Read this, Not Political Flaming Please. Taxes

Discussion in 'Off-Topic' started by maxpower097, Jun 1, 2012.

  1. maxpower097

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  2. Wendy

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    TANSTAAFL, perhaps you would like to shut down the military and other organizations that protect us? We may gripe, but they serve a purpose. I may have misjudged your reasons for starting this thread, if so I apologize.

    As for the freeloaders, a flat tax with no exemptions would be a good start.
     
    Last edited: Jun 1, 2012
  3. gerty

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    I worked with a husband/wife team that tried using creative deductions several years ago. The IRS took them to court about 3 years later.
    Rresults: His whole check was garnished and they were allowed to live off her check until back taxes and penalties were paid, which took approx 2 years.

    I asked him after it was all over with if they were going to try something different next year, he advised the IRS and Judge had made a firm believer out of him, and that he would never consider doing anything like that again.
    His voice sounded very credible at that point.
     
  4. maxpower097

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    My point is people are making millions of dollars a year and contributing nothing to our society. Thats why America's infrastructure is falling apart and we have no money to repair any of it. We paid for the interstates, fire dept's, police, military, and everything else from tax money. Its not right when you have laws light these specifically designed to let incredibly rich people not pay any taxes.

    Its like right now in Italy their going after all the Ferrari and Lambo owners for not paying taxes. Their finding plumbers making 30k a year on the books driving cars worth $500k and not even paying taxes on it. Italy is really cracking down on this like we need to.

    Why shouldn't overseas profits be taxed? That just gives incentive to invest and outsource jobs.
     
  5. maxpower097

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    The problem is what your friends were doing was illegal, what these millionaires are doing is perfectly legal. Their not being creative or playing the tax game, their just using the tax laws they've lobbied to get passed so they don't have to pay taxes like the rest of us. If they get audited they will come out smelling like a Rose even though they made 3 million dollar last year and paid $0 in taxes.

    I tell you, you really wanna start putting this country on the right track. Make lobbying and lobbiest illegal. Also make corporate donations to politicians illegal. Make them get their money from the people. Then things might start changing when their getting their money from Dick and Jane and not Walmart, RJ Reynolds, and Morgan Stanley.
     
  6. maxpower097

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    If you mean flat tax as % of your income I agree. If you mean flat tax as in only sales tax I disagree.
     
  7. shortbus

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    Some counties like Japan I believe, lobbying is a treason offense. But it will never change in America, because the people that can change it are the people that benefit from it. :(
     
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  8. maxpower097

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    We'll see, if I were an 1%er I'd be very scared were have nearly 300,000 combat trained vets in their 20's and 30's very upset with our gov and where its headed. If it does change thats where its gonna start.
     
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  9. strantor

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    Damn, I copied this for nothing...
    I see you've already eloquently addressed the issue of legal bribes.
     
  10. maxpower097

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    What kills me Strantor is the deductions of medical bills. My medical bills run 5k-10k a year no insurance, no nothing. I can't get any deduction for my medical bills because you have to make over 100k or what ever their amount is to write it off. Why can rich people deduct medical bills, but poor/middle class can't.
     
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  11. maxpower097

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    But do you know what these investments are? Around here its community center/ballrooms that are private. Putting in palm trees in their neighborhood medians to raise property values, building walls between the interstate and projects so you can't see the hood from the interstate, and getting sweet gov contracts.
     
  12. strantor

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    i think a pretty smart guy just answered that question...
     
  13. WBahn

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    The refrain is always, "The rich don't pay their fair share!"

    Okay, what is the metric by which "their fair share" should be measured?

    Very nearly half of the people in the U.S. pay no income tax at all (and, in fact, many of them receive considerable "refunds" despite the fact that they didn't pay a dime in fed or state income tax). Are these people paying their fair share?

    State and local governments like to pay below market rates for bonds in order to reduce the cost to the taxpayers of financing public projects. So how do they attract investors? One the principal ways is by exempting the return on those bonds from state and local income tax so that the people that invest will get an effective return comparable to what they could have expected from other investments of similar risk that had higher returns but were taxable. So should we eliminate this "tax loophole" and thereby significantly increase the amount that taxpayers have to pay to investors in government bonds?

    The article started off talking about how Diane Hendricks reduced her state income tax burden from $2.3 million in 2009 to zero in 2010. But while they do a reasonable job describing the mechanics of how she did that, they rely on the reader understanding enough about the interaction between business and personal taxes to understand what it really means. Her company changed from being an "S" corp to a "C" corp. In an "S" corp, the company pays no taxes directly. Instead, the profits are paid by the shareholders at their personal tax rates on their personal returns. Thus, the fact that she paid $2.3 million in taxes in 2009 on her personal return does not mean that she personally saw much, if any, of that money; she merely had to pay the taxes on the company's profits whether she saw any of it or not. When they reorganized to a "C" corp, the original owners are given their share of ownership in stock in the new company at the book value. This value represents the value of their ownership of the company, upon which taxes have already been paid in full at the individual's personal marginal tax rate. So when she sells some of that stock in 2010 at the book value, there is no tax liability because she has already paid the full income tax on that money in prior years.

    A big deal was made about Mitt Romney only paying an effective tax rate of 15% because the bulk of his income was from capital gains on dividends. In other words, he put money at risk and received money from the companies only after they paid full taxes on those payouts at the corporate tax rate (and the U.S. has the highest corporate tax rate of any industrialized nation). Thus he received considerably less money because the corporations paid taxes on those profits before paying them out to shareholders. What Romney paid was taxes above and beyond that. Wouldn't it seem "fair" that if you are going to tax dividends at the recipient's wage tax rate that the business paying the dividends should be able to write off those dividends as expenses the same way they do wages?

    So how much income would a family of four (the stereotypical family that is almost always used in these types of discussions) have to earn before their federal tax burden rose to 15%?

    Using the 2011 rules, a married couple with two kids filing jointly could claim a standard deduction of $11,600 and four exemptions totaling $14,800. So, even without taking any deduction or credits for anything else, the first $26,400 that they make is tax free. In fact, before their average federal income tax rate reaches 15%, their Gross Income would have to exceed $143,500. Anyone below that income level is paying less than 15% of their income in federal tax even before they take any other deductions of any kind at all.

    Isn't it interesting that we always hear about how Warren Buffet paid a lower tax rate (and how many times this is reported as him paying less in taxes, which is not even close) than his secretary but they never point out that his secretary is paid nearly half a million dollars a year.

    And speaking of Warran Buffet, one of the main reasons that his tax rate is as low as it is is because Berkshire Hathaway (sp?) plays a game that requires no special loopholes in the tax code. They provide a significant amount of money to their shareholders simply by buying stock shares back from them.

    For instance, let's say that we have a company that has 100 million shares of stock outstanding valued at $100/share (so a company that is nominally worth $10 billion) and Bob buys 10,000 shares (so he has $1 million invested in this company). Now let's say that over the course of the next year the company's value (after paying all of the corporate taxes) increases by 10% over the course of a year (it's stock price is now $110/share) and wants to pay that out to its shareholders. The normal way of doing this would be to pay out $10/share as a dividend to investors. So Bob would get $100,000 that he would have to pay taxes on at his long-term capital gains rate. The company, after paying out the dividend, would be worth the $10 billion that it started off at and Bob would still have 10,000 shares now valued back at $100/share. Thus the fraction of the company that he owns would not have changed, he would have received his share of the year's net profits, and paid taxes (above and beyond the corporate taxes) accordingly. But what if, instead, they company bought about 10% of everyone's stock back? Specifically, if it bought 909 shares of Bob's stock for $110/share? Bob would receive $99,990. But Bob only has to pay taxes on the gain associated with the shares sold. Since he paid $90,900 for those shares, his gain is only $9,090 and that is what he pays the long-term capital gains on. Other than that, the company ends up being worth the same $10 billion but now there are only 90.9 million shares outstanding at $110/share and, as a consequence, Bob still owns the same fraction of the company that he did before.

    But keep in mind that the company had to pay the full corporate taxes on the money it eventually used to buy back the stock. So the company pays a high tax rate (basically at the 35% top rate since we are talking about $1 billion in profits and the corporate rate maxes out after less than $20 million) and the individual pays effectively a low tax rate (about 1.5%) above and beyond this). So the federal governent got about $36% of that company's profits between the two. This is very unlike the situation with wages. There the company pays no tax at all (it is a business expense) and the individual is responsible for paying the whole thing. So how much in wage income would our family of four have to make before the government gets 36% of the money paid out? The answer is that they couldn't make enough because the highest personal tax rate is presently 35%. A family making $600,000/yr is paying, at most, 30% of it in federal income tax.

    Notice that there is no loophole here. Unless, of course, the "fix" is to require that anyone that sells stock pay taxes on the full sale price of the stock without regard to how much they bought it for. Before people start jumping on that bandwagon, however, they better consider that this is the same thing as saying that anytime you make a withdrawal from your checking or savings account that you have to report it as income and pay income tax on it.
     
  14. strantor

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    I think a "fair share" is one that's paid at the exact same rate by everybody, no matter what. Flat tax, no loopholes, no refunds for anyone. I don't see how anybody on either side of the fence could say that wouldn't be fair.
     
  15. Wendy

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    Sure they can. They can even do it with a straight face.

    So far I'm not touching this one, but I am sure every one of the moderators is watching it.
     
  16. JoeJester

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    First if you are eligible to claim the itemized deductions ... and the eligibility is you exceed the standard deduction and you choose to itemize, you can claim any medical expense (copays, mileage, prescriptions, surgery, etc) that exceeds 7.5 percent of your adjusted gross income. That is the rules for everyone.

    Who ever said you can't deduct medical expenses either didn't explain the rules to you or they did not know the rules.
     
    Last edited: Jun 1, 2012
  17. WBahn

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    Where do you get this from? It's just the opposite. You can only write off medical expenses to the degree that they exceed 7.5% of your adjusted gross income (will become 10% under the new healthcare law). So someone whose AGI is $25k has to eat the first $1,875 but can deduct the rest while someone whose AGI is $100k has to eat the first $7,500. When the new limits go into effect, the $25k guy will lose $625 worth of deductions while the $100k guy will lost $2,500 worth.
     
  18. WBahn

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    If that's the measure of fair share, then the overwhelming majority of "the rich" are paying far more than their fair share. From the U.S. Census Bureau's data for 2010, 80% of households were below $100k. Our hypothetical family of four would have paid, at most, $10,869 in federal income tax, or less than 11%.

    No refunds? Remember, when someone gets a refund it is because they paid more than their final tax liability. So you are saying that if someone pays MORE than they owed, that they shouldn't get the excess returned to them?
     
  19. strantor

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    Right, we need this convoluted system of overpayment and refunds because of how rediculous and complicated our tax law is. If there were a flat tax, no refunds, no loopholes, then you would (whoever you are and however much you make) have 10% (example %) deducted from every paycheck, with no option of claiming or not claiming dependents and paying or refunding at the end of the year.
    I agree. As it stands, with the with the graduated tax, anybody who pays anything, while someone else is not forced to, is paying more than their fair share. The unfairness appears to increase as you look higher and higher up on the earnings ladder, but that's what this thread is about - People in the upper rungs not paying anything while it's advertised that they're paying more than all the rest of us combined.
     
    Last edited: Jun 2, 2012
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  20. Ron H

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    This may be true of some people, but many of them make up the engine that makes this economy run.
    Have you ever gotten a paycheck from a poor person?
    I can also personally testify that, now that I am retired, my income has gone down, while our medical expenses have skyrocketed (partly because we have to pay for medical insurance). I can now deduct a significant portion of our medical expenses.
     
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