Pay taxes so others can have cable, cigarettes, smart phones, vacations -

[seattlecyclone]

That just makes it a more progressive tax anyway, since an independent businessman would have to pay for both sides of his own FICA; and couldn't deduct the portion of his own health care expenses under 7% (now 10%) unless he had employees for which he provided an employer sponsored group plan anyway.

Under current law, self-employed people can deduct the full amount of their health insurance premiums as a pre-AGI deduction. I think they'll still owe self-employment tax (which means self-employed people aren't given quite as big of a subsidy as corporate employees who get health insurance through work), but it's a lot better than the treatment given to employees who do not receive health insurance and have to buy it on their own.

The health care deduction rule is specifically designed to approximate the deduction advantages of employer sponsored care, without making it just as easy to quit working.

No, it's not designed to approximate employer-sponsored insurance... or if it is, they did a terrible job designing it. If they wanted to approximate the exclusion for employer-provided insurance, they would make a pre-AGI deduction of the full amount (capped at your wage income), similar to what already exists for self-employed people.

Instead, the deduction is only available to people who itemize and pay more than 10% of their AGI for health insurance, and whether their income came from work or elsewhere is irrelevant to the calculation.

Only because the standard deduction includes such things in it's calculations.  Repeal the standard deduction and almost anyone would be itemizing, which is the point.  If your itemized deductions don't beat the standard, the tax code gives you an easy way to do at least as well.  And damn near anyone who would qualify for subsidies would be in the 7% range without either ACA subsidies or an employer sponsored plan.  Notably, that may not be quite as true now that the threshold is 10%.

People who have employer-provided health insurance are able to take the full standard deduction anyway. This is a tax benefit over and above any of the deductions that would be covered by the itemized/standard deductions. Again, there's no good reason to make this insurance tax-free when people who buy insurance with their own money that they earned working a job that doesn't have health benefits get to deduct only a fraction of the cost.

The employer-provided health insurance exclusion really is a good deal. There's no good reason for employer-provided coverage to be preferred in this way, especially now that everyone can buy decent insurance on the private market.

Sure there is.  Economically encourage working class/middle class people who can work, to work for an employer.

It doesn't do that though. It encourages people to work for an employer that provides health insurance, and it encourages employers to buy health insurance for their employees. Plenty of employers don't do this. Why should their employees have higher taxes? If you want to encourage work, you should give everyone who works the same tax break on health insurance, whether their employer buys it for them or not. Better yet, have a lower tax rate for earned income than investment income. Much simpler that way.

I would posit that if we got rid of this special tax break on employer-provided health insurance, many employers would stop offering it. This would be a good thing. It would give more people a chance to select the best plan for them out of everything on the market, not just the one or two plans their employer chose. It would make it easier for employees to compare job offers between two companies, since there would be one less hard-to-quantify piece of the benefits package to try and make sense of. It would mean that losing a job (a pretty major life event on its own) would no longer require you to scramble to find a new health insurance plan. It would mean that more people would be exposed to the true cost of their health insurance, and maybe that would help bring down the rate of cost increases in the medical industry as more customers start to question prices for things.

[MoonShadow]

No, it's not perfectly neutral; both of us could easily find particular people who are more or less screwed over on either side.  That's not really the point.  The health care deduction rule is specifically designed to approximate the deduction advantages of employer sponsored care, without making it just as easy to quit working.

Challenge accepted. Lay out one scenario where someone would be better off getting paid $x and paying $y for their own health insurance policy than they would be if they got paid $(x-y) and had their employer pay $y for the same health insurance policy. I dare you.

Set up within your constraints, that looks impossible.  In part, because you require that my out of pocket costs and my employer's costs be fixed to the same number ($y) which is not how the real world works.  But also because, as I already noted, the system is geared to favor employees in this context.  I.E., the working class.

That said, let's see how close I can come.  I'm using the 7% AGI rule, btw.

I found out immediately that actual un-subsidized premium costs are not available to myself in my home state of Ky.  So I will use the average costs of a bronze plan according to https://www.healthpocket.com/individual-health-insurance/bronze-health-plans#.Vh3HZlJkZwI as a proxy for a low end, employer provided plan.

Rule #1, only out of pocket expenses above 7% are deductible, because premiums (paid either by employee or employer) are already deductible for someone.

Rule #2, premiums avoid FICA, but out of pocket expenses do not.

Rule #3, co-pay is 40%, deductible is $10,545 (family plan) & max-out-of-pocket is $12,749

Rule #4, our couple is 60 years old, with average monthly premiums of $627 each.  Costs of plan to be shared by employer 50/50.

Rule #5, our couple earns the national median household (2012) income of $50,500, so their 7% mark is $3,535.

Rule #6, ignore the standard deduction for simplicity.

Annual premium = $7524 for both the insured couple and the employer, $15,048 total.

Couple has an epicly bad year.  Say cancer treatments.  Racks up bills right at $31872.50

(40% of  $31872.50 is $12,749, is the deductible included in this?  I will assume yes)

As employees, this couple still paid $956.18 in FICA taxes on the out of pocket portion of these costs, as did the employer.  But managed to deduct $9,214  ($12,749 - $3,535) with a net deduction of $1382.10 (15% tax bracket).  This results in an overall reduction in taxes of $425.92 ($1382.10 income tax refund - $956.18 in FICA taxes paid in)

But what if our couple is FIREd, pre-Medicare? In this case, $24,262 is deductible ($12,749 total out-of-pocket expenses + $15,048 total annual premium - $3,535).  At the 15% bracket, this is a net income tax savings of $3639.30.  FIREd don't pay FICA anyway.  So from a tax perspective alone, the 7% of AGI threshold wins.  From the perspective that an employer (or taxpayers, in the case of ACA subsidiy eligibility) pays for half, working for insurance coverage wins.

But what if our couple just didn't pay the premiums, and paid those costs themselves; perhaps from a savings or retirement account.  They'd eat the $31872.50 themselves without premiums, resulting in a deduction of $28337.50  ($31872.50 - $3,535) with a net tax savings of $4250.63.

In either of the two bottom cases, the difference if the couple were self-employed would be very small, because if one is self employed, you can deduct your medical expenses "above the line" before calculating FICA, and regardless of whether or not you use the standard deduction.
(https://www.irs.gov/taxtopics/tc502.html)

I'm too tired to run those numbers at a 10% threshold, but I'm going to declare my own victory.  From a purely tax perspective, the medical expenses deduction is better than the employment exemption for a 60 year old median couple with health problems.  Of course, this is also super-simplified.  The FIREd & self-employed couples can claim more expenses as medical deductions on their taxes than is considered against the employed couple's annual out-of-pocket limit; such as local or regional travel expenses, over-the-counter drugs, etc.  It's also possible for either the plan to have a better negotiated price for cancer treatments, or for the FIREd couple to travel out of country for significantly reduced cash costs in a medical tourism region.

[MoonShadow]

I would posit that if we got rid of this special tax break on employer-provided health insurance, many employers would stop offering it. This would be a good thing

I don't disagree, seattlecyclone.  I'm just trying to point out that the employer tax deduction isn't as advantageous as it may appear.  Certainly it's not set up to work well, or be straight forward.  We are talking about the tax code, the ultimate in buggy legacy code.

[Big Boots Buddha]

Two weeks ago I was getting gasoline at one of those gas stations that has a pretty nice market inside.

So a woman in front of me throws a bunch of chips, soft drinks, and other junk on the counter and pays with EBT.

Then she proceeds to pull out a wad of cash, purchase ~$100 in lotto tickets, 2 dutchmasters blunts, and visine.

I pay for my gas and follow her out to her 2010+ Nissan Maxima..........wtf.

shhhhh, everyone here is above seeing things like that. =)

Being poor growing up, it seemed to me that the most of the people in my neighborhood were complete morons who drank, smoked packs of cigarettes a day, bought expensive items they couldn't afford (SUV with rims, but missing windows because they didn't have the money) all the while they couldn't afford clothes for the kids or enough food in the house.

I'm of the opinion these days, if you don't live in a poor neighborhood and see how people live, your opinion doesn't matter. It isn't based on anything except self-righteousness.

-edit

I should add, my house was also one of those places where cigarettes were smoked all day and night, but we had enough food and enough clothes from salvation army.

[AlwaysLearningToSave]

I was a little wary of posting my comment in response to saying that employer-provided tax-free health insurance is a subsidy.  But the language of "tax expenditure" is even worse - it implies that the government is spending money on things – but it's not.  The government doesn't spend money on health insurance - it has deliberately been set up not to tax that employer-provided benefit, because it is a public good.  Again, employer-provided health insurance was never intended to be taxed.  We can have a discussion about whether this is good or not, but the language of "tax expenditure" implies that it is the government's money to spend, and it's not.

The objection to the terminology is a bit bizarre.  It would be functionally equivalent if, instead of directly providing employees with employer-subsidized health insurance, employers provided employees with a lump sum of dollars that had to be used by the employee to purchase health insurance coverage, where that lump sum was tax deductible for the employee.  Surely the tax deduction for that compensation could be fairly described as a "government subsidy" or a "tax expenditure", so why not the non-taxed compensation provided in the form of direct insurance coverage?  Because that employer-provided benefit is a public good?  Isn't that equally true in both cases?  If an employer paid for the college tuition of its employees or its employees' children, and that benefit were not taxed, wouldn't we say the government/taxpayers are subsidizing the tuition?

I'll use whatever term you want to use.  Rather than "tax expenditure" we could use the phrase "the government choosing to forego income it would otherwise receive."  Beltim is right to point out that it is not money flowing out of the government's pocket.  Rather, it is money that never makes it into the government's pocket because the government chooses to not require us to place the money in its pocket in the first place.  But the fact the benefit is provided to the taxpayer on the income side of the government's ledger rather than the expense side of the ledger doesn't change the fact that it is a very real and valuable economic benefit provided by the government to the taxpayer.  [Edit to add: I only use the term "tax expenditure" because you object to calling it a "subsidy" and "tax expenditure" is the only other generally-recognized concise term I am aware of to express the concept.  If this economic benefit is not a "subsidy" and it is not a "tax expenditure," what is it?  I ask in all sincerity... Please tell me if a better term exists.]     

Remember, the starting point of the income tax system is that it taxes all income from whatever source derived.  Then some forms of income are excluded and some adjustments and deductions are allowed before calculating the tax.  The only reason the money "is not the government's to spend" is because the government has chosen not to impose a tax on that particular type of income for some policy reason.  The same concept applies to tax income the government chooses to forego because a taxpayer chose to make use of a tax deferred retirement account.  The same concept applies to any other exclusion, adjustment, or deduction that is not fundamentally necessary for the income tax system to work (like the business expense deduction).  Just because employer-provided health insurance premiums have not been taxed before does not mean that Congress couldn't reconsider its policy decision and amend Section 106 of the Internal Revenue Code, thereby subjecting some or all of an employee's income derived from an employer's contribution to health insurance to income tax.

[Bob W]

Two weeks ago I was getting gasoline at one of those gas stations that has a pretty nice market inside.

So a woman in front of me throws a bunch of chips, soft drinks, and other junk on the counter and pays with EBT.

Then she proceeds to pull out a wad of cash, purchase ~$100 in lotto tickets, 2 dutchmasters blunts, and visine.

I pay for my gas and follow her out to her 2010+ Nissan Maxima..........wtf.

shhhhh, everyone here is above seeing things like that. =)

Being poor growing up, it seemed to me that the most of the people in my neighborhood were complete morons who drank, smoked packs of cigarettes a day, bought expensive items they couldn't afford (SUV with rims, but missing windows because they didn't have the money) all the while they couldn't afford clothes for the kids or enough food in the house.

I'm of the opinion these days, if you don't live in a poor neighborhood and see how people live, your opinion doesn't matter. It isn't based on anything except self-righteousness.

-edit

I should add, my house was also one of those places where cigarettes were smoked all day and night, but we had enough food and enough clothes from salvation army.

Saddly I see this way too often.   Get calls all the time "electric turned off."  The calls typically come from $100 per month cell phone plans.   Not saying this is always the case,  just often enough.   I mean as mustachians we are pretty aware that the majority of people rich and poor piss their money away.  I just accept it as a fact and try not to judge.   I've tried to talk sense and modify behavior  "hey,  you should try my $10 per month or the free Obama phones"  to no avail.   Yep,  my kids wear used/handmedown clothes and beat up shoes as well.   I drive beaters.   The young ones never notice but in our case we are saving at least a part of the money.   

[brooklynguy]

I just accept it as a fact and try not to judge.

The entire premise of this thread is built on passing judgment on those who "game the system" (which could also fairly be described as "utilize the system").  We have benefit systems in place with clearly defined rules for taking advantage of them, and people in this thread have been accusing those who satisfy those rules and obtain the benefits to which they are legally entitled of acting unscrupulously.  If you think the system's rules are unfair, then criticize the system, not the people using the system according to its own rules.

I think it's outrageously unfair that our regressive tax system will allow my rich family to pay less taxes than a poor working stiff.  Accordingly, in the exercise of my voting rights in our democratic process, I attempt to change that system.  But, for as long as it remains in place, I'm going to minimize my tax liability to the fullest extent permitted by that system.  And my refusal to avoid voluntarily donating money to Uncle Sam is no less immoral than the decision of a qualified recipient of social service benefits to accept those benefits while making the titular purchases of cable, cigarettes, smartphones and vacations.

[Cathy]

I think it's outrageously unfair that our regressive tax system will allow my rich family to pay less taxes than a poor working stiff.

The future tense here probably makes your statement accurate in the sense that once you are retired you won't pay much income tax, but I strongly disagree that that is unfair, especially since you pay far more tax in the present. If your gross income is, say, $250,000 per year in wages, and you pay an implausibly low 20% total effective tax rate between all income taxes, that is still $50,000 in tax, which is probably around the median household income in the USA. In other words, in the present tense, you are paying far more in tax than the gross income of "a poor working stiff". That cannot seriously be called "regressive".

I agree with the policy described in all your posts that we should want to transform society so that it is better for everybody, even if that makes it worse for us. But I can't agree that raising taxes is the way to make society better for everybody. You seem to take for granted that people who think taxes are too high in the United States think that out of pure self-interest at the expense of others, but that is not true.

It's not a popular sentiment on this forum, but some people -- including me -- genuinely believe that society is made better for everybody through increased freedom and reduced government spending, rather than through raising taxes.

[iamlittlehedgehog]

I'm about to write something that is about to make me fairly unpopular.

I was on welfare and subsidized housing for almost 2 years and I don't have a single shred of guilt over it. If it wasn't for those things I would still be struggling with addiction and living in some squalid apartment barely holding down a job.

But that safety net was there for me, a US citizen when I decided I couldn't live as an addict anymore. I left the bad relationship and lived in a little studio paid for by the Florida Section 8 housing with a futon and a laptop. Between the food stamps, occasional groceries from my sister and pantries I had more than enough to eat, not very healthy but mac and cheese is still food.  I found a minimum wage retail job that I could bike to or take the bus if my schedule allowed it. I still smoked, but quitting one addiction was hard enough, I couldn't give up 2 at the same time (although now I've been an ex-smoker for years), but I paid for the carton once a week out of my meager paycheck or exchanged cartons for childcare, cleaning, menial jobs. Around this time I enrolled in the local community college and my classes were paid for by the Pell Grant. My parents bought me a smart phone for my 60 day sobriety celebration on the condition I continue classes and stay employed to pay my $95 phone bill.  My recovery program was funded by taxes through a public health clinic.

I'm not a sterling example of success, I backslide on my recovery more time than I can count. 2 steps forward 1 step back. But I had the support of that safety net to keep me going.

So many people suffer from addiction and mental illness - things that are not always evident to the naked eye. I will never begrudge someone from using welfare if they need it - and most do. Sometimes we need to help people get bootstraps before they can pull themselves up by them.

[brooklynguy]

That cannot seriously be called "regressive".

The taxes I would pay living off the income stream from my investments would be lower than the taxes payable by a wage earner with an equal income (in both absolute dollars and as a percentage of that income), even if I never previously paid a dime of taxes in my life.  I think that can be seriously called "regressive."

You seem to take for granted that people who think taxes are too high in the United States think that out of pure self-interest at the expense of others, but that is not true.

If I'm being honest, I wouldn't be surprised if I allowed my liberal bias to seep into my posts to give that impression, but where in particular did my posts take that idea for granted?

[nereo]

It's not a popular sentiment on this forum, but some people -- including me -- genuinely believe that society is made better for everybody through increased freedom and reduced government spending, rather than through raising taxes.

Just a simple quesiton for you Cathy - at what rate do you think we should be taxed?  Put another way, how much of our total income should go towards funding the government and how much should we be allowed to keep for ourselves?  To me it's useless just to say "less than now" or "as little as possible".  There has to be some floor and some ceiling.

I seen no real effort to ever really discuss this amount.  Instead I see countless arguments about how much the poor/wealthy "should" pay, usually in relative terms (though there are occasional excptions, like "9-9-9!!"). 

[Cathy]

If I'm being honest, I wouldn't be surprised if I allowed my liberal bias to seep into my posts to give that impression, but where in particular did my posts take that idea for granted?

What gave me that impression was this post:

The reason our (that is, mustachians') economic interests often align with right-wing conservative policies is because we are rich (or striving to become rich).  We, like the uberwealthy oligarchs promoting these policies, are fat cat business-owners living off our investments. ...

I may have misinterpreted the above, but the use of words "right-wing" and "fat cat" caused me to believe that you think these policies are being promoted out of self-interest rather than the support of freedom. "Fat cat" in particular sounded derogatory, but I see from searching the internet that some people use it in a neutral fashion, which may have been your intent.

As for "liberal bias", the word "liberal" is largely meaningless in the United States. The root of the word "liberal" is "libre", which means "freedom". Since I support freedom, I am a liberal. It is because of my liberalism that I am sceptical of claims that taxes are too low.

Just a simple quesiton for you Cathy - at what rate do you think we should be taxed?

There's obviously not a simple answer because it depends on what services we want the government to offer. The amount of work required to prepare a detailed analysis is grossly excessive in the context of this thread.

[brooklynguy]

What gave me that impression was this post:

The reason our (that is, mustachians') economic interests often align with right-wing conservative policies is because we are rich (or striving to become rich).  We, like the uberwealthy oligarchs promoting these policies, are fat cat business-owners living off our investments. ...

I may have misinterpreted the above, but the use of words "right-wing" and "fat cat" caused me to believe that you think these policies are being promoted out of self-interest rather than the support of freedom. "Fat cat" in particular sounded derogatory, but I see from searching the internet that some people use it in a neutral fashion, which may have been your intent.

That post was made in response to a thread started by a poster who sought feedback on how to reconcile his personal belief that a particular left-wing* presidential candidate would be best for our country with his belief that the policies supported by that candidate would adversely affect his own wallet.

I did intend for "fat cat" to have a negative (though tongue-in-cheek) connotation, and I do believe that many of the wealthy people who influence policy decisions in this country do so out of self-interest, but I do not believe that everyone who does not share my particular views on tax policies or politics (including yourself) hold their views out of self-interest rather than a genuine belief that those views reflect what's best for society, and I apologize if I gave the impression that I do.

*I'm using the term "left-wing" (instead of "liberal," even though it's probably subject to similar concerns to those you expressed above) out of convenience given that I'm not aware of any better substitute.

[AlwaysLearningToSave]

. . . my refusal to avoid voluntarily donating money to Uncle Sam is no less immoral than the decision of a qualified recipient of social service benefits to accept those benefits while making the titular purchases of cable, cigarettes, smartphones and vacations.

^^^ This.  To expect someone to not take the benefits to which they are legally entitled would be akin to someone else expecting me to not take advantage of tax benefits to which I am entitled because "I earn enough that I can afford to pay the tax."  Someone choosing not to earn more money so as to continue qualifying for aid is engaging in the same type of strategic behavior as someone who chooses to realize capital gains in low income years rather than high income years, such as choosing to start the Roth conversion pipeline in the first year of FIRE rather than the years leading up to FIRE. 

It is one thing to criticize the system because you disagree with the law's purpose or effects or to criticize those people who abuse the system by lying, cheating, or otherwise breaking the rules to benefit themselves.  To me, these are acceptable forms of social criticism.  But it is unfair to criticize the people who use the system in their best interests while remaining (at least arguably) within the letter of the law.  Before you do this, you'd better first make sure there is no log in your own eye. 

If someone is entitled to accept benefits and accepts them while also making poor financial decisions, criticize the poor financial decisions, not the receipt of benefits.  Then the behavior you are criticizing is no different than the consumerist behavior of the spendypants neighbors we all love to mock.  But also try to have a little compassion because there is a good chance they've not had the opportunity to learn better money management and they-- unlike our spendypants neighbors-- likely lack the financial means to make better financial choices, at least in the short term.

[nereo]

Just a simple quesiton for you Cathy - at what rate do you think we should be taxed?

There's obviously not a simple answer because it depends on what services we want the government to offer. The amount of work required to prepare a detailed analysis is grossly excessive in the context of this thread.

Not "we" - you.  I'm ask this because you brought up earlier how you think that society is made better for everybody through increased freedom and reduced government spending, rather than through raising taxes.  I can certainly understand that sentiment.  And if you want you can stick by the "it's not int eh scope of this thread" (even though this train of this thread long since jumped the tracks, ran down an embankment and is now plowing into just about everything) that's fine... but if you want to play along, what do you think we should be paying, and what level of government would make society better for [mostly] everybody?

[regulator]

Just a simple quesiton for you Cathy - at what rate do you think we should be taxed?

There's obviously not a simple answer because it depends on what services we want the government to offer. The amount of work required to prepare a detailed analysis is grossly excessive in the context of this thread.

Not "we" - you.  I'm ask this because you brought up earlier how you think that society is made better for everybody through increased freedom and reduced government spending, rather than through raising taxes.  I can certainly understand that sentiment.  And if you want you can stick by the "it's not int eh scope of this thread" (even though this train of this thread long since jumped the tracks, ran down an embankment and is now plowing into just about everything) that's fine... but if you want to play along, what do you think we should be paying, and what level of government would make society better for [mostly] everybody?

I'll play.  Minimal military, just enough to deploy at US borders if and when necessary.  Kill the Dept of Education and let the states do it.  Kill most of the rest of the random departments that do nothing but suck up tax dollars and make rules that are not necessary.  Kill Medicare and Medicaid and go to a single payer system for everyone.  Leave Social Security more or less intact, but make it sustainable (reduce benefit payments and/or increase retirement age).  Size target tax revenue sufficient to balance the budget and pass something similar to the Colorado TABOR act.

[Cathy]

if you want to play along, what do you think we should be paying...?

Maybe I wasn't clear, but what you're asking for here is a dissertation-level response, probably requiring hundreds of pages to answer with any level of precision. I decline to provide that in the context of this thread.

[beltim]

Kill Medicare and Medicaid and go to a single payer system for everyone. 

Just for discussion purposes, this would raise government spending by a lot.  If we assume that transformation to a single-payer system instantly gets our health expenditures down to the level of other universal health care systems in rich countries, that would get us down from 17.4% to about 12% of GDP.  Medicaid and Medicare spending combined are about 6.0% of GDP.  So this proposal alone would double government health care spending, to about 12% of GDP overall.

The Department of Education spends about $87 billion a year, a majority of which is disbursed in the form of college loans and is paid back (with interest!). 

Total defense spending is about 3.5% of GDP.

I'm curious what the "random departments that do nothing but suck up tax dollars and make rules that are not necessary" are.

[regulator]

I'm curious what the "random departments that do nothing but suck up tax dollars and make rules that are not necessary" are.

Pretty much all of them.

[nereo]

if you want to play along, what do you think we should be paying...?

Maybe I wasn't clear, but what you're asking for here is a dissertation-level response, probably requiring hundreds of pages to answer with any level of precision. I decline to provide that in the context of this thread.

I don't think you've been unclear at all - I also think this is a master non-response.  Here's where I am coming from:  I constantly hear this drum-beat about lowering taxes, and there are times when I find myself nodding along saying "yeah - this really could be great for everyone!"  But saying "lower" without giving any quantification is both unhelpful and borderline absurd. 

It seems to me there are two ways of approaching taxes and a governmental budget.  You could decide on the government you want and then fit taxes to fund that level of government.  This is the strategy we largely take, and it's a fine strategy.  Alternatively, you could decide what tax revenue we wanted, and then fund a government based on that amount of revenue.  This is closer to what a family does with its budget (at least the budgeting part).

So: dissertation-level detail or not, whenever I hear someone expounding the virtues of lowering taxes on everyone the obvious follow up question to me is "lower them to what level?".    Saying that you don't know or can't answer that calls into question why it shuold be done in the first place.  It's a politician's answer.  I'm not looking for to-the-dollar level precision,  but imagine if someone said "go lower" and I asked "how much lower?" and their response was "I won't tell you"... well there isn't much you can do with that.  At least Beltim Regulator gave some sort of an answer.

EDIT; corrected reference to regulator's post.

[beltim]

At least Beltim gave some sort of an answer.

You mean regulator?  I just put numbers to what regulator said.  Of course, regulator wanted to double government spending on health care while saying that "pretty much all of [the departments] do nothing but suck up tax dollars and make rules that are not necessary" so I'm not sure how serious to take that answer.

I don't think I've expressed an opinion on government spending in this thread.  I do think the vast majority of government spending is on programs that the vast majority of Americans want and support.

[nereo]

At least Beltim gave some sort of an answer.

You mean regulator?  I just put numbers to what regulator said.  Of course, regulator wanted to double government spending on health care while saying that "pretty much all of [the departments] do nothing but suck up tax dollars and make rules that are not necessary" so I'm not sure how serious to take that answer.

I don't think I've expressed an opinion on government spending in this thread.  I do think the vast majority of government spending is on programs that the vast majority of Americans want and support.

Right you are - I apologize for incorrectly referencing you.  Edited post to correct.

[regulator]

At least Beltim gave some sort of an answer.

You mean regulator?  I just put numbers to what regulator said.  Of course, regulator wanted to double government spending on health care while saying that "pretty much all of [the departments] do nothing but suck up tax dollars and make rules that are not necessary" so I'm not sure how serious to take that answer.

I don't think I've expressed an opinion on government spending in this thread.  I do think the vast majority of government spending is on programs that the vast majority of Americans want and support.

Meh, I did not give it much thought or flesh because it is a waste of time.  We live in a Roman imperium and nothing I think, say or do will change that.

[lostamonkey]

That cannot seriously be called "regressive".

The taxes I would pay living off the income stream from my investments would be lower than the taxes payable by a wage earner with an equal income (in both absolute dollars and as a percentage of that income), even if I never previously paid a dime of taxes in my life.  I think that can be seriously called "regressive."

You seem to take for granted that people who think taxes are too high in the United States think that out of pure self-interest at the expense of others, but that is not true.

If I'm being honest, I wouldn't be surprised if I allowed my liberal bias to seep into my posts to give that impression, but where in particular did my posts take that idea for granted?

The tax system is not regressive. Dividends are paid from post corporate tax income. Since you own a portion of the company, you pay (indirectly) a portion of the company's income taxes. By the time the income is actually paid to you as a dividend and taxed personally, you have paid a much higher tax rate than if you had earned in personally as employment income.

[brooklynguy]

The tax system is not regressive. Dividends are paid from post corporate tax income. Since you own a portion of the company, you pay (indirectly) a portion of the company's income taxes. By the time the income is actually paid to you as a dividend and taxed personally, you have paid a much higher tax rate than if you had earned in personally as employment income.

I would argue that you, as a shareholder, are not paying taxes when the corporation (a distinct legal entity) pays its taxes.  But even assuming for the sake of argument that taxation of both profits at the corporate level and dividends at the shareholder level amounts to unfair double taxation, the same is not true of taxation of capital gains, which also receives favorable treatment under our tax regime.

[nereo]

The tax system is not regressive. Dividends are paid from post corporate tax income. Since you own a portion of the company, you pay (indirectly) a portion of the company's income taxes. By the time the income is actually paid to you as a dividend and taxed personally, you have paid a much higher tax rate than if you had earned in personally as employment income.

I would argue that you, as a shareholder, are not paying taxes when the corporation (a distinct legal entity) pays its taxes.  But even assuming for the sake of argument that taxation of both profits at the corporate level and dividends at the shareholder level amounts to unfair double taxation, the same is not true of taxation of capital gains, which also receives favorable treatment under our tax regime.

I see this argument used occasionally on employee's, too, and how they include a corporation's share of taxes as 'taxes they pay'.  Basically if a company pays 30% in corporate taxes that's actually money that could/should/would be paid to employees and so (the claim goes) the employees are paying that tax.  The argument doesn't hold water.  The company could pay larger dividends to shareholders (as indicated above), or higher wages to employees, to build a larger factory or to buy large ice statues of David and drink vodka out of his penis.

[beltim]

This shows the progressiveness of the Federal tax code:

[brooklynguy]

This shows the progressiveness of the Federal tax code:

That shows the progressiveness of the average tax rates actually paid, which, yes, is good evidence of the overall progressiveness of the U.S. federal income tax regime.

But it does not contradict the more limited point I was trying to make, which is the regressiveness of the rules that result in a high-income taxpayer whose income is derived primarily from investments paying a lower effective tax rate than a lower-income taxpayer whose income is derived primarily from wages (as reflected in the widely-cited, self-observed fact that Buffet pays a lower tax rate than his secretary).

[beltim]

This shows the progressiveness of the Federal tax code:

That shows the progressiveness of the average tax rates actually paid, which, yes, is good evidence of the overall progressiveness of the U.S. federal income tax regime.

But it does not contradict the more limited point I was trying to make, which is the regressiveness of the rules that result in a high-income taxpayer whose income is derived primarily from investments paying a lower effective tax rate than a lower-income taxpayer whose income is derived primarily from wages (as reflected in the widely-cited, self-observed fact that Buffet pays a lower tax rate than his secretary).

Ah, sorry, I didn't realize the limited part of that.  Yes, that can be considered regressive.

[MoonShadow]

This shows the progressiveness of the Federal tax code:

Huh.  So the 9-9-9 plan would have actually worked?

[nereo]

This shows the progressiveness of the Federal tax code:

Huh.  So the 9-9-9 plan would have actually worked?

worked to do ...what, exactly? Make the tax code less progressive?

[MoonShadow]

(as reflected in the widely-cited, self-observed fact that Buffet pays a lower tax rate than his secretary).

Yes, a lower overall rate.  Not a lower absolute amount.  And I think this matters as well.  The argument can be made that very wealthy people do pay a lower percentage of either their total income or their net worth than middle or lower class earners.  I, personally, averaged about 7.5% overall last year, counting ALL income, payroll & capital gains taxes that I could identify. (not property, sales or service taxes)  That does not mean that, per capita, they actually pay less.  Quite the opposite is true.  If the definition of a 'progressive tax system' is that the wealthy pay more towards government revenues, individually, than the middle class; and the middle class pay more than the lower class, then the US federal (and probably every state) is quite progressive.  For example, even with a low overall average of 7.5%; that still means that I paid about $9K last year, even though I'm actually exempt from federal income taxes.  So while my tax bracket is 0%, I still paid more than a typical middle class couple making $40K.

[MoonShadow]

This shows the progressiveness of the Federal tax code:

Huh.  So the 9-9-9 plan would have actually worked?

worked to do ...what, exactly? Make the tax code less progressive?

To replicate the current income tax revenues, while simplifying the tax code.  It would have made the tax code less progressive as well, but that really wasn't touted as one of it's official goals.

[nereo]

(as reflected in the widely-cited, self-observed fact that Buffet pays a lower tax rate than his secretary).

Yes, a lower overall rate.  Not a lower absolute amount.  And I think this matters as well.  The argument can be made that very wealthy people do pay a lower percentage of either their total income or their net worth than middle or lower class earners.  I, personally, averaged about 7.5% overall last year, counting ALL income, payroll & capital gains taxes that I could identify. (not property, sales or service taxes)  That does not mean that, per capita, they actually pay less.  Quite the opposite is true.  If the definition of a 'progressive tax system' is that the wealthy pay more towards government revenues, individually, than the middle class; and the middle class pay more than the lower class, then the US federal (and probably every state) is quite progressive.  For example, even with a low overall average of 7.5%; that still means that I paid about $9K last year, even though I'm actually exempt from federal income taxes.  So while my tax bracket is 0%, I still paid more than a typical middle class couple making $40K.

Here is how I understand the term "progressive tax" - and judging on the wiki definition how most people understand it (emphasis mine):
A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term "progressive" refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the person's marginal tax rate

https://en.wikipedia.org/wiki/Progressive_tax

whether you believe that we should have a progressive tax code is a philisophical argument.  But changing the definition to fit an argument isn't helpful.

[beltim]

This shows the progressiveness of the Federal tax code:

Huh.  So the 9-9-9 plan would have actually worked?

worked to do ...what, exactly? Make the tax code less progressive?

To replicate the current income tax revenues, while simplifying the tax code.  It would have made the tax code less progressive as well, but that really wasn't touted as one of it's official goals.

That graph gives no information in support or opposed to that.  It has nothing to do with the 9-9-9 plan.

[going2ER]

I have also worked for a Social Services Agency, ours is run provincially. Most people were simply given money, it was their choice how to spend it, rent, groceries, drugs or beer, no food stamps or equivalent. For a few people rent was paid direct to landlords as they had a history of not being able to keep accomodations. However, once you get your money, that is it for the month. Most of my experience was that the majority of my clients lived frugally and tried to pay their bills before indulging in anything extra, but you always have a few that have messed up priorities.

There is now a movement in the province, which I forget what it is called. But, it is to increase Social Assistance Rates. I am fine with this for those that are disabled, however, many doctors will put disabled on the form just so the recieptiant  can get a higher rate, even if it is something that really wouldn't be considered something that would impair them from all types of work. For those that are able bodied/minded I believe there should be a limit on the time they can recieve assistance for. It is a temporary support in times of need, not a lifestyle. There is support for them to obtain education and assistance with job searching. However, with raising the rates of Social Assistance we are then providing more for someone on assistance than those that are out working minimum wage jobs. Those on Social Assistance already get health and dental care which those working minimum wage jobs do not recieve.

So for a standard living allowance how would we determine how much it should be? Should those in large cities with more expensive housing get more? Rural areas less? If you're disabled more? able bodied and not working less? Would it be more than minimum wage? or how much less than minimum wage should it be?

[brooklynguy]

But changing the definition to fit an argument isn't helpful.

It would be quite curious to consider a tax system under which billion-dollar income-earners pay 1% while five-figure income-earners pay 100% "progressive," wouldn't it?

[MoonShadow]

This shows the progressiveness of the Federal tax code:

Huh.  So the 9-9-9 plan would have actually worked?

worked to do ...what, exactly? Make the tax code less progressive?

To replicate the current income tax revenues, while simplifying the tax code.  It would have made the tax code less progressive as well, but that really wasn't touted as one of it's official goals.

That graph gives no information in support or opposed to that.  It has nothing to do with the 9-9-9 plan.

Sure it does, the average graph bar on the far right.  It shows that the average taxpayer ends up paying roughly 9% in income taxes.

[MoonShadow]

I have also worked for a Social Services Agency, ours is run provincially. Most people were simply given money, it was their choice how to spend it, rent, groceries, drugs or beer, no food stamps or equivalent. For a few people rent was paid direct to landlords as they had a history of not being able to keep accomodations. However, once you get your money, that is it for the month. Most of my experience was that the majority of my clients lived frugally and tried to pay their bills before indulging in anything extra, but you always have a few that have messed up priorities.

This is the best way to do it, in my opinion.  This encourages beneficiaries to learn to budget for the month, or earn more income in some other way; for if they fail to do either properly, the end of the month becomes uncomfortable.  Unfortunately, this also affects the children of a household, who have no control over the finances.

[beltim]

This shows the progressiveness of the Federal tax code:

Huh.  So the 9-9-9 plan would have actually worked?

worked to do ...what, exactly? Make the tax code less progressive?

To replicate the current income tax revenues, while simplifying the tax code.  It would have made the tax code less progressive as well, but that really wasn't touted as one of it's official goals.

That graph gives no information in support or opposed to that.  It has nothing to do with the 9-9-9 plan.

Sure it does, the average graph bar on the far right.  It shows that the average taxpayer ends up paying roughly 9% in income taxes.

1) No it doesn't.  It shows 16%, at least if you compare it to the 9-9-9 plan, which has no payroll taxes.
2) It doesn't address other sources of tax revenue.
3) It doesn't the sales and business taxes - the other two 9's.
4) Even if you don't accept point #1, consider:
You're saying that a + b + c = d + e + f because a > d.  It doesn't matter if a <, >, or = d, you still don't have enough information to say anything about the totals.

[nereo]

Sure it does, the average graph bar on the far right.  It shows that the average taxpayer ends up paying roughly 9% in income taxes.

I'm not sure how "all" could possibly be the true median or mean here- according to the graph 95% of taxpayers are currently paying 9% income tax or less.  The bottom 40% isn't paying any.   Seems improbable that the top 5% would balance out the bottom 5% to average 9% - particularly when 95-99% is still hovering ~14%.  Could be wrong though...

I'm all for simplifying the tax code and eliminating the vast majority of deductions and credits.  But I'm not ready to support a single-tiered tax system.

[beltim]

Sure it does, the average graph bar on the far right.  It shows that the average taxpayer ends up paying roughly 9% in income taxes.

I'm not sure how "all" could possibly be the true median or mean here- according to the graph 95% of taxpayers are currently paying 9% income tax or less.  The bottom 40% isn't paying any.   Seems improbable that the top 5% would balance out the bottom 5% to average 9% - particularly when 95-99% is still hovering ~14%.  Could be wrong though...

It is the true mean.  See here:

[nereo]

Sure it does, the average graph bar on the far right.  It shows that the average taxpayer ends up paying roughly 9% in income taxes.

I'm not sure how "all" could possibly be the true median or mean here- according to the graph 95% of taxpayers are currently paying 9% income tax or less.  The bottom 40% isn't paying any.   Seems improbable that the top 5% would balance out the bottom 5% to average 9% - particularly when 95-99% is still hovering ~14%.  Could be wrong though...

It is the true mean.  See here:

well I'll be darned.  There's some people out there with some redonklous wealth.

[Kaspian]

Most all my clients have cable, big screen TVs,   smart phones,  either take vacations or fun outings, and many of them smoke cigarettes.

The rub is that they also have food stamps,  Medicaid,  subsidized housing etc..

Seems to be the way she blows, doesn't it?  I pass the local soup kitchen/shelter every day while they line up around 5PM drinking takeout coffee and chain smoking cigarettes.  Not much I can do about it.  I'm prepared to take rotten vegetables at me for saying this, but the majority of the people I see there didn't get to that point by being monetary Einsteins.  ...And yeah, most of them at the soup kitchen have nicer phones than I do.

[FLA]

I'm about to write something that is about to make me fairly unpopular.

So many people suffer from addiction and mental illness - things that are not always evident to the naked eye. I will never begrudge someone from using welfare if they need it - and most do. Sometimes we need to help people get bootstraps before they can pull themselves up by them.

You turned your life around with help and you want the same for others. If that makes what you said unpopular, who cares? You did it and are proof that it works. It's easy to judge from the catbird seat.

[Leisured]

Alright, so a couple with a $1.2 million net worth can expect to get about $48,000 per year from their investments.  That's roughly comparable to their Social Security benefits if they each had an average salary of $45k or so.  So you think that is sufficient to completely eliminate their Social Security benefit?

I don't think it's fair to apply a 50% reduction in retirement benefits for people who have that income level.

No, I am not suggesting that we completely eliminate their SS benefit.  It's certainly easy to see why SS is considered a "third rail" of political discussions.  As I see it, there is an unintended flaw with how SS payments are made and it's largely the result of our demographics.  In short, those that need the program the least are the ones who are most likely to receive the most over the course of their lifetime.  If we were only speaking in absolute dollars (as beltim suggestion) that would be one thing - after all high wage earners pay more into the system.  But largely due to vastly different life expectancies at age 65/67, the wealthiest stand to receive more than they put in, while the less financially successful (and those that rely on SS the most for retirement income) will tend to die sooner and collect fewer benefits.
As for the hypothetical couple with $1.2MM in assets - yes I believe they should get benefits.  But (and I realize this might be a hugely unpopular opinion here) I believe benefits should gradually be scaled down as income/assets go up. Where that point is I'm not certain, but I'd say certainly anyone with $100MM doesn't need nor should they receive SS payouts.  Perhaps we start with 'full benefits' as high as $1.2MM and for each $100k over the payout is reduced by 2-3%. Under such a scenario even an individual with $3MM in assets would get ≥50% of their benefits.  If they experience an economic catastrohpie than SS will again provide full benefits.  How best to implement it I don't know - right now this is largely a thought-exercise.  For certain we might want to exclude the person's primary residence from the equation.  The underlying goal is to balance needs and longevity.  I doubt it will ever happen though.

 Perhaps we start with 'full benefits' as high as $1.2MM and for each $100k over the payout is reduced by 2-3%. Under such a scenario even an individual with $3MM in assets would get ≥50% of their benefits.  If they experience an economic catastrohpie than SS will again provide full benefits.  How best to implement it I don't know - right now this is largely a thought-exercise.  For certain we might want to exclude the person's primary residence from the equation.  The underlying goal is to balance needs and longevity.  I doubt it will ever happen though.

This already happens in Australia. I am what is known as a self funded retiree, and I get about a quarter of what a non self funded retiree gets per fortnight for the Government aged pension. I accept that in Australia, the Government aged pension scheme is means tested.

[RangerOne]

Most all my clients have cable, big screen TVs,   smart phones,  either take vacations or fun outings, and many of them smoke cigarettes.

The rub is that they also have food stamps,  Medicaid,  subsidized housing etc..

Seems to be the way she blows, doesn't it?  I pass the local soup kitchen/shelter every day while they line up around 5PM drinking takeout coffee and chain smoking cigarettes.  Not much I can do about it.  I'm prepared to take rotten vegetables at me for saying this, but the majority of the people I see there didn't get to that point by being monetary Einsteins.  ...And yeah, most of them at the soup kitchen have nicer phones than I do.

 I suppose they are helping to prop up corporate profits for companies that sell toys and drugs... Society trains people at all income levels to be bad with money.

At least they are free to be consumer drones working dead end jobs with just enough help to where if they ever wake up they have a chance to improve their status.

[FLA]

I suggest reading up on the eligibility to receive SNAP and the work requirements.  It is quite well run with a 3% fraud rate.  I find that pretty impressive. Funny how everyone thinks they know, judging by appearance, only those in the 3% category.