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The problem with VAT or a national sales tax is that it is very regressive. The less you make, the more you pay proportionally. I think this is backwards from what we really want.
I skimmed this last page of nutty claims that people making $35K pay more in taxes than a wealthy person. The guy who gets nailed the worst is the self-employed person with an AGI just over $100K. They're in the 28% tax bracket. They pay both sides of the FICA/Medicare self-employment tax. They pay their own unemployment insurance. They pay their own workman's comp. They pay their own medical insurance with after-tax dollars. Their state thinks they're rich so if they're in a state with a graduated income tax, they're paying big there. They probably own some commercial property and their town taxes that at a higher commercial property tax rate. Their effective tax rate is at least 50%.
The problem with VAT or a national sales tax is that it is very regressive. The less you make, the more you pay proportionally. I think this is backwards from what we really want.
I skimmed this last page of nutty claims that people making $35K pay more in taxes than a wealthy person. The guy who gets nailed the worst is the self-employed person with an AGI just over $100K. They're in the 28% tax bracket. They pay both sides of the FICA/Medicare self-employment tax. They pay their own unemployment insurance. They pay their own workman's comp. They pay their own medical insurance with after-tax dollars. Their state thinks they're rich so if they're in a state with a graduated income tax, they're paying big there. They probably own some commercial property and their town taxes that at a higher commercial property tax rate. Their effective tax rate is at least 50%.
Geoff D, I advocate to whatever extent feasible we replace our federal taxes upon net incomes with a general sales tax.
Progressive income tax rates’ purpose is to promote a good and justifiable policy that we provide some tax relief for lower income earners. We simply didn’t realize or appreciate the extent of mischief due to our choosing progressive income tax rates as the method to achieve that purpose.\
Each perceived or actual tax inequity induces a modification of our tax regulations; each of those remedies for actual or perceived inequities induces other factions to in turn lobby for still another remedy. Our income tax regulations grow as a great onion under the ground; they’re layers upon layers of additional inequities.
Consequentially a significant portion of those earning the greatest net incomes pay taxes upon their severely (and sometimes more or less legally) understated net incomes rather than their actual net incomes. Thus a significant portion of tax burden is shifted from those who earned the most and were instead borne by our nation’s middle income earners.
If we eliminated preferential tax treatments for favored income sources and taxpayers, enacted a general sales tax to enable equitable per capita income tax credits annually adjusted to the purchasing power of the U.S. dollar, our federal tax revenues would not be reduced, our actual tax rates would more closely reflect our taxpayers’ actual net incomes and the proportion of wage earners and their families total taxes relative to their actual net incomes would not be increased. That’s due to whatever extent the general sales tax would effectively eliminate or reduce income taxes upon the lowest income tax brackets.
The problem with VAT or a national sales tax is that it is very regressive. The less you make, the more you pay proportionally. I think this is backwards from what we really want.
I skimmed this last page of nutty claims that people making $35K pay more in taxes than a wealthy person. The guy who gets nailed the worst is the self-employed person with an AGI just over $100K. They're in the 28% tax bracket. They pay both sides of the FICA/Medicare self-employment tax. They pay their own unemployment insurance. They pay their own workman's comp. They pay their own medical insurance with after-tax dollars. Their state thinks they're rich so if they're in a state with a graduated income tax, they're paying big there. They probably own some commercial property and their town taxes that at a higher commercial property tax rate. Their effective tax rate is at least 50%.
Geoff D FICA is our most regressive federal tax.
Refer to city-data.com/forum/economics/2081117-fica-payroll-tax-our-most-regressive-6.html .
That thread describes a proposal to shift a half of Social Security’s and all of Medicare's funding from a tax upon payrolls to sales tax. It would not reduce or increase taxes upon wage earners and their families but it would better fund these social programs that are of the greatest proportional benefit to those earning the lowest incomes. The next greatest beneficiaries of this proposal would be independent contractors.
Although the proposal reduces enterprises payroll taxes, those reductions are illusional. Enterprises’ payroll taxes are now eventually passed on to final purchasers and users which also target purchasers and final users.
The economic benefit of a general sales tax is due to general sales being a greater than payrolls’ tax base granting great tax revenue to fund social programs which are of net economic benefit to the nation and of net financial benefit to the nation’s aggregate lowest earners and their families.
This manner of shifting from net income taxes to a general sales tax would increase the total federal taxes of those earning more than the median income. The extent that a taxpayer’s income exceeds the median income, the taxpayer’s total federal taxes would be increased. Those earning $70,000 per year will pay somewhat more; those earning millions of dollars per year will pay a great deal more.
Social Security isn't a tax. It's a government-run pension fund. Everybody contributes. Everybody is entitled to their pension benefit. Not only that, the pension program is highly progressive. When you look at distributions, the less you contributed, the more you receive proportional to your lifetime contribution. A 5%-er contributing the maximum amount every year would need to live well into their 90's to receive benefits, inflation adjusted, equal to the inflation-adjusted contributions they and their employers made over their work careers. Somebody making median household income has a much quicker payback.
I've maxed out my Social Security contribution since my 5th work year at age 26. In my work career, the combination of my contribution and my employer's contribution every year has been a bit less than what I would receive as a Social Security check at full retirement age. I have 35+ years of that.
Somebody who makes $40K puts in less than half what I do but receives a check 2/3 the size of mine. I don't have a problem with that but Social Security is hardly "regressive".
Social Security isn't a tax. It's a government-run pension fund. Everybody contributes. ... I don't have a problem with that but Social Security is hardly "regressive".
Geeoff D, although (similar to ordinary insurance), Social Security retirement benefits are generally related to their participants’ “contributions”, those contributions are legally mandated (similar to ordinary taxes); generally Social Security participants cannot choose not to “contribute” to the funding of Social Security programs.
I agree that U.S. Social Security administration’s are greatly net beneficial to USA employees and their families, particularly of greater benefit to our population segments with the lowest annual incomes, it reduces incidents and extents of poverty within our nation and is of net benefit to our economy.
But until a family actually receives any Social Security benefits it reduces their cash flow. The definition of a “regressive tax” is a tax which is of greater burden to those of lesser wealth and of lesser burden to wealthier persons.
FICA contributions or taxes proportions relative to individuals’ incomes, (i.e. their tax rates) are greater among the poor and extremely less detrimental to the net incomes of the wealthiest persons.
Our current policy reduces our population’s median post tax income and is an exact description of a “regressive tax”. Our government policies should to the greatest possible extent increase rather than decrease the quality of USA’s population’s lives.
Geeoff D, although (similar to ordinary insurance), Social Security retirement benefits are generally related to their participants’ “contributions”, those contributions are legally mandated (similar to ordinary taxes); generally Social Security participants cannot choose not to “contribute” to the funding of Social Security programs.
I agree that U.S. Social Security administration’s are greatly net beneficial to USA employees and their families, particularly of greater benefit to our population segments with the lowest annual incomes, it reduces incidents and extents of poverty within our nation and is of net benefit to our economy.
But until a family actually receives any Social Security benefits it reduces their cash flow. The definition of a “regressive tax” is a tax which is of greater burden to those of lesser wealth and of lesser burden to wealthier persons.
FICA contributions or taxes proportions relative to individuals’ incomes, (i.e. their tax rates) are greater among the poor and extremely less detrimental to the net incomes of the wealthiest persons.
Our current policy reduces our population’s median post tax income and is an exact description of a “regressive tax”. Our government policies should to the greatest possible extent increase rather than decrease the quality of USA’s population’s lives.
Respectfully, Supposn
Again, Social Security isn't a tax. It's a government-run annuity and disability insurance program where the benefit distribution is very progressive.
I'm a 5%-er. I'd love to have that $37K per year my employer and I pitch in as part of my retirement portfolio. After 30-ish years of maxed out contributions and assuming my investments merely tracked inflation, I'd something approaching a couple million bucks. Social Security exists because the unwashed masses have a totally crap savings rate and would otherwise starve to death if they couldn't work. This is a case of the Federal government saving people from themselves. I'm totally fine with the government saving people from themselves even though I don't particularly benefit from it. I don't feel rich but being in the top-5% for wealth and income, I get kind of screwed by the government pension system in the same way I get kind of screwed in my effective tax rate compared to most taxpayers.
Again, Social Security isn't a tax. It's a government-run annuity and disability insurance program where the benefit distribution is very progressive.
I'm a 5%-er. I'd love to have that $37K per year my employer and I pitch in as part of my retirement portfolio. After 30-ish years of maxed out contributions and assuming my investments merely tracked inflation, I'd something approaching a couple million bucks. Social Security exists because the unwashed masses have a totally crap savings rate and would otherwise starve to death if they couldn't work. This is a case of the Federal government saving people from themselves. I'm totally fine with the government saving people from themselves even though I don't particularly benefit from it. I don't feel rich but being in the top-5% for wealth and income, I get kind of screwed by the government pension system in the same way I get kind of screwed in my effective tax rate compared to most taxpayers.
That puts your total income at what, around $650,000?
The problem with VAT or a national sales tax is that it is very regressive. The less you make, the more you pay proportionally. I think this is backwards from what we really want.
I skimmed this last page of nutty claims that people making $35K pay more in taxes than a wealthy person. The guy who gets nailed the worst is the self-employed person with an AGI just over $100K. They're in the 28% tax bracket. They pay both sides of the FICA/Medicare self-employment tax. They pay their own unemployment insurance. They pay their own workman's comp. They pay their own medical insurance with after-tax dollars. Their state thinks they're rich so if they're in a state with a graduated income tax, they're paying big there. They probably own some commercial property and their town taxes that at a higher commercial property tax rate. Their effective tax rate is at least 50%.
Use an LLC and elect to be taxed as an S corp.
Pay yourself what you want for income, then take the rest at dividend tax rates.
As for the topic, because the country won't work with a sales tax instead of income tax and it's a regressive, not progressive tax which would be terrible for the economy.
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