Tax Realities

[dgs49]

I read yesterday that a recently-released study by the CBO concluded that 51% of American households paid NO FEDERAL INCOME TAX in 2009. Indeed, many of these households paid “negative” taxes in the form of the EITC, and there is no reason to believe that 2010 and 2011 will be any different.

Is it even necessary to point out that this is an absurd and potentially disastrous situation? More than half of the voting population has no vested interest in the fiscal health of the U.S., other than to keep the money and benefits rolling in and to demand (through their votes) that the U.S. Gub’mint continue to be financed by Other Peoples’ Money.

The other half of the population – the ones paying ALL of the federal income taxes – is not only burdened more and more with the accumulated bills for our profligate central government, but the top ten percent of wage earners are paying an ever increasing portion of the total. And the AMT snags more and more middle class taxpayers every year.

Democrat politicians, who have constructed this situation in an attempt to perpetuate their grip on Government, portray any attempts to rectify our absurd current tax scheme as, “seeking to balance the budget on the backs of the poor and middle class,” and “tax cuts for the Rich.”

Of course, truth is never the objective of the Democrat political narrative. It is noteworthy, for example, that Democrats always speak of the taxes being paid by “the Rich,” tax cuts for “The Rich,” and so forth. And yet there is nothing in the Internal Revenue Code that says anything about being rich or wealthy. We are taxed on our INCOME, not our wealth. We have many people with high incomes who are decidedly not “rich,” and many people with modest taxable incomes who are very rich. Wealth has absolutely no bearing on what you pay in Federal income taxes. In fact, our wealthiest demographic is our retired population, and NOBODY – least of all Democrats – is suggesting that we start taxing wealth, for fear that it will alienate a reliable source of campaign contributions.

And Democrats always talk about taxes paid by The Rich (i.e., high earners) in terms of percentages and never in terms of dollars. It paints one picture to say that a “Banker” with a four million dollar income is “only” paying 25% of his total income in Federal Income Taxes, but quite another picture to describe him as paying more than a million dollars a year in Federal income taxes. Indeed, a casual listener might actually sympathize with someone paying a million a year to the feds, and probably another couple hundred thousand to state and local governments for basically less benefit than what is realized by your average welfare queen (thankfully a dying breed – no play on words intended).

The Dem’s position on corporate income taxes is equally devious and obfuscatory. The Tax Code has intentionally been developed to induce corporations to do certain things and refrain from others, using tax incentives to bend the corporations to do Congress’ will. Then when the corporations take advantage of those tax incentives and inducements – behaving as Congress wants them to – Democrat politicians excoriate the enterprises for not “paying their fair share” of Federal taxes.

Of course, the corporate income tax itself is utterly stupid and counterproductive. A corporation is nothing but a fictitious person created by the state to serve as (among other things) a conduit for business revenues and profits to flow from the business to its owners (where it is taxed as ordinary income). Indeed, Subchapter S recognizes the fictitious nature of corporations, taxing only the owners. As a side benefit, it allows Democrat politicians to say – accurately but essentially falsely – that “90% of American corporations PAID NO FEDERAL INCOME TAXES last year!” Of course they didn’t; they filed under Subchapter S. Their owners paid the taxes directly.

Again, truth is not the objective.

It has been written recently that neither side wants to resolve the coming Federal fiscal calamity at this time. The Democrats don’t want to alienate their base by cutting programs, the Republicans don’t want to alienate their base by raising taxes, and the Republicans are willing to allow a bad situation to fester so they can use it against the Democrats (particularly in the WH and the Senate) in the 2012 elections.

My own view is that EVERYONE ought to be paying Federal taxes. I recognize that about half of the people in that 51% paying “no” taxes are actually paying SS and Medicare taxes, which counts for something, but “freeloaders” are a bad thing in any organization. Everyone has to have a vested interest in the outcome, even if it comes about through some sort of federal sales tax or value added tax. Alternatively, voter registration cards should be distributed by the IRS, and people who don’t pay anything should not get one. (Maybe I would “grandfather” grandfathers).

[Crackpot]

The EITC is a progam designed to give people an incentive to work for a living instead of sucking off welfare and as such it costs taxayers less than not having it.

[rubato]

Milton Friedman, among others, was a fervent supporter of the EITC.

And 51% paid no FEDERAL INCOME TAX they paid substantial taxes in many other forms: State income taxes, excise taxes, property taxes, SS and Medicare taxes &c. And the fact that they paid no federal income tax is significantly due to the fact that incomes have gone down for the bottom 80% of households since the Repuglican takeover in yr 2000 and the resulting financial catastrophe.

http://www.cbo.gov/ftpdocs/88xx/doc8885 ... ates.shtml



yrs,
rubato

[Sue U]

The OP has it exactly backwards. When you're talking about an income tax, why wouldn't you want the fewest number of people possible paying the tax, with those who do pay being those most able to afford it? Or is "tax the poor" seriously your approach to government funding? Because ... the poor of course can have no interest in the fiscal health of their government? On what do you base such a preposterous assertion? Oh that's right, only white land-owning men have any right to participate in government, because they're the only ones with any true stake in it.

[Crackpot]

There is a belief amongst many that everyone should at least pay some tax. Something in concept I Too believe in. Then again I'm not one to get all worked up about stories like this because I know our system is set up to credit you for other taxes paid.

[rubato]

Everyone, within their means, has an obligation to contribute to the support of society and as a matter of personal dignity is benefitted from doing so. This is already true in that everyone pays taxes.


Everyone, as a matter of personal self-respect, has an obligation to provide for their own support and not be a burden on others. Very few people fail to attempt to meet this standard.


Everyone, as a matter of honesty, fairness, with an understanding of the practical effects of rewards on the behavior of humans has an obligation to create a legal system which ensures that all working people are decently provided for, their children are educated, and their health care and safety are reasonably assured.


And this last part is where we fail in our obligations. Until WE meet this last one using the resources of one of the richest societies in all history, it is inappropriate to whine about #s 1 and 2.



yrs,
rubato

[dgs49]

What absolute rubbish.

The "feelings" expressed above are, I suppose, manifestations of what has come to be called our "Living Constitution."

The Government that was codified in 1789 by the United States Constitution provides for a central government of limited powers (outlined in Article I, Section 8). Those who are literate and actually read the Constitution will note that those powers (in other words, the functions of the Federal Government) are essentially ALL for the common benefit. For example, to regulate commerce with other countries and amongst the states, to print money, to establish a system of post offices and post roads, to issue patents and trademarks, and to fund the military services.

NONE of these could be construed by even the most devious lawyer in the land to allow the Federal Government to take money from one citizen (or group of citizens) and give it to another, either in cash or in kind, for any reason.

Furthermore, the original Constitution prohibits taxes on incomes, a philosophy that was modified by Constituitonal Amendment only in 1913.

But the fact that the Constitution allows taxes on incomes does NOT imply that those taxes are to be collected for any reason OTHER THAN to fund the legitimate operations and activities of the Federal Government. The idea - expressed above - that taxes ought to be assessed based on what one can "afford," or that the payers of Federal income taxes have some sort of an obligation to pay money to the government for the purpose of alleviating the poverty, disease, or other real or imagined suffering of others, is total, made-up, un-American bullshit.

It may well be the operative principle in other countries that are not constrained by a written constitution - and those who believe in those principles are welcome to go there - but in THIS country, they are pure, utter nonsense.

[Grim Reaper]

And Democrats always talk about taxes paid by The Rich (i.e., high earners) in terms of percentages and never in terms of dollars.

That's because when you look at the dollars paid, you're not looking at how much they get to keep. A guy who spends a million in taxes still has nearly 3 million dollars left over. I'm not crying myself to sleep over that guy.

The idea - expressed above - that taxes ought to be assessed based on what one can "afford," or that the payers of Federal income taxes have some sort of an obligation to pay money to the government for the purpose of alleviating the poverty, disease, or other real or imagined suffering of others, is total, made-up, un-American bullshit.

Right. Lets tax the poor into the ground, get those nickels and dimes from them so the rich can pay a lot less and hold on to even more of their money than ever before.

[quaddriver]

why wouldn't you want the fewest number of people possible paying the tax, with those who do pay being those most able to afford it?

Ans: Still a huge defecit

Ill take: "what do you call a budget with no defense spending and people making over $200K a year taxed at 100%
' for $200 Alex

<weird noise>

and its the daily double!

seriously, not to be nitpicking and not directing this at you Sue, but if we are going to discuss taxes, rates, quintiles etc isnt it best to at least get a rudimentary understanding of the topic? (given that no one reading this is involved or connected to US tax policy, preparation or review in any remote way save 1?)

The OP, sorry to say, pretty much has it nailed spot on. Id question the 51% number a little, but the points remain, per bracket the more you make, the more we take, the less you make the more you get back and corporations should not be taxed at all - thats economic suicide, but the USA is REAL GOOD at economic suicide when it comes to corporations. IIRC in antoher thread, another poster posited the idea that lowering a corporate tax rate does not aid in creating jobs. I fear that they believe that raising a corporate tax rate WOULD aid in creating jobs. But such is the quality of the contributions on topics such as this.

[dales]

SOAK THE RICH!

(didn't Huey Long run on that platform?)

[quaddriver]

SOAK THE RICH!

(didn't Huey Long run on that platform?)

but he was talking water balloon fights

[dgs49]

Corporations should be in the business of making money, period. The money they make will be (a) paid out to employees in salary and bonuses WHEN IT WILL BE TAXED, (b) paid out to its owners as dividends WHEN IT WILL BE TAXED, (c) paid as interest to its creditors WHEN IT WILL BE TAXED, or (d) plowed back into the business, which generates additional revenue and tax revenue.

Causing corporations to modify their activities to accommodate the taxing authorities is just stupid. Whether it is accelerated depreciation or tax credits for one thing or another, they are misguided and in the long run counterproductive.

The principles of Subchapter S should be universalized. No corporate taxes.

[Big RR]

OK, but why not go one step further; why do we need corporations? Just do a way with corporations altogether and treat the shareholders as partners. It would be a lot easier and would do away with using corporate money to influence political policies and elections.