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Thread: The times they are a changing... Bob Dylan

  1. #1
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    Default The times they are a changing... Bob Dylan

    April 15th Tax day.
    A trillion dollar spending spree....
    Bailouts on the unbailoutable...

    Unemployment, foreclosures and a spade of new taxes...
    The trickle tax down affect is upon us. When everything goes broke the pressure is downward to collect and make up the difference.

    This is the pinch that we all feel and the country feels it too.

    Yahoo reports Thousands rally with 'tea parties' on tax day
    Stuff not seen since the 1960's

    http://news.yahoo.com/s/ap/20090415/...x_day_protests

    I wonder what is going to come back at me now?

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    From the 4/15 (6:56pm) post by Salon.com's Joan Walsh (emphasis added):

    Protests are as American as apple pie, and that includes the Glenn Beck, Fox News and CNBC backed "Tax Day Tea Parties" on Wednesday. ...

    Just in time for this day of massive protest, Gallup released a poll showing that 61 percent of Americans believe the income taxes they paid this year are "fair," and more Americans now say the amount they pay is "just right" than "too high" -- one of the most pro-tax outcomes since Gallup began polling on this question in 1956. Great timing, Tea Partiers! Way to have your fingers on the nation's pulse.

    To be clear, Alan, I'm in no way disputing that we're in a bad way economically.

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    Default Gallup polls can be a little misleading

    According to an article titled "Americans' Tax Burden Near Historic Low", 43% of households in the U.S. will pay ZERO federal income tax for 2008 - I wonder how many of these people are included in the 61% of people Gallup surveyed.

    See quote below:

    "According to the most recent IRS statistics, about 45 million households -- a third of all filers -- owed no federal income tax after taking their credits and deductions in 2006. This year, with the profusion of new credits in the stimulus package, about 65 million households -- or 43 percent of all filers -- are likely to owe no income taxes, according to a new analysis by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution."

    I could be wrong, but I'm guessing the people that are protesting taxes are the ones who are actually paying them.

  4. #4
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    Default the rest of the story...

    Quote Originally Posted by David Wells View Post
    According to an article titled "Americans' Tax Burden Near Historic Low", 43% of households in the U.S. will pay ZERO federal income tax for 2008 - I wonder how many of these people are included in the 61% of people Gallup surveyed.
    David, to be completely fair, you should provide a link to the whole article. To balance things out, you might note, for example, this quote from the same article:

    Quote Originally Posted by Washington Post
    "Of course, even filers who have no income tax liability still pay federal taxes, due in large part to the payroll tax, which funds federal insurance programs like Social Security. According to the CBO, taxpayers shelled out an average of 7.5 percent of their earnings in payroll taxes in 2006."
    And these same people are paying real estate taxes, excise taxes, sales taxes, meals taxes, etc. which eat a disproportionate part of their income relative to the higher income taxpayers.

    Here's a link to the full article: http://www.washingtonpost.com/wp-dyn...041503371.html

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    Default Washington Post Article

    Hi Kim

    I tried to post a response, but I don't think it registred.

    Sorry about not posting a link to the article - rooke mistake.

    I wasn't intentionally trying to take the article out of context - certainly people who don't pay federal income tax still pay lots of other taxes.

    My point was just that the gallup poll referenced earlier is misleading, because it makes no allowance for the large number of participants that are not not paying any federal income tax.

    My hypothesis is that people with no federal income tax burden are likely to be more satisfied with the tax structure than people who pay substantial federal income tax.

    I would be interested in tax satisfaction studies that break out the participants based on their current tax burdens.

    Regards,
    Dave

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    Dave,

    I agree that breakout by tax burden would be interesting.

    I'll add my vote. I definitely paid federal taxes, and I think the amount I paid was just about right. Would be nice to pay less, but I think it was fair.

    Kim

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    Gallup (or any pollster) would have to work a LOT harder to get a representative sample that includes the non-taxpayers. They are harder simply harder to reach. That doesn't mean that Gallup didn't reach them, of course.

    Kim, I'm with you--I don't feel overtaxed. And, it's not as if I'm in a financial position that makes paying taxes painless. In fact, I'd pay more if I knew that it was being invested in long term needs.

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    Well, I guess I might as well fess up.

    I think the current tax structure is unfair, and is about to get even more so.

    Running tally of federal income tax payer poll: 66 2/3% say fair, 33 1/3% say unfair...

    oh well!

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    David, which way is it unfair? I'm not trying to be argumentative, I'm truly interested.

    Flat tax is interesting, but not particularly progressive. Progressive is my style, but too progressive and you've got problems (e.g., 90% tax rate on the wealthy is counterproductive).

    Two beefs, in no particular order.

    • Taxes are too complicated. I can do most of mine with no trouble, but mine are reasonably simple. Then I get to parts where I have no idea what the words mean. I just figure that H&R Tax Cut knows more than I do, and go with their defaults.

    • It's a huge problem that we tax based on income at the federal and state levels, then tax at the local level based on real estate value. That's brutal for people on fixed incomes who've been in their homes for a long time.

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    Jeff,

    The short answer is I don't think progressive taxes are fair.

    What would be fair to me is if everyone paid the same percentage of their income.

    I also do not think inheritance taxes are fair - the money someone accumulates over their lifetime has already been taxed - usually more than once.

    Regarding real estate taxes - they don't seem to be a very equitable way to go about funding schools. It would seem more fair to me to have school funding awarded on a per capita basis out of a general educational budget at the state level, which gets funded by the state income tax.

  11. #11
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    Default The purpose of taxes

    Jeff/Kim,

    As a follow-up to my post yesterday, here's a multiple choice question for you:

    What are the purposes of taxes?

    a) to fund the operating expenses of the government
    b) to redistribute wealth
    c) to modify behavior
    d) some combination of the above
    e) something else entirely?

    My answer is a) to fund the operating expenses of the government.

    I believe every citizen has an equal responsibility to fund the operations of the government - No more, no less, which is why I do not believe in progressive taxation.

    Besides a philosophical objection to progressive taxation, I have a more practical concern; I believe it is much easier for people to vote for policies and programs that spend other people's money rather than their own. If everyone bears an equal proportion of the "pain", my contention is that we will get a more fiscally responsible result over time.

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    David, interesting set of questions. Setting aside semantics about the meaning of "purpose," I'll say that both the current and desired answers are (D). But, there may be other purposes that didn't occur to you or me.

    To be sure, taxes fund government. And to be sure, we use them to modify behavior: alcohol, tobacco, and gasoline taxes being just a few obvious examples. With respect to modifying behavior, it strikes me as fitting when the collected taxes are spent in a fashion encouraging the desired behavior. For instance, gasoline taxes might be used to fund the construction of public transportation.

    Modifying behavior isn't about me wanting to control others, by the way. It's about wanting a lower net economic drag. Destructive behavior, whether active or negligent, always ends up costing way more than early intervention.

    As for redistributing wealth, I think that society works best when the gaps between the haves and the have-nots don't get too large. Overly large gaps seem destabilizing. Please don't get me wrong--those gaps are inevitable in capitalism, and I'm not arguing that we should come remotely close to eliminating them.

    I think that I have a better way of life when I don't have to walk down a city street accosted by people who are homeless. And I'm confident that a professional can do better work routing my charity (taxes) to help that homeless person build life skills and get a job than I can in handing over some pocket change or even bills. My life is diminished when others suffer--that's the way I'm wired. I'm not saying that we have to give them the sky--I'm just making the case for a floor.

    You argue for a flat tax. I don't know the percentage that is overall tax neutral, but let's say that it's 15%. Minimum wage is about $15k/year, so that person would pay about $2,250 in taxes. That seems like a lot for a salary where a huge chunk will be also be consumed by housing, utilities, food, and other basics. Compare to someone, for example, in the financial world making $10M per year. $1.5M doesn't sound like all that much given that there's $8.5M left over.

    "Amount left over" is an interesting way to thing about taxes. The first example above leaves $12.8k, the second leaves $8,500k. In both cases, I'm imagining the people working hard--to the maximum of their ability--for what they bring home. One person was dealt a nice hand (the ability to earn), the other less so.

    Let's say we drop the rich person's "left over" to $8M. The extra $500k in taxes could cover the taxes for 222 people at minimum wage. In this new example, we have a somewhat progressive tax structure where those at minimum wage pay 0% and those in the $10M bracket pay 20%. Are we "redistributing wealth?" Of course. Are we demotivating the pursuit of wealth? I don't think so.

    As to your point about an equal tax proportion leading to fiscal responsibility, is there any evidence to support that this is so? As it is, I think that people demonstrably vote AGAINST their own self interest, not for it.

    Whatever you think of the estate tax, it affects very few people, yet many people vote against it. Are they voting against it on principle, or because they imagine getting to a point in life where it will apply? I don't know.

    The whole "Joe the Plumber" meme in the last election was a perfect example. He was voting to avoid taxes he wasn't in a position to be paying. Now, maybe he does make a go of the plumbing business he was imagining (I would think that he would first want to get his plumbing license, though!), or maybe he wouldn't. But in terms of his current wallet, he was voting to lighten it more than Obama was.

    Presumably, there's an optimum tax code somewhere (optimum as measured by resulting health of the entire economy), and I'm betting its progressive. Maybe that's the tax code under Clinton, maybe it's the tax code under Bush. Got me--I'm no economist. Empirically, it would seem right now, no one is!

  13. #13
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    Jeff,

    I greatly appreciate the thoughtful response, and thanks for going easy on the semantics. Rather than dash off something fast (I'm on the way to the sox game), I'll respond later when I have the time.

    BTW - on an unrelated topic, thank you for your service to the town. My children attend Wayland schools, and I follow Wayland school issues with great interest. I have great admiration for dedicated volunteers such as yourself.

    Regards,
    Dave

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    Well in that case, go Sox!

    (You aren't the David Wells of Red Sox and other pitching fame, are you?)

  15. #15
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    Default

    Quote Originally Posted by AlanJReiss View Post
    April 15th Tax day.
    A trillion dollar spending spree....
    Bailouts on the unbailoutable...

    Unemployment, foreclosures and a spade of new taxes...
    The trickle tax down affect is upon us. When everything goes broke the pressure is downward to collect and make up the difference.

    This is the pinch that we all feel and the country feels it too.

    Yahoo reports Thousands rally with 'tea parties' on tax day
    Stuff not seen since the 1960's

    http://news.yahoo.com/s/ap/20090415/...x_day_protests
    "Thousands" is an extremely small number, Alan. The anti-war rallies of the 60's involved hundreds of thousands, and were organized without either the internet or Rupert Murdoch's media empire.

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