taxation

[glatt]

Originally Posted by infinite monkey

I've seen thousands of tax forms. A whole hell of a lot of people make a profit.

OK, but the tax reforms you are seeing are all submitted to you by people who think they are poor enough to get financial aid for college, right? So it's not a representative sample of the public at large, or even of that age group.

[HungLikeJesus]

Originally Posted by Clodfobble

ITEM ONE: just this morning, I insisted to Mr. Clodfobble that I would have to make a separate trip to Home Depot, because no way did Target carry toilet seats as he thought they might. But in fact, they do, and I got one.
...

But is it wise to get a toilet seat with a target on it?

[HungLikeJesus]

Originally Posted by infinite monkey

...
Yeah, yeah, it costs money to raise kids. But I didn't get anybody pregnant.

You almost got me pregnant.

That one time.

[infinite monkey]

OK, but the tax reforms you are seeing are all submitted to you by people who think they are poor enough to get financial aid for college, right? So it's not a representative sample of the public at large, or even of that age group.

Actually, that would be incorrect.

People fill out the FAFSA for any number of reasons. Many scholarships are contingent upon filling out the FAFSA (the monies for the scholarship put on the back burner to see what FEDERAL funds might pay first.) Like Tech Prep. The kid follows this path throughout HS and gets the scholarship, but may never use the funds because federal aid pays first. If the student doesn't fill out the FAFSA, they don't get the scholarship. If they get selected for verification and don't submit the documents (one third of all fafsas are selected) they don't get the scholarship. No matter if the family income is one thousand or one hundred thousand.

Also, even a family with a really high Expected Family contribution can qualify for federal loans, which are also contingent upon the FAFSA.

And, a community college has no 'age group.'

We see all ages and all income ranges. My sample, while of course not scientifically "representative" is still pretty darn representative. ESPECIALLY of the middle class.

It's not equitable, which is the question in the OP.

[infinite monkey]

Originally Posted by HungLikeJesus

You almost got me pregnant.

That one time.

You said you had your diagram in.

[Happy Monkey]

Originally Posted by classicman

I wish it were that simple. In some cases it is... in many it is not.

What happens when the standard deductions and child credits and EIC and a host of other deductions are added, especially to that person at the bottom? They actually get money back. In some/many/most (???) it is more than they put in. I know this from personal experience. Effective tax rate??? Its a negative - They actually make money.

That's a separate issue from how tax brackets work. And even the "Fair Tax" folks support continuing that; they propose giving everyone a check every month as a sales tax "prebate", which is similar to the tax credits that can result in a negative income tax rate for the poor.

[infinite monkey]

Originally Posted by Happy Monkey

That's a separate issue from how tax brackets work. And even the "Fair Tax" folks support continuing that; they propose giving everyone a check every month as a sales tax "prebate", which is similar to the tax credits that can result in a negative income tax rate for the poor.

*bold mine

No, not just the 'poor'. Not by a long shot.

[Pico and ME]

At what income does it stop being a profit?

[BigV]

Originally Posted by HungLikeJesus

But is it wise to get a toilet seat with a target on it?

Better that than being the target of a toilet seat, even if you do get a tv show out of it.

[BigV]

Originally Posted by classicman

oh and that "taxable income" BigV ... that's AFTER a bunch of reductions and adjustments as well.

I think the proposal was "income" period. If you made it, we tax it - no matter how it was generated.

Right, right. The point I answered was regarding the shape of our tax brackets. And I tried to be careful in my language to keep it restricted to "taxable income". Actually, there is plenty of taxable income that isn't subject to those rules. I should have said "taxable income from wages and salaries". And that is part of the current debate, though I feel it hasn't gotten nearly enough attention.

Take for example, capital gains. They are taxed at a flat rate of 15%. If you have capital gains of $1000 or 75,000 or twenty million, the maximum you'll owe on *that* "taxable income" is 15%. You could be making BANK from this kind of income, but never be exposed to any tax rate greater than 15%. How is this "progressive"? It's not. It wasn't built to be especially progressive, it was built (ostensibly) to put the minimum burden on capital, so it could "create more jobs", or... whatever. Realistically, those with capital have the wherewithal to influence the lawmakers to write laws that are especially favorable to those with capital. BIG SURPRISE.

Now, let's look at the wage/salary income rates again: 10, 15, 25, 28, 33, 35. Only one bracket, and on only a tiny amount of income does wage/salary income have a better effective rate than capital gains income, namely, 10% on the first $8,375. Between $8,375 and $34,000 of wage/salary income, capital gains income is taxed at the same rate. From there upward though, wage/salary income is taxed at higher and higher rates. But not income from capital gains.

See what happens? If you make your money by working for a wage or salary, as soon as you're making more than $16.35 an hour, your income will be taxed at a higher rate than ANY amount of capital gains income.

Don't freak out--we'll get to deductions in a minute, I want to stick with "taxable income" which you pointed out above.

It seems to me that 34k/yr isn't a lot of money. It seems to me that folks earning that kind of money should be paying a pretty modest tax rate. It also seems to me that someone earning 34k/yr of capital gains probably has other sources of money. It gets less clear for me to articulate here, but my point is that I think capital gains are undertaxed. I think the wage earners have been given the very fucking heavy end of the stick compared to the capital gains earners.

So. Yeah, "taxable income" is a highly specific phrase, one that has seen a lot of manipulation by the time you get to it. This is why I find the language of this large, important debate the biggest and most important thing to get right, and the most difficult.

[HungLikeJesus]

I imagine that people that have worked for their money, and that have invested, and that are now retired, are living off of the income from those investments, which would be taxed as capital gains, wouldn't it?

[BigV]

Originally Posted by Pico and ME

At what income does it stop being a profit?

....


This is a confusing question, ME.

let me try to recast it.

maybe:
People make a profit from our tax system when they get money back from the government.

That could happen at practically any level of income, though the higher the income, the greater the size and number of deductions needed to offset that income and achieve a "negative tax rate", ie a refund. We need a bigger discussion about deductions, especially about tax credits, a special kind of tax deduction.

OR

People who get a check from the government make a profit.

This is much less likely to be true. For example, I get a check practically every year, but I promise I'm not making any profit. I get a check as a refund of my overpayment through the year by way of my payroll withholding.

OR

something else... I don't understand, sorry.

[BigV]

Originally Posted by HungLikeJesus

I imagine that people that have worked for their money, and that have invested, and that are now retired, are living off of the income from those investments, which would be taxed as capital gains, wouldn't it?

No, not strictly speaking. The simplest definition of capital gains is the difference between the cost of something you buy and then sell. If you sell it for more than you paid for it when you bought it, that difference is a capital gain. Stocks are the most common kind of asset that produces capital gains or losses. What you describe is more likely to be dividend income. This is from irs.gov:

Dividends are distributions of property (which can include money, stock of another corporation or other property) a corporation pays you because you own stock in that corporation. You also may receive dividends through a partnership, an estate, a trust, a subchapter S corporation or from an association that is taxable as a corporation. Most dividends are paid in cash. A shareholder of a corporation may be deemed to receive a dividend if the corporation pays the debt of its shareholder, the shareholder receives services from the corporation, or the shareholder is allowed the use of the corporation's property. A shareholder may also receive distributions such as additional stock or stock rights in the distributing corporation; such distributions may or may not qualify as dividends.

This sounds like what the income from retirement nest egg would be. Dividends are taxed at the same rate as capital gains.

GENERALLY SPEAKING: If you make your money from your labor your taxes range from 10 to 35%. If you make your money from your money, your taxes range from 0 to 15%. This shows the strong bias in our tax system to put more of the tax burden on wage earners than on capital possessors.

[Pico and ME]

Originally Posted by BigV

....


This is a confusing question, ME.

I was addressing IM's point. Since she sees all those tax returns, at what point do people stop making a profit from the government - or making more in their return than they even made in income - at least that's what I think she said.

At what point are you not poor enough.

[Happy Monkey]

Originally Posted by BigV

....
maybe:
People make a profit from our tax system when they get money back from the government.

In this sense the "profit" is only with respect to the income tax. The person may not be making much of a profit themselves, as most refundable tax credits require (directly or indirectly) that you spend money in some other way.