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Old 09-21-2012, 10:27 AM
 
Location: My beloved Bluegrass
14,065 posts, read 9,796,392 times
Reputation: 18903

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I put a version of this example on another thread. I really get so tired of people equating a tax break to an entitlement by saying things like the rich are not paying their fair share or we subsidize rich people more. We just aren't taking as much from them as you deem fair. They are not the same.
Citizen A: Made $10. Government says I wanted $5 but I am only going to $4 (tax break). So citizen A started with $10 and ended up with $6, making a net loss of $4. Government made $4.
Citizen B: Made $0. Government says have $5 (entitlement program). So citizen B started with nothing and ended up with $5, making a net gain of $5. Government spent $5.
The difference between citizen A's contribution to the government coffers and citizen B's is $9. The entitlement program doesn't just cost the government the $5 they sent citizen B, it also cost them the $4 they would have collected in taxes if citizen B had worked. The tax break only made $1 difference. Getting citizen B gainfully employed would make $9 difference.

For fun lets add in another scenario:
Citizen C: Made $4. Government says have an extra $1 (earned income credit). So citizen C started with $4 and ended up with $5, making a net gain of $1. The government spent $1.
The difference between citizen A's contribution to the government coffers and citizen C's is $5. The entitlement program doesn't just cost the government the $1 they sent citizen C, it also cost them the $1 they would have collected in taxes if citizen C had made above the magic earned income level and they paid at the same rate as citizen A. So citizen C would have paid $1 in taxes but instead received $1. Earned income credit actually costs $2.

The difference between citizen B's contribution to the government coffers and citizen C's is a question of which costs the government more, and citizen B costs $3 less. So yes, if I have to choose one to keep, I'll take citizen C anyday.

Yes, I know it's overly simplified but that is the gist of it. I am not saying those with more shouldn't pay a greater percentage - I actually think they should to a reasonable level. I have no problem with citizen C not paying the $1 in taxes but I do with them receiving a $1 "refund" (income redistribution).

By the way, did you notice that between the $5 citizen B was paid and the $1 citizen C was paid, it wasn't covered by the $4 citizen A paid. Liberals want citizen A to now pay an extra $2 to fix that. Do the math when that happens and that is why people like me have a problem with it.

Thoughts?
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Old 09-21-2012, 10:33 AM
 
33,046 posts, read 20,726,186 times
Reputation: 8928
Quote:
Originally Posted by Oldhag1 View Post
I put a version of this example on another thread. I really get so tired of people equating a tax break to an entitlement by saying things like the rich are not paying their fair share or we subsidize rich people more. We just aren't taking as much from them as you deem fair. They are not the same.
Citizen A: Made $10. Government says I wanted $5 but I am only going to $4 (tax break). So citizen A started with $10 and ended up with $6, making a net loss of $4. Government made $4.
Citizen B: Made $0. Government says have $5 (entitlement program). So citizen B started with nothing and ended up with $5, making a net gain of $5. Government spent $5.
The difference between citizen A's contribution to the government coffers and citizen B's is $9. The entitlement program doesn't just cost the government the $5 they sent citizen B, it also cost them the $4 they would have collected in taxes if citizen B had worked. The tax break only made $1 difference. Getting citizen B gainfully employed would make $9 difference.

For fun lets add in another scenario:
Citizen C: Made $4. Government says have an extra $1 (earned income credit). So citizen C started with $4 and ended up with $5, making a net gain of $1. The government spent $1.
The difference between citizen A's contribution to the government coffers and citizen C's is $5. The entitlement program doesn't just cost the government the $1 they sent citizen C, it also cost them the $1 they would have collected in taxes if citizen C had made above the magic earned income level and they paid at the same rate as citizen A. So citizen C would have paid $1 in taxes but instead received $1. Earned income credit actually costs $2.

The difference between citizen B's contribution to the government coffers and citizen C's is a question of which costs the government more, and citizen B costs $3 less. So yes, if I have to choose one to keep, I'll take citizen C anyday.

Yes, I know it's overly simplified but that is the gist of it. I am not saying those with more shouldn't pay a greater percentage - I actually think they should to a reasonable level. I have no problem with citizen C not paying the $1 in taxes but I do with them receiving a $1 "refund" (income redistribution).

By the way, did you notice that between the $5 citizen B was paid and the $1 citizen C was paid, it wasn't covered by the $4 citizen A paid. Liberals want citizen A to now pay an extra $2 to fix that. Do the math when that happens and that is why people like me have a problem with it.

Thoughts?
As a person who has never had a tax break beyond the standard deduction and personal exemption that everybody gets, I have a different take.

Citizen C: Made $1800 cash, no insurance and no other employer-provided benefits. Pays $180 tax. Pays $600 out of pocket for individual insurance. Receives $1800 and has $1020 left to live on and must somehow figure out how to fund his retirement.

Citizen D: Made $1600 cash plus employer pays $400 for similar individual insurance (employer enjoys a lower group insurance rate) and employer pays $200 into D's retirement plan. Pays $160 tax. Receives $2200, has $1440 left to live on, plus $200 socked away for retirement.

D enjoys greater compensation and a higher standard of living than C, yet pays lower taxes than C.

Government is redistributing money from C to D just as it is redistributing money from A to B.

Why exactly should C pay more tax than D?
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Old 09-21-2012, 11:12 AM
 
30,900 posts, read 24,229,648 times
Reputation: 17790
both of these examples show just how screwed up the tax code is.
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Old 09-21-2012, 11:38 AM
 
Location: NC
10,005 posts, read 8,719,959 times
Reputation: 3062
There are so many issues with the tax code it is obscene. That is why I support ultimately going to a consumption and gift/estate tax structure rather then a income tax structure.

With that said I will give one fun example of the absurdity of the tax code.

Person A donates $100 a week to the church for a total of $5200 a year. Person A does this by putting an after tax $100 bill in the collection plate every week and as such his donation is $5200 dollars of money he has paid taxes on and gets to deduct it on his tax bill.

Person B donates $5200 dollars worth of stock to his university. Person B paid $1,000 for the stock 5 years ago so in terms of money he has paid taxes on his donation is $1000 and the money he has not paid taxes on ever is $4,200. He also gets to deduct $5,200 dollars bill despite never having paid any taxes on $4,200 of it.
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Old 09-21-2012, 11:51 AM
 
270 posts, read 469,142 times
Reputation: 62
Why do you think the rich should be taxed at a greater percentage?
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Old 09-21-2012, 11:56 AM
 
637 posts, read 447,243 times
Reputation: 181
There's more to it - Take Steve Jobs - he was paid 1 dollar a year, but got a lot of stock options as a form of compensation. The sale of stocks is taxed at a lower rate than regular income.

So the really rich, who derive their income mostly in this manner pay a maximum tax rate of 15%. As Warren Buffett said, his secretary pays more in taxes.

When we talk about the rich, I don't think of lawyers, doctors, or small business owners... I don't have a problem with some types of income inequality - but I do have a problem when the government encourages that inequality for no good reason (because paying someone in stocks is not a reward for risking your money, it's Apple and Steve Jobs making an end run on the tax code).

There are plenty of problems at every level - from entitlements to a tax code that favors the 1%.
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Old 09-21-2012, 11:58 AM
 
637 posts, read 447,243 times
Reputation: 181
Quote:
Originally Posted by bettyboopster View Post
Why do you think the rich should be taxed at a greater percentage?
Because 20% of 50,000 leaves a person with 40,000 dollars. 35% of 250,000 dollars leaves a person with 165,000 dollars.

Many costs are fixed, or don't scale up - insurance for a person making 50,000 a year costs the same, for example. Utility costs don't ramp up, food costs don't ramp up, housing costs, etc.
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Old 09-21-2012, 12:03 PM
 
2,910 posts, read 2,863,604 times
Reputation: 1047
Quote:
Originally Posted by Randomstudent View Post
There are so many issues with the tax code it is obscene. That is why I support ultimately going to a consumption and gift/estate tax structure rather then a income tax structure.

With that said I will give one fun example of the absurdity of the tax code.

Person A donates $100 a week to the church for a total of $5200 a year. Person A does this by putting an after tax $100 bill in the collection plate every week and as such his donation is $5200 dollars of money he has paid taxes on and gets to deduct it on his tax bill.

Person B donates $5200 dollars worth of stock to his university. Person B paid $1,000 for the stock 5 years ago so in terms of money he has paid taxes on his donation is $1000 and the money he has not paid taxes on ever is $4,200. He also gets to deduct $5,200 dollars bill despite never having paid any taxes on $4,200 of it.
They are exactly the same for tax purpose. The amount is the same. The deduction is against adjusted gross income, it has nothing to do with before tax or after tax.

Anyone, the tax code need to be scrapped. It is awfully long, 70,000+ page and still adding every day. No wonder tax preparers took over lawyers as the biggest profession in the USA.
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Old 09-21-2012, 12:06 PM
 
270 posts, read 469,142 times
Reputation: 62
Quote:
Originally Posted by qr5667 View Post
Because 20% of 50,000 leaves a person with 40,000 dollars. 35% of 250,000 dollars leaves a person with 165,000 dollars.

Many costs are fixed, or don't scale up - insurance for a person making 50,000 a year costs the same, for example. Utility costs don't ramp up, food costs don't ramp up, housing costs, etc.
What does it matter what it leaves a person with? The problem with the poor or middle class is that they don't realize that it works the way you described in your previous thread, which sounds just about right.
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Old 09-21-2012, 12:09 PM
 
9,857 posts, read 6,735,072 times
Reputation: 3281
Obama blocked all the thousands of regulations he signed away till after the election. When those go into effect along with Obama-care you are going to see employers fire a tons from the people in the example above and many businesses will close due to Obama and you will find there is a need to confiscate a lot of people's personal wealth due to government incompetence.

Lower taxes and you get more money to the treasury.
Reduce entitlements and government employees back to the private sector and you also reduce future tax burdens on the citizens.
Remove the Obama regulations now on hold along with many others and Obama care and we can turn this around.
Don't do the above and we are gone as a prosperous nation in well under two years.

Feel free to bookmark this quote.
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