieve full personhood.
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Greg Davidson
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quote:
your point is partially valid, but you're also relying on the rich, spend-happy playboy/girl mental image of the very rich.
I know a lot of wealthy people, including brilliant, hard-working people. In general, there is a broad distribution of wealthy people, just like there is of everybody else. The curve is perhaps slightly shifted for wealthy people towards having more focus and capability (some of the capabilities are based on the mind, some are based on their looks), but there still are plenty of flawed people who are rich, and don't "deserve" it any more than a wide range of people with much less wealth. And I feel that even the very deserving ones can afford to pay more in taxes than they do.
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Redskullvw
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What would I think is fair? I think 15% to the federal level, 5% to state, and 5% to local government would be fair. But when I finish my taxes this year and did the final numbers, 48 cents of every single dollar we earned was taxed away. It is acctually more than that because of hidden taxes on gasoline, electricity, and tariffed exchanges sanctioned by the state such as on liquor and even peanut butter. It's impossible to get a full final account, but the reality is at least half of every dollar my family earned went to taxation.

Our tax level will be going up on the federal level as the Bush tax package expires. Our local government schools suck in terms of NCLB so we send Alex to private school. Our local mill rate will be going up due to school board vote. There is also a planned sales tax increase planned locally, as well as one planned at the state level. It is also likely that our healthcare costs will go up in 2014 if the plans of our regional hospital insurance program is indeed effected as current Obama healthcare law is written. So in a short time I expect well over 50% of every dollar my family makes to be expropriated by government taxes.

Liberal or conservative, can you honestly agree that it is fair for any government to take half of aperson's income?

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Colin JM0397
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Of course, but people don't seem to be able to manage to see the tax forest when they are focused only on federal income tree.

Certain folks will tell you that you paying over half is perfectly "fair".

I did the same tally a year or two back and also came up with 50%+ currently. Remember that the "corporate" tax is kicked down to the consumer at around 20 cents on every dollar you spend on any given item. That's how the fair tax movement shows a federal sales tax of 20% not changing anything.

Re all your impending tax increases... At what point - from nationally to locally - do us voters finally "throw all the bums out" when they never manage to cut any spending? In NC we were supposed to have a rainy day fund - which was spent kind of like how the Feds manage to spend all the SS excess every year. Or, like here in Charlotte, when the only cuts they can manage are the “the sky is falling” variety designed to invoke citizen outrage that “something must be done”. School lunch programs, closing the libraries, etc. Of course, the Mayor’s pet street car project is still on the table. They always go for the most painful cuts first in order to avoid any responsibility.

How is it fiscal responsibility isn't demanded from all politicians, regardless of political affiliation?

[ April 20, 2010, 09:38 AM: Message edited by: Colin JM0397 ]

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TommySama
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quote:
What would I think is fair? I think 15% to the federal level, 5% to state, and 5% to local government would be fair. But when I finish my taxes this year and did the final numbers, 48 cents of every single dollar we earned was taxed away. It is acctually more than that because of hidden taxes on gasoline, electricity, and tariffed exchanges sanctioned by the state such as on liquor and even peanut butter. It's impossible to get a full final account, but the reality is at least half of every dollar my family earned went to taxation.
Why more for the federal government? For me it should be the opposite. I have a better shot of getting my views heard at the city/state level than the federal, so I get better representation for my taxes.
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G2
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quote:
Originally posted by Redskullvw:
Liberal or conservative, can you honestly agree that it is fair for any government to take half of aperson's income?

According to the vice president, it's the patriotic thing to do. According to the president, you're supposed to say "Thank you". Just wait until someone like Adam Masterman comes along and tells you not liking to pay half your income is proof of an "unbalanced personality" ... it's only a matter of time.

[ April 20, 2010, 10:19 AM: Message edited by: G2 ]

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cherrypoptart
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Someone elderly lady in a wheelchair had a cute sign at a tea party:

"Even God only asks us to pay 10%."

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Wayward Son
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Actually, the old lady didn't read the tax rules correctly in the Good Book. It actually comes to 30%, when you factor in some other taxes (including 10% put aside to be spent during the fall festivals). [Smile]
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Redskullvw
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The first year when I did this and posted the results on Ornery I think the total was 42%. Of course things have changed over the years. I earn income now of differing amounts with things like a child thrown in to make an apple to apple comparison possible. But I do know this. We work exceptionally hard. And in my case I donate almost 40 hours a week to several charities as well as paying support costs for them when they need money. From literally picking up garbage in the park, to digging ditches, patching pavement, and providing free computer support and resources I give a lot back to the local community. My wife deals constantly with indigent medical care under conditions that would crush most people.

We had our yearly post tax personal economy talk severAl weeks ago. And looking to the future results of taxes and how hard we work we came to some decissions. Amoung the decissions we made were the fact that my charity work is a huge cost in both time And money. And my wife working as hard as she does places her into a taxation level that literLly will net her less than half the money she makes at a lower work obligation. We figure that by me ceasing most of my charity work and her reducing her work by about 25% we not only will pay substantially less taxes but will also have a lot more time to spend as a family.

Given the taxation penalty for being productive and charitible, we have decided to be less productive and charitible because it makes little sense to continue as we have just to be taxed higher. At some point the people who happen to bein the top tiers of level of taxation and incomes will realize as I have that the costs of being productive are too much. I believe we must pay taxes but when the taxes become so progressive in nature that the benefits of more income has less net benefit, then a wise person will realize that being less productive places a person closer to those who pay no federal tax.

We expect our taxes to be several thousands of dollars less next year. We also expect to have a lot more free time as a family. We hope the government won't miss the $20k next year.

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Colin JM0397
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God? What it should say was "even the men who run the church only ask for 10%".

God needs nothing because God is everything. The church, OTOH, is quite a large organization (some might even call it a business) and it needs funding!
[Razz]
-------------
Red, can you two work remote?
Central America and Ecuador are looking muy bien these days. IIRC, somewhere around 330+ days out of the country each year relieves you of your US tax liability.

[ April 20, 2010, 02:26 PM: Message edited by: Colin JM0397 ]

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Redskullvw
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Colin
nope. A neuro icu nurse has to be in the room. And while I could phone in remote tech support, the reality is that cleaning park land requires me to be there as well.

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TomDavidson
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quote:
We figure that by me ceasing most of my charity work and her reducing her work by about 25% we not only will pay substantially less taxes but will also have a lot more time to spend as a family.

Given the taxation penalty for being productive and charitible, we have decided to be less productive and charitible....

Don't blame your decision to be less charitable on your taxes. Yes, your wife's productivity might be affected, but it's not like your taxes have an impact on your charitable labor.

I'm also not entirely sure why you think your wife's labor pushes you into a tax bracket that somehow reduces the net value of her contribution; that's not really how tax brackets work, unless you guys are currently qualifying for an Earned Income Credit. Perhaps you're also factoring in the cost of childcare?

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Redskullvw
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Tom
my charity work is what I do full time. I get no renumeration for the efforts. It does have some write off value but that value does not even come close to ballancing the actual cost of my contributions due to IRS rules. In short by drasticly cutting my charity, I will personally benefit by having far less out of pocket costs. And in terms of my wife, by working less we will not fall under the tax increase that gies into effect when the tax rollback expires. We are on the end of the spectrum that pays high taxes. We don't qualify for social programs like EIC. The end of the Bush tax breaks will mean our income level will be taxed higher unless we actively lower our income as our tax bracket gets adjusted higher. By earning less we can drop one bracket, pay less net tax, and coupled with not being as charitible we should personally have the same funds we normally have by being less productive.

In short work less and pay less is our strategy. Working at our current output would mean paying more taxes on the same income with no net benefit to ourselves. Namely if we work as we have always done we will have less money left to live on. If we work less we will have more money to live on. Those who fall into the 50% that pay no federal income tax will have to make up the loss of our tax payment somewhere else.

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TomDavidson
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quote:
The end of the Bush tax breaks will mean our income level will be taxed higher unless we actively lower our income as our tax bracket gets adjusted higher. By earning less we can drop one bracket, pay less net tax, and coupled with not being as charitible we should personally have the same funds we normally have by being less productive.
Don't, again, pretend that it's dropping the bracket that's getting you more money. Even in the next tax bracket, you still have more take-home funds as a result of the work. By paying out less in charity, however, you do hang onto more of your money -- which is important if you want to maintain your lavish lifestyle. It would be awful, I'd imagine, if you couldn't be as charitable as you used to be without actually having to live more cheaply.
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Pyrtolin
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Tom- it's possible from what he's saying that they're brushing up against the AMT, which, as I understand it, creates a problematic discontinuity in the overall tax rates, especially if the current patch that was put on it is allowed to expire.

It's pretty likely that we'll see another patch to that before the year is out, but at the moment nothing has been put in place to fix the upcoming reversion.

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TomDavidson
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If he's worried about the AMT, reducing his charitable deductions is just about the worst thing he can do.
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