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Old 10-18-2011, 06:54 PM
 
75 posts, read 53,939 times
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Quote:
Originally Posted by C.C View Post
Huh? Didn't you say "I still don't understand why not paying income tax matters if people already pay other taxes."? Everybody "already pays other taxes", so by your logic it shouldn't "matter" if anyone pays income taxes, right?
In terms of "fairness" I meant... I don't see why the number of different types of taxes someone pays is relevant to that.
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Old 10-18-2011, 07:01 PM
C.C
 
2,235 posts, read 2,357,628 times
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Quote:
Originally Posted by madpaddy View Post
Great information that has changed my perspective. It has been characterized, and I have bought into the characterization, that the bottom half of earners are not paying income tax. Turns out it's about the bottom third, and a smattering of people from higher income brackets. While I think the threshold should be about the bottom 20-25%, 33% is closer to that than the socially problematic bottom 50%. It never occurred to me that those with losses "carrying forward" were such a significant part of the non-payers.
How did you get 33%? I don't know if those numbers are correct - they don't even total 100% - but 62.3M of 153M total households is 40%, and that is slightly closer to the "socially problematic" 50% than to your ideal of 20-25%...

But more to the real point - do you seriously find it comforting to learn that some significant percentage of people paying zero or negative income tax make more than $50K? Personally I wouldn't find it offensive at all to learn that 100% of households making less than $20K pay no IT. But it's an outrage that any $50K household can get away without paying at least a token amount.
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Old 10-18-2011, 07:15 PM
 
Location: Chicago
38,707 posts, read 102,800,235 times
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Quote:
Originally Posted by madpaddy View Post
That doesn't make any sense to me either. That would suggest that 96% of those with an income over $100,000 are self-employed or only have passive income. I wouldn't be surprised if it was quite high, over 50% even. But 96%? I know too many people that are payroll employees with a six-figure income to believe it is that high. Even assuming it was true, the self employed (who make up a significant percentage of those making over 100k) pay "self employment tax" which is a different name for the same thing.
Even the self-employed pay payroll taxes -- at twice the rate of those who answer to an employer, I might add. Been there, done that.
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Old 10-18-2011, 07:40 PM
 
1,129 posts, read 2,009,371 times
Reputation: 873
Quote:
Originally Posted by C.C View Post
How did you get 33%? I don't know if those numbers are correct - they don't even total 100% - but 62.3M of 153M total households is 40%, and that is slightly closer to the "socially problematic" 50% than to your ideal of 20-25%...
68% of those under the median is about a third of the overall. The other ~12% are above the median.


Quote:

But more to the real point - do you seriously find it comforting to learn that some significant percentage of people paying zero or negative income tax make more than $50K?
I do find it comforting that we're farther away than I thought from a situation where a socioeconomic voting block that doesn't pay taxes is large enough to dictate a policy of raising taxes on the upper-income minority with impunity. While we still have a problem where ~50% aren't paying, that 50% are NOT a cohesive constituency.



Quote:
it's an outrage that any $50K household can get away without paying at least a token amount.
I'm speculating that most of those situations are losses carried forward. If a business owner loses $80,000 his first year and makes $50,000 the next his two-year income is $-30,000. So he gets a break and doesn't have to pay taxes that year he made $50,000. If he makes $80,000 the next year he get's the $30,000 in remaining carryforward credit and pays tax on $50,000. If he makes a $100,000 the following year he will have to pay income on the full $100,000.

Without a limited carryforward allowance for losses in the tax code business investment would fall off a cliff. Many businesses take well over a year to become profitable. Without carryforward the potential break-even point for the initial investment gets pushed substantially farther down the road, making the initial investment in such a venture less appealing.

Last edited by madpaddy; 10-18-2011 at 07:54 PM..
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Old 10-18-2011, 07:50 PM
 
1,129 posts, read 2,009,371 times
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Quote:
Originally Posted by Drover View Post
Even the self-employed pay payroll taxes -- at twice the rate of those who answer to an employer, I might add. Been there, done that.

Like I said: self employment tax & payroll tax are two terms for the same thing. Some like to use the two different terms as a wedge by telling gullible people that the self employed are somehow getting over because they don't pay "payroll tax"

As for the "twice the rate" issue, the self employed do get to a deduction for half their SE tax so, depending on the marginal bracket, the true cost isn't usually twice the payroll rate. And then there's an argument to be made that if employers didn't have to pay the payroll tax they could pay workers more so we're all paying double, whether we're self employed or employed.
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Old 10-18-2011, 09:13 PM
 
4,911 posts, read 3,417,324 times
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Quote:
Originally Posted by workingclasshero View Post
federally ..yes

but I get killed by the state, and moreso by the local

I EARN (gross) 60k..yet my property tax is 12k...a full 20% of my gross
"federally" yes?? Are you saying that you don't really count as part of the 47% because you pay local and state taxes?
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Old 10-18-2011, 09:20 PM
 
Location: Chicago
38,707 posts, read 102,800,235 times
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Quote:
Originally Posted by madpaddy View Post
Like I said: self employment tax & payroll tax are two terms for the same thing. Some like to use the two different terms as a wedge by telling gullible people that the self employed are somehow getting over because they don't pay "payroll tax"

As for the "twice the rate" issue, the self employed do get to a deduction for half their SE tax so, depending on the marginal bracket, the true cost isn't usually twice the payroll rate. And then there's an argument to be made that if employers didn't have to pay the payroll tax they could pay workers more so we're all paying double, whether we're self employed or employed.
Uhm, yeah... back here on planet reality, the more likely scenario is that employees are more concerned with their take-home pay rather than the total cost to employ them, and employers will adjust their labor costs to pay the employees what they'll work for in take-home pay. If other labor costs increase, employers don't respond by reducing employees' take-home pay dollar-for-dollar to make up the difference. Neither would they respond by saying, "here's a 7% raise!" if payroll deductions were eliminated tomorrow.
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Old 10-18-2011, 10:30 PM
 
1,129 posts, read 2,009,371 times
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Quote:
Originally Posted by Drover View Post
Uhm, yeah... back here on planet reality, the more likely scenario is that employees are more concerned with their take-home pay rather than the total cost to employ them, and employers will adjust their labor costs to pay the employees what they'll work for in take-home pay. If other labor costs increase, employers don't respond by reducing employees' take-home pay dollar-for-dollar to make up the difference. Neither would they respond by saying, "here's a 7% raise!" if payroll deductions were eliminated tomorrow.
I don't necessarily subscribed to the argument, at least not at face value.
But free market competitive pressures suggest the 7% would eventually filter back to the proletariat in some combination of higher wages, lower prices, and/or more complete employment.

When "other" labor costs increase, employers have three possible courses of action:
  1. Raise prices. To a large degree, the extent this option can be executed is limited by the competition's willingness to employ options 2 and/or 3
  2. Accept the higher expense and its negative effect on profitability. May be a short term solution, rarely a long term strategy.
  3. Lower wages. Sometimes an actutal $-for-$ reduction in wages or benefits IS enacted. More often some employees are laid off (meaning the remaining employees must increase their productivity for the same pay) and/or wages are frozen for some time while inflation erodes the actual value of those wages.
Typically #1 is employed until market share loss is a threat, then #2 unil the "pain" is too much, and finally #3.


The opposite options would present themselves if payroll taxes were eliminated over night
  1. Take the 7% as a windfall profit. Might work for a while, but it won't be long before you risk losing market share to companies that choose employ options 2 and/or 3. Competitive pressures will eventually drive industry-wide profit margins back to historic levels.
  2. Lower prices.
  3. Increase employee pay. Maybe you give people raises, maybe you give them more benefits, or maybe you just bring some more people on board to reduce the workload and increase job satisfaction.

It's not clear to me how much of the 7% stops at option two and how much filters down to three. Probably depends a lot on the industry and how much of a difference employee talent makes in the actual value of the product or service sold.
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Old 10-18-2011, 10:39 PM
 
Location: Long Island
32,816 posts, read 19,376,344 times
Reputation: 9616
Quote:
Originally Posted by mmmjv View Post
"federally" yes?? Are you saying that you don't really count as part of the 47% because you pay local and state taxes?
maybe I am not typing clear enough for you

yes I am one of those 47% who pay nothing in federal tax...why because I get killed on the state and local level..plus I have 3 kids

many, many people earning under 60k pay nearly nothing...

I pay 20% (12,000) in property taxes...that right there is bigger than the 'standard deduction"

or would you rather see people double, triple , and quadruple taxed

we need to get rid of the income (and payroll) taxes all together.....a good portion of income is never reported anyhow
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Old 10-18-2011, 10:50 PM
 
1,129 posts, read 2,009,371 times
Reputation: 873
Quote:
Originally Posted by workingclasshero View Post
maybe I am not typing clear enough for you

yes I am one of those 47% who pay nothing in federal tax...why because I get killed on the state and local level..plus I have 3 kids

many, many people earning under 60k pay nearly nothing...

I pay 20% (12,000) in property taxes...that right there is bigger than the 'standard deduction"

or would you rather see people double, triple , and quadruple taxed

we need to get rid of the income (and payroll) taxes all together.....a good portion of income is never reported anyhow

Or we could just trade away the state & local tax deduction for lower marginal rates. Why should persons who choose to live in a state with reasonable local tax rates have to subsidize larger deductions for those who choose to live in states with punitive local taxes? If you make $60k, you should pay the same FEDERAL TAX whether you live in NY or Montana, whether you pay $12k in property tax or no property tax. Same with the mortgage interest deduction. phase it out, phase in lower marginal rates. No reason two people with identical incomes and identical situations other than one has a huge house with a huge mortgage and one has a modest house with a modest mortgage that the person with the larger house should have to contribute less to run the Federal government.

Last edited by madpaddy; 10-18-2011 at 11:00 PM..
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