Death and Taxes....

[GGT]

The only two Known Knowns in Life. Well, except for cryogenics believers like Alber (wherever the hell he is...) :

Joking aside, now that we've got both (R) and (D) taking our FUBAR tax code to the forefront, we're gonna have a national debate about

1) the purpose of taxation
2) the definition of tax "fairness"
3) taxation by representation
4) elected representatives relying on lobbyist or super-PAC money

Okay, #4 might be making the argument more complicated, at this time. But still....

By now, everyone's heard that Romney paid less than 15% on his multi-million dollar income, because he had no earned income from salary or wages. It's the same inequitable argument Warren Buffet makes; that he pays less income taxes than his secretary....and that we tax labor and work at higher rates than financial speculation investments. Even our 'high' corporate tax rate has been exposed as a myth, since the mega-international corporation GE paid zero federal tax, and instead received tax rebates.

Can we re-work a tax code that acknowledges the purpose and legitimacy of taxes?
Can we figure out what "fairness" means?
Can we rely on our elected representatives?

[Veldan Rath]

Someone correct me if I'm wrong, buy doesn't the company pay the corporate tax rate first, then pay out the capital gains (which gets taxed?) SO this 15% is a bit of a lie...er misstatement.

And did you see how much of his income he gave to charity? I'd say as an individual, he is doing a better job for the poor and helpful programs than any bureaucrat.

[Loki]

Someone correct me if I'm wrong, buy doesn't the company pay the corporate tax rate first, then pay out the capital gains (which gets taxed?) SO this 15% is a bit of a lie...er misstatement.

And did you see how much of his income he gave to charity? I'd say as an individual, he is doing a better job for the poor and helpful programs than any bureaucrat.

Why would most companies pay a capital gains tax? That's a tax on capital gains...I don't imagine most corporations (especially outside of the banking and consultant sectors) have much in the way of stocks of other companies...

[Nessus]

Someone correct me if I'm wrong, buy doesn't the company pay the corporate tax rate first, then pay out the capital gains (which gets taxed?) SO this 15% is a bit of a lie...er misstatement.

And did you see how much of his income he gave to charity? I'd say as an individual, he is doing a better job for the poor and helpful programs than any bureaucrat.

Whom does it help to pour money at denying legislation that benefits homosexuals?

[coinich]

To address one point; fairness usually means everyone does the same thing without exception. A fair tax would be everyone paying the same amount of money. Now a government cannot likely rely on everyone paying the same solid lump sum, so it works by percentages of income. A/The "fair" tax is when everyone pays the same percentage on their income.

[Flixy]

Someone correct me if I'm wrong, buy doesn't the company pay the corporate tax rate first, then pay out the capital gains (which gets taxed?) SO this 15% is a bit of a lie...er misstatement.

And did you see how much of his income he gave to charity? I'd say as an individual, he is doing a better job for the poor and helpful programs than any bureaucrat.

I don't know if you're wrong, but corporate tax is based on profits, so I could imagine that would be after paying out capital gains. But I could of course also be very wrong about this.

I do approve of charity donations being deductable, as long as there are decent criteria for becoming a charity. But yeah, not all deductions or 'loopholes' are bad, I would assume most are there for a reason other than paying less tax. And, at least over here, the amount you donate is significantly more than you would have otherwise paid in taxes. But I'm only really familiar with the Belgian tax shelter regulations, which allows deductions (under strict conditions) for money invested in a film, which is win-win: producers have money for film, and the companies that invest can deduct a part of that from their taxable income, and still gain money if the film is successful. Worst case, if the film flops, but the producer does not go bankrupt, they hardly lose money (though slightly more than if they had paid the taxes).

[Veldan Rath]

I don't know if you're wrong, but corporate tax is based on profits, so I could imagine that would be after paying out capital gains. But I could of course also be very wrong about this.

No, over here Capital Gains is after the corporation pays its taxes. (Correct Wiggin/Loki?)

[LittleFuzzy]

To address one point; fairness usually means everyone does the same thing without exception.

No it doesn't, not even close. That's what equality usually means, but fairness is WAY more complex than equality.

[coinich]

No it doesn't, not even close. That's what equality usually means, but fairness is WAY more complex than equality.

Not entirely certain why there's a difference here. Could you expand on what you mean a bit more?

[Aimless]

Not entirely certain why there's a difference here. Could you expand on what you mean a bit more?

If you take two people with very different levels of income and wealth, and just steal half of their money, you have given them equal treatment. However, you've left one with less money than he needs to survive the coming month, while you've left the other with enough money to buy another yacht full of food and porn. While both acts of theft are wrong and unfair, which is more wrong and unfair? Fairness can be assessed along several dimensions. Differences in outcomes is one such dimension.

[LittleFuzzy]

Not entirely certain why there's a difference here. Could you expand on what you mean a bit more?

Equality's simple. Everyone's the same and everyone gets treated the same, whether in total or proportional terms everyone is in parity with everyone else. But that in no way reflects the real world, does it? The impact is different, just as everyone's situations are different and fairness is concerned with conditions AFTER an action, not just before or during. It involves what people need, what they deserve, and what they've earned. The Marxist line "from each according to their ability, to each according to their need" is one interpretation of fairness, a libertarian's "don't tread on me" view is another. You can't reduce such a broad and interpretive term like that into a miserable tautology with equality. At best that's just one way of looking at fairness in an incredibly circumscribed framework and set of environmental conditions, one which you pretty much will never find actually appearing in reality.

[Veldan Rath]

I either explained it so badly the even you missed it OR I am not understanding the process myself.

Company A makes X$. They are taxed on it. Then the shareholders get their share of the leftovers and then get taxed at 15%...or am I wrong?

[Lebanese Dragon]

To address one point; fairness usually means everyone does the same thing without exception. A fair tax would be everyone paying the same amount of money. Now a government cannot likely rely on everyone paying the same solid lump sum, so it works by percentages of income. A/The "fair" tax is when everyone pays the same percentage on their income.

I think a much better analogy of what's fair when it comes to taxes is this. Imagine a small african village is moving somewhere. The male adults hold a basket that's 100 pounds, the female adults 60 pounds, and the kids 10 pounds. This is everyone carrying their fair burden. 10 pounds might only be 1/15 6.6% of the child's weight. Whereas 100 pounds might be 50% of the adults weight. But the child cannot lift half of their weight. Society functions best on a progressive system where the more you have the higher percentage you pay.

[Loki]

Kind of. But the value of stocks is only partially related to current earnings, and capital gains are paid only when the stocks are sold. I guess you could say the money is taxed twice, but you could that make argument about anything (i.e. a company pays a tax and then its employees have to pay a tax).

[wiggin]

No, over here Capital Gains is after the corporation pays its taxes. (Correct Wiggin/Loki?)

Kind of. But the value of stocks is only partially related to current earnings, and capital gains are paid only when the stocks are sold. I guess you could say the money is taxed twice, but you could that make argument about anything (i.e. a company pays a tax and then its employees have to pay a tax).

I think this logic might work better for qualified dividend payments, but not that much better. It's kinda like arguing that you shouldn't have to pay tax on the gain in value of a home after you sell it because you've been paying annual property tax. There's plenty of pseudo double-taxation around, but I don't think this is a particularly egregious example.

A much bigger issue IMO is the fact that most ordinary Americans don't really benefit from the lower taxes on long term capital gains. That's because the bulk of people's investments are tied up in 401(k)s and IRAs, which have many advantages, but have a big downside that distributions are taxed at income tax rates and not capital gains rates. I'm not sure this should change (the nature of tax-deferred growth and only partial distributions annually), but it means that outside of rich Americans who save/invest/earn far more than they can contribute to a tax protected account end up with fairly low marginal rates on the bulk of their earnings.

[Flixy]

Kind of. But the value of stocks is only partially related to current earnings, and capital gains are paid only when the stocks are sold. I guess you could say the money is taxed twice, but you could that make argument about anything (i.e. a company pays a tax and then its employees have to pay a tax).

Correct me if I'm wrong, but on that last bit, employers pay tax over their income, and wages are not part of the profit of a company and is therefore not taxed at the company level. So basically, a company makes money, spends a portion on wages, a portion on other costs, what's left over is profit and that is taxed. I don't see double taxation there.

[Veldan Rath]

And what happens when you have less 'men' to carry the weight?

[Lebanese Dragon]

The wealthier you are the higher percent one should be charged, this is the most logical. I can lose much more money when i'm a wealthy person before I change my lifestyle signinificantly (where I shop, what I buy, what I invest in, my quality of life etc...) Whereas the poorer you are those taxes really do affect your quality of life, if you invest, if you start a business, what you buy, how you live.

This is why when maximizing overall productivity and happiness of the society while still collecting taxes for government to function a progressive tax works best. Sometimes if you're too poor, don't get taxed at all.

[Veldan Rath]

So we can agree that taxes are to raise revenue for the government to function correct, and to raise that revenue in the most efficient way possible?

[wiggin]

Hmm. One could argue much more theoretically that the price of a business is determined not by past income but by an expectation of future income. If that expectation goes up, the value of your business goes up, and if you sell it you get a capital gain. So what we're really taxing is the improvement in expected income, while corporate income taxes are focused on annual profits. It's two fundamentally different metrics.

[Loki]

Most people probably wouldn't think it's fair to treat a 13-year-old who committed one burglary the same as they would a 30-year-old who committed a thousand.

[Hazir]

My simple solution is; no taxation on labour or capital of living people and a 100% tax on vertical transfers of wealth within families (including estates).

[Loki]

My simple solution is; no taxation on labour or capital of living people and a 100% tax on vertical transfers of wealth within families (including estates).

So if a 10-year-old kid loses both his parents, he should go bankrupt?

[Nessus]

So if a 10-year-old kid loses both his parents, he should go bankrupt?

Wouldn't that make them a ward of the state anyway?

[Loki]

Wouldn't that make them a ward of the state anyway?

Until 18. Plus he might have grandparents or uncles that can acts as trustees of the estate until he turns 18. According to Hazir, the kid's life is now screwed and he's at the total mercy of whatever welfare the state grants him.

[Nessus]

Until 18. Plus he might have grandparents or uncles that can acts as trustees of the estate until he turns 18. According to Hazir, the kid's life is now screwed and he's at the total mercy of whatever welfare the state grants him.

Hang on, I think I'm missing something. Hazir's post reads, to me, that the state just gets the entire inheritance (I'm not saying anything about the merits of the idea here). Okay, fine. So your kid with two decently earning parents who own a home get killed, the kid goes into the system and is fed and housed by the state (or foster parents in practice, but anyhows). Kid turns 18, he has the clothes on his back and whatever she's earned working at Mickey Dee's after class. How is that kid any more shafted than the kid with parents who have virtually nothing to contribute to the kid's own new household?

[Veldan Rath]

My simple solution is; no taxation on labour or capital of living people and a 100% tax on vertical transfers of wealth within families (including estates).

Hahahaha...wait, you're serious?

So we would really never own anything, just borrowing it (and growing it through our labor) from the state...and then leave nothing behind?

Isn't that how the Church consolidated power and land by forbidding priests to marry, thus no heirs?

Brilliant.

[wiggin]

I never got that idea. People accumulate capital for the future, and they have incentive to do more capital accumulation (i.e. more work) if they can pass excess capital to those they wish to. Furthermore, families are to a large extent economic units in and of themselves - they exist to amortize costs (be they education, healthcare, childcare, or retirement) across the members of the family. To place an artificial barrier on capital passage from one part of a family to another seems counterproductive and arbitrary.

I'm not opposed to estate taxes in general, though they do form a subclass of wealth taxes that I'm generally not a big fan of. But 100% taxes is counterproductive and excessive.

[ImAnOgre]

Why should the rich pay more of a percentage? Doesn't that discourage making more? I remember when I was an hourly employee, if I worked 20 hours of overtime, I moved into the next tax bracket, so I would always cut myself off at 19hours of overtime to keep from losing a ton of money.

I still feel like income tax is stupid though, we should move to a consumption based tax.

[Lebanese Dragon]

Why should the rich pay more of a percentage? Doesn't that discourage making more? I remember when I was an hourly employee, if I worked 20 hours of overtime, I moved into the next tax bracket, so I would always cut myself off at 19hours of overtime to keep from losing a ton of money.

From what I understand of the tax, and I don't spend my time looking at the stuff Wiggin, Rand, and whoever find interesting. The tax is done in brackets and only the amount of money that passes into bracket gets taxed at that rate. So meaning you can't lose money by going into a higher bracket, only gain less.


10k < 15%
10k>= 20%


Simple tax bracket here. if you made 11k. Your first 10k is taxed at 15%, and your last 1k will be taxed at 20%. So you don't lose money just start making less per hour, and you can compute that, and see if it's still worthwhile for you to keep working.