Let's drug-test the rich before approving tax deductions, US congresswoman says

[RJKarl]

What percentage of people get no salary and only dividends? I would guess it is minuscule. Why are we talking about them?

Social Security tax is a different issue. That money is just supposed to be set aside to be given back to the taxpayer later and has nothing to do with funding the government. That is not technically a tax break - it just means less money going in to fund an account that will be coming back to you later.

So if billions of dollars of tax revenues are lost due to benefits that only a few of the richest cab realize, we should soak the rest of us to help them avoid paying their share. Yep, that makes sense.

RE: Social Security- I bet if you asked those who created it, they would be aghast that millionaires would be getting it. Also, to keep it solvent ending the cap would be hugely helpful.

 

[scooter84]

Social security is a completely different animal and I think you should leave it out of this discussion.

I don't know what billions you are talking about but I just get so tired of people blaming every tax revenue problem on the 'rich'. Sure there are loopholes that need to be closed and changes here and there but, generally, people that make more money pay more taxes and are supporting a large portion of the populace.

 

[RJKarl]

According to Forbes, the Top 25 hedge fund managers made $24.3BILLION -http://www.forbes.com/sites/nathanvardi/2014/02/26/the-highest-earning-hedge-fund-managers-and-traders/#28ccc18a1984

Many others make over $1M/ year in income sources other that salary.

These loopholes cost the IRS billions and probably tens of billions.

 

[MysteryMen]

Typical LW claptrap. Apparently, tax incentives are the same as handouts.

I mean they are the same. What's the difference between taking $1000 less to start with and taking $1000 but then giving you $1000 back?

 

[TuffaloDeac10]

If you don't itemize, you generally get a bigger benefit out of the standard deduction then you would out of itemizing, so your tax benefit is actually better just using the standard.

What's your point? My point is the 70% of income tax filers who don't itemize get no benefit (except option value I guess) from the mortgage interest deduction they're not claiming.

 

[scooter84]

What's your point? My point is the 70% of income tax filers who don't itemize get no benefit (except option value I guess) from the mortgage interest deduction they're not claiming.

So maybe they should make the standard deduction smaller?

 

[TuffaloDeac10]

So maybe they should make the standard deduction smaller?

Perhaps. I don't look at the US tax and transfer system and think it needs to be made less progressive, but if you do want that it's certainly one way to do it.

 

[scooter84]

According to Forbes, the Top 25 hedge fund managers made $24.3BILLION -http://www.forbes.com/sites/nathanvardi/2014/02/26/the-highest-earning-hedge-fund-managers-and-traders/#28ccc18a1984

Many others make over $1M/ year in income sources other that salary.

These loopholes cost the IRS billions and probably tens of billions.

I don't even know what the point of this discussion is anymore. You are complaining now about general tax policy - there are a million issues we could talk about there - to no avail.

The original discussion was tax deductions vs welfare payments and I maintain that it is stupid to equate the two. I also decry the demonization of the rich and the idea that, as a general rule, they don't pay their fair share. Beyond that, I'm out.

 

[RJKarl]

Is it "demonizing the rich" to say they shouldn't be able to change the terminology of their earnings to avoid paying their fair share of taxes?

 

[Wrangor]

You are forgetting that lots of rich people don't get paid salaries. They get paid as dividends and other ways to avoid paying the progressive rate. Everyone over about $110,000 get a tax break those make under that don't get by the capping of Social Security Tax which shouldn't happen and should apply to all earnings.

Salary is much more efficient for the individual than disbursements. I receive a portion of my income as a salary and a portion as disbursements from a farming entity and the salary is much better for me. You have to pay the full employment tax on disbursements which costs you an extra 7.125% (I think that is right - usually half is lid by employer).

So unless you are über rich this simply isn't true.


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[RJKarl]

And I mentioned it was a method for the very rich.

 

[Wrangor]

Yeah, which just isn't that many people. I assure you that no matter what tax system we have in place, the 5,000 wealthiest people in this country will find a way to avoid paying as much taxes as humanly possibly. They have too much money and time. The best way ironically to get them to pay the designated amount on their income is to have some sort of flat tax with no deductions. Because they they have no tools in the toolshed. Talking about the top 1% of the top 1% is a red herring because you are never going to catch those guys in a system that has any sort of leveraged process. They control the levers, and they will always control the levers. The only way to combat that is remove the levers of power (IE: deductions, different classes of income, etc....). These are the same levers that average people can use to reduce their tax exposure on a much larger % level of income, but obviously the uber rich are able to remove more money on an aggregate due to their much larger share of taxes paid.

In general I just don't have a lot of angst for people who make that much money. They are paying a massive amount of money towards our government. I will never make that much, but kudos to them for working within the system to minimize their tax exposure. I would do the exact same thing in their place. If we truly want to effect that, then we have to be willing to change our system wholesale, and Democrats are impossibly tied to the status quo when it comes to taxes. Pretty much the only thing most Democrats in power ever suggest is raising taxes, but no one really suggests upsetting the apple cart. At least no one that is elected in a position to do so. Even Bernie doesn't want wholesale change of the tax code as much as he wants to just use the framework we have an increase the taxes on anyone making over a quarter of a million dollars by a massive amount. We really need a visionary that can sell a new path of taxation. It honestly could transform our economy in a positive way.

 

[RJKarl]

The Republicans tax plans have been abject failures.What would be worse would be a flat tax.

 

[ChrisL68]

What's your point? My point is the 70% of income tax filers who don't itemize get no benefit (except option value I guess) from the mortgage interest deduction they're not claiming.

My point was that many of those people have those expenses but the standard deduction, which is a proxy for those deductions, provides them a better benefit.

 

[TuffaloDeac10]

My point was that many of those people have those expenses but the standard deduction, which is a proxy for those deductions, provides them a better benefit.

I think this is ahistorical. The 1986 tax reform generally reduced itemized deductions (notably did not reduce the MID benefit) while increasing the standard deduction and personal exemptions. Could be that things were out of whack in the other direction beforehand, I wouldn't know.

 

[WFU Lurker]

So if billions of dollars of tax revenues are lost due to benefits that only a few of the richest cab realize, we should soak the rest of us to help them avoid paying their share. Yep, that makes sense.

RE: Social Security- I bet if you asked those who created it, they would be aghast that millionaires would be getting it. Also, to keep it solvent ending the cap would be hugely helpful.

If you cap benefits but not contributions then it is an entitlement program. You can't have it both ways.

Also, in a general sense, dividend income and capital gains are taxed at a higher rate than standard cash compensation because they do not count as business expenses and therefore are double-taxed (note: disclaimer, not a tax accountant or lawyer so I am sure there are some complexities and exceptions that I do not appreciate).

 

[RJKarl]

It is a "paid for entitlement". The money doesn't come out of the general tax receipts. It was not meant to pay rich people.

Your dividend income comments are exactly the sidestep the GOP uses to avoid people paying taxes at a fair rate.

As to capital gains, your statement makes absolutely no sense. Capital gains are paid when a person sells an asset. They have nothing to do with the taxes of corporations. You don't understand capital gains at all.

 

[jhmd2000]

It is a "paid for entitlement". The money doesn't come out of the general tax receipts. It was not meant to pay rich people.

Your dividend income comments are exactly the sidestep the GOP uses to avoid people paying a second round of taxes at a fair rate.

As to capital gains, your statement makes absolutely no sense. Capital gains are paid when a person sells an asset. They have nothing to do with the taxes of corporations. You don't understand capital gains at all.

Here to help.

 

[WFU Lurker]

It is a "paid for entitlement". The money doesn't come out of the general tax receipts. It was not meant to pay rich people.

Your dividend income comments are exactly the sidestep the GOP uses to avoid people paying taxes at a fair rate.

As to capital gains, your statement makes absolutely no sense. Capital gains are paid when a person sells an asset. They have nothing to do with the taxes of corporations. You don't understand capital gains at all.

Let's take this in pieces:

Social security: What does "paid for entitlement" mean? All entitlements are paid for. Whether by tax payers or by debt that is then funded by tax payers. In the current world, because your benefit is derived from your contribution, you could say that social security was not an entitlement. I would disagree because there isn't a direct link between the benefit and the contribution (otherwise it wouldn't be in danger of insolvency in the first place), but that's for another day. For now, if you remove the link that is there by saying that contributions should far out measure benefits for some segment of the population then I don't see how it is anything but an entitlement.

Dividend income: Let's assume a theoretical world where a high level executive works for a firm with a corporate income tax rate of 25%, pays a personal income tax rate of 25%, and there is no difference in taxes between salary and dividends.

For each $1000 of salary, the government receives $0 from his company and receives $250 from him.

For each $1000 of dividends, the government receives $333 from his company ($1333*75%=$1000) and receives $250 from him.

The dividends are taxed more. That isn't sidestepping; that's math.

Capital gains: I am afraid I do. The value of a financial asset is based on its future cash flows. If corporate income was tax free then the cash flows would be larger, the asset would be worth more, and the capital gain would be larger.

 

[ImTheCaptain]

Capital gains: I am afraid I do. The value of a financial asset is based on its future cash flows. If corporate income was tax free then the cash flows would be larger, the asset would be worth more, and the capital gain would be larger.

um, sure, the potential value at the time of sale might be larger but that has nothing to do with it being a capital gain or loss. that's like saying capital gains amount is dependent on the amount of debt on the books