Should The Rich Pay More Taxes?

[YardleyLabs]

Again you avoid the thesis, to instead pontificate on your view of how taxes should be levied and collected - requring a complete overall of the tax code - favoring the large multi-national corporations.

1st, the rich for my thesis included owners of small businesses with combined company & personal income of $200K or more. The rich, as defined by current proposals of the democratic party include everyone with income over $200K regardless of its origin, personal or company (in the case of small business owners). There are a significant number of small businesses within this category. This means, as I have stated previously, all small business owners whose companies earn in excess of $200K per year, simply because of the current tax code wording, requires these small business owners to pays income taxes on those company earnings as if they are that owner's personal income, even when not otherwise distributed & used personally. Such a practice, is THE primary deterrent to additional hiring by growing small businesses. This is particularly relevant now because of the high unemployment rate which persists dispite the massive stimuli & bailouts by the Obama government. It is even more relevant, because (according to fed gov statistics), such small businesses have provided the majority of new jobs within the US over the last 15 years. And there has been no suggestion from my part to raise the exception from income taxes upon the rich per say. Instead I have suggested a simple & very narrow exemption of small business earnings from income taxes as long as they remain in the business (to be on par with large corp tax status). Notwithstanding your claims to the insignificance of such small businesses, they do employ the majority of Americans & have consistently provided the majority of jobs within the US over the last 15 yrs.

And to your assertion that "we" should pay more taxes, the obvious answer is "we" do. So much so that the top 5% pay 58%+ of all income taxes & the bottom 48% pay no income taxes at all (see the link to IRS statistics above).

And just a minor, yet substantial, correction to your assertion that FICA taxes are regressive. They are, in fact, just as progressive as the income tax for everyone earning under $106,800 in salary or wages. This means that to the vast majority of wage earners, the FICA tax levy is progressive. Just another note, gov aid to individuals, is the single most progressive portion of US gov aid that exists. Meaning that such payments are strictly limited to the lowest income earners or not to earners at all. I'm not implying fair or unfair, just that the tax code is stacked against moderate & wealthy tax payers at both ends.

My original post & all subsequent have all been motivated by the persistent, high rate of unemployement while billions have been spent on US gov programs that have not yielded one net new job when compared to the 15 yr avg rate of employment within the US. And since small business provides and has provided the majority of new jobs within the US over the same 15 yrs, it only makes logical sense to address the needs of small business in order to create new jobs. If the simple, narrowly focused tax consideration I suggest above were adopted, within 2-3 yrs our unemployment rate would likely be reduced by 50% or more. This would significantly reduce gov costs of unemployment, greatly increase real production within the US and create the demand for that increased production.

And there may be some merit to your suggestions, but they ignore the thesis of this thread topic.

How have I ignored your thesis? I have addressed point by point everything you have said. And, by the way, by definition, a progressive tax is one that charges a higher percentage tax rate for higher incomes than is charged for lower incomes. A proportional tax is one that charges the same percentage tax rate regardless of income. A regressive tax is one that charges a high percentage rate for lower incomes. Social security is a regressive tax because those with incomes of $200,000 are paying a lower percentage of their incomes for social security tax than those earning $20,000 per year. Sales tax, when applied across all types of consumption, is a regressive tax because lower income people spend a higher percentage of their incomes than higher income people.

I actually believe that it should be easier for all businesses to retain earnings for future investment. I also suggested what I believe is a better way to achieve that result. However, I believe that all monies received by individuals as income should be taxed, without regard to how that money was earned. That means that the minute the money comes out of the business it should be taxed at the same rate as salaries and wages -- no exemptions and no preferences. There is no evidence whatsoever to suggest that consumption by the wealthy adds more benefit to the economy than consumption by the non-wealthy. Get rid of payroll taxes as a source of financing for social security, medicare and unemployment. Get businesses out of the business of financing health care insurance. Don't tax business profits unless those profits are distributed to individuals in whatever form. Do those things and America's competitive position in the global economy will improve dramatically, there will be fewer incentives to relocate jobs to other countries, and business investment will sky rocket, creating more jobs. What's the downside? Personal income tax rates will go up significantly, offset to an unknown extent by increases in personal income.

[Buzz]

Jeff, he specifically said that if your income is less than $106,000 the social security tax is progressive.

I guess I shouldn't speak for David, but considering the way that the benefit is calculated, SS tax in that income bracket is progressive.

The specifics of the calculation is at www.ssa.gov. First what you do is calculate your indexed monthly earnings during your top 35 earning years. Then you bracket the monthly income multiply each bracket by a percentage. That part of the calculation is copied and pasted below. You get 90% of your first $761, then 32% of the next $3825, then the rest gets multiplied by 15%.

It's easy to see that the size of the benefit is weighted toward the lower income. I guess I never minded because I figured that at least I can afford to put away 25% of my income every year to invest for retirement. However now they are talking about raising the cap on income that's taxed for SS and at the same time cutting the maximum benefit. That ticks me off. They wait till I'm 50, then start talking about raising the income level that the tax will apply to, increasing the retirement age again, and cut my benefit.

Step 5:

a. Multiply the first $761 in Step 4 by 90%.


$__________________

b. Multiply the amount in Step 4 over $761 and less than or equal to $4,586 by 32%. .

$__________________

c. Multiply the amount in Step 4 over $4,586 by 15%. .

$__________________

Step 6:
Add a, b and c from Step 5. Round down to the next lowest dollar. This is your estimated monthly retirement benefit at age 66, your full retirement age.

$__________________


PS:

I would be more than happy to see earnings not taxed until they are distributed, allowing small business to invest in growing their business "pre-tax." I am assuming however that uncle sam would want to take away the ability to write off depreciation and they would likely want to reduce the impact that the pre-tax reinvestment had on your basis in return for the "favor."

[YardleyLabs]

Jeff, he specifically said that if your income is less than $106,000 the social security tax is progressive.

I guess I shouldn't speak for David, but considering the way that the benefit is calculated, SS tax in that income bracket is progressive.

The specifics of the calculation is at www.ssa.gov. First what you do is calculate your indexed monthly earnings during your top 35 earning years. Then you bracket the monthly income multiply each bracket by a percentage. That part of the calculation is copied and pasted below. You get 90% of your first $761, then 32% of the next $3825, then the rest gets multiplied by 15%.

It's easy to see that the size of the benefit is weighted toward the lower income. I guess I never minded because I figured that at least I can afford to put away 25% of my income every year to invest for retirement. However now they are talking about raising the cap on income that's taxed for SS and at the same time cutting the maximum benefit. That ticks me off. They wait till I'm 50, then start talking about raising the income level that the tax will apply to, increasing the retirement age again, and cut my benefit.

Step 5:

a. Multiply the first $761 in Step 4 by 90%.


$__________________

b. Multiply the amount in Step 4 over $761 and less than or equal to $4,586 by 32%. .

$__________________

c. Multiply the amount in Step 4 over $4,586 by 15%. .

$__________________

Step 6:
Add a, b and c from Step 5. Round down to the next lowest dollar. This is your estimated monthly retirement benefit at age 66, your full retirement age.

$__________________


PS:

I would be more than happy to see earnings not taxed until they are distributed, allowing small business to invest in growing their business "pre-tax." I am assuming however that uncle sam would want to take away the ability to write off depreciation and they would likely want to reduce the impact that the pre-tax reinvestment had on your basis in return for the "favor."

Actually, the tax is proportional -- everyone paying the same percentage up to the cap. It is regressive only because of the cap, but that includes those earning $200k+ who were the subject of David's initial post. The benefit definitely favors lower income people. However, questions of benefits from government services apply at all income levels and to all governments services. To focus on one while ignoring the others is cherry picking. The activities of government as a whole (including all levels of government) benefit all, but not equally. Those who are poor and those with property tend to benefit disproportionately.

[luvmylabs23139]

Pretty screwed up, I agree. I hope you've written your congressmen urging them to change the tax code.

I sent congresswoman and both senators the entire breakdown with IRS forms included and asked them for an explanation. I asked them to explain why this blatent redistribution of income was not socialism. Should be interesting to see if I get any responses.
I also reminded them that everyone has an option to not reproduce by simply crossing their legs and keeping their pants zipped.

[pat addis]

every one who wants to live in this country should pay a income tax i don't care if it's only a dollar a year. you need to have some skins in the game to play

[Granddaddy]

Unfortunately 48% don't pay any income taxes & that percentage is increasing annually.....all the while our gov continues to extend unemployment compensation and the deficit grows larger & larger.

[TX WINGSHOOTER]

I think that the refundable credits should not exist in the tax code. People getting paid by the tax system for not making much money is not incentive to do better.

I think the super rich should pay even more in tax. I believe the economy is more complex that the board game Monopoly, but don't the winner end up wiping out everyone else? If the donimate players in Monopoly paid tax everytime they pass GO then the game would go forever.

Is the board game Monopoly already happened to the small business owner. Hard to compete against the big corporations and even remotely think you can be competitive.

Small businesses "service" has to be the competitive advantage.

IRS said 1 B. dollars in refunds about to expire for the tax year 2007. They send invitations to people that "owe" money, I wonder why they can't send the notice to the people that fall under the 1 B. dollars refund.

Folks - always follow the money trail and question motives.

I am sure that all the millionaire politicians are there because they want to make a difference. RIGHT.....

[Uncle Bill]

I think that the refundable credits should not exist in the tax code. People getting paid by the tax system for not making much money is not incentive to do better.

I think the super rich should pay even more in tax. I believe the economy is more complex that the board game Monopoly, but don't the winner end up wiping out everyone else? If the donimate players in Monopoly paid tax everytime they pass GO then the game would go forever.

Is the board game Monopoly already happened to the small business owner. Hard to compete against the big corporations and even remotely think you can be competitive.

Small businesses "service" has to be the competitive advantage.

IRS said 1 B. dollars in refunds about to expire for the tax year 2007. They send invitations to people that "owe" money, I wonder why they can't send the notice to the people that fall under the 1 B. dollars refund.

Folks - always follow the money trail and question motives.

I am sure that all the millionaire politicians are there because they want to make a difference. RIGHT.....

I hate to take exception to your views, but please explain how it's hard to compete against the big corporations? The corporations in trouble in this country ARE the BIG ones. The small ones didn't allow the unions to get hold of them by the short hairs and promise them the moon, knowing the money will eventually run out; especially when you are paying non-working-retirees the same amount as when they were producing. How intelligent is that?

UB

[cotts135]

I hate to take exception to your views, but please explain how it's hard to compete against the big corporations? The corporations in trouble in this country ARE the BIG ones. The small ones didn't allow the unions to get hold of them by the short hairs and promise them the moon, knowing the money will eventually run out; especially when you are paying non-working-retirees the same amount as when they were producing. How intelligent is that?

UB

I think you need to define what a big corporation is. Seems to me that a lot of big corporations are doing just fine especially if they are in one of the big six industries that control Congress. (Health Care,Defense,Energy, Agriculture, Telecom, and the biggest- Banking)
No doubt Unions buy politicians in order to get the best possible benefits for there members------- but this is no different than what big industry does. They influence politicians with promises of campaign contributions if they will vote a certain way on a piece of legislation that will benefit them. Often times these are amendments added to the proposal at the last minute that most of us don't find out about until the bill is passed. Where is the outrage about these guys?
The current whipping boy is the Unions but they are not alone. Until we take a comprehensive look at campaign finance and fix what is broken(Legal Bribes) we will continue to get the same results.

[TX WINGSHOOTER]

UB.....maybe I am looking at things from a narrow perspective, but the 80 small business clients that I work with can't afford the locations, absorbtion of start up of new facilities, and all the other benefits high volume companies can.

Feed stores - can't compete with Tractor Supply with locations, hours, purchasing power

Nurseries - head to head with Lowe's / Home Depot / etc.........

Auto Garages - the auto dealers and the complexities of vehicles now is tuff

Appliances - head to head with Sears, Home Depot, Lowes,

In my opinion "service" and "differentiation" must be a small businesses plan.