[Discussion] The tax tax tax thread

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The state of US tax code and upcoming proposed changes.

We’ll get more specific about this later.

Pulling this in from the other thread, edit it out if you do not want it here...

I found this on reddit in /r/dataisbeautiful. Seems relevant, but the data could probably use more refining so take it within the context it was created.

IMAGE(https://i.redd.it/6gu72mpsxvvz.png)

DSGamer wrote:

Not every person who makes a decent amount of money and thinks they’re overtaxed is a real housewife of Manhattan or whatever caricature you were trying to paint here. There’s a real problem with upward mobility and the tax code in America. It’s a reason small businesses have an actual grievance where maybe Apple and Exxon don’t.

We’re either actually upwardly mobile in America or it’s just bullsh*t. But your caricature was what I was responding to.

Someone making $250,000 a year isn't making "a decent amount of money." They are making 4.23 times the median household income. They are making more than ten times what the government says a family of four needs to live. They are doing well by any standard of what the middle class represents.

And, just as I said, now the discussion is now centering on just what constitutes a "decent amount of money" instead of homing in the actual problem which is that 1% and, really, the 0.1%, make the most and control obscene levels of wealth.

I don't disagree with that you upwards mobility is an issue in the US. We're back to pre-Great Depression levels of income inequality and that's quantifiably bad for people and the US economy.

But the issue for that isn't that people making $250,000 pay too much in taxes. It's that people making millions from investments pay way too little (and when they do pay they're paying a tax rate that someone making less than $35,000 would pay). Income is income and it should be taxed as such.

That and there literally should be a Daddy Warbucks tax bracket in the high six figures or just over a million that is through the goddamned roof. That way no one can say that a family with an income of $1.2 million a year is just making "a decent amount of money." They're f*cking rich and can eat a tax of 50% plus. Hell, bring back the 1950s rate and tax that sh*t at 90%. The country needs the money and one less future Koch brother.

OG_slinger wrote:
DSGamer wrote:

Not every person who makes a decent amount of money and thinks they’re overtaxed is a real housewife of Manhattan or whatever caricature you were trying to paint here. There’s a real problem with upward mobility and the tax code in America. It’s a reason small businesses have an actual grievance where maybe Apple and Exxon don’t.

We’re either actually upwardly mobile in America or it’s just bullsh*t. But your caricature was what I was responding to.

Someone making $250,000 a year isn't making "a decent amount of money." They are making 4.23 times the median household income. They are making more than ten times what the government says a family of four needs to live. They are doing well by any standard of what the middle class represents.

And, just as I said, now the discussion is now centering on just what constitutes a "decent amount of money" instead of homing in the actual problem which is that 1% and, really, the 0.1%, make the most and control obscene levels of wealth.

I don't disagree with that you upwards mobility is an issue in the US. We're back to pre-Great Depression levels of income inequality and that's quantifiably bad for people and the US economy.

But the issue for that isn't that people making $250,000 pay too much in taxes. It's that people making millions from investments pay way too little (and when they do pay they're paying a tax rate that someone making less than $35,000 would pay). Income is income and it should be taxed as such.

That and there literally should be a Daddy Warbucks tax bracket in the high six figures or just over a million that is through the goddamned roof. That way no one can say that a family with an income of $1.2 million a year is just making "a decent amount of money." They're f*cking rich and can eat a tax of 50% plus. Hell, bring back the 1950s rate and tax that sh*t at 90%. The country needs the money and one less future Koch brother.

I want to play devil's advocate for a moment and ask something that my friend who's a financial adviser asked me. Does America have a tax problem or a spending problem?

This isn't meant to be a snarky attack btw - I'm honestly interested in good articles/reports that show how much we need to spend on basics like defense, infrastructure, social security, etc. and why our current taxes are falling so short of that number.

jdzappa wrote:

I want to play devil's advocate for a moment and ask something that my friend who's a financial adviser asked me. Does America have a tax problem or a spending problem?

whynotboth.gif

We spend too much on some things (wars, drug enforcement, etc), not nearly enough on others (entitlements, education, etc), and we let corporations and the wealthy parasitize the system while doing everything they can to give back as little as possible. There isn’t One Big Problem that we can slap One Big Bandage over, there are hundreds of smaller problems that are collectively bleeding us dry and it’s going to take reform on a massive scale at every level if the ruling class wants to avoid being hunted down in the streets and eaten (figuratively, but probably also literally).

Free healthcare and free education (until tertiary studies and even then you get government loans which are indexed to inflation but interest-free) is a thing in Australia and our average tax rate is not 50 to 60%. We have an average rate which is somewhere around 25 to 35% plus a 10% sales tax. Average and minimum weekly wage is close to $50,000 per annum per capita.

We have structural problems with our budget. It probably isn't sustainable but nobody has the political willpower to tax captial gains harder (to give the US Goodjers context, this is what people like Warren Buffet argued for since he gets tax concessions for capital gains and so does the rest of his fellow high income earners) nor to increase the sales tax (state sales taxes vary in the US so this one is also hard to sell to voters when it taxes poor taxpayers disproportionately).

We also have a crazy housing market in our two largest cities. Sydney median house prices (including units/apartments) is over $1M. Melbourne is not far behind. They rank about the same as New York, Vancouver, Singapore or Tokyo in housing affordability indices.

$50k does not get you far in Sydney. It probably doesn't even let a two income household afford a mortgage. Outside of Sydney it is enough to buy a home and be above household distress.

OG, I hear what you are saying, it is definitely easy to feel poor when you are servicing higher living costs. This is where the government needs to step in so that higher income earners can have lower cost of living on average they could bear more tax and so more of their tax goes towards lifting up the rest of the country. This is where government is failing.

Minimum wage is more like $32k p.a. and ~10% tax. Dunno how to factor in per capita etc. just for reference. ($24.5kUSD)

jdzappa wrote:

Does America have a tax problem or a spending problem?

A spending problem, without a doubt. You could double tax revenues and the American government would simply spend more. We know this because over the last three decades, that's pretty much exactly what has happened. Federal tax revenue for FY1987 was $850 billion ($1.8 trillion in 2017 dollars according to CPI), and for FY2017 is estimated to be $3.4 trillion. During that entire period, the American government spent more than it brought in every year, except for a brief revenue surge during the dot-com bubble (which was an illusion, but I won't get into that).

Increasing taxes will not fix the problem, it will just make it worse by increasing the loot pile being squabbled over. The only way to stop it is to stop increasing spending - or "cut spending", in the current parlance. And since borrowing money is politically painless while spending cuts are not, good luck with that.

We need higher taxes to control the wealthy. They have too much and they will never stop taking. Even if we balanced the budget tomorrow I would want higher taxes in the 1%. It's the only way to keep the rest of us safe.

NathanialG wrote:

We need higher taxes to control the wealthy. They have too much and they will never stop taking.

Who do you think makes up the government? The majority of Congress are millionaires. Our President is one of the wealthiest men in the country, and he was preceded by a string of wealthy men. The people who get tapped for regulatory positions are the same people who are being regulated, a practice so common there's a name for it.

Government is how the wealthy do their taking. Who benefited from the 2008 bailout? It certainly wasn't the poor or middle classes. Who gets billions from the national flood insurance program? Who benefits from inflation - asset holders or cash holders? Who benefits from unending wars?

Well, part of the problem with the cuts cuts cuts is that they've apparently decided that America is tired of leading in science and research and would like to give up its lead in higher education:
Republican Tax Proposal Gets Failing Grade From Higher-Ed Groups

College Students Set to Lose Several Big Tax Breaks Under GOP Tax Plan

Particularly, the tuition waivers for PhD students will be taxed under the plan, meaning that they'll be paying taxes on money that they never got in the first place. Grad students are already underpaid (sometimes below the poverty line). Without exaggeration, passing this tax plan will destroy STEM research in the US, as only the very wealthy will be able to afford advanced degrees.

1. GOP tax bill would tax tuition wavers for grad students. This would be a disaster for US STEM PhD education.https://t.co/4BFPCbkNbQ

— Claus Wilke (@ClausWilke) November 3, 2017

So I broke down my tax bill under Trump's "Cut Cut Cut" proposal.

My taxes won't be cut. My tax bill will quadruple.

— David A. Walsh (@DavidAstinWalsh) November 5, 2017

And that's just one of the anti-education provisions in this thing. If this passes, our research capabilities will be a desiccated husk of what they used to be.

I have no problem taxing the wealthy. I have big problems taxing the poor to fund the wealthy while also destroying one of our remaining economic advantages.

The sad thing is, the few middle class households who WILL actually see a cut, most of those expire in 5 years.

Aetius wrote:
jdzappa wrote:

Does America have a tax problem or a spending problem?

A spending problem, without a doubt. You could double tax revenues and the American government would simply spend more. We know this because over the last three decades, that's pretty much exactly what has happened. Federal tax revenue for FY1987 was $850 billion ($1.8 trillion in 2017 dollars according to CPI), and for FY2017 is estimated to be $3.4 trillion. During that entire period, the American government spent more than it brought in every year, except for a brief revenue surge during the dot-com bubble (which was an illusion, but I won't get into that).

Increasing taxes will not fix the problem, it will just make it worse by increasing the loot pile being squabbled over. The only way to stop it is to stop increasing spending - or "cut spending", in the current parlance. And since borrowing money is politically painless while spending cuts are not, good luck with that.

We don't have a spending problem.

We have a problem raising suitable tax revenues for the government services and benefits that Americans have agreed they want to receive (and like to receive).

Well over half of government spending is on autopilot. Spending for Social Security, Medicare, and Medicaid (and debt servicing and government retirement benefits) is all mandatory spending required by law.

It can't be cut short of Americans getting together and agreeing that they want to see gam-gam eat cat food instead of cutting her a Social Security check.

Medicare and Medicaid spending can't be controlled short of being cool with a lot of people dying until we acknowledge that our system of private healthcare gives us the most expensive and worse medical care among industrialized nations and do something about it.

Only about $1.1 trillion of government spending is considered discretionary. And well more than half of that is chewed up by the military.

IMAGE(http://masspeaceaction.org/home/wp-content/uploads/2017/01/budgetobama.png)

Bfgp wrote:

Free healthcare and free education (until tertiary studies and even then you get government loans which are indexed to inflation but interest-free) is a thing in Australia and our average tax rate is not 50 to 60%. We have an average rate which is somewhere around 25 to 35% plus a 10% sales tax. Average and minimum weekly wage is close to $50,000 per annum per capita.

That seems awfully low. Is that just your national taxation, not adding in more local taxation? Or does Australia not have State/Province and City level taxation like the US does?

Okay, so more context.

Australia only has one layer of income tax (Federal), unlike the US.

Sales tax is also uniform nationally (10% unless something is exempted, such as fresh food or education).

A lot of our national revenue comes from royalties on mining (mineral and other resources). This is why the relative tax rate on individuals and companies is rather low but nevertheless manages to almost completely fund such a large social security program; I say almost because there are national deficits and we do have debt which is growing and ultimately unsustainable.

Minimum wage is $694.9 for 38 hour work week, equates to $36,134.8 per annum. Basic calculation yields a marginal tax rate of about 19%.

The current tax-free threshold for resident individuals is $18,200.

Per our ABS:

- all employees average weekly total earnings is $1,177.70, equates to $61,240.4 per annum. Basic calculation yields a marginal tax rate of 32.5%

- total taxation revenue as a proportion of GDP increased from 27.6% in 2014-15 to 28.1% in 2015-16

- sales tax accounted for about 13% of total tax revenue (cf business tax at 15.3%)

So, yeah, pretty low rate of taxation on individuals but still manage to give people free healthcare and mostly free education. It can be done. But the US model is a lot different and would take a lot of work to reform.

OG_slinger wrote:

IMAGE(http://masspeaceaction.org/home/wp-content/uploads/2017/01/budgetobama.png)

And this is now out of date, since Congress passed a military budget in excess of $700B for FY18, which was $37B higher than was sought by the Trump administration.

To be fair, this includes $60B for (endless) war operations in Afghanistan and Iraq. But, it doesn't (as far as I can tell) include the VA, which in the above chart is another $75B.

To be even more fair and more ridiculous: the bill passed the Senate by a vote of 89-9. Democrats can't vote against giant increases in military spending, because they've learned that Republicans have won the "tough guy" image* and would beat them over the head in any election about being "soft" by only wanting to spend $665B on the military instead of >$700B.

* - Yes, I know it's sort of sexist to say "tough guy" and leave out the gals, but the Republicans pretty much have in their caucus (10% in the Senate), so it's pretty accurate as is.

Bfgp wrote:

A lot of our national revenue comes from royalties on mining (mineral and other resources). This is why the relative tax rate on individuals and companies is rather low but nevertheless manages to almost completely fund such a large social security program; I say almost because there are national deficits and we do have debt which is growing and ultimately unsustainable.

Ah ok, so it sounds like as a whole your country is similar to Alaska or Texas in that taxes on resource extraction take the place of a lot of the other revenue. Texas has no income tax, and Alaska actually pays a stipend to all of their citizens to assist with the high cost of living.

Yonder wrote:
Bfgp wrote:

A lot of our national revenue comes from royalties on mining (mineral and other resources). This is why the relative tax rate on individuals and companies is rather low but nevertheless manages to almost completely fund such a large social security program; I say almost because there are national deficits and we do have debt which is growing and ultimately unsustainable.

Ah ok, so it sounds like as a whole your country is similar to Alaska or Texas in that taxes on resource extraction take the place of a lot of the other revenue. Texas has no income tax, and Alaska actually pays a stipend to all of their citizens to assist with the high cost of living.

Yeah, giant spiders running in treadmills are good for about 40% of energy production.

dejanzie wrote:
Yonder wrote:
Bfgp wrote:

A lot of our national revenue comes from royalties on mining (mineral and other resources). This is why the relative tax rate on individuals and companies is rather low but nevertheless manages to almost completely fund such a large social security program; I say almost because there are national deficits and we do have debt which is growing and ultimately unsustainable.

Ah ok, so it sounds like as a whole your country is similar to Alaska or Texas in that taxes on resource extraction take the place of a lot of the other revenue. Texas has no income tax, and Alaska actually pays a stipend to all of their citizens to assist with the high cost of living.

Yeah, giant spiders running in treadmills are good for about 40% of energy production.

I was with you up to the giant spiders.

Yonder wrote:
Bfgp wrote:

Free healthcare and free education (until tertiary studies and even then you get government loans which are indexed to inflation but interest-free) is a thing in Australia and our average tax rate is not 50 to 60%. We have an average rate which is somewhere around 25 to 35% plus a 10% sales tax. Average and minimum weekly wage is close to $50,000 per annum per capita.

That seems awfully low. Is that just your national taxation, not adding in more local taxation? Or does Australia not have State/Province and City level taxation like the US does?

Yonder, you'd like this. OECD breakdown in tax revenue by country. They are PDFs but easily read. Sorry, can't find the main page.

United States
Australia
Germany
Belgium
Ireland (For giggles)

Basically, the US puts alot on income tax. Other nations spread it around which results in a higher tax take but a lower or similar income tax rate. Not make a value judgement but thought the hard data would be good for the discussion as well.

Bfgp wrote:

A lot of our national revenue comes from royalties on mining (mineral and other resources).

I'm not sure I'd agree with this statement. Here's the official Commonwealth Govt figures on where the revenue comes from. Resources taxes are lumped in with Company tax and still only represent 17% of revenue. You could potentially add in fuel excise (4%) but that's mostly a tax on imported fuel rather than Australian resources.

Figures for the State governments would be different. For my own fine State of WA, it looks like royalties are about 20% of revenue.

IMAGE(https://i.imgur.com/LcGwGOY.png)

Money talks

Wink_and_the_Gun wrote:

Money talks :(

Like a lot of people, money talks a lot of sh*t. The Republican donor class isn't going to suddenly start funding Democrats because they didn't get their tax bill.

Jonman wrote:
Wink_and_the_Gun wrote:

Money talks :(

Like a lot of people, money talks a lot of sh*t. The Republican donor class isn't going to suddenly start funding Democrats because they didn't get their tax bill.

I think the implied threat is that they will fund a different Republican candidate next election cycle.

Jonman wrote:
Wink_and_the_Gun wrote:

Money talks :(

Like a lot of people, money talks a lot of sh*t. The Republican donor class isn't going to suddenly start funding Democrats because they didn't get their tax bill.

Yeah, it's going to go from "can we, as an industry, pay hundreds of millions of dollars in lobbying and campaigning in order to get tens of billions of money in tax cuts" to "can we, as an industry, pay hundreds of millions of dollars in lobbying and campaigning in order to avoid losing tens of billions in tax increases"

EvilDolphin wrote:
Bfgp wrote:

A lot of our national revenue comes from royalties on mining (mineral and other resources).

I'm not sure I'd agree with this statement. Here's the official Commonwealth Govt figures on where the revenue comes from. Resources taxes are lumped in with Company tax and still only represent 17% of revenue. You could potentially add in fuel excise (4%) but that's mostly a tax on imported fuel rather than Australian resources.

Figures for the State governments would be different. For my own fine State of WA, it looks like royalties are about 20% of revenue.

I suppose when I said a lot I meant a material percentage. It's not like Australia is similar to say the UAE where a vast majority of income arises from resources.

But yeah, the challenge is budget allocation and tax policy nationally when you have more sales tax in certain states (the populated southeastern seaboard in Australia) vs higher resource royalties in others (Western Australia and Queensland). The US is similar in relation to how seaboard states generate more income than the inner states.

Aetius wrote:

Federal tax revenue for FY1987 was $850 billion ($1.8 trillion in 2017 dollars according to CPI), and for FY2017 is estimated to be $3.4 trillion.

According to figures from here, US GDP over that period (1987 to 2016 but close enough) slightly more than doubled (x2.05) in real terms. So spending actually grew slightly less than the economy. Doesn't seem unreasonable to me.

Ryan says election results make passing tax cuts more important because GOP promised them

I think it makes it more important to them because they fear they might not be able to have strong enough majorities to do it after the elections in two years.

Got to fleece the people before they can change things.

farley3k wrote:

Ryan says election results make passing tax cuts more important because GOP promised them

I think it makes it more important to them because they fear they might not be able to have strong enough majorities to do it after the elections in two years.

Got to fleece the people before they can change things.

(one year)

Keith Hall, the Director of the Congressional Budget Office, just sent the following letter (and associated financial analysis) to Rep. Richard Neal, the ranking Democrat on the House Ways and Means Committee.

CBO wrote:

Dear Congressman:

This letter responds to your request for information about the estimated deficits and debt under the Chairman’s amendment in the nature of a substitute to H.R. 1, the Tax Cuts and Jobs Act.

The staff of the Joint Committee on Taxation determined that provisions in the Chairman’s amendment would increase deficits over the 2018-2027 period by $1.4 trillion (not including the macroeconomic effects of enacting the legislation). By CBO’s estimate, additional debt service would boost the 10-year increase in deficits to $1.7 trillion. CBO’s June 2017 baseline projects that debt held by the public in 2027 will be 91.2 percent of gross domestic product. As a result of those higher deficits, debt held by the public in that year, under H.R. 1, would be about 6 percent greater, reaching 97.1 percent of gross domestic product.

If you wish further details on this estimate, we will be pleased to provide them.

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