Yahoo.com: Fact Check, Are rich taxed less than secretaries?

[Prosperity]

I also have a HUGE problem with middle/lower classes not paying more taxes.

It means middle and lower classes are not making enough money. Middle and lower classes need to make more money in order to sustain our economy (and obviously they will also pay more taxes when this happens). The biggest problem with our economy is lack of consumers who buy things.

exactly, we have created a system that results in an ever increasing wealth disparity in the US. It's not even that everyone is better off, and the wealthy are even more better off... the bottom 90% of this country is less well off now than 10-15 years ago. Only the top 10% (but really the top 1%) is actually more prosperous than it was years ago. We need to shift taxation burdens away from income and towards capital gains and estate taxes. The path that we are on now will lead to social unrest down the line.

[Ancalagon the Black]

Yes, I know somebody who has been paid in stock and I suppose you simply hold on to it for a few years and ultimately you pay 15% tax on it rather than the full amount if you had taken it as income.

Doesn't work that way. If you are paid in stock, that stock is taxed as income at the stock's market value when it's given to you. The 15% applies only to gains in the stock price after you own it.

[Wrong Direction]

Doesn't work that way. If you are paid in stock, that stock is taxed as income at the stock's market value when it's given to you. The 15% applies only to gains in the stock price after you own it.

In this thread it's definitively stated that the numbers in the article exclude capital gains earnings? I'm not sure that's true (but it may be). I just read the article carefully and it's not clear to me. They do refer to income and income taxes, but then they also state this:

Obama's claim hinges on the fact that, for high-income families and individuals, investment income is often taxed at a lower rate than wages. The top tax rate for dividends and capital gains is 15 percent. The top marginal tax rate for wages is 35 percent, though that is reserved for taxable income above $379,150.

The above paragraph implies that they're including investment income (capital gains) in these calculations. I'm not saying one way or the other, but I think it's premature to just assume that this article refers only to taxes on wages, and not including capital gains.

By the way, if investment income should have something like tax parity, should the government then pay investors who lose money in their investments at the same rate?

[Larry]

exactly, we have created a system that results in an ever increasing wealth disparity in the US. It's not even that everyone is better off, and the wealthy are even more better off... the bottom 90% of this country is less well off now than 10-15 years ago. Only the top 10% (but really the top 1%) is actually more prosperous than it was years ago.

After 30 years of Reaganomics, after-inflation income of the bottom 90% have gone up 1%.

Not 1% a year. 1% in 30 years.

(Over the same time period, I'm going from memory, but I think the after-inflation income of the top 1% have gone up 180%. And the top 0.1% have gone up 450%.)

Again, going from memory, but over the 30 years prior to Reagan, after-inflation income of the bottom 90% went up by like 75%, and the top 1% went up by like 60%.

[bcl05]

It seems to me that the central message coming from the right's economic statements lately is that they believe the rich aren't rich enough and the poor aren't poor enough. We tax the rich too much and the poor to little.

[Wrong Direction]

Also from the article:

Households making between $50,000 and $75,000 will pay an average of 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

So, if every single penny of someone's income comes from capital gains, they'll pay the same average rate as someone making between 50 and 75k, and more than those making less.

[Larry]

Can someone please define "tax loophole?"

Any tax deduction that doesn't apply to me.

It's like "special interest group": It only applies to groups of voters that I don't agree with.

[Prosperity]

Any tax deduction that doesn't apply to me.

It's like "special interest group": It only applies to groups of voters that I don't agree with.

A special interest composed of corporations is composed of a group of voters?

[Predicto]

Also from the article:

So, if every single penny of someone's income comes from capital gains, they'll pay the same average rate as someone making between 50 and 75k, and more than those making less.

Of course, the poor person pays a much, much higher percentage of his or her income in payroll taxes and sales taxes as well.

The article is really kind of dishonest.

[Corcaigh]

The simple answer is yes.

Executives restructure how they are paid by their companies (dividends versus bonus) in order to owe less tax. Can secretaries manipulate how they are paid by their employer in order to lower tax liability?

Plus for lower earners a greater proportion of their income is consumed by payroll taxes which max out for higher earners. With the myriad of deductions available the proportion of actual take home pay for lower earners is often lower than high earners.

[Wrong Direction]

Of course, the poor person pays a much, much higher percentage of his or her income in payroll taxes and sales taxes as well.

The article is really kind of dishonest.

It's all dishonest. Here's another angle from the WSJ today, and this includes capital gains earnings:

http://online.wsj.com/article/SB10001424053111904194604576580800735800830.html?mod=WSJ_Opinion_LEADTop

There's one small problem: The entire Buffett Rule premise is false, as the nearby table shows. In 2008, the last year for which such data are available, the IRS reports that those who made more than $1 million in adjusted gross income paid an average income tax rate of 23.3%.

That's slightly lower than the 24.1% rate paid by those making between $500,000 and $1 million, probably because the richest are like Mr. Buffett and earn more from capital gains and dividends. The rate for a relative handful of the rich—400 people—fell to 18%, the modern equivalent of Barr's Gang of 21. But nearly all millionaires still paid a rate that is more than twice the 8.9% average rate paid by those earning between $50,000 and $100,000, and more than three times the 7.2% average rate paid by those earning less than $50,000. The larger point is that the claim that CEOs are routinely paying lower tax rates than their secretaries is Omaha hokum.

---------- Post added September-20th-2011 at 02:15 PM ----------

The simple answer is yes.

Executives restructure how they are paid by their companies (dividends versus bonus) in order to owe less tax. Can secretaries manipulate how they are paid by their employer in order to lower tax liability?

Plus for lower earners a greater proportion of their income is consumed by payroll taxes which max out for higher earners. With the myriad of deductions available the proportion of actual take home pay for lower earners is often lower than high earners.

It's true that the payroll tax is regressive, but so are the write-offs. Child credits and mortgage deductions dramatically lower the effective tax rate for lower earners, in many cases offsetting or overwhelming any effect of payroll taxes.

The truth is not what Obama is painting. Today's articles are devastating for Obama. He picked a political fight on purpose by proposing something that he knew had no chance in passing, and now the real data is undermining his case altogether.

[Predicto]

It's all dishonest. Here's another angle from the WSJ today, and this includes capital gains earnings:

http://online.wsj.com/article/SB10001424053111904194604576580800735800830.html?mod=WSJ_Opinion_LEADTop

---------- Post added September-20th-2011 at 02:15 PM ----------

It's true that the payroll tax is regressive, but so are the write-offs. Child credits and mortgage deductions dramatically lower the effective tax rate for lower earners, in many cases offsetting or overwhelming any effect of payroll taxes.

The truth is not what Obama is painting. Today's articles are devastating for Obama. He picked a political fight on purpose by proposing something that he knew had no chance in passing, and now the real data is undermining his case altogether.

I really don't agree.

We have been over this subject so many times, I am really tired of it. It is frustrating to have to go back to First Principles every time it comes up.

[Art]

The problem with our tax code is simple.

First, MORE than half the working public pays 0 income taxes. Of W2 employees about half of them pay 0 income taxes. They need to chip in and contribute money for the services they consume at a higher rate than those currently paying for those services.

More importantly, the tax code is dumbly complex. I prefer a national sales tax of, say, 10 percent on every item forcing businesses to account for the taxes but leaving individuals to avoid having to worry about it. But, a simple rate of 10 or 12 percent on all income for every citizen with 0 deductions for anything works fine. It's more than the government needs, but would be acceptable to engineer a society that understands there's a X percentage obligation rather than one designed to find ways to drive their obligation downward.

Now, once money is taxed, it should not be taxed a second time.

If you win gambling, or invest in a company which makes you money, that is not income. Income is what you earn for what you do. Tax it. Leave the money you make from your savings to each individual.

[Predicto]

The problem with our tax code is simple.

First, MORE than half the working public pays 0 income taxes. Of W2 employees about half of them pay 0 income taxes. They need to chip in and contribute money for the services they consume at a higher rate than those currently paying for those services.

More importantly, the tax code is dumbly complex. I prefer a national sales tax of, say, 10 percent on every item forcing businesses to account for the taxes but leaving individuals to avoid having to worry about it. But, a simple rate of 10 or 12 percent on all income for every citizen with 0 deductions for anything works fine. It's more than the government needs, but would be acceptable to engineer a society that understands there's a X percentage obligation rather than one designed to find ways to drive their obligation downward.

Now, once money is taxed, it should not be taxed a second time.

If you win gambling, or invest in a company which makes you money, that is not income. Income is what you earn for what you do. Tax it. Leave the money you make from your savings to each individual.

For every complex problem there is an answer that is clear, simple, and wrong.

H. L. Mencken

(I do agree that our tax system is too complex, no doubt about that).

[Prosperity]

Income is what you earn for what you do. Tax it. Leave the money you make from your savings to each individual.

So investing is not something people do?

ok whatever

[Art]

Not in any way wrong.

Wrong is what we do today. Means testing is wrong.

Excluding people from having to fund the services they utilize and wish for is wrong. The simple answer is almost always the right one. Always has been.

Only when you allow people's individual beliefs to influence universal policy are you wrong. That's what we have now. A tax code based on social engineering, NOT on applying the same rules to all people. Liberals will want to exempt people who make less from taxes and conservatives have gone along with it. To the detriment of all of us as they have no skin in the game, thus, have no problem asking others to give them more. Spreading the pain of supporting the government leads citizens to be far more interested in how that money is spent and allows them to be far more interested in policy generally.

Individuals should not get rewarded for owning homes, or smart cars, or pumping out kids, or siding their home. Just let us do that with the money we have while the government takes a simple, easily calculated amount from us allowing each citizen to understand their burden and budget according to their needs.

[AsburySkinsFan]

So investing is not something people do?

ok whatever

See that's what I'm talking about in that this whole thing has turned into semantics...income is earned...cap gains isn't earned so it's not income ergo it can't be taxed....well heck get the gov't hands off the lottery winnings if that's the case. How is that any different than cap gains? Answer...it's not.

[Art]

So investing is not something people do?

ok whatever

Investing is something people do with money they have earned and has been taxed. If you are fortunate enough to earn enough money after taxes to do NOTHING but invest in business and help the economy, you should not be taxed a second time on that generous behavior that enriches the businesses you invest in, and, with hope, yourself. Traders who get paid a wage to invest money for clients should be taxed on that wage. I actually don't believe in taxes generally, beyond excise taxes, thus why I prefer a use tax on all items purchased, from bread to homes and fees on the services you utilize to pay for those we prioritize for others but which you may not use.

If, though, there needs to be a tax on the income you earn from your labor, it should be one shot at the apple and after you save, the government should allow you to do with your money what you feel is best for yourself and whatever altruistic measures you feel you should take for your country.

[The Evil Genius]

Individuals should not get rewarded for owning homes, or smart cars, or pumping out kids, or siding their home. Just let us do that with the money we have while the government takes a simple, easily calculated amount from us allowing each citizen to understand their burden and budget according to their needs.

Of course, this assumes that their is no value added to the town/city/state/country when people own homes or smart cars, or improve the homes they have.

[Art]

See that's what I'm talking about in that this whole thing has turned into semantics...income is earned...cap gains isn't earned so it's not income ergo it can't be taxed....well heck get the gov't hands off the lottery winnings if that's the case. How is that any different than cap gains? Answer...it's not.

That's correct, yes.

If you are fortunate enough to win the lottery, the government should have zero right to dip in to your good fortune.

[AsburySkinsFan]

Investing is something people do with money they have earned and has been taxed. If you are fortunate enough to earn enough money after taxes to do NOTHING but invest in business and help the economy, you should not be taxed a second time on that generous behavior that enriches the businesses you invest in, and, with hope, yourself. Traders who get paid a wage to invest money for clients should be taxed on that wage. I actually don't believe in taxes generally, beyond excise taxes, thus why I prefer a use tax on all items purchased, from bread to homes and fees on the services you utilize to pay for those we prioritize for others but which you may not use.

If, though, there needs to be a tax on the income you earn from your labor, it should be one shot at the apple and after you save, the government should allow you to do with your money what you feel is best for yourself and whatever altruistic measures you feel you should take for your country.

You're arguing double taxation...but that's not what capital gains are...capital GAINS....i.e. what you increased your money by, you shouldn't pay taxes on money if you put it in an investment and didn't earn anything...we are talking about GAINS which is an increase...i.e. money you haven't paid taxes on.

[Art]

Of course, this assumes that their is no value added to the town/city/state/country when people own homes or smart cars, or improve the homes they have.

No.

This assumes it doesn't matter what value there is when people own homes, or smart cars, or improve their own homes. It assumes people will do what they believe is best for themselves and those around them in a way which respects and honors individual liberty and freedom. Remember, I'm more a libertarian than anything else. It's great a person would want to own a home or a smart car. They likely will want that beneficial thing whether they are rewarded for it by a tax code which currently picks winners and losers and engineers behavior, or not. Now, people HAVE bought homes BECAUSE of the tax incentive to do so, but, without that, people would likely rent, allowing investors to own as it's far easier to rent and allow someone else the burden of ownership without the benefit of a deduction.

If the code is lowered appropriately you have no need for that social engineering. Homes will still be built and owned, but it may transition how.

[AsburySkinsFan]

That's correct, yes.

If you are fortunate enough to win the lottery, the government should have zero right to dip in to your good fortune.

But it is STILL income, pretending it isn't is childish.

[DjTj]

This whole "no skin the game" thing is driving me crazy. Poor people have more skin in the game than anyone else. If you are on food stamps and live in public housing, your skin is in the game, and it's not figurative "skin" referring to money, but literally skin as your life is dependent on government decisions. They don't need to pay money to be interested in government policy; they are living government policy.

I agree that the tax code needs to be simplified greatly, and in my opinion, this whole Buffet tax is more of a publicity stunt than any real reform, but the idea that the biggest problem with our tax code is that poor people don't pay enough and thus don't have "skin in the game" is completely ridiculous.

[Tulane Skins Fan]

No.

This assumes it doesn't matter what value there is when people own homes, or smart cars, or improve their own homes. It assumes people will do what they believe is best for themselves and those around them in a way which respects and honors individual liberty and freedom. Remember, I'm more a libertarian than anything else. It's great a person would want to own a home or a smart car. They likely will want that beneficial thing whether they are rewarded for it by a tax code which currently picks winners and losers and engineers behavior, or not. Now, people HAVE bought homes BECAUSE of the tax incentive to do so, but, without that, people would likely rent, allowing investors to own as it's far easier to rent and allow someone else the burden of ownership without the benefit of a deduction.

If the code is lowered appropriately you have no need for that social engineering. Homes will still be built and owned, but it may transition how.

Art, you've missed the entire problem with this.

Inidividuals get payments for the work they do structured as capital gains. If you own part of a company, you don't take a salary, but you take a "disbursement" for the work you do and then have it taxed at capital gains. That happens all the time. I do it.

Its income in every way shape and form, except that I own part of the business. That's what we're talking about. No one is complaining that capital gains rate is too low (well, not many people). We are complaining that people, like me, are able to "structure" what would be income for anyone else as capital gains simply because they are already rich.