News European Court Ruling on UK Taxation Laws

[cobalt124]

I think the non-payment of tax is a separate issue. How many people are non-taxpayers? Of more concern to me (going off topic a second) is this, care of our friends in the European Court:

http://www.bbc.co.uk/news/uk-12022013

 

[Vanadium 50]

I think the non-payment of tax is a separate issue. How many people are non-taxpayers?

About 40%.

 

[cobalt124]

About 40%.

How do 40% get off paying any tax? I tried to find some figures for the U.K., the best I could come up with was a site stating that we have 33 million people of working age, 2 million of which are unemployed which gives about 6% of non-taxpayers. Does anyone have more accurate figures? I don't know the reasons, but rather than taking away the vote, I'd be finding ways of getting them to pay tax.

 

[turbo]

How do 40% get off paying any tax? I tried to find some figures for the U.K., the best I could come up with was a site stating that we have 33 million people of working age, 2 million of which are unemployed which gives about 6% of non-taxpayers. Does anyone have more accurate figures? I don't know the reasons, but rather than taking away the vote, I'd be finding ways of getting them to pay tax.

In the US (and in the UK), there are regressive taxes added to anything of value, such that anybody who has to buy anything (apart from perhaps food) has to pay taxes every time they spend any money. Poor people in the US are already charged taxes (state and local) for most everything that they buy. That's not such a terrible thing, but it would be a good idea to raise the marginal rates on all forms of income - not just wages, but capital gains and other forms of income. It is very easy for wealthy people to shield income from taxation in the US.

Back to the original subject - would it be possible to get a majority of people to vote for real reform (electoral financing and taxation)? It seems like the wealthy and their minions have been able to get a large number of ordinary taxpayers to vote against their own interests in the name of "conservatism". Worse, since the SCOTUS ruled that corporations and un-named groups can dump unlimited money into political campaigns as "free speech" I fear that the rights of actual citizens and voters will be drowned out in perpetuity unless that ruling is overturned. The Right is building an oligarchy in the US, and they are relentless.

 

[Vanadium 50]

How do 40% get off paying any tax?

It's up to 47%. This is federal income tax only - states can have their own income tax, their own sales tax, both or neither. Here is a http://www.cbsnews.com/stories/2010/04/07/national/main6372418.shtml" which discusses why.

The US Federal system is quite progressive. The top ~3% or so of taxpayers pay as much in income tax as the bottom 97% or so.

 

[cobalt124]

It's up to 47%. This is federal income tax only - states can have their own income tax, their own sales tax, both or neither. Here is a http://www.cbsnews.com/stories/2010/04/07/national/main6372418.shtml" which discusses why.

The US Federal system is quite progressive. The top ~3% or so of taxpayers pay as much in income tax as the bottom 97% or so.

Thankyou for the link. I may be reading this wrong, but it looks to me that your tax system needs an overhaul. People should not make money off a tax system. Anybody who works should surely pay some tax. I'm all for tax rates to be linked to income, but this seems a bit out of balance. Is this tax system popular? You say it's quite progressive, so I'm probably not seeing the big picture here.

 

[Vanadium 50]

I've split this off to its own thread.

Is the tax system popular? It's fair to say its more popular with the 47% of the population that's paying no income tax than the 1% of the population that pays 35% of the income tax.

 

[Mech_Engineer]

Some facts about US federal income tax from 2005. Not sure what it is today, I poked around on the IRS website some and couldn't navigate the monstrosity.

In 2005:
Top 50% of earners (approx $45,000+) paid 97% of all taxes.
Top 25% of earners (approx $80,000+) paid 86% of all taxes.
Top 1% of earners (approx $250,000+) paid 39% of all taxes.

Household income in US: http://en.wikipedia.org/wiki/Household_income_in_the_United_States

IRS data: http://www.irs.gov/pub/irs-soi/05in05tr.xls
[PLAIN]http://www.rushlimbaugh.com/home/menu/irs_screen_grab.MainParTop.82655.ImageFile.jpg

 

[Jack21222]

Thankyou for the link. I may be reading this wrong, but it looks to me that your tax system needs an overhaul. People should not make money off a tax system. Anybody who works should surely pay some tax. I'm all for tax rates to be linked to income, but this seems a bit out of balance. Is this tax system popular? You say it's quite progressive, so I'm probably not seeing the big picture here.

Anyone who works DOES pay some taxes. All workers, regardless of income, have to pay into medicaid and social security. They also have to pay federal income tax, but that is, in many cases, offset by tax credits for doing things the government likes (going to college, owning a house, having kids, etc).

For example, if you make 8000 a year in income, you still technically owe 10%. But then there is the standard deduction of 5700, so your income was only 2300, so it's 10% of that. Most people in that situation will have some sort of tax credit they qualify for, so the net result is they don't pay any tax.

One thing to keep in mind is that in some places, things like a college education and health care are free to the end-user. Here, we have to pay for health care, and a lot of college is subsidized through the tax code.

For example, in the UK, a poor person might have to pay some income tax, but they get free health care. Here, they have to pay for health care, but they don't have to pay any net income tax. It balances out in the end.

 

[cobalt124]

In the U.K. we have income tax, a local tax and a "goods purchased tax". The U.S. system does seem to me to be overweighted towards the well off (I never thought I'd ever be saying that), and I don't understand why it is allowed for people to make money off it, though the system is going to be a lot more complicated than the U.K. one. Maybe I'm reading the numbers wrong. Anyway, at least I'm learning something about the U.S. tax system.

 

[Mech_Engineer]

Another interesting fact from the Wall Street Journal: "In 1980 when the top icome tax rate was 70%, the richest 1% paid only 19% of all income taxes; now, with a top rate of 35%, they pay more than double that share."

So when the top income tax bracket was cut in half, the contribution of the rich to the total amount of taxes coming in more than doubled! Counterintuitive, but true...

 

[WhoWee]

Anyone who works DOES pay some taxes. All workers, regardless of income, have to pay into medicaid and social security. They also have to pay federal income tax, but that is, in many cases, offset by tax credits for doing things the government likes (going to college, owning a house, having kids, etc).

For example, if you make 8000 a year in income, you still technically owe 10%. But then there is the standard deduction of 5700, so your income was only 2300, so it's 10% of that. Most people in that situation will have some sort of tax credit they qualify for, so the net result is they don't pay any tax.

One thing to keep in mind is that in some places, things like a college education and health care are free to the end-user. Here, we have to pay for health care, and a lot of college is subsidized through the tax code.

For example, in the UK, a poor person might have to pay some income tax, but they get free health care. Here, they have to pay for health care, but they don't have to pay any net income tax. It balances out in the end.

The US system provides an Earned Income Tax Credit (EITC) that caps at approx $50,000 for a family of 4 - their eligibilty is roughly a $5,000 cash payout - it is NOT based on taxes paid in - it was designed to return Social Security contributions to low income people.

 

[cobalt124]

The US system provides an Earned Income Tax Credit (EITC) that caps at approx $50,000 for a family of 4 - their eligibilty is roughly a $5,000 cash payout - it is NOT based on taxes paid in - it was designed to return Social Security contributions to low income people.

Are you saying that a family of four with an income of $50,000 or less is eligible to a $5,000 dollar payout, and that the system was not originally designed to do this? That does sound excessive, though I don't know the price of goods in the U.S. (but I always thought things were cheaper over there).

 

[russ_watters]

Anyone who works DOES pay some taxes. All workers, regardless of income, have to pay into medicaid and social security.

You'll probably want to be careful how you characterize Social Security, lest you inadvertently characterize it in a way you don't want. The reason SS is treated differently in measuring taxes paid is that it is much different in how the money is used. With your other taxes, you pay with no expectation of getting the money back. The fact that I pay money toward the President's salary and 47% of the population doesn't, does not mean he works for me and not for them - he works for all of us equally. Even with the flat tax on state services, if I pay twice the taxes someone else does, that doesn't mean I'm granted twice the access to roads or police.

The way SS has been sold to the public is that you pay in and you eventually get that money back, plus interest. So SS taxes and payments are based on your income and the cap on taxable income is also the cap on payments out.

But if SS is restructured to divorce the payments in from the payments out, it becomes a simple redistribution scheme, taking from the rich and giving to the poor, but also taking from one generation and giving it to the next.

So if you see SS as a forced retirement savings plan, it makes sense to treat the money separately in statistics like people have done above. If you want SS included because the logic behind the tax changes (say, welfare for the elderly), then you open a huge can of worms about the purpose of SS that I don't think you want to open.

[edit] Heck, since the SS fund was never meant to be self-sustaining based on each individual's contributions, eliminating it would still reduce the rich-poor divide in a pure $$ measurement.

One thing to keep in mind is that in some places, things like a college education and health care are free to the end-user. Here, we have to pay for health care, and a lot of college is subsidized through the tax code.

For example, in the UK, a poor person might have to pay some income tax, but they get free health care. Here, they have to pay for health care, but they don't have to pay any net income tax. It balances out in the end.

Um, well, no it most certainly does not balance out in the end. The whole reason we're having this discussion is too point out that the rich pay vastly more than the poor and middle classes for the same services. If you add-in enough services you'll eventually reach a level where the poor can't continue paying nothing otherwise the government won't have enough money to fund the services. So the poor would pay some small amount. That would eliminate the divide-by-zero error in the calculation, but the difference in burden in actual dollars would still increase.

 

[Ygggdrasil]

The US Federal system is quite progressive. The top ~3% or so of taxpayers pay as much in income tax as the bottom 97% or so.

Note that it can be somewhat misleading to consider only the share of taxes contributed by each income bracket. For example, in the case of a flat tax system (one where everyone pays the same percentage of their income regardless of their earnings), the top 3% of taxpayers would pay as much in income tax as the bottom 97% if the top 3% of taxpayers earned as much as the bottom 97%.

So, these numbers need to be taken into context with how income is distributed within the society. So, let's add the proper context to the numbers Mech_Engineer provided:

In 2005:
Top 50% of earners (approx $45,000+) accounted for 87% of income and paid 97% of income taxes.
Top 25% of earners (approx $80,000+) accounted for 68% of income and paid 86% of income taxes.
Top 1% of earners (approx $250,000+) accounted for 21% of income and paid 39% of income taxes.
(income data from IRS link provided by Mech_Engineer)

Clearly the US income tax is progressive, but perhaps less progressive than it seems without considering the share of income generated by each group of earners.

Another interesting fact from the Wall Street Journal: "In 1980 when the top icome tax rate was 70%, the richest 1% paid only 19% of all income taxes; now, with a top rate of 35%, they pay more than double that share."

So when the top income tax bracket was cut in half, the contribution of the rich to the total amount of taxes coming in more than doubled! Counterintuitive, but true...

Therefore, data like these reflect the growing income inequality in the US. While the economy has grown significantly since the 1980s, most of the growth has gone to the top earners and comparatively little has gone to the lower and middle classes.

 

[Mech_Engineer]

So, these numbers need to be taken into context with how income is distributed within the society. So, let's add the proper context to the numbers Mech_Engineer provided:

In 2005:
Top 50% of earners (approx $45,000+) accounted for 87% of income and paid 97% of income taxes.
Top 25% of earners (approx $80,000+) accounted for 68% of income and paid 86% of income taxes.
Top 1% of earners (approx $250,000+) accounted for 21% of income and paid 39% of income taxes.
(income data from IRS link provided by Mech_Engineer)

...

Therefore, data like these reflect the growing income inequality in the US. While the economy has grown significantly since the 1980s, most of the growth has gone to the top earners and comparatively little has gone to the lower and middle classes.

Thanks for the extra context. Even with it though, it's important to note that it isn't the job of taxes to narrow the income disparity in the country! The rich get richer because they have good fiscal practices; the poor get poorer because they have poor fiscal practices. This can be seen in the bankruptcy rate in lottery winners and professional athletes for example: even when given ridiculous amounts of money, a person with poor fiscal responsibility will blow it away no problem.

Clearly the US income tax is progressive, but perhaps less progressive than it seems without considering the share of income generated by each group of earners.

Be that as it may, it really puts calls to "make the rich pay their fair share of taxes" into perspective... they already pay out the nose!

 

[WhoWee]

Another interesting fact from the Wall Street Journal: "In 1980 when the top icome tax rate was 70%, the richest 1% paid only 19% of all income taxes; now, with a top rate of 35%, they pay more than double that share."

So when the top income tax bracket was cut in half, the contribution of the rich to the total amount of taxes coming in more than doubled! Counterintuitive, but true...

Ahh, the good old days of tax shelters. Your post should be mandatory reading for all politicians (IMO). Raising the top tax rate does not work . Rich people find ways to protect themselves - even if it means leaving the US (financially).

Also IMO/observation, most working people are willing to pay a fair amount of taxes and most people (the bottom 50%) are typically not subject to "Capital Gains".

At the same time, it's generally accepted that unemployment (lack of jobs) and reduced tax revenues (deficit spending) are current (2010) problems.

Given these variables, how should elected representatives address the problem - raise rates/lower rates, cut spending/increase spending, or maybe engage in class warfare and contiue the "shell game"?

IMO, this would be a logical path to follow:
1.) Raise the top rates for families earning over $50,000 by 5% at all levels.
2.) Eliminate the EITC
3.) Promote investment in the US with accelerated depreciation schedules for capital equipment (purchased from US manufacturers)
4.) Reduce Capital Gains on US based activities by 5%.
5.) Increase Capital Gains on foreign investments by 5%.
6.) Encourage savings (up to 50% of income) in tax deferred retirement funds (US based only) and expand HSA's (and similar programs) - restrict lending of these funds (by banks) to domestic investment and lowest risk.

7.) Cut government spending by 40% (a few ideas: eliminate duplication, renegotiate union contracts, cut foreign aid, cut SSDI spending (primarily Bi-Polar disorder), cut Medicaid spending (address emergency room visits - send non-emergencies to a clinic or require they have a PCP), (restore) Social Security rate and increase to 8% AND eliminate the cap on SS max (but reduce to 4% at $100,000) AND increase the SS and Medicare ages by 3 years).
8.) Seek a return on investment from defense spending

Last week, someone asked me what I thought was the greatest problem faced in the US today? My response was a lack of direction and purpose. The Chinese plan in 250 year+ increments, we plan in 90 day increments and election cycle to election cycle - it's a disgrace.

The top priority of the US should be to protect the US - now and in the long term. Tax policy needs to encourage investment in the US. Tax policy needs to encourage savings to protect against unforeseen future economic downturns and retirement. Tax policy needs to guarantee that, regardless of the Party in power, the "Golden Goose" continues to lay golden eggs - and not be eaten in a singl meal.

 

[WhoWee]

Are you saying that a family of four with an income of $50,000 or less is eligible to a $5,000 dollar payout, and that the system was not originally designed to do this? That does sound excessive, though I don't know the price of goods in the U.S. (but I always thought things were cheaper over there).

Approximately - yes - here's a quick summary.

http://www.consumeraffairs.com/news04/2010/12/taxpayers-to-see-more-generous-deductions-in-2011.html

"The maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,751, up from $5,666 in 2010. The maximum income limit for the EITC rises to $49,078, up from $48,362 in 2010.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children. "

 

[Mech_Engineer]

Raising the top tax rate does not work . Rich people find ways to protect themselves - even if it means leaving the US (financially).

...

IMO, this would be a logical path to follow:
1.) Raise the top rates for families earning over $50,000 by 5% at all levels.

You say that raising taxes does not increase federal income, yet you want to raise taxes on people making more than $50,000? What is your reasoning behind it? Why $50,000? What's the purpose of the tax hike?

 

[WhoWee]

You say that raising taxes does not increase federal income, yet you want to raise taxes on people making more than $50,000? What is your reasoning behind it? Why $50,000? What's the purpose of the tax hike?

It's a reasonable increase. When rates were 70%, investors had no choice but to find shelters. An increase of 5% is a collectable amount.

 

[Mech_Engineer]

It's a reasonable increase. When rates were 70%, investors had no choice but to find shelters. An increase of 5% is a collectable amount.

Why is 5% a "reasonable" amount? What would be achieved through the increase? It certainly wouldn't cover the current federal deficit...

 

[WhoWee]

Why is 5% a "reasonable" amount? What would be achieved through the increase? It certainly wouldn't cover the current federal deficit...

The amount of the increase is reasonable - on it's own 5% won't cover the deficit. Together with the other items I specified, the multiple problems would be addressed comprehensively.

 

[Mech_Engineer]

The amount of the increase is reasonable - on it's own 5% won't cover the deficit. Together with the other items I specified, the multiple problems would be addressed comprehensively.

You assume a 5% increase would result in higher federal income. What if we are on the falling edge of the Laffer Curve rather than the rising edge? The Bush tax cuts significantly increased federal income- this suggests to me we are (and still are) on the falling edge of the Laffer Curve. Therefore it seems to me that a 5% increase would result in less federal income.

I think we should do the following to get out of the economic trouble we're in:

• We need to balance the Federal budget. If the budget isn't balanced, we're prepetually screwing ourselves. This would be a painful process, but it can't be looked at as optional any more.
• Major overhaul of the US tax code. Imagine the savings that would be realized in IRS resources if a flat tax was implemented. I think a flat tax of 15-20% would be reasonable for a starting point.
• Cut corporate taxes. This will have a two-fold effect- incentivise companies to expand and hire (supply), and give consumers (employees) more money in their pocket for buying power (demand). Tax cuts also need to be implemented permanently rather than for a 5-10 year period, so that companies do not feel the need to stave off a tax increase that's just around the corner.
• Expand US manufacturing/export incentives. I personally like the German implementation- income made on all exported products are tax-free. Germany is a huge export powerhouse because of this policy and only have a population of 80 million; imagine what would happen to the US manufacturing base if similar incentives were implemented here!

 

[Jack21222]

You'll probably want to be careful how you characterize Social Security, lest you inadvertently characterize it in a way you don't want.

I characterized it exactly how I want.

Um, well, no it most certainly does not balance out in the end. The whole reason we're having this discussion is too point out that the rich pay vastly more than the poor and middle classes for the same services.

First off, no, the reason we're having this discussion is comparing the US system to foreign systems. Secondly, that's the context in which I made the "it balances out" statement. Compared to foreign countries, they make their credits to the poor more explicit, while in the US, we merge it with the tax code. It all balances it out.

Mech_Engineer:

Be that as it may, it really puts calls to "make the rich pay their fair share of taxes" into perspective... they already pay out the nose!

There are no calls to "make the rich pay their fair share" that I'm aware of. There are calls to raise taxes on the rich to help pay for government spending, and the fact is that the rich have more money to be ABLE to pay higher taxes.

If you raise taxes on that family making 50k per year, they have to cut back on important things, like college savings plans, food, et cetera. If you raise taxes on the rich, unless they were living very extravagantly compared to their means, they don't have to cut back on their lifestyle at all. Maybe they only put 50k instead of 75k into their hedge fund this year. Big deal.

WhoWee:

7.) Cut government spending by 40% (a few ideas: eliminate duplication, renegotiate union contracts, cut foreign aid, cut SSDI spending (primarily Bi-Polar disorder), cut Medicaid spending (address emergency room visits - send non-emergencies to a clinic or require they have a PCP), (restore) Social Security rate and increase to 8% AND eliminate the cap on SS max (but reduce to 4% at $100,000) AND increase the SS and Medicare ages by 3 years).

None of these things would even come CLOSE to reaching 40%.

 

[WhoWee]

You assume a 5% increase would result in higher federal income. What if we are on the falling edge of the Laffer Curve rather than the rising edge? The Bush tax cuts significantly increased federal income- this suggests to me we are (and still are) on the falling edge of the Laffer Curve. Therefore it seems to me that a 5% increase would result in less federal income.

I think we should do the following to get out of the economic trouble we're in:

• We need to balance the Federal budget. If the budget isn't balanced, we're prepetually screwing ourselves. This would be a painful process, but it can't be looked at as optional any more.
• Major overhaul of the US tax code. Imagine the savings that would be realized in IRS resources if a flat tax was implemented. I think a flat tax of 15-20% would be reasonable for a starting point.
• Cut corporate taxes. This will have a two-fold effect- incetivise companies to expand and hire (supply), and give consumers (employees) more money in their pocket for buying power (demand). Tax cuts also need to be implemented permanently rather than for a 5-10 year period, so that companies do not feel the need to stave off a tax increase that's just around the corner.
• Expand US manufacturing/export incentives. I personally like the German implementation- income made on all exported products are tax-free. Germany is a huge export powerhouse because of this policy and only have a population of 80 million; imagine what would happen to the US manufacturing base if similar incentives were implemented here!

You've made it difficult for me to defend only 1 leg of my 8 legged (post) - therefore, I'll respond to your list.

Budget: a balanced budget is very good -but after reducing the size and scope of Government (by 40% IMO).
Flat Tax: is a great idea - but will never be passed - it's too fair. Instead, as long as higher income individuals pay slightly more - the Left will approve - AND as long as the bottom 50% pay something - the top 50% will agree to pay a little more (IMO) - especially if up to 50% could be tax deferred.
Cut Corp Taxes: YES, I agree -however, we need domestic investment incentives now - if we hope to get people back to work. In the long term - our corporate rate is excessive.
Increased Exports: I agree again - and to facilitate, we need to promote domestic investment.

 

[WhoWee]

WhoWee:

None of these things would even come CLOSE to reaching 40%.

We have to start somewhere.

Social Security, Medicare, and Medicaid are projected to double (then triple) in cost - all borrowed funds subject to interest expense.
http://www.gao.gov/cghome/townhall092905/img18.html

 

[Mech_Engineer]

Budget: a balanced budget is very good -but after reducing the size and scope of Government (by 40% IMO).

The only way to balance the budget at this point is to reduce the size of government and the number of wealth redistribution programs!

Flat Tax: is a great idea - but will never be passed - it's too fair. Instead, as long as higher income individuals pay slightly more - the Left will approve - AND as long as the bottom 50% pay something - the top 50% will agree to pay a little more (IMO) - especially if up to 50% could be tax deferred.

You could be right that it's too fair. The real problem is that we're nearing the point that more than 50% of the population will not be paying taxes, meaning more than 50% of the voting population will have a voting majority to keep it that way... once that happens, it's just a matter of time before chatastrophic breakdown IMO.

More than anything I disagree with letting anyone (let alone a huge segment of society) go tax-free. If everyone's paying taxes, everyone has a stake in the success (or failure) of the government; conversely if 50% of the population is dependent on the government and pays no taxes, they will tend to want to support that system of dependency, regardless of cost to the people paying taxes. In essence they are voting for their income (which they will tend to want to increase), rather than how much of their income is taken away (which they would want to minimize)...

 

[Jack21222]

We have to start somewhere.

Social Security, Medicare, and Medicaid are projected to double (then triple) in cost - all borrowed funds subject to interest expense.
http://www.gao.gov/cghome/townhall092905/img18.html

Right, but what you outlined hardly qualifies as a start.

 

[WhoWee]

More than anything I disagree with letting anyone (let alone a huge segment of society) go tax-free. If everyone's paying taxes, everyone has a stake in the success (or failure) of the government; conversely if 50% of the population is dependent on the government and pays no taxes, they will tend to want to support that system of dependency, regardless of cost to the people paying taxes.

This is why I want to eliminate the Earned Income Tax Credit program.

The average income (nationally) is approximately $50,000 currently and the EITC runs to approximately $49,000 for a family. EITC was designed and intended to give back Social Security contributions to low income people (something I can't comprehend as this is the group who wiill reap the greatest benefit in the future). Somehow, the giveback now exceeds the contributed amount? Worse yet, a great many people think of EITC as a REFUND. EITC is not a tax refund - a refund implies you had over-paid your taxes.


I'd like to share a personal story - IMO - this summarizes a portion of our problem.
I had a conversation with a person at the end of November. She was playing the lottery and said all she wanted was to win $1 million dollars - so she could get off welfare. I smiled and quizzed her. It turns out that she's always been on some type of Government relief program. As a teenager, she had a few children out of wedlock and received (ADC?), food stamps, Medicaid, and qualified for housing (plus utility assistance). She was actually emancipated as a teen and lived independently (at Government expense) while in high school. When eligible for college, she received grants and continued with other benefits. She disclosed that her social worker is special and has really "hooked her up" through the years.

After telling me her story, together we figured out the value of her Government benefits and she concluded they exceed $20,000 per year. When I explained that she's already a Millionaire, she looked at me as though I was insane and demanded an explanation. I responded that $20,000 per year for 50 years was $1 million in benefits - she's already received over 35 years of benefits - and that she would probably receive quite a bit more (she figures at least another 35 years) - to which she agreed. She thanked me and bought me a lottery ticket - then winked and said she guessed she could afford it.

I agreed and took the ticket - it was a loser.

 

[WhoWee]

Right, but what you outlined hardly qualifies as a start.

Ok, what do you think would be more effective?

 

[Jack21222]

Ok, what do you think would be more effective?

Military spending.

 

[WhoWee]

Military spending.

Can you be more specific?

 

[Vanadium 50]

Well, this is drifting away from taxes and onto spending.

I will suggest that people take a look at what the federal budget is before deciding how to change it. For example, if you take the 2009 budget, and zero out the entire discretionary program - including the military - you still wouldn't balance the budget. You also should take a look at Treasury rates and ask yourself what would happen if rates moved up from historic lows to more typical levels.

 

[JonF]

http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.png"
Defense(782B): 23%
Social Security(678B): 20%
Medicare and Medicaid(676B): 19%
Other Mandatory(607B): 17%
Other Discretionary(437B): 12%
Interest(187B): 5%
TARP(151B): 4%

http://en.wikipedia.org/wiki/File:U.S._Federal_Receipts_-_FY_2007.png"
Individual Income Tax (915B): 43%
Social Security and Social Insurance (891B): 42%
Corporate Taxes (138B): 7%
Other (99B):5%
Excise Taxes(62B): 3%

This means we spend roughly 1.4T more than our revenue. Or we would need to cut spending by 40% to balance the budget.


I was just wondering where and how those in this thread purpose on cutting from the budget, or increasing revenue?

 

[WhoWee]

http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.png"
Defense(782B): 23%
Social Security(678B): 20%
Medicare and Medicaid(676B): 19%
Other Mandatory(607B): 17%
Other Discretionary(437B): 12%
Interest(187B): 5%
TARP(151B): 4%

http://en.wikipedia.org/wiki/File:U.S._Federal_Receipts_-_FY_2007.png"
Individual Income Tax (915B): 43%
Social Security and Social Insurance (891B): 42%
Corporate Taxes (138B): 7%
Other (99B):5%
Excise Taxes(62B): 3%

This means we spend roughly 1.4T more than our revenue. Or we would need to cut spending by 40% to balance the budget.


I was just wondering where and how those in this thread purpose on cutting from the budget, or increasing revenue?

I'll cite my Post 17 above.

"IMO, this would be a logical path to follow:
1.) Raise the top rates for families earning over $50,000 by 5% at all levels.
2.) Eliminate the EITC
3.) Promote investment in the US with accelerated depreciation schedules for capital equipment (purchased from US manufacturers)
4.) Reduce Capital Gains on US based activities by 5%.
5.) Increase Capital Gains on foreign investments by 5%.
6.) Encourage savings (up to 50% of income) in tax deferred retirement funds (US based only) and expand HSA's (and similar programs) - restrict lending of these funds (by banks) to domestic investment and lowest risk.

7.) Cut government spending by 40% (a few ideas: eliminate duplication, renegotiate union contracts, cut foreign aid, cut SSDI spending (primarily Bi-Polar disorder), cut Medicaid spending (address emergency room visits - send non-emergencies to a clinic or require they have a PCP), (restore) Social Security rate and increase to 8% AND eliminate the cap on SS max (but reduce to 4% at $100,000) AND increase the SS and Medicare ages by 3 years).
8.) Seek a return on investment from defense spending"

We clearly need to cut spending AND increase tax revenues - which are down significantly due to the recession.

Mech also makes a very good point - the US corporate tax rates are among the highest in the World - that will need to be addressed in the next few years as well.

 

[turbo]

I was just wondering where and how those in this thread purpose on cutting from the budget, or increasing revenue?

That's where the rubber hits the road. At some point, we need to stop being the world's policeman, IMO, and provide for our own defense. Much of the foreign-aid we funnel to allies is in the form of military armament, and that should stop, too.

Slash farm subsidies that take farmland out of food production and that subsidize the production of ethanol that costs more to make than it is worth, and is contaminating our fuel supplies so that it is difficult to maintain small-engines that are used only seasonally, like outboard motors, wood-splitter, chain-saws, etc. I have a friend who is a small-engine specialist and much of his business is now driven by decomposing fuel, rotted fuel lines, clogged fuel filters, etc. He used to do mostly rebuilds, now his shop is jammed up with nickel and dime repairs caused by crappy fuel. Can't get pure gasoline anymore, and many older engines don't perform properly on anything but...

These are not just drop-in-the-bucket fixes, but can have a real stimulative effect that can provide multipliers. Stop taxing me to give money to Agri-giants that make ethanol, and then I can get decent fuel that lasts for a while in storage, and I don't have to pay the extra "tax" of buying fuel-stabilizers or paying for unnecessary repairs. I hadn't used my chain saw in a couple of years and when I needed it recently, the fuel line had collapsed and stuck together due to crappy fuel. Never happened before in 30+ years.

Luckily, my tractor was designed to run on ultra-low-sulfur diesel, because that's the only stuff you can buy around here these days. Lots of government regulations and mandates have costs that impact businesses all over. Imagine being a commercial fisherman and having to pay for hundreds of gallons of diesel a week, AND having to cope with the reality that you can only get ultra-low-sulfur diesel at the docks because there aren't any refineries in Maine. Oops! Lower lubricity means more frequent rebuilds and resultant down-time and loss of income? Too bad to be you.

 

[JonF]

More stats...


http://en.wikipedia.org/wiki/Wealth_in_the_United_States" is the best numbers i could find for this with a quick look:

0-20% have a mean net worth of 72.6k or 2% of the total net worth
20-39.9% have a mean net worth of 121.5k or 3% of the total net worth
40-59.9% have a mean net worth of 194.6k or 5% of the total net worth
60-79.9% have a mean net worth of 340.8k or 9% of the total net worth
80-89.9% have a mean net worth of 487.4k or 13% of the total net worth
90-100% have a mean net worth of 2,534.60k or 68% of the total net worth

http://en.wikipedia.org/wiki/Military_budget_of_the_United_States#cite_note-Budget_FY2010-0"
Family Housing $3.1 billion or 0.4%
Military Construction $23.9 billion or 3%
Research, Development, Testing & Evaluation $79.1 billion or 11%
Procurement $140.1 billion or 20%
Military Personnel $154.2 billion or 23%
Operations and maintenance $283.3 billion or 41%

 

[JonF]

I'll cite my Post 17 above..

WhoWee, look at the numbers I posted. Your plans in Post 17, even if enacted simply won’t nearly be enough.

Turbo. Look at the numbers, Even if we reduced military spending to 0 and eliminated every federal subsidy it wouldn’t be enough.

 

[mheslep]

Here, we have to pay for health care,

Minus seniors over age 65, minus the poor who qualify for Medicaid, minus those in the military and some veterans. Minus all that and some more, at least http://news.yahoo.com/s/ap/20101014/ap_on_bi_ge/us_medicare_fraud_arrests"

 

[Mech_Engineer]

More stats...

http://en.wikipedia.org/wiki/Wealth_in_the_United_States" is the best numbers i could find for this with a quick look:

0-20% have a mean net worth of 72.6k or 2% of the total net worth
20-39.9% have a mean net worth of 121.5k or 3% of the total net worth
40-59.9% have a mean net worth of 194.6k or 5% of the total net worth
60-79.9% have a mean net worth of 340.8k or 9% of the total net worth
80-89.9% have a mean net worth of 487.4k or 13% of the total net worth
90-100% have a mean net worth of 2,534.60k or 68% of the total net worth

Mean net worth has nothing to do with what we've been discussing. So what if the "richest" people have a mean net worth of 2.5mil? At my current contribution rate, assuming 8% avg return and 3% raises every year, I'll have over $2mil in my 401k when I retire (interest on interest adds up fast when you're 35+ years from retirement). That points to good saving practices, not excess income.

 

[mheslep]

http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.png"
Defense(782B): 23%
Social Security(678B): 20%
Medicare and Medicaid(676B): 19%
Other Mandatory(607B): 17%
Other Discretionary(437B): 12%
Interest(187B): 5%
TARP(151B): 4%

http://en.wikipedia.org/wiki/File:U.S._Federal_Receipts_-_FY_2007.png"
Individual Income Tax (915B): 43%
Social Security and Social Insurance (891B): 42%
Corporate Taxes (138B): 7%
Other (99B):5%
Excise Taxes(62B): 3%

This means we spend roughly 1.4T more than our revenue. Or we would need to cut spending by 40% to balance the budget.

Closer to $1.6T this year.

I was just wondering where and how those in this thread purpose on cutting from the budget, or increasing revenue?

Rescind the balance of the stimulus, rescind the balance of TARP, restore all other spending to 2008 levels. That's a cut of over $1T.

 

[mheslep]

[*]Expand US manufacturing/export incentives. I personally like the German implementation- income made on all exported products are tax-free. Germany is a huge export powerhouse because of this policy and only have a population of 80 million; imagine what would happen to the US manufacturing base if similar incentives were implemented here!
[/LIST]

I like that idea; apparently its being called a 'territorial' tax system now: tax free exports, some taxes on imports.
http://www.expatintelligence.com/territorial-tax-systems.shtml

 

[turbo]

Turbo. Look at the numbers, Even if we reduced military spending to 0 and eliminated every federal subsidy it wouldn’t be enough.

Our country's budget is not a zero-sum game. Every subsidy and every mandate passes costs along to tax-payers. They might not show up as line-item taxes, but they oppress us all and we all have to pay. It's not enough to look at lines on a budget with revenues and expenditures all perfectly balanced out (they never are, BTW). You have to pay attention to the friction that our government imposes on our economy, and that is not insignificant.

 

[WhoWee]

WhoWee, look at the numbers I posted. Your plans in Post 17, even if enacted simply won’t nearly be enough.

Turbo. Look at the numbers, Even if we reduced military spending to 0 and eliminated every federal subsidy it wouldn’t be enough.

I agree that spending cuts alone will not solve the problem. Again, I'm suggesting ways to increase investment which will yield revenue in excess of prior years.

 

[mheslep]

I agree that spending cuts alone will not solve the problem.

Yes they can.

 

[Jack21222]

Yes they can.

Go ahead, cut 1.6 trillion from the budget. Post how much you cut, and from where.

 

[Mech_Engineer]

Go ahead, cut 1.6 trillion from the budget. Post how much you cut, and from where.

Problem is- if we don't start now, eventually things will chatastrophically collapse instead. Little pain now, or die later...

I would start with seriously gutting medicare/medicaid/welfare, obviously repeal obamacare because we haven't got the money for it, cut military spending (not to zero though, maybe .75-.5 what we spend now), privatize social security into 401k's asap, and start economic recovery through tax cuts and manufacturing incentives like the ones I posted above.

We've got to start thinking about these things now, if we don't things will get to the point of no return without seriously painful meausres...

 

[cobalt124]

Quote Mech Engineer - "The rich get richer because they have good fiscal practices; the poor get poorer because they have poor fiscal practices. This can be seen in the bankruptcy rate in lottery winners and professional athletes for example: even when given ridiculous amounts of money, a person with poor fiscal responsibility will blow it away no problem."

That's a bit of a sweeping generalisation, surely. There must be lots of other reasons why the poor are poorer.

Whoo Whee - I cant't comment on the effect your eight point plan may have, but if the EITC is giving out thousands of dollars like that I would think it at least needs serious reform, if not, as you say, abolishing.

Mech Engineer - similar, can't comment on the effects of the plan, but the Tax system does look over complicated and simplifying it would save on bureaucratic costs and reduce the chances of fiddling the system.

Quote Jack2122 - "it all balances out"

I think this would be fair comment if you trusted your government to oversee and overcomplicated tax system. I don't trust mine. In fact I shouldn't have to. There should be transparency.

Quote Whoo Whee - "it's too fair"

Maybe I'm too idealistic and not enough pragmatic, but why would "too fair" be a problem?

Quote Mech Engineer - "The only way to balance the budget at this point is to reduce the size of government and the number of wealth redistribution programs!"

This would be necessary, but there are other options. Cut defence? Cut research?

Quote Mech Engineer - "More than anything I disagree with letting anyone (let alone a huge segment of society) go tax-free. If everyone's paying taxes, everyone has a stake in the success (or failure) of the government; conversely if 50% of the population is dependent on the government and pays no taxes, they will tend to want to support that system of dependency, regardless of cost to the people paying taxes. In essence they are voting for their income (which they will tend to want to increase), rather than how much of their income is taken away (which they would want to minimize)..."

Agree with this.

EITC looks like a handout to me, not a tax refund.

I'm unable to give a possible comprehensive solution to this, just an outsiders perspective on the bits that look sensible and the bits that look daft.

 

[WhoWee]

I'm unable to give a possible comprehensive solution to this, just an outsiders perspective on the bits that look sensible and the bits that look daft.

I've always been a fan of common sense.

 

[Mech_Engineer]

That's a bit of a sweeping generalisation, surely. There must be lots of other reasons why the poor are poorer.

Are you making an argument, or are you just disagreeing because you're sure there's another reason, you just don't know what it is?

In reality, the poor are on average richer too. The gap has just widened between the richest and the poorest. But like I said, poor fiscal practices will tend to perpetuate poor economic position. You don't see payday and car title loans making a killing on the rich, do you?