Death and Taxes

[RobG]

FWIW, a flat tax is considered regressive, if not oppressive. Here's why. Say you need $30,000 just to pay for basic necessities like rent, food, etc. If you are forced to pay a 20% flat tax you are giving up $6000, which has a huge impact on someone already on the edge. You have to give up rent, or food, or something. Retirement isn't even an option, and that person is stuck in the hole of poverty and is probably dependent on government for basic necessities. Poverty has a huge cost to society so we net much less than the $6000 tax levied.

Compare that with a %20 flat tax on $1 million dollar income. Yes, $200,000 is a lot of money to pay the IRS, but that person will still have $800,000, which allows him to have an extremely luxurious lifestyle and save for a luxurious retirement.

I hope this make sense... flat tax sound "fair" on the surface, but it really affects the lower income and is another huge barrier to getting out of poverty.

 

[westbranch]

I worked in the corporate finance department of a division of a F500 construction/materials company in 2017-2018 when the TCJA passed. None of our internal modeling reflected the lowered tax rate and it was not a factor in Capex, bonuses and payroll decisions which were all based on before tax numbers and operational results. Our division probably had an additional $30M-50M of "cash" due to the tax cuts but that all got passed up to the chain back to the parent company and back to the stockholders. Plenty of people do end up making decisions based on tax rates where it is a relevant factor but overall the it seems to be people letting the tax tail wag the dog. A lot of the assumptions would be based on people acting rationally and when it comes to taxes many people do not.

I pretty much agree with the quote from @SAJ-99 in post #1. From what have seen after doing this for 12+ yrs of working in this and related fields is that tax savings generally just mean more money for the business owners as it is part of the final slice of the pie. Most businesses did not start raising wages in 2018 but a couple years later they had pressure from the job market, the TCJA had little impact on those decisions. I don't necessarily view this is a negative, just (my) reality of what I see and talk about with small to medium sized business owners on a daily basis. And yeah, lower tax rates probably helps the GDP because then they can buy second homes, side by sides, Montana Ranches, and landowner elk tags.

 

[westbranch]

FWIW, a flat tax is considered regressive, if not oppressive. Here's why. Say you need $30,000 just to pay for basic necessities like rent, food, etc. If you are forced to pay a 20% flat tax you are giving up $6000, which has a huge impact on someone already on the edge. You have to give up rent, or food, or something. Retirement isn't even an option, and that person is stuck in the hole of poverty and is probably dependent on government for basic necessities. Poverty has a huge cost to society so we net much less than the $6000 tax levied.

Compare that with a %20 flat tax on $1 million dollar income. Yes, $200,000 is a lot of money to pay the IRS, but that person will still have $800,000, which allows him to have an extremely luxurious lifestyle and save for a luxurious retirement.

I hope this make sense... flat tax sound "fair" on the surface, but it really affects the lower income and is another huge barrier to getting out of poverty.

And once congress gets their fingers into it we will end up with something similar to what we have now.

 

[LWC55]

FWIW, a flat tax is considered regressive, if not oppressive. Here's why. Say you need $30,000 just to pay for basic necessities like rent, food, etc. If you are forced to pay a 20% flat tax you are giving up $6000, which has a huge impact on someone already on the edge. You have to give up rent, or food, or something. Retirement isn't even an option, and that person is stuck in the hole of poverty and is probably dependent on government for basic necessities. Poverty has a huge cost to society so we net much less than the $6000 tax levied.

Compare that with a %20 flat tax on $1 million dollar income. Yes, $200,000 is a lot of money to pay the IRS, but that person will still have $800,000, which allows him to have an extremely luxurious lifestyle and save for a luxurious retirement.

I hope this make sense... flat tax sound "fair" on the surface, but it really affects the lower income and is another huge barrier to getting out of poverty.

This is why I think a flat sales tax is more fair/equitable. High wealth/income people buy the most stuff. They would be taxed the most. Not perfect but everyone would have skin in the game. Even folks that might be getting paid under the table would still pay sales tax.

 

[RobG]

This is why I think a flat sales tax is more fair/equitable. High wealth/income people buy the most stuff. They would be taxed the most. Not perfect but everyone would have skin in the game. Even folks that might be getting paid under the table would still pay sales tax.

No, a flat sales tax is as bad or worse. In that scenario ALL income of an impoverished person will go to buying necessities so they pay the sales tax on top of any income tax.

On the other hand, rich people love a sales tax (and a flat income tax) rather than income because they can invest their extra wealth.

 

[Deleted member 28227]

It has been replied to you by others that taxes don't work that way. I don't expect anything I reply this time to change your mind. You will keep thinking what you want, even if the data doesn't;t support it.

Right is a chart of the earnings per share of the S&P 500, Left is government tax receipts (col 1 income/payroll, col 2 corp receipts). Tell me where the tax hike was? Point being, it's complicated. Simplifying it to some generic belief isn't helpful for solving problems.

Regarding min wage, you are probably correct, but I think Americans can pay 20cents more for their happy meal for someone to make $15 rather than $7. Businesses complain that they will have to lay off people because they can't increase prices. The latest year of inflation shows that is complete BS. If all employers have to operate under the same competitive market dynamic, any change affects them all equally.
View attachment 241854View attachment 241857

I think tipping kinda goes to your point.

Consumer directly pays waitstaff, it’s inherently tied to inflation as it’s a ‘fixed’ cultural 15-20%.

You rarely hear folks complaining about how tipping costs have gotten ridiculous or that they won’t eat out because of it.

It’s pretty much the worst case scenario in the book of minimum wage antagonists, yet it underpins our entire service sector. I struggle with the idea that we can increase the total price of a burger and it’s fine but not the price groceries.

 

[Deleted member 28227]

No, a flat sales tax is as bad or worse. In that scenario ALL income of an impoverished person will go to buying necessities so they pay the sales tax on top of any income tax.

On the other hand, rich people love a sales tax (and a flat income tax) rather than income because they can invest their extra wealth.

100%, anecdote here, but I have a buddy who makes 250k a year, he’s just not a spender and saves about 2x what I do and I’m far from a spendthrift.

You go to a sales tax and he’s going to invest an extra 40k+ a year. He probably lives on what a person making 40-50k does.

 

[SAJ-99]

This is why I think a flat sales tax is more fair/equitable. High wealth/income people buy the most stuff. They would be taxed the most. Not perfect but everyone would have skin in the game. Even folks that might be getting paid under the table would still pay sales tax.

I really don't understand where you get information to form these ideas. A flat tax is incredibly regressive. A person making $500k doesn't have 10X the living expenses of the person making $50k. Any flat tax would need to be accompanied by a wealth tax on second homes (or even homes over a certain $ amt), boats, jet skis, campers, etc. A flat tax on basic groceries and supplies might be doable but there needs to be more to keep revenue collections the same.

 

[BigHornRam]

When are you guys going to get around to arguing about property taxes?

 

[LWC55]

I really don't understand where you get information to form these ideas. A flat tax is incredibly regressive. A person making $500k doesn't have 10X the living expenses of the person making $50k. Any flat tax would need to be accompanied by a wealth tax on second homes (or even homes over a certain $ amt), boats, jet skis, campers, etc. A flat tax on basic groceries and supplies might be doable but there needs to be more to keep revenue collections the same.

Taxes are inherently regressive. If a business makes something YOU need gets taxed at a higher amount, YOU will pay more for their product. Taxes hurt the poor more than the rich. I'm just willing to acknowledge that and try to make it simple to understand and cut out the complicated IRS bs tax code. Possibly tax "luxury" items at a higher rate. Get enough money to run the govt and move along. I know it is a pipe dream but we are dreaming here.

We could make the tax rate of every family making less than $1million zero and do you know who would end up footing the bill? It wouldn't be in the form of taxes but the same folks would be paying it in the form of higher goods/services. Crap runs downhill and the ones at the bottom catch more of it.

 

[Sytes]

FWIW, a flat tax is considered regressive, if not oppressive. Here's why. Say you need $30,000 just to pay for basic necessities like rent, food, etc. If you are forced to pay a 20% flat tax you are giving up $6000, which has a huge impact on someone already on the edge. You have to give up rent, or food, or something. Retirement isn't even an option, and that person is stuck in the hole of poverty and is probably dependent on government for basic necessities. Poverty has a huge cost to society so we net much less than the $6000 tax levied.

Compare that with a %20 flat tax on $1 million dollar income. Yes, $200,000 is a lot of money to pay the IRS, but that person will still have $800,000, which allows him to have an extremely luxurious lifestyle and save for a luxurious retirement.

I hope this make sense... flat tax sound "fair" on the surface, but it really affects the lower income and is another huge barrier to getting out of poverty.

I appreciate your perspective and the base level, it is visibly imperfect. That said, we have welfare recipients currently. We have low income, we currently pay 25-35% tax, as it is.
Random thought - we have reductions and exemptions, as it is. Same deal, same setting.

Someone making 30k is in a lower tax bracket, as it is.

Taxes have setting to adjust for such. The theme of flat tax is not impervious to low income adjustments.

If someone makes 1mil and pays 200k... Hell, this is not a socialized country, we're a regulatory / social / capitalistic melting pool called American economics.

200k paid by one is massive! For being a u.s. citizen equal to another u.s. citizen... I don't dash a wealthy because s/he is wealthy. More power to the person.

 

[RobG]

I appreciate your perspective and the base level, it is visibly imperfect. That said, we have welfare recipients currently. We have low income, we currently pay 25-35% tax, as it is.
Random thought - we have reductions and exemptions, as it is. Same deal, same setting.

Someone making 30k is in a lower tax bracket, as it is.

Taxes have setting to adjust for such. The theme of flat tax is not impervious to low income adjustments.

If someone makes 1mil and pays 200k... Hell, this is not a socialized country, we're a regulatory / social / capitalistic melting pool called American economics.

200k paid by one is massive! For being a u.s. citizen equal to another u.s. citizen... I don't dash a wealthy because s/he is wealthy. More power to the person.

I think you are saying that any tax method would need to be modified with credits, deductions, etc to be fair. I would agree with that, but the first step in making it fair would be to convert the flat tax to the equivalent of a progressive one. A flat tax with greater deductions/credits for low income purposes can be made near equivalent to a progressive tax, but it would be more complicated.

Would you agree that a progressive tax (i.e. one with increasing tax brackets as income increases) is not that difficult to understand? And that it's when deductions, credits, etc are added in that it becomes confusing?

 

[Sytes]

My extent for a modified tax scale (progressive) stops at low income necessity. Food, education, health.

It boils down to this:
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

 

[SAJ-99]

My extent for a modified tax scale (progressive) stops at low income necessity. Food, education, health.

It boils down to this:
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

A progressive tax system doesn’t limit anyones pursuit of happiness. It would be like claiming the same of income inequality.

 

[Sytes]

A progressive tax system doesn’t limit anyones pursuit of happiness. It would be like claiming the same of income inequality.

The difference, outside aiding health and education, the idea of taxing others at different % scale is beyond my socialized flavor, however, ymmv.

 

[SAJ-99]

The difference, outside aiding health and education, the idea of taxing others at different % scale is beyond my socialized flavor, however, ymmv.

No way that works without reworking the entire tax system from scratch. In the end it is aways a battle of people trying to keep theirs and screw everyone else. We should change the phrase on our currency to E. Pluribus Narcissism.

 

[SAJ-99]

@bullbugle307 The topic was moved here to keep the other thread on topic.
Generally they do pay US taxes on what is sold in US. They were just allowed to keep profits made overseas offshore (in other countries) without paying US taxes until it was repatriated. Of course, it rarely was. The TCJA addressed that (see below), albeit in favor of corporations and not US citizens. Pfizer's effect tax rate since the TCJA has been in the 5-7% range. Now congress is fighting over Medicare's ability to negotiate drug prices, with one piss-poor argument being reduced prices would limit R&D.

Before the 2017 Tax Cuts and Jobs Act (TCJA), the United States generally taxed its corporations and residents on their worldwide income. However, a US corporation could defer foreign income by retaining earnings indefinitely through a foreign subsidiary. The US corporation would pay US tax on the foreign earnings only when they were repatriated (by a dividend from the foreign subsidiary, for example). Upon repatriation, the earnings would be subject to US taxation at a rate up to 35 percent, with a credit for foreign taxes paid. The repatriation typically resulted in a net US tax obligation because the US tax rate was usually higher than the foreign tax rate. As of 2015, US corporations accumulated more than $2.6 trillion of earnings in foreign subsidiaries, according to the Joint Committee on Taxation.

Pursuant to the TCJA, the United States now generally exempts the earnings of a US firm from active businesses of foreign subsidiaries, even if the earnings are repatriated (i.e., there now is a 100 percent dividend-received deduction). But, as a transition to the new system and to avoid a potential windfall for corporations that had accumulated unrepatriated earnings abroad, the new law taxes these earnings as if they were repatriated but at preferred lower rates.

There are two tax-preferred rates for the foreign earnings deemed repatriated: foreign earnings held in cash and cash equivalents were taxed at 15.5 percent and those not held in cash or cash equivalents at only 8 percent. The TCJA permits a US corporation to pay any tax on the deemed repatriations in installments over eight years. The tax revenue raised by this transition tax on earnings accumulated abroad was estimated at $340 billion over the 10 years from 2018 to 2027.

 

[bullbugle307]

@bullbugle307 The topic was moved here to keep the other thread on topic.
Generally they do pay US taxes on what is sold in US. They were just allowed to keep profits made overseas offshore (in other countries) without paying US taxes until it was repatriated. Of course, it rarely was. The TCJA addressed that (see below), albeit in favor of corporations and not US citizens. Pfizer's effect tax rate since the TCJA has been in the 5-7% range. Now congress is fighting over Medicare's ability to negotiate drug prices, with one piss-poor argument being reduced prices would limit R&D.

Before the 2017 Tax Cuts and Jobs Act (TCJA), the United States generally taxed its corporations and residents on their worldwide income. However, a US corporation could defer foreign income by retaining earnings indefinitely through a foreign subsidiary. The US corporation would pay US tax on the foreign earnings only when they were repatriated (by a dividend from the foreign subsidiary, for example). Upon repatriation, the earnings would be subject to US taxation at a rate up to 35 percent, with a credit for foreign taxes paid. The repatriation typically resulted in a net US tax obligation because the US tax rate was usually higher than the foreign tax rate. As of 2015, US corporations accumulated more than $2.6 trillion of earnings in foreign subsidiaries, according to the Joint Committee on Taxation.

Pursuant to the TCJA, the United States now generally exempts the earnings of a US firm from active businesses of foreign subsidiaries, even if the earnings are repatriated (i.e., there now is a 100 percent dividend-received deduction). But, as a transition to the new system and to avoid a potential windfall for corporations that had accumulated unrepatriated earnings abroad, the new law taxes these earnings as if they were repatriated but at preferred lower rates.

There are two tax-preferred rates for the foreign earnings deemed repatriated: foreign earnings held in cash and cash equivalents were taxed at 15.5 percent and those not held in cash or cash equivalents at only 8 percent. The TCJA permits a US corporation to pay any tax on the deemed repatriations in installments over eight years. The tax revenue raised by this transition tax on earnings accumulated abroad was estimated at $340 billion over the 10 years from 2018 to 2027.

Good call, and thanks for the info. I was way off in how I thought that whole situation worked.

 

[Irrelevant]

1. Why is this always such on contentious issue? Is your life not easier and better and more accommodating than any generation prior to you? Are you not one of the most fortunate human beings to have ever been born... EVER? I have more "stuff", more retirement savings, more spending power, more free time than my parents did at my age. They absolutely had more than my grandparents, who in turn, how orders of magnitude more than my great grandparents. Why does it matter if you have to pay a bit more taxes, you're already living the life of a kid in a GD candy store. Talk about shifting baselines...

2. Who has the lowest power rates in the country? WA PUDs. Why? Two reasons, hydroelectric dams (though we're certainly not the only ones), they're not for PROFIT. People hate government so much that they forget how F-in' useful it is.

For all the waste in government there's at least as much greed on the private side.

 

[Sytes]

1. Why is this always such on contentious issue? Is your life not easier and better and more accommodating than any generation prior to you? Are you not one of the most fortunate human beings to have ever been born... EVER? I have more "stuff", more retirement savings, more spending power, more free time than my parents did at my age. They absolutely had more than my grandparents, who in turn, how orders of magnitude more than my great grandparents. Why does it matter if you have to pay a bit more taxes, you're already living the life of a kid in a GD candy store. Talk about shifting baselines...

2. Who has the lowest power rates in the country? WA PUDs. Why? Two reasons, hydroelectric dams (though we're certainly not the only ones), they're not for PROFIT. People hate government so much that they forget how F-in' useful it is.

For all the waste in government there's at least as much greed on the private side.

Just to throw out some thought on the "Why" when I read your post.

I believe the American generations have slowly eroded and gaining speed from the days where responsibility for one's own action meant something. WWII was an era of American business and individual pride to support the war effort. There was vaulted pride that continued from Theodore Roosevelt's speech that I place on equal level with MLK's I have a dream speech, regarding an AMERICAN.

"There can be no divided allegiance here. Any man who says he is an American, but something else also, isn't an American at all. We have room for but one flag, the American flag... We have room for but one language here, and that is the English language... and we have room for but one sole loyalty and that is a loyalty to the American people."

This American pride does not exist. In fact, I would argue it is frowned upon by the dissolving collective generation that promote PRIDE in LGBT-A-B-C-and D, BLM, etc. However, American... the WWII national pride has left the field.

Why? We can postulate 'til our hearts bleed dry. IMO, you answered the "WHY?" within your message. We pacify ourselves, rationalize poor behavior, discount respect for this great nation... and with that, our businesses hold the morale owned by other countries who give two craps for American pride.

We've lost our sense of pride in our, "Community"... We are a mess as a nation. More stuff, less work.

That was a run on... haha! Agree, disagree though the WHY it matters to some is due to our downward trend we need to reverse though, IMO - we're too far down the selfish path to recover.