Graduated Income Tax - is this true? (Chicago: rich, retirement)

[Justabystander]

Originally Posted by Vlajos

So, we should have punitive tax rates because someone has earned more money?

The very wealthy have tax writeoffs that we can only dream of, such as depreciation of assets, business losses etc. Although an extreme example because of his dishonesty, Trump is a prime example of how the rich are able to avoid taxes, no matter what state and how graduated the income tax is . Why are those who make less punished for not having shelters or write offs?

[Grlzrl]

Originally Posted by ChicagoDavid

Hmmm. I am with you on making 10x more pay 10x more. I don’t think you should pay 20 or 30. Problem is that most rich aren’t paying 10x on that 10. By same token, you think what DT is paying is fair? They’re avoiding paying taxes like plague through multiple corporations and investments. They just aren’t paying enough so might as well let them pay 20 or 30, they can afford it.

Since bunch of rich people just came out against it, I think it’s brilliant idea. They are threatening to take business elsewhere. Go ahead, you gonna pay more in CA, NY. Florida? Good luck finding workers. Bunch of dumb@ss, lazy workforce down there. Go ahead, leave.


“Group of Illinois’ top employers announce opposition to Pritzker’s graduated income tax amendment”. I.e. Sacks, Griffin.

https://chicago.suntimes.com/politic...al-club-oppose

You are all over the place.

[Grlzrl]

Originally Posted by Justabystander

The very wealthy have tax writeoffs that we can only dream of, such as depreciation of assets, business losses etc. Although an extreme example because of his dishonesty, Trump is a prime example of how the rich are able to avoid taxes, no matter what state and how graduated the income tax is . Why are those who make less punished for not having shelters or write offs?

Well, I would pay a lot more and I don't have the option of a bunch of shelters or writeoffs.. and I can assure you that we won't stay in Illinois more than 6 more years if they pass this tax.

[wjj]

Originally Posted by Justabystander

The very wealthy have tax writeoffs that we can only dream of, such as depreciation of assets, business losses etc. Although an extreme example because of his dishonesty, Trump is a prime example of how the rich are able to avoid taxes, no matter what state and how graduated the income tax is . Why are those who make less punished for not having shelters or write offs?

Wait a minute. A business loss is a loss that has always been deductible since the Code was established in 1913. If you ran a lemonade stand business (not a hobby) and lost money, you would deduct the loss. Depreciation of business assets is required under financial accounting standards and the Internal Revenue Code. If you converted part of your house to rental property, you would depreciate it and everything in it. That is beyond routine and hardly deductions the common folk could only dream of. And clearly not any kind of tax shelter.



Let's look at something that affects tens of millions of middle class taxpayers that is analogous to business losses/profits. If you have capital losses on stock investments, you can use those losses to offset capital gains and deduct up to an additional $3000 of losses every year that can offset non investment income like salary. And unused capital losses carry forward to future years to be used against future capital gains. Tens of millions of middle class people with small investment accounts do that every single year. This time of year, people start looking at stock loss harvesting as part of their year end tax planning. This is no different than business loss activities offsetting business profitable activities and net losses carrying forward to offset future business income. This is the basic structure of the tax code. If you want to risk your capital and start a business, the same deductions that Trump takes, you can take. Then your dream can come true.


People making less are not being punished at all. They have many dozens of personal deductions available to them. If they decide to take risks with their money and operate a business, then they get business deductions in addition to personal deductions. It really is simple and there is nothing nefarious about it.

[Vlajos]

Originally Posted by Justabystander

The very wealthy have tax writeoffs that we can only dream of, such as depreciation of assets, business losses etc. Although an extreme example because of his dishonesty, Trump is a prime example of how the rich are able to avoid taxes, no matter what state and how graduated the income tax is . Why are those who make less punished for not having shelters or write offs?

There are no write offs in Illinois flat tax other than property taxes and maybe a few other items. So mole and flat is the best income tax for the state of illinois. Our pols have never been able to balance a budget, why do you think they will now?

Amd there is nothing nefarious about depreciation as an expense. It's basic accounting. One doesn't have to be wealthy to own a rental property and use depreciation.

[Grlzrl]

Originally Posted by Vlajos

There are no write offs in Illinois flat tax other than property taxes and maybe a few other items. So mole and flat is the best income tax for the state of illinois. Our pols have never been able to balance a budget, why do you think they will now?

Amd there is nothing nefarious about depreciation as an expense. It's basic accounting. One doesn't have to be wealthy to own a rental property and use depreciation.

Not only that, high earners can't deduct their property taxes. So when everyone else got a 67% increase in 2017, higher earners got a 100% increase in their state taxes.

[BRU67]

Originally Posted by Justabystander

The very wealthy have tax writeoffs that we can only dream of, such as depreciation of assets, business losses etc. Although an extreme example because of his dishonesty, Trump is a prime example of how the rich are able to avoid taxes, no matter what state and how graduated the income tax is . Why are those who make less punished for not having shelters or write offs?

Many ordinary people take a tax writeoff for depreciation of assets. The Mexican-born owner of a two or three flat in Brighton Park or Little Village certainly uses this deduction. And you yourself probably take the standard deduction on your 1040-EZ and perhaps the earned income tax credit, which are tax write offs. And while a very rich person such as Trump may have business related deductions which get his federal income tax bill pretty low, his business entities also pay property taxes, sales taxes, payroll taxes, various fees, etc. That's the point of giving businesses tax breaks - we make it up elsewhere for hopefully a net gain.

[BRU67]

Originally Posted by Justabystander

The very wealthy have tax writeoffs that we can only dream of, such as depreciation of assets, business losses etc. Although an extreme example because of his dishonesty, Trump is a prime example of how the rich are able to avoid taxes, no matter what state and how graduated the income tax is . Why are those who make less punished for not having shelters or write offs?

Let me elaborate further. Let's say hypothetically we have Jessica Banos and Anna Barista. Both have little money. Say each one inherits $1 million. Jessica just graduated from a very difficult business program that required long hours of study. She has a strong entrepreneur spirt and a great idea for a business. It's called Rain Forest. If she can get it off the ground, it will greatly enhance online shopping and will employ thousands of people.

Anna partied her way through college and now has a degree in transgender ethnic studies. She has been holding down service jobs since graduation. She has a FICO score in the 400s, three maxed out credit cards, and is just generally disorganized, and doesn't have any particular career goal. Her real goal is to get enough money to travel the world and leave her a-hole boyfriend and all her troubles behind her.

Under the (fictional) tax rules, either Jessica or Anna can roll their inheritance over into a business and avoid paying the estate tax, which is 45%. Jessica takes advantage of that and forms Rain Forest. She works 18 hour days and in two years grows it into a multi-million dollar corporation with 5,000 employees. Jessica is living lean and taking her profits and reinvesting them into Rain Forest, and projects another 5,000 employees will be added over the next two years. Under the (fictional) tax rules, she is not paying taxes on this money under an investment rollover exemption in the tax code.

Anna takes her inheritance, pays the 45% tax, flies off to Rio, and launches her YouTube channel called "Vagabond Anna." She spends the next two years going from country to country, drinking and eating in the best restaurants and bars, staying at top flight AirBnBs, and comes home flat broke. She starts working at a coffee shop again making $15.00/hour. Her wages and tips are taxed at the normal income tax rate (minus her earned income tax credit and standard deduction of course), so she is paying much more in taxes by percentage of her income than Jessica is.

Was Anna treated unfairly because Jessica got tax breaks and she didn't? Do you think Jessica shouldn't have been given the breaks because Anna didn't get them? And taking it a step further, do you think the income of Jessica and those like her should be taxed and given to Anna and those like her so they are equal? Do you see that any productive benefit resulted to overall society by the above fictional tax rules?

[JonhE]

@BRU67 thanks for summing it up. I hope the average taxpaying citizen of Illinois realizes this.


It seems like "bystander" is a plant or works for the group promoting this amendment.


A state really wants productive people. This state has more than enough takers and is losing productive folks.

[BRU67]

Originally Posted by JonhE

@BRU67 thanks for summing it up. I hope the average taxpaying citizen of Illinois realizes this.


It seems like "bystander" is a plant or works for the group promoting this amendment.


A state really wants productive people. This state has more than enough takers and is losing productive folks.

Jessica can afford to move! Maybe he/she is a plant or supporter but I really think there are a lot of people who just really don't understand this stuff. They teach that capitalism is evil or even systemically racist in college and some people are just emotive as opposed to analytical thinkers. They haven't been trained otherwise. And everyone's too busy or too scared to correct them in the real world. That's why I'm trying to get the idea across through the hypothetical stories.