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Old 08-20-2017, 04:16 AM
 
1,028 posts, read 559,669 times
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What’s a more "progressive" or "regressive" tax?
From the discussion thread:
FICA payroll tax; our most regressive tax.

Transcript of TaxPhd’s post #208:

Excerpted from post #207:
Regarding your contention that we cannot compare extents of any regressive effects that can be attributed to sales taxes or to payroll taxes, I don’t understand why you believe they’re so “disparate” as to make such comparisons unfeasible?
It appears that you have misunderstood my post.

"Regressive Tax" has a particular meaning, and that meaning has been made abundantly clear in this thread. A big part of the problem is that a great many people use the term incorrectly. They describe a tax as "regressive" when it (either by appearance or in actuality) "harms" poor people more than rich people. What is described in the previous sentence is not a regressive tax, but rather a tax that has a "disparate impact" on the poor vis-à-vis the rich.

Sales and payroll taxes aren't regressive, as neither one meets the definition of the term. But they may well have a disparate impact, and as such, I bet we could have a much more meaningful and useful discussion about that. It would most certainly be more useful than what this thread has been from the start.
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TaxPhd, Investopedia’s opinion is valid, but if we consider the consequential effects of differing tax methods from differing viewpoints, Investopedia’s viewpoint is one that differs from others no less valid. Using the term regressive as a comparative adjective, a tax can be evaluated as more or less regressive due to the attributes of its tax rate schedule, or due to taxpayers’ differing individuals’ ratio of taxes and incomes, or ratio of taxes and wealth, or their ability to afford those taxes.

What is more or less of a regressive tax, like beauty, “is in the eyes of the beholder”.
////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
Regressive Tax
What is 'Regressive Tax'
A regressive tax is a tax that takes a larger percentage of income from low-income earners than from high-income earners. It is in opposition with a progressive tax, which takes a larger percentage from high-income earners. A regressive tax is generally a tax that is applied uniformly to all situations, regardless of the payer.
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https://en.wikipedia.org/wiki/Regressive_tax
A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, so that the average tax rate exceeds the marginal tax rate. In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich: there is an inverse relationship between the tax rate and the taxpayer's ability to pay, as measured by assets, consumption, or income. These taxes tend to reduce the tax burden of the people with a higher ability to pay, as they shift the relative burden increasingly to those with a lower ability to pay.
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Old 08-20-2017, 09:11 AM
 
5,221 posts, read 2,378,942 times
Reputation: 5111
Quote:
Originally Posted by Supposn View Post
What’s a more "progressive" or "regressive" tax?
From the discussion thread:
FICA payroll tax; our most regressive tax.

Transcript of TaxPhd’s post #208:

Excerpted from post #207:
Regarding your contention that we cannot compare extents of any regressive effects that can be attributed to sales taxes or to payroll taxes, I don’t understand why you believe they’re so “disparate” as to make such comparisons unfeasible?
It appears that you have misunderstood my post.

"Regressive Tax" has a particular meaning, and that meaning has been made abundantly clear in this thread. A big part of the problem is that a great many people use the term incorrectly. They describe a tax as "regressive" when it (either by appearance or in actuality) "harms" poor people more than rich people. What is described in the previous sentence is not a regressive tax, but rather a tax that has a "disparate impact" on the poor vis-à-vis the rich.

Sales and payroll taxes aren't regressive, as neither one meets the definition of the term. But they may well have a disparate impact, and as such, I bet we could have a much more meaningful and useful discussion about that. It would most certainly be more useful than what this thread has been from the start.
///////////////////////////////////////////////////////

TaxPhd, Investopedia’s opinion is valid, but if we consider the consequential effects of differing tax methods from differing viewpoints, Investopedia’s viewpoint is one that differs from others no less valid. Using the term regressive as a comparative adjective, a tax can be evaluated as more or less regressive due to the attributes of its tax rate schedule, or due to taxpayers’ differing individuals’ ratio of taxes and incomes, or ratio of taxes and wealth, or their ability to afford those taxes.

What is more or less of a regressive tax, like beauty, “is in the eyes of the beholder”.
////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
Regressive Tax
What is 'Regressive Tax'
A regressive tax is a tax that takes a larger percentage of income from low-income earners than from high-income earners. It is in opposition with a progressive tax, which takes a larger percentage from high-income earners. A regressive tax is generally a tax that is applied uniformly to all situations, regardless of the payer.
//////////////////////////////////////////////////////////////////
https://en.wikipedia.org/wiki/Regressive_tax
A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, so that the average tax rate exceeds the marginal tax rate. In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich: there is an inverse relationship between the tax rate and the taxpayer's ability to pay, as measured by assets, consumption, or income. These taxes tend to reduce the tax burden of the people with a higher ability to pay, as they shift the relative burden increasingly to those with a lower ability to pay.
///////////////////////////////////////////////////////////////
I'm not sure what the point of this thread is, as you haven't told us. However, the two highlights from your quoted information above is what I have maintained from the beginning is the definition of a regressive tax. And both of those highlighted portions are in complete contrast to your repeated attempts to redefine the term.

Let us know what you want out of this thread, and maybe I'll participate. If all it will be is you attempting to say that "regressive tax" means something completely different from what you have posted above (and that I've highlighted), then I'll pass.
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Old 08-22-2017, 10:02 AM
 
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FICA is effectively progressive in the front end of the household income distribution and a flat rate until the wage limit defined by the system. EITC was not only designed to reduce income taxes for the lower incomes, but to give back some or all of their payroll taxes without affecting their benefits. This can be viewed in the effective tax rates for the lowest income levels where the negative income tax rates approach -10% (yes, they're also being refunded some of the employer contribution as well) and gradually rises with income. This is the last word as far I am concerned.
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Old 08-22-2017, 10:15 AM
 
Location: North Idaho
21,001 posts, read 25,765,271 times
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The social security tax is a forced pension plan for people. Without social security, low income people would get to the point where they could no longer work and they would have nothing. No income, no medical.

That's a lot of complaining about having a retirement plan.
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Old 08-22-2017, 02:14 PM
 
11,325 posts, read 5,846,190 times
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Quote:
Originally Posted by oregonwoodsmoke View Post
The social security tax is a forced pension plan for people. Without social security, low income people would get to the point where they could no longer work and they would have nothing. No income, no medical.

That's a lot of complaining about having a retirement plan.
That's a lot of complaining about a retirement plan that is largely subsidized by the top-20%. Since the early 1980's, only about 6% of wage earners hit the income cap (~$120K this year). The top-20% pay in far more than they pull out in Social Security checks. The bottom half don't pay anything close to what they pull out of the system as retirees.

I'd have no problem lifting the cap if they also made the distributions fully proportional to how much you contribute in your lifetime. I have 35 years of maximum contributions over my career. Somebody making an inflation-adjusted $60K contributing half as much to the system gets a check that's only 15% smaller than mine. How is that fair?
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Old 08-22-2017, 02:20 PM
 
17,626 posts, read 12,211,350 times
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There is no such thing as more progressive or regressive. It really is either progressive or it's not. You can't be a little pregnant
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Old 08-22-2017, 03:04 PM
 
33,046 posts, read 20,720,491 times
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Quote:
Originally Posted by GeoffD View Post
That's a lot of complaining about a retirement plan that is largely subsidized by the top-20%. Since the early 1980's, only about 6% of wage earners hit the income cap (~$120K this year). The top-20% pay in far more than they pull out in Social Security checks. The bottom half don't pay anything close to what they pull out of the system as retirees.

I'd have no problem lifting the cap if they also made the distributions fully proportional to how much you contribute in your lifetime. I have 35 years of maximum contributions over my career. Somebody making an inflation-adjusted $60K contributing half as much to the system gets a check that's only 15% smaller than mine. How is that fair?

1. Isn't it effectively subsidized by everyone who dies before getting back what they paid in?

2. Even for those who die before getting back what they paid in?
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Old 08-25-2017, 06:43 PM
 
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Quote:
Originally Posted by GeoffD View Post
That's a lot of complaining about a retirement plan that is largely subsidized by the top-20%. Since the early 1980's, only about 6% of wage earners hit the income cap (~$120K this year). The top-20% pay in far more than they pull out in Social Security checks. The bottom half don't pay anything close to what they pull out of the system as retirees.

I'd have no problem lifting the cap if they also made the distributions fully proportional to how much you contribute in your lifetime. I have 35 years of maximum contributions over my career. Somebody making an inflation-adjusted $60K contributing half as much to the system gets a check that's only 15% smaller than mine. How is that fair?
GeoffD, I’ve always assumed Security’s monthly benefits were deliberately calculated to favor the lower income earners.
The retirement benefits are of course financially beneficial to retired employees and their families; but they are also of net economic and social benefit to our nation.

I’m opposed to the cap upon individual employees’ maximum annual FICA payroll tax and continuing to cap the benefits in order increase the system’s tax revenues but not the costs of its benefits. The point is to better afford the subsidy of retirees that had poor lifetime earnings.

I’m among the proponents for additional funding of Social Security retirement by a tax base greater than only employees and employers; no less than half of Social Security retirements’ funding should be from the FICA payroll tax. I advocate that greater tax base should be a federal sales tax.


Refer to the topic
Replacing reduced FICA payroll tax rates with a federal general sales tax.
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Old 08-25-2017, 09:24 PM
 
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Replacing reduced FICA payroll taxes.

Due to IRS regulations’ many exceptions, exclusions, and waivers, (i.e. justifiable and unjustifiable “tax loop holes”) our taxing of net incomes are not as progressive as many people believe. Peoples’ spending, rather than income tax filings are generally a more accurate reflection of people’s comparative incomes and wealth.

A general sales tax is a flat tax. Only to a limited extent can it be drafted to be somewhat more progressive. But a general sales tax rather than increasing our “progressive” income tax rates would replace reduced FICA payroll tax rates in superior manner.

It’s contended that because purchases rather than tax filings are more accurate reflections of wealth and incomes, and (particularly for the wealthy), sales taxes are more difficult to evade, and particularly if the “value added tax” method were used, a sales tax rather than increasing our progressive income taxes’ rate would be consequentially be no less effective.
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Old 08-25-2017, 10:11 PM
 
1,760 posts, read 581,887 times
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Something that's interesting to note though is the idea of progressive income taxation is to limit wealth inequality but it has actually had the opposite effect. Take a look at neighboring states Utah and California. Utah has what you would consider a regressive tax policy, they have a flat tax. California has a very progressive income tax. Utah has best wealth equality in the country and California has some of the most wealth inequality. CT is another example, very progressive income tax, extreme inequality. Infact the top 10 states for wealth equality are almost all made up of states with a flat tax or no tax and most of the bottom 10 have progressive tax policies. Of course there are other factors at play but it is noteworthy.
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