how is this fair?

[DosEquis]

“New IRS data indicates that the 400 highest income earners together earned $85.6 billion in 2005, an average income of $213.9 million each. These 400 households took home 1.15 percent of all income earned in the U.S. The average federal income tax rate for the group was 18.23 percent, low because 86 of the income was capital gains and taxed at a 15 percent rate.”


Can we raise their taxes to at least what everyone else pays? Why am I getting punished for being middle class and they are getting a break for being rich?

[lew]

They shouldn't have their taxes raised.



We should have our taxes cut / slashed.

[WickedLou9]

Originally Posted by lew

They shouldn't have their taxes raised.



We should have our taxes cut / slashed.

that is why the two democratic candidates want to repeal the bush tax cut on capital gains. So instead of 15% it would go back to like 25% I think.


edit: woops I replied to the wrong post. I think you will actually be angry about this.

[bheld]

Bush is actually one step ahead of you. He's been working hard during his administration to close the loophole he made through tax cuts by making sure that as few people as possible get capital gains. Luckily, most Americans that are in the market and give their money to people like Bear Stearns to manage won't have to worry about capital gains this year.

No capital gains, no problem!

[Fed Up]

Originally Posted by bheld

Bush is actually one step ahead of you. He's been working hard during his administration to close the loophole he made through tax cuts by making sure that as few people as possible get capital gains. Luckily, most Americans that are in the market and give their money to people like Bear Stearns to manage won't have to worry about capital gains this year.

No capital gains, no problem!

And because of our great tax code, they get to write off those Bear Stern Stock capital losses to the tune of a whopping $3,000 a year! So if you had $100,000 invested in Bear Stearns stock as an employee, you'll be able to write off that loss from your income over the next 33 years! Unless of course you had it in your 401k...then you get ZERO write-offs (which would be the majority of employees)!

Lovely!

Fed Up

[Fed Up]

Originally Posted by DosEquis

Can we raise their taxes to at least what everyone else pays? Why am I getting punished for being middle class and they are getting a break for being rich?

The tax code is there for everyone to take advantage of. The wealthy just get better advice.

I don't know how many CPA's I've met who know nothing about charitable trusts. If you gift your highly appreciated stock or real estate to one of these trusts, you don't pay the tax whether it's at 15% or 28%. But how many of the middle class know about these types of trusts?

Fed Up

[motivez]

Originally Posted by DosEquis

Can we raise their taxes to at least what everyone else pays? Why am I getting punished for being middle class and they are getting a break for being rich?

Because the system is designed to keep them rich.

Look at the lengths the government is going to bail out these banks who made bad decisions, but although there's been a lot of talk about something to help people who fucked up with their mortgage, no government agency is going to have an emergency meeting to dole out money so Mr and Mrs Smith can keep their house.

This situation just illustrates that the rich, the influential, and big businesses can screw up and expect the government to bail them out, while the little guy gets to suffer.

[Fed Up]

Originally Posted by motivez

Because the system is designed to keep them rich.

Look at the lengths the government is going to bail out these banks who made bad decisions, but although there's been a lot of talk about something to help people who fucked up with their mortgage, no government agency is going to have an emergency meeting to dole out money so Mr and Mrs Smith can keep their house.

This situation just illustrates that the rich, the influential, and big businesses can screw up and expect the government to bail them out, while the little guy gets to suffer.

Understand that the government bailout is the taxpayer via taxes and/or inflation.....which I think you already know.

Fed Up

[Phantom]

It's ridiculous to me that capital gains are taxed at a lower rate than ordinary income. The levels should be the opposite - encourage people actively doing the work to work harder with lower rates and tax those with passive income at a higher level.

[WickedLou9]

Originally Posted by Fed Up

The tax code is there for everyone to take advantage of. The wealthy just get better advice.

I don't know how many CPA's I've met who know nothing about charitable trusts. If you gift your highly appreciated stock or real estate to one of these trusts, you don't pay the tax whether it's at 15% or 28%. But how many of the middle class know about these types of trusts?

Fed Up

That's sort of bogus. It just doesn't scale that way. Most of america earns w-2 wages and those are taxed at normal income tax rates. For most of us, that is where our taxes end. Sure we might have child tax credits or some humble charitable donations, but that's about it. There is no way to wiggle out of paying taxes on your income. Setting up a trust? With what? I don't have hundreds of thousands of extra dollars. I don't earn anything worth mentioning in terms of capital gains.
the fact is that these loopholes that the rich take advantage of do not exist for people in middle class america. We also don't earn any capital gains to speak of( unlike the wealthy) so almost 100% of my income is taxed at the full income tax rate. The wealthy earn significant amounts in terms of cap gains so they now pay only 15% on those gains, and as you mentioned they have ways of making that rate even less.

[A_C_E]

Originally Posted by WickedLou9

That's sort of bogus. It just doesn't scale that way. Most of america earns w-2 wages and those are taxed at normal income tax rates. For most of us, that is where our taxes end. Sure we might have child tax credits or some humble charitable donations, but that's about it. There is no way to wiggle out of paying taxes on your income. Setting up a trust? With what? I don't have hundreds of thousands of extra dollars. I don't earn anything worth mentioning in terms of capital gains.
the fact is that these loopholes that the rich take advantage of do not exist for people in middle class america. We also don't earn any capital gains to speak of( unlike the wealthy) so almost 100% of my income is taxed at the full income tax rate. The wealthy earn significant amounts in terms of cap gains so they now pay only 15% on those gains, and as you mentioned they have ways of making that rate even less.

Indeed.

You can't take advantage of loopholes to pay a lower income tax rate if the only thing you have to play with is your hourly/weekly wage/salary.

[Ardentfrost]

Obviously I'm going to agree with Lew here... I do think it's bullshit that the rest of us have to pay a higher % than rich people who make the majority of their income off money they already have. However, I do not think it's good for the economy as a whole to punish these people who put a LOT of money into the market, which allows us (everyone else) to enjoy low unemployment and the ability to borrow money and all the other shit we do with that money.

The more they put into the market, the more we can reap the benefits, however it sucks that by reaping those benefits we just have to pay more dollars to the government. We need to decrease the tax burden across the board. Get MORE money in the market (all forms of the market, not just stocks, but commodities and whatever else people like to spend their money on... hookers, whatever).

Money spent by the federal government is wasted. Money spent by citizens is as good as gold (as far as the economy is concerned).

[Fed Up]

Originally Posted by WickedLou9

That's sort of bogus. It just doesn't scale that way. Most of america earns w-2 wages and those are taxed at normal income tax rates. For most of us, that is where our taxes end. Sure we might have child tax credits or some humble charitable donations, but that's about it. There is no way to wiggle out of paying taxes on your income. Setting up a trust? With what? I don't have hundreds of thousands of extra dollars. I don't earn anything worth mentioning in terms of capital gains.
the fact is that these loopholes that the rich take advantage of do not exist for people in middle class america. We also don't earn any capital gains to speak of( unlike the wealthy) so almost 100% of my income is taxed at the full income tax rate. The wealthy earn significant amounts in terms of cap gains so they now pay only 15% on those gains, and as you mentioned they have ways of making that rate even less.

WickedLou, if you have disposable income, then you can take current income tax decuctions by setting up a trust. Granted, if you are just struggling to survive, this doesn't apply to you. If one maxes out their 401k's and IRA's, taxes shouldn't apply to them anyway right?

I never implied these trusts were for everyone. I did imply that CPA's don't know about these trusts that can help.

Here's one example of how it works where it's not a capital gain tax bypass trust (two individuals contributing $25,000 a year):

Making Your Charitable Trust Mimic a Pension - Vaughn Henry & Associates

Fed Up

[A_C_E]

Originally Posted by Ardentfrost

Obviously I'm going to agree with Lew here... I do think it's bullshit that the rest of us have to pay a higher % than rich people who make the majority of their income off money they already have. However, I do not think it's good for the economy as a whole to punish these people who put a LOT of money into the market, which allows us (everyone else) to enjoy low unemployment and the ability to borrow money and all the other shit we do with that money.

The more they put into the market, the more we can reap the benefits, however it sucks that by reaping those benefits we just have to pay more dollars to the government. We need to decrease the tax burden across the board. Get MORE money in the market (all forms of the market, not just stocks, but commodities and whatever else people like to spend their money on... hookers, whatever).

Money spent by the federal government is wasted. Money spent by citizens is as good as gold (as far as the economy is concerned).

The problem with this is that you can't assume that people are going to go right out and spend all the money you give them in tax breaks, just like you can't assume that by lowering interest rates, you're going to make banks lend more.

It becomes an issue of theory for which there's no readily identifiable answer. You can give consumers tax breaks, but if they don't go out and invest the money, in the end we're all screwed. The sanctity of government spending is that government ALWAYS spends, it doesn't hoard. Again, there's no way of knowing which situation is better without hard data each way. But it's something to consider.

[Fed Up]

ACE,

In your current discussion in class, what is proposed as a solution to this? If the IRS was entirely eliminated and people were allowed to keep what they earn, have you ever discussed an "equal rate" tax? Just curious.

Fed Up

[RMNIXON]

Originally Posted by DosEquis

“New IRS data indicates that the 400 highest income earners together earned $85.6 billion in 2005, an average income of $213.9 million each. These 400 households took home 1.15 percent of all income earned in the U.S. The average federal income tax rate for the group was 18.23 percent, low because 86 of the income was capital gains and taxed at a 15 percent rate.”


Can we raise their taxes to at least what everyone else pays? Why am I getting punished for being middle class and they are getting a break for being rich?

How are "you" being punished?

What are you really upset about. What they earn or what they pay in real dollars as taxation? I am not so sure about what you define as fair?

[WickedLou9]

Originally Posted by Fed Up

WickedLou, if you have disposable income, then you can take current income tax decuctions by setting up a trust. Granted, if you are just struggling to survive, this doesn't apply to you. If one maxes out their 401k's and IRA's, taxes shouldn't apply to them anyway right?

I never implied these trusts were for everyone. I did imply that CPA's don't know about these trusts that can help.

Here's one example of how it works where it's not a capital gain tax bypass trust (two individuals contributing $25,000 a year):

Making Your Charitable Trust Mimic a Pension - Vaughn Henry & Associates

ACE, it seems that no matter what I write now you are going to take the opposite side. Oh, and I didn't mention anything about Austrian economics in this thread did I?

Fed Up

My point is that the scale is not the same. Most of my taxes are income taxes. most of my income goes to paying expenses like my mortgage and utilities and car payment. When all is said and done we have enough left over to contribute to my daughters 529 plan and put some money away.
Just for arguements sake lets say I have 1000 dollars left at the end of each month in terms of discretionary income. If I can avoid paying the taxes on that, we are talking about what, a couple hundred bucks? It's not an insignificant amount but it's not enough to change anything for me. If I was one of the say top 5 or 10% in the country, I would have much much more than this in discretionary income. Maybe 20 or 30 thousand per month. If I could avoid paying taxes on that much money it's another thing all together. I would be saving enough in a year to buy a new Mercedes. For the bottom 80% in terms of income, if I could avoid paying any income tax on 100% of my discretionary income (which is probably unrealisitic) we would save enough to what, pay for our car insurance?

[Thorgrim]

I can't believe I have to hear someone say (paraphrasing)

"It's great us working people are helped by Paris Hilton pouring her money into the market which helps keep us employed and take out loans"

Instead of "Isn't it great all those WORKERS who clean the rooms, wash the sheets, greet and settle the guests, take up the luggage, maintain the outside...and many more who work their asses off and with whose work gives people like Paris Hilton a fortune to spend for her latest party cruise"

[lew]

Originally Posted by A_C_E

The problem with this is that you can't assume that people are going to go right out and spend all the money you give them in tax breaks, just like you can't assume that by lowering interest rates, you're going to make banks lend more.

It becomes an issue of theory for which there's no readily identifiable answer. You can give consumers tax breaks, but if they don't go out and invest the money, in the end we're all screwed. The sanctity of government spending is that government ALWAYS spends, it doesn't hoard. Again, there's no way of knowing which situation is better without hard data each way. But it's something to consider.

Right. The problem is though, that when the government spends (which like you said is always), it always leads to something counterproductive. People saving and hoarding money is still a better alternative to government spending.

[lew]

Originally Posted by Thorgrim

I can't believe I have to hear someone say (paraphrasing)

"It's great us working people are helped by Paris Hilton pouring her money into the market which helps keep us employed and take out loans"

Instead of "Isn't it great all those WORKERS who clean the rooms, wash the sheets, greet and settle the guests, take up the luggage, maintain the outside...and many more who work their asses off and with whose work gives people like Paris Hilton a fortune to spend for her latest party cruise"

None of those workers would be employed to do any of those things if rich people didn't have the money to pay for them.