Poll

10 votes (35.71%)
18 votes (64.28%)

28 members have voted

MathExtremist
MathExtremist
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July 19th, 2011 at 7:37:42 PM permalink
Quote: AZDuffman

The 50% rate would bother me every paycheck, why on earth does the government have a right to that much of a person's money?
A flat tax is still the best idea. And everyone pays no matter how low their income.


The government (our government, anyway) has the rights accorded to it by the people. If the people collectively decide that a progressive tax structure is how they want to fund their government, and that tax structure has a 50% bracket, *that* is the right the government has to that much of a person's money.

A flat tax is perhaps the worst-conceived fiscal policy idea ever. It is underpinned by the flawed assumption that the marginal value of a dollar is equal for everyone. It's not, and it never can be unless we move to a pure centrally-managed economy (and that won't happen). If I make $180,000 per year, the next dollar I make is worth a whole lot less to me than if I made $18,000 per year. If you tax me at the same rate on both dollars, I'm screwed if I only make $18,000. The flat tax is a populist ruse dressed up in the garb of "fairness", but in reality is promulgated by those much wealthier than you who would just as soon see your taxes rise so theirs can shrink. Don't fall for it.
"In my own case, when it seemed to me after a long illness that death was close at hand, I found no little solace in playing constantly at dice." -- Girolamo Cardano, 1563
s2dbaker
s2dbaker
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July 19th, 2011 at 7:40:32 PM permalink
Quote: MathExtremist

The flat tax is a populist ruse dressed up in the garb of "fairness", but in reality is promulgated by those much wealthier than you who would just as soon see your taxes rise so theirs can shrink. Don't fall for it.

Yet they do fall for it every single time.
Someday, joor goin' to see the name of Googie Gomez in lights and joor goin' to say to joorself, "Was that her?" and then joor goin' to answer to joorself, "That was her!" But you know somethin' mister? I was always her yuss nobody knows it! - Googie Gomez
Wizard
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Wizard
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July 19th, 2011 at 7:43:32 PM permalink
Quote: MathExtremist

A flat tax is perhaps the worst-conceived fiscal policy idea ever....



Not that I'm a flax-taxer, but the proponents say the idea would actually benefit the middle class, and disadvantage the rich. They site as evidence the many loopholes only within reach of the rich and tax caps on such things as Social Security. Even Warren Buffet said he pays a lower ratio of taxes to income than his secretary. Not saying I agree or disagree, but would be interested to see a non-biased look into the effects.
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s2dbaker
s2dbaker
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July 19th, 2011 at 7:57:44 PM permalink
Here's how a flax tax might work, every dollar that you make over $30,000 gets taxed at 40% and no one gets any deductions on anything else, even interest and dividend income.

Sounds pretty awesome if you make $30,000, heck, even people making $60,000 only pay 20% over all.

But what about your mortgage interest? Are you willing to give up that deduction? What about small businesses and sole proprietorships? Are they willing to let go of their amortized deductions on office equipment? What about stock losses? If you're allowed to deduct stock losses again stock gains then what other deductions are allowable? What if you have five children and only make $40,000? Should you get a tax break for more offspring? Who pays the tax on Alimony? Is that another deduction that goes down the slippery slope?

Flat tax is just the first step in getting back to where we are right now.
Someday, joor goin' to see the name of Googie Gomez in lights and joor goin' to say to joorself, "Was that her?" and then joor goin' to answer to joorself, "That was her!" But you know somethin' mister? I was always her yuss nobody knows it! - Googie Gomez
MathExtremist
MathExtremist
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July 19th, 2011 at 8:09:05 PM permalink
Quote: Wizard

Not that I'm a flax-taxer, but the proponents say the idea would actually benefit the middle class, and disadvantage the rich. They site as evidence the many loopholes only within reach of the rich and tax caps on such things as Social Security. Even Warren Buffet said he pays a lower ratio of taxes to income than his secretary. Not saying I agree or disagree, but would be interested to see a non-biased look into the effects.


Loopholes exist, yes, but those aren't a compelling reason to create a fundamentally regressive flat tax structure. They're just a compelling reason to get rid of the loopholes. Warren Buffett pays less in tax/income than his secretary? Why is making that ratio *equal* the right call? Shouldn't he be paying more?

I say yes, based on an over-arching concept of economic utility. And Warren Buffett agrees with me (or really, I agree with him, because he's Warren Buffett and I'm not). Consider an economy with two earners, A and B. A earns $25,000/year, B earns $75,000/year. Suppose the government needs $20,000/year to operate. Total earnings are $100,000, so the flat-tax approach would be 20% for both. A pays $5000, B pays $15,000. Fair, right? Under the ratio definition perhaps, but I submit that the $5000 tax burden has hurt A's finances far more than the $15000 tax has hurt B's finances. In other words, the utility of A's $5000 is far greater than the utility of B's $15,000. I further submit that being truly "fair" means that the utility of each household's tax burden be equalized, not that the ratio of tax to income be equalized. Why? It is the use (utility) that one derives from money that makes it valuable. At the end of the day, you can't spend a ratio, so why focus the design of a taxation scheme around it?

Here's an Arizona example:
http://ktar.com/category/local-news-articles/20110325/Proposed-flat-tax-would-cost-more-for-many/
"In my own case, when it seemed to me after a long illness that death was close at hand, I found no little solace in playing constantly at dice." -- Girolamo Cardano, 1563
MathExtremist
MathExtremist
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July 19th, 2011 at 8:16:35 PM permalink
Quote: s2dbaker

Flat tax is just the first step in getting back to where we are right now.


And worse, it gives us far fewer levers to make adjustments down the road. Brackets (or, more elegantly, a continuous function!) are definitely the way to go, in conjunction with those deductions which serve to further socioeconomic policy. For example, I donate a lot to Goodwill every year because I get a charitable deduction. If I didn't, I'd be much more likely to post it on Craigslist or eBay. Do we really want to do away with fiscal incentives to fund non-profit organizations?

Note, I do not necessarily condone tax breaks for corporate jets. But the fact that we can give them is indicative of the flexibility in our current tax system which would be entirely gone if we moved to the flat tax proposed by some. I'm not sure why a rigid and inflexible tax system would appeal to anyone.
"In my own case, when it seemed to me after a long illness that death was close at hand, I found no little solace in playing constantly at dice." -- Girolamo Cardano, 1563
Wizard
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Wizard
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July 19th, 2011 at 8:22:11 PM permalink
If the object were to maximize utility, and we assume no change in behavior, then the optimal tax solution would be to tax all income above $x at 100%, and all income below it at 0%. It would just be a matter of finding $x so that all income above it equaled government spending.
It's not whether you win or lose; it's whether or not you had a good bet.
MathExtremist
MathExtremist
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July 19th, 2011 at 8:26:07 PM permalink
Quote: Wizard

If the object were to maximize utility, and we assume no change in behavior, then the optimal tax solution would be to tax all income above $x at 100%, and all income below it at 0%. It would just be a matter of finding $x so that all income above it equaled government spending.


It's not that simple either. If you live in Manhattan or San Francisco and make $50,000/year, you're a pauper. If you live in Greene County, Alabama, you're rich. It's all relative. Utility isn't computed in a vacuum. That's why it's a hard thing to figure out. But that doesn't mean we should all give up and just go with a nice steady ratio instead. Lazy is dangerous.
"In my own case, when it seemed to me after a long illness that death was close at hand, I found no little solace in playing constantly at dice." -- Girolamo Cardano, 1563
boymimbo
boymimbo
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July 19th, 2011 at 11:42:00 PM permalink
The IRS has this information online.

More to the point, I present the following chart for the top 1 percent of tax earners:

Year1984 dollarsAGI (000s)Tax (000s)Tax Rate
19861084112851979449133.13
19871226143466359155926.41
198813282847352711384124.04
198913215246807910925923.34
199012809648325211233823.25
199112491945660311126724.37
199212965452358613115625.05
199312852252058614583628.01
199413206954670015433728.23
199513740661961017803528.73
199614502673654521262628.87
199715622287282624123927.64
1998164427101024527400927.12
1999176119115282031741927.53
2000182038133677336692927.45
2001165394109429630089827.5
200215865798578126860827.25
2003160595105456725634024.31
2004173663130641730690223.49
2005186716159171136813223.13
2006192860179188640836922.79
2007197827200825945092622.45
2008176662168547239214923.27


The 1984 dollars column represents the income level, in 1984 dollars, to reach that top 1 percent. The CPI is 215.3 for 2008 or $380,353 to make it to the top 1 percent.

For me this shows a few things: The richest Americans pay well under the marginal tax rate of 35 percent and closer to the capital gains tax rate of 15 percent. In 1996 the top marginal tax rate was 39.6 percent and the capital gains tax was 25 percent. In 2000 Capital Gains tax was mainly 20 percent. In 2008 the capital gains tax is 15 percent and the top marginal tax rate was 35 percent.

It is clearly the capital gains tax rate that is giving the wealthiest of Americans their lower tax rate and if you want to look at the charts here, please feel free to educumacate yourself and stop buying into the Sean Hannity / Chris Matthews bull.

So, let's rephrase: If I was making 500,000 a year, I only pay an average of 116K in taxes in 2008. Not bad.

Reduce government spending. Bring the tax rate up on ALL Americans (the bottom 75 percent of income earners pay an average tax rate of 5.13 percent in 2008, down from 7.43 percent in 2000) to balance the budget just up to 2000 levels.

Do you like apples?
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thecesspit
thecesspit
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July 20th, 2011 at 12:05:05 AM permalink
I'd love to see how those rates compare to the UK and Canada. I assume this is federal taxation only? The low rate for the bottom seventy five percent surprises me.
"Then you can admire the real gambler, who has neither eaten, slept, thought nor lived, he has so smarted under the scourge of his martingale, so suffered on the rack of his desire for a coup at trente-et-quarante" - Honore de Balzac, 1829

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