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And now for a reality check. I made $14,475 last year. I paid $1,498 in taxes, so just over 10% as this includes social security and medicare.
So just to further the discussion, you said you only work 9 hours per week due to health issues.
If someone else is doing same job for 40 hours and paying $9,000 in income taxes how is that fair? They work more, they don't use any more of the benefits that come with taxes roads police fire etc. why is that fair to the 40 hour worker person that they chip in more to the public coffers when the only reason they are doing so it that they are spending 40 hours per week at work instead of 9?
So just to further the discussion, you said you only work 9 hours per week due to health issues.
If someone else is doing same job for 40 hours and paying $9,000 in income taxes how is that fair? They work more, they don't use any more of the benefits that come with taxes roads police fire etc. why is that fair to the 40 hour worker person that they chip in more to the public coffers when the only reason they are doing so it that they are spending 40 hours per week at work instead of 9?
If you are figuring this off of a hourly rate 14475/52/9= 30.92 x 2080= 64313.60 yes paying more taxes because you made 4.5 times more income than the above poster is fair. We have an income based system not a road, police, infrastructure based system
Fwiw all in fed/fica the 14475 earner is paying 10.5% effective and the 64313.60 is paying 22% effective
And now for a reality check. I made $14,475 last year. I paid $1,498 in taxes, so just over 10% as this includes social security and medicare. I ONLY get Medicaid health insurance and the crappy Obama phone, no EBT, section 8, free food, etc. I wear clothes from the thrift store. I still have big, heavy CRT tv. I drive a 2007 Toyota Sienna with over 100,000 miles on it. The only reason I even have that is because it is provided by my employer. I have always worked. I could no longer afford my own apartment after 2013, so I now I rent a room out of someone's house. Some lavish lifestyle, eh? Yet you and Harry think I should pay more in taxes. For the record, I never said the upper middle class and wealthy should pay more than they do now. I simply said that the tax system is fine as it is.
Again, an income tax on total income less savings can be as progressive as you like. In your post, you don't list your savings. For the sake of argument, let's say your savings is $0.
Then, you would be taxed on $14475 in income, which of course equals your total consumption. In Professor Cochrane's proposal, in order to make the income tax/consumption tax progressive, we could set the tax rate at, say, zero for the first $10,000 of income, and then, say, 1% for the next $10,000, etc. Under those hypothetical numbers, your personal income tax would be reduced to $144.
The key of the simplification is to eliminate the plethora of complications that cause massive distortions in the allocation of resources.
Making it progressive, those with much higher consumption (funded, of course, by higher incomes and withdrawal from savings) would pay much more in income tax than you would.
You would be better off under such a system than the current system. Makes sense, right???
And now for a reality check. I made $14,475 last year. I paid $1,498 in taxes, so just over 10% as this includes social security and medicare...
Quote:
Originally Posted by Lowexpectations
No what he wants is for you to pay effective 10% fed while my wife and I made over 200k and we too should pay 10% effective. So my effective rate drops from 13-14% down to 10% and your goes from 2.5% +\- up to 10%. You should pay 1078.00 more and I should pay 8000.00 or more less
Lowexpectations, please re-read Katie's post -- she already pays over 10%. She lists her paid income tax at $1498. I suspect you misread her original post.
Lowexpectations, please re-read Katie's post -- she already pays over 10%. She lists her paid income tax at $1498. I suspect you misread her original post.
She pays over 10% effective for fed/fica not for fed alone
This as is much in the term of economics is opinion and theory. For instance in theory a higher income tax rate at higher incomes is a disincentive to earn more, a higher capital gains rate is disincentive to invest. But in reality and in real life the impact isn't that clear. Do I decline a raise because it puts me into the next tax bracket? Typically only if I'm ignorant and don't understand how things actually work. Do I invest less if cap gains are taxed higher? In reality no I don't and from the investor behavior I seen over nearly two decades most aren't impacted by this either.
In the article it mentions
"when the govt taxes savings" this would be abnormal and I'm not aware where savings are taxed,
"investment income" this happens and should and btw typically receives beneficial treatment which by the theory should incentivize the activity
"wealth" does this happen? If so where?
"Inheritence" this from a federal level just doesn't apply to very many people
"It reduces the incentive to save, invest, and build companies rather than enjoy consumption immediately"
Does it? I don't believe it really has a real life impact is as the theory states. I complelty understand the theory but I simply don't see it playing out in real life and it's written in black and white
Further more if the theory or theories are correct then the following must apply
"If you tax consumption and consumption only there is a disincentive to consume"
If that is true consumption drops and that becomes problematic for business even with additonal investments even if they could occur probably wouldn't with decreased revenue potential right? Further in real life application consumption may fall and/or some would move to an underground market to avoid taxation.
The concept cuts both ways, if taxes decrease incentive to save, invest they would also do the same with consumption
Lowexpectations, please re-read Katie's post -- she already pays over 10%. She lists her paid income tax at $1498. I suspect you misread her original post.
No, she never said she pays $1,498 in income taxes. That includes FICA. FICA is a separate tax that is flat for most of us. It pays for what it pays for, which is SS and (along with premiums) half of Medicare. Normally when one talks about income tax reform they're talking about income tax reform. The reforms necessary for FICA and SS/Medicare is usually considered as a separate topic. It only really comes into the income tax reform in that SS is going insolvent and maybe where we turn to is general revenue. Medicare already gets half its money from general revenue as well. Those are two considerations for income tax reform in that they're huge actual and potential future costs that need to be covered by general funds, most of which come from income taxes.
Again, an income tax on total income less savings can be as progressive as you like. In your post, you don't list your savings. For the sake of argument, let's say your savings is $0.
Then, you would be taxed on $14475 in income, which of course equals your total consumption. In Professor Cochrane's proposal, in order to make the income tax/consumption tax progressive, we could set the tax rate at, say, zero for the first $10,000 of income, and then, say, 1% for the next $10,000, etc. Under those hypothetical numbers, your personal income tax would be reduced to $144.
The key of the simplification is to eliminate the plethora of complications that cause massive distortions in the allocation of resources.
Making it progressive, those with much higher consumption (funded, of course, by higher incomes and withdrawal from savings) would pay much more in income tax than you would.
You would be better off under such a system than the current system. Makes sense, right???
Define consumption.
Consumption taxes are inherently unfair when homeowners enjoy untaxed consumption.
The income group that I am a part of earns approximately 50% of the income in the US, but pays more than 80% of the income taxes. It becomes even more lopsided as incomes increase. When people that pay NO income taxes want to vilify me because they don't think I pay enough, yeah, I get a bit upset about that.
If you think that your taxes are too low, by all means, cut a check to the treasury.
While I wholeheartedly agree with the sentiment expressed, we should note that this step requires a level of courage in one's philosophical convictions that is notably (one might say "universally") absent in our esteemed proponents of "progressive" taxation.
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