Should U.S. wealth be redistributed? - Page 6

Lucky Mom · 07-10-2007, 08:26 PM

Austing, you make total sense, and I absolutely agree with you! My dh makes decent money. We aren't rich. We can't even afford to own a house. We get by, with just a little extra. We do have some extravagancies, but we absolutely bargain hunt for everything. I can't remember the last thing we paid full price for. He is supporting our family of four, and he is being taxed at 45%! Nearly half of his income is going straight to taxes! Mind you, we are still talking 5-digit income, not even close to 6 digits.

Getting taxed less would make a huge difference in our lives. It would mean a car that was an adequate size for our family, or a house that we could call our own, with a bedroom for each of our kids. I don't have a problem with getting taxed and some of that money going to help people who aren't as fortunate as we are. But I do expect those agencies to be run with some level of competency. Also, I don't see why we are paying half of our income to income tax (excluding for the moment, sales tax and "fees"), while the rich and giant corporations are getting tax shelters so they pay little to nothing. That is where I have a problem.

I don't think the rich should pay a higher rate, they work equally as hard as the rest of us do, but I don't think they should get a free ride either. These people are in these special brackets because of the corruptness of politicians. It's wrong. I like the idea of a flat tax- everyone pays the same percentage. And for any lawmaker to say that that system is unfair, is laughable.

Spoodler · 07-10-2007, 09:32 PM

Quote:

Originally Posted by Lucky Mom

These people are in these special brackets because of the corruptness of politicians. It's wrong. I like the idea of a flat tax- everyone pays the same percentage. And for any lawmaker to say that that system is unfair, is laughable.

Can you elaborate on the "special tax brackets"? What are they and who benefits from them? Do you mean tax shelters?

Would you mind posting specific links to your sources...I have never heard of "special" tax brackets before...

Spoodler · 07-10-2007, 09:38 PM

Quote:

Originally Posted by austing

Some of you other ladies are so knowledgable on political topics. I feel a bit dumb and out of the loop. I am a smart person, but I think being a stay at home mom has sheltered me a bit over the last 3 years.

Don't feel dumb. Get yourself back in the loop...the internet is a wealth of knowledge and information. The best thing you can do is get informed about politics, ESPECIALLY local politics so you can vote for the person (not the political party) that will run things like you want them run.

Just watch who your sources are, there are a lot of questionable sites out there that can mislead you.

BTW, I completely understood the point you were trying to get across in your post and I think you have some valid points worth discussing. It was great to read your input.

Lucky Mom · 07-11-2007, 01:29 AM

I'm sorry, I mispoke. I didn't mean "special tax brackets" so much as I meant, "in a position to get many more breaks than most of us". "Special" was in no way meant to be a technical term. Lol (oops).

Part of what I was refering to was the effect of tax shelters, but more than that, in high income brackets, people are taxed differently than you or I. Most of the links I'm going to site here are from the Tax Policy Center. There is a ton of great, useful information on their website. Here goes:

So, on the face of it, the tax system appears as though the less you earn, the less you pay; the more you earn, the more you pay. This is because people in lower income brackets have a smaller percentage that they pay to the government in income taxes and people in the higher brackets pay a higher percentage in income taxes. However, those in the higher tax brackets receive much of their income from non-wage sources, such as capital gains, which there is no income tax on. Also, wages subject to Social Security tax are currently taxed at $97,500. That means that anything earned beyond that ammount is not taxed for Social Security. So think about what that does to the overall percentage people are being taxed when you get into the incomes of the superwealthy. Do you realize that if you make $100,000 a year, you will be paying the exact same ammount to social security as if you made $1,000,000. Not the same percentage, the same dollar ammount!

As if that were not enough, tax cuts over the last 5 years have been overwhelmingly in favor of those in the highest income brackets. Bullet points from this source, referencing 2006:
-Those in the lowest income quintile will receive a tax break equaling .3% of their after tax income.
-Those in the middle income quintile will receive a tax break equalling 2.5% of their after tax income.
-Those in the highest income quintile will receive a tax break equalling 4.1% of their after tax income.
As if that weren't enough, those in the top 1% will receive a tax cut equalling 5.4% of their after tax income, and by 2010, that tax cut is going to jump up to 6.7% of their after tax income.

On a side note, for those who have problems with the Earned Income Tax Credit, there is a wonderful page of information about it here. Basically, it evens out the effect of inflation on the minimum wage. Most people who qualify for it do not receive the maximum benefit of $4,120.

If I keep talking about this, my head is going to explode, so here are some great articles for further reading.
This article from Bloomberg is from a year ago, but still full of great information and not as dry as the articles from the Tax Policy Center.
This one is from the Democratic Party. It links to their source (the New York Times), but it is a pay site. However, this link gives a bit of information about the article. It is about Hedge Fund managers earning in excess of 1 billion dollars a year who are only being taxed at 15%.

Eh. I'm done. I can't talk about this anymore.

Spoodler · 07-11-2007, 09:24 AM

Thanks for the links.

I only have time to reply to two of your comments...laundry awaits!

Quote:

Also, wages subject to Social Security tax are currently taxed at $97,500. That means that anything earned beyond that ammount is not taxed for Social Security. So think about what that does to the overall percentage people are being taxed when you get into the incomes of the superwealthy. Do you realize that if you make $100,000 a year, you will be paying the exact same ammount to social security as if you made $1,000,000. Not the same percentage, the same dollar ammount!

There has been a cap on earnings subject to SS tax since it's inception. SS was created to supplement retirement, NOT replace private sources of retirement income.

I find it interesting that you mention the caps placed on income being taxed, but fail to mention that there are also yearly limits to benefits that a worker can receive from the Social Security program.

Of course there are caps! Why should someone who makes a billion dollars a year pay SS tax on the whole billion when they will only receive benefits for $97,500?

Social Security is NOT a wellfare program and it was never intended to be.

Quote:

On a side note, for those who have problems with the Earned Income Tax Credit, there is a wonderful page of information about it here. Basically, it evens out the effect of inflation on the minimum wage. Most people who qualify for it do not receive the maximum benefit of $4,120.

I still disagree with this. There is NO reason that people should get free money from hard working taxpayers just because their income is below a certain level. Period. Where is the incentive to better themselves? Why bother, when you not only don't have to pay income tax, but get MORE money to boot!?!

anniebananie · 07-11-2007, 01:03 PM

Quote:

As if that were not enough, tax cuts over the last 5 years have been overwhelmingly in favor of those in the highest income brackets. Bullet points from this source, referencing 2006:
-Those in the lowest income quintile will receive a tax break equaling .3% of their after tax income.
-Those in the middle income quintile will receive a tax break equalling 2.5% of their after tax income.
-Those in the highest income quintile will receive a tax break equalling 4.1% of their after tax income.
As if that weren't enough, those in the top 1% will receive a tax cut equalling 5.4% of their after tax income, and by 2010, that tax cut is going to jump up to 6.7% of their after tax income.

I think these numbers can be "read" a number of ways; the easiest way is to see that those in the highest income brackets get the biggest tax cuts, which, on the surface is true.

However, people with higher incomes pay more in taxes; therefore, shouldn't they get a larger percentage reduction? Even with the deduction they are still bearing the majority of the tax burden of this country.

Quote:

It is about Hedge Fund managers earning in excess of 1 billion dollars a year who are only being taxed at 15%

The hedge fund managers aren't actually "earning in excess of 1 billion dollars a year" because they aren't taking a salary. They are using their investments to generate income and taking the dividends out of those investments. Therefore, they are being taxed at 15%, since the long term capital gains tax (28%) was removed and short term capital gains tax was lowered (from 20% to 15%). So, technically they have no income.

Look at it this way. Julia Roberts makes a movie in 2006 and gets paid $20M. She is taxed out the wazoo on that 20M and puts the rest into investments. In 2007 and 2008, she doesn't work, however, she still lives like a queen. How, you ask? Her investments, which are only taxed at 15% since they are not considered income.

Now, I know that many out there will say "that's not fair"! Ok, it's not fair. But you know what, these people are smart enough to game the system to make it work for them. If we overhauled our tax system (FAIR TAX, folks!) then there would be no system for them to game.

Only way to fix this is to let your legislators know that you are fed up with all of this and you want a common sense, fair taxation system.

Now I'm off my soapbox.

Lucky Mom · 07-11-2007, 01:37 PM

I'm with you Annie. All about either a fair tax or a flat tax system. My only point with all this is that the current tax system sucks.

Spoodler · 07-11-2007, 01:41 PM

Quote:

Originally Posted by anniebananie

I think these numbers can be "read" a number of ways; the easiest way is to see that those in the highest income brackets get the biggest tax cuts, which, on the surface is true.

However, people with higher incomes pay more in taxes; therefore, shouldn't they get a larger percentage reduction? Even with the deduction they are still bearing the majority of the tax burden of this country.

The hedge fund managers aren't actually "earning in excess of 1 billion dollars a year" because they aren't taking a salary. They are using their investments to generate income and taking the dividends out of those investments. Therefore, they are being taxed at 15%, since the long term capital gains tax (28%) was removed and short term capital gains tax was lowered (from 20% to 15%). So, technically they have no income.

Look at it this way. Julia Roberts makes a movie in 2006 and gets paid $20M. She is taxed out the wazoo on that 20M and puts the rest into investments. In 2007 and 2008, she doesn't work, however, she still lives like a queen. How, you ask? Her investments, which are only taxed at 15% since they are not considered income.

Now, I know that many out there will say "that's not fair"! Ok, it's not fair. But you know what, these people are smart enough to game the system to make it work for them. If we overhauled our tax system (FAIR TAX, folks!) then there would be no system for them to game.

Only way to fix this is to let your legislators know that you are fed up with all of this and you want a common sense, fair taxation system.

Now I'm off my soapbox.

Thanks for addressing these points in Lucky's post.

I think you brought up an important point about the "hedge fund billionaire". I think that there are quite a few people who confuse income with wealth. Just because someone wealthy doesn't mean his yearly salary is high. He is likely making his money off interest from his investments, sales of real estate, sales of stock, etc. (capitol gains). And should only be taxed on that interest. You just can't keep taxing them on the original amount...