BusterAg said:
aggie93 said:
BusterAg said:
YouBet said:
And it's only getting worse even under Trump with his idiotic no tax on tips or overtime.
Can you help me with this logic?
How does a tax break on manual labor overtime and waitresses make the US tax system MORE progressive?
It lowers taxes further on people who barely pay any taxes now. Their perception is they are paying a lot but it's a pittance compared to someone who makes $300k proportionately. It's populism so that's on brand for Trump and I get it, most people have no clue about economics and they have little understanding of how insane our tax code is. If you are a family of 4 making $75-100k you pay virtually nothing in income taxes, it's possible you actually get more money back depending on how you have your deductions and pay structured. This will make that even more extreme.
The problem is it detaches taxation from a majority of the populace as being nothing or next to nothing to them. Thus they have no skin in the game. Add in some media and pols saying "The rich don't pay their fair share" and it only gets worse. The assumption becomes that the guy who makes $300k also pays almost nothing when in reality they are paying a massive tax bill that is often more than their mortgage and car combined. We don't educate people though so the ignorance only builds and populists will take the easy path of making more people who pay almost no taxes and increasing taxes on the people who do because there aren't enough of them to vote against you. Then you layer on stuff like how the truly rich are able to avoid taxes through things like borrowing against equity and a ton of other methods yet the politicians talk about those people as though raising income taxes is about sticking it to them when they pay almost nothing. The current system absolutely hammers the upper middle class, especially W-2 employees, at a ridiculously disproportionate level.
The solution is to get rid of income taxes and have a consumption tax and tariffs with exceptions for staple goods and housing. You can send citizens a rebate every year as well so it can make it so that essentially anyone at the low end pays effectively nothing. This makes administration far simpler and makes it so that everyone has skin in the game for the most part. The current system is incredibly inefficient. A consumption tax with no income tax would result in far more revenue and solve so many issues.
Of course the truth is that none of this has to do with fairness or revenue collection, it's about power. There is no single thing that gives the government more power over you than the tax code and the ability to manipulate it with incentives and disincentives to force you to act as they want and to control you.
I can, in some ways, respect this opinion.
But I believe that this type of analysis ignores a reality.
These people that pay very little income tax probably have an overall tax burden that is higher as a percentage of their income than top earners, precisely BECAUSE the majority of the taxes that they pay are consumption and other taxes.
Almost all of the analyses that I see that say that tax breaks for lower tax brackets are progressive fail to even attempt to look at the percentage of total taxes people pay compared to their income in those income ranges. They isolating income taxes, ignoring consumption taxes in the analysis, to say that the income tax is progressive, and then use that analysis to advocate for a universal consumption tax, which is obviously less progressive than any type of reasonable income tax scheme.
Don't be surprised if I call such an analysis specious. It's not properly looking at holistic tax policy at the margin, which you attempt to be doing when you argue about the relative tax burden paid for by a waitress compared to a CEO.
The topic was about income taxes so I focused on that. However since you are talking about all taxes....
Most Federal taxes a low income earner pays are SS and Medicare taxes. I'm all for reforming those as well but that's much messier because of how badly those programs are structured and the fact people understand those programs even less than income taxes (such as how all the money just goes in the General fund anyway and there is no actual fund, it's just revenue) and they are Entitlement programs that have a litany of other issues. I don't think you can address both those taxes and Income taxes at the same time outside of an intellectual discussion.
Consumption taxes currently are almost exclusively State and Local with a few exceptions (Federal Gas Tax for instance). I did address the inequality issue you brought up though because any VAT/Sales/Consumption tax plan that has been brought forth has 2 things on that. First it has exceptions for staple items such as groceries. Second it would have a rebate for every Citizen that would be the equivalent of the amount of taxes they pay assuming they made up to a certain amount based on spending patterns. For instance averaging the amount of money someone would pay annually if they make $50k and sending everyone a check for that amount. That way the lower income folks get relief but the government also has no need to know how much money people make or to have power over them based on that. It also treats money equally. If you are paid in a tax advantaged way or have a business or equities that allow you to avoid income taxes you can't avoid consumption taxes unless you simply don't buy anything.
The best tax system is a simple and flat amount at a low enough level that it has minimal impact on buying behavior. A relatively low consumption tax accomplishes that. No one wants to pay taxes but people just accept when you buy something now you have to add on a percentage already so an increase in that amount wouldn't be that traumatic. It would make sure that people can't avoid it though by creative accounting and so long as the amount isn't so high it creates a black market you will have a big increase in economic activity that both creates revenue and jobs and commerce (thus less need for governmental assistance).
BTW, most CEO's can't avoid taxes unless they have massive equity that they have already earned (they pay tax when they earn it or cash it out). Who does avoid taxes though are people with significant equities and assets because they can borrow against those equities at a very low interest rate and technically make no income and thus avoid tax, it's a tried and true strategy. The thing is you have to have enough equities and assets to pull that off and only the truly wealthy can for the most part. Usually it isn't even them who benefits but their children who are trust fund babies. Those folks couldn't care less what the tax rate is because they are able to avoid taxes with this method, many don't even know how it works they just have an accountant and attorney that their parent set up to take care of it for them. That's why so many of the truly wealthy are liberals. It also is how you end up with stories about how "Super rich guy pays no taxes! The rich must pay their share!" yet the way they want to do it is by raising taxes on income which is paid by the Upper Middle Class on W2 primarily. The only way to get the truly rich to pay those taxes is by a consumption tax so when they spend their money they pay.
I don't want additional burdens on the lower income folks who are trying to get by but I've already addressed how that gets fixed. The people who get abused in our current system are higher W2 income earners without enough assets to live off borrowing against them, mainly because they are in a chicken and egg issue of trying to grow equity when their income is taxed at such a high rate they can't accumulate it. They also lose basically all deductions and have to pay a premium for everything (such as health care and college tuition for their children which are usually means tested).
