Billionaires and Roth IRAs: the case for tax reform

[volkyries]

What about alimony? Child support? Legal judgments? Earned and unearned income the same?

There is a lot not defined as "income".

Only because the lawmakers have decided to not consider those income. I am sure there could a few carve-outs for legit things (child support) but a lot of other types of "incomes" don't need special treatment. Alimony should be taxed since your job is not finding another job.

 

[McDad]

If "income" is to be taxed at a flat percentage and capital gains will be treated as income, that proposal would not do anything to resolve the "dilemma" announced in the OP of this thread. Capital gains are only applicable on the realized gains. Paper gains are not taxed. One would have to sell, partially or fully, the appreciated asset to incur a flat percentage on that "income".

 

[volkyries]

SS works because it’s the biggest ponzi scheme going. Imagine if you could take 12% of your income and invest it. You’d have millions by 65. Not only that but you’d have a transferable asset that could create generational wealth. Instead Uncle Sam gives you maybe $25k for ten years and if you croak your wife can have 80% of your benefit if she forfeits hers. When she dies the jig is up. If you’re middle class you’ll never break even or come ahead on SS unless you live to be 120.

It may be, but it is the only thing keeping a lot of people out of poverty or in less poverty than they would have been. You would think if it was so easy to just save 12% of your income everyone would do it. Sadly, most people refuse to think that far ahead and invest nothing, don't earn enough for 12% to be available or enough, or just save less than 12% (I saw between 5-8% contribution rates for people in their 20s which is the most critical time to start saving).

 

[DancingOutlaw]

A flat tax will never happen unless it can be structured to exempt the poors. And ultimately our tax system isn't geared towards fairness in that sense, "fairness" to many is the rich pay a higher percentage because a) they can afford it and b) they're not me.

 

[McDad]

It may be, but it is the only thing keeping a lot of people out of poverty or in less poverty than they would have been. You would think if it was so easy to just save 12% of your income everyone would do it. Sadly, most people refuse to think that far ahead and invest nothing, don't earn enough for 12% to be available or enough, or just save less than 12% (I saw between 5-8% contribution rates for people in their 20s which is the most critical time to start saving).

That is true. Most do not prepare for the day they will by choice or necessity stop working.
However, since SS is deducted off the gross we can do the same with private retirement instruments. Take the % and put it in one or more of a handful of limited-choice investments. I think the numbers show it outpaces SS by a wide margin.

 

[volkyries]

I think unearned income in the form of appreciated assets like stock, land, etc. should not be taxed until they are sold which then generates the actual income. Now if you make money giving people your stocks to short sell or rent your land to a farmer, then you pay on those income streams at the time you get the income. Flat taxes don't have to be hard. You make real money (cash or cash equivalent) in hand, you have income to which you can remove any applicable expenses (cost of stock or land for example) and then pay on the profit. Get income off labor or with no real expenses involved, pay it on the income alone. Yes, you would also have to scrap alot of the deductions and other carve-outs to make it easier on the business side as well. Would it be perfect, definitely not, but I don't believe many people think the current system is either. At least it could be made more equitable.

 

[DancingOutlaw]

It may be, but it is the only thing keeping a lot of people out of poverty or in less poverty than they would have been. You would think if it was so easy to just save 12% of your income everyone would do it. Sadly, most people refuse to think that far ahead and invest nothing, don't earn enough for 12% to be available or enough, or just save less than 12% (I saw between 5-8% contribution rates for people in their 20s which is the most critical time to start saving).

We have plenty of people at work that don't even make the minimum contribution to get the company match. Free money and they don't even put in 5%. Lots of them don't contribute at all. And these are people making good wages. They should easily be able to afford 5%, if they can't they have serious spending issues that they need to address. They don't miss them Disney trips or their iPhone upgrades though lol.

 

[volkyries]

A flat tax will never happen unless it can be structured to exempt the poors. And ultimately our tax system isn't geared towards fairness in that sense, "fairness" to many is the rich pay a higher percentage because a) they can afford it and b) they're not me.

A flat tax alone would hit the poor hard, but they could, probably would, receive the same support they are receiving today. The difference being everyone should get the support separate from their taxes. Everyone pays 10% and then everyone goes somewhere else to get their the funds back if there need them. There is a lot of support built into the tax code that allows the average person to believe they are no receiving breaks when they are.

Child tax rebate for example. You pay 10% of your income and then go collect your 5% back from other office. No denying you are receiving govt benefits that way and it would be easily trackable. The current system just lets you pay 5% and then grip about everyone else taking from the government.

That works for all sorts of stuff. Homeowners want a break. Got fill out the homeowner form and get your $ back. It would really show people all of the breaks they are getting and might not put themselves in the same class as welfare since they are just "taking advantage" of the tax code. For the record, I put myself squarely in the "taking advantage" category, but I know what I am doing.

 

[volkyries]

We have plenty of people at work that don't even make the minimum contribution to get the company match. Free money and they don't even put in 5%. Lots of them don't contribute at all. And these are people making good wages. They should easily be able to afford 5%, if they can't they have serious spending issues that they need to address. They don't miss them Disney trips or their iPhone upgrades though lol.

I agree with you. I am just saying our country values personal freedom, but with the perverse need to protect people when they make bad choices. Should those people be allowed to go to Disney and then starve when they can't work anymore since they refused to save? I think a lot of people would say yes, until it is them, their family members, or friends in that situation and then they change their tune to we need to help them since you can't let them starve, live on the street, or eat cat food in retirement.

 

[DancingOutlaw]

A flat tax alone would hit the poor hard, but they could, probably would, receive the same support they are receiving today. The difference being everyone should get the support separate from their taxes. Everyone pays 10% and then everyone goes somewhere else to get their the funds back if there need them. There is a lot of support built into the tax code that allows the average person to believe they are no receiving breaks when they are.

Child tax rebate for example. You pay 10% of your income and then go collect your 5% back from other office. No denying you are receiving govt benefits that way and it would be easily trackable. The current system just lets you pay 5% and then grip about everyone else taking from the government.

That works for all sorts of stuff. Homeowners want a break. Got fill out the homeowner form and get your $ back. It would really show people all of the breaks they are getting and might not put in the same class as welfare since they are just "taking advantage" of the tax code. For the record, I put myself squarely in the "taking advantage" category, but I know what I am doing.

I would take lower statutory rates over the silly give and take social engineering code we currently have. But our tax system is used as a backdoor mechanism for wealth redistribution and welfare so that won't change anytime soon.

 

[DancingOutlaw]

I agree with you. I am just saying our country values personal freedom, but with the perverse need to protect people when they make bad choices. Should those people be allowed to go to Disney and then starve when they can't work anymore since they refused to save? I think a lot of people would say yes, until it is them, their family members, or friends in that situation and then they change their tune to we need to help them since you can't let them starve, live on the street, or eat cat food in retirement.

They won't starve, they'll just have to work until they're 70 or die before they can ever safely retire. They're not interested in a little temporary pain to live easier later, they want to play today and work an extra 10-15 years to pay for it.

 

[volkyries]

I would take lower statutory rates over the silly give and take social engineering code we currently have. But our tax system is used as a backdoor mechanism for wealth redistribution and welfare so that won't change anytime soon.

Seems like you would support a flat tax then. Anything other than a flat is going to contain engineering at some level.

 

[volkyries]

They won't starve, they'll just have to work until they're 70 or die before they can ever safely retire. They're not interested in a little temporary pain to live easier later, they want to play today and work an extra 10-15 years to pay for it.

They are magically going to have money once they turn 70?

 

[utvolpj]

I agree with you. I am just saying our country values personal freedom, but with the perverse need to protect people when they make bad choices. Should those people be allowed to go to Disney and then starve when they can't work anymore since they refused to save? I think a lot of people would say yes, until it is them, their family members, or friends in that situation and then they change their tune to we need to help them since you can't let them starve, live on the street, or eat cat food in retirement.

Then their family members or friends can help them out of that situation. People weren't dying from those things before the govt stepped in and created a false floor

 

[DancingOutlaw]

Seems like you would support a flat tax then. Anything other than a flat is going to contain engineering at some level.

As I said a flat tax will never go. Because our current system is designed to send money back to poor people through refundable credits and various tricks while making the rich pay a "more fair" amount. Even if you make the poor 100% exempt from the tax progressives will never go for taking away their credits and conservatives aren't going to go for increasing welfare payments to offset the change. The last year has given too many people a taste of UBI and I highly doubt they're going to want to detox off that. And since we stopped pretending to care about deficits and national debt years ago who cares if we ever balance a budget ever again?

 

[lawgator1]

You including state/federal assistance in the treat all income the same?

No

 

[hog88]

No

Why not? isn't that income?

 

[Thunder Good-Oil]

America already tried importing cheap African labor to sustain an industry.

You don’t understand the difference between free men coming across the Atlantic as a choice and taking a months long journey in shackles then being forced to labor in miserable conditions for no compensation?

 

[McDad]

Then their family members or friends can help them out of that situation. People weren't dying from those things before the govt stepped in and created a false floor

Responsibility for self and family members is no longer en vogue.

 

[volkyries]

Then their family members or friends can help them out of that situation. People weren't dying from those things before the govt stepped in and created a false floor

I admit I am not an expert on SSA yet. Let me do a few googles to get caught up. just messing. Not an expert, no interested in becoming one.

I would assume there was a reason the safety net was created in the 1930s and poverty/poor living conditions of the elder at that point would have probably been the driving factor. There are plenty of examples of social laws that came into effect due to need in the early 1900's (Child labor, food safety, general labor/OSHA) so I will assume this one was partially needed as well. Judging by the number of friend/relatives that are mostly supporting themselves on social security, there is still a need for it for one reason or another.

 

[Thunder Good-Oil]

I’m liking the flat tax idea a bit more. Administer it the same as Medicare (1.45% x 2). Take off the Social Security cap… 6.2% x 2 on every penny. Let market forces adjust the wages on the low end. $9/hour at zero tax is the same as $10/hour with a 10% tax. Make every worker have skin in the game. If the government can’t control their spending, then taxes are raised on EVERYBODY.

 

[Weezy]

You don’t understand the difference between free men coming across the Atlantic as a choice and taking a months long journey in shackles then being forced to labor in miserable conditions for no compensation?

I assumed folks wouldn't want to spend money on their training, food, lodging without some compensation like indentured servitude. After all, you didn't want to subsidize children. Why subsidize immigrants? Do you think you'll be able to import cheap labor without some costs to the system?

The fact is this whole thing relies on replacing current workers with future workers. Immigration can supplement some industries, but others will just go away and your country will collapse.

 

[hog88]

We'll never go to a flat tax or national sales/consumption tax because either would require our government to give up the power to manipulate behavior through tax policy.

 

[Thunder Good-Oil]

I assumed folks wouldn't want to spend money on their training, food, lodging without some compensation like indentured servitude. After all, you didn't want to subsidize children. Why subsidize immigrants? Do you think you'll be able to import cheap labor without some costs to the system?

The fact is this whole thing relies on replacing current workers with future workers. Immigration can supplement some industries, but others will just go away and your country will collapse.

I’m against giving a discount to those with the kids and forcing those without them to contribute at substantially more oppressive rates. You’re making it up that I commented not wanting to subsidize children.

It’s not necessarily cheap labor that would be “imported”. It is willing and able workers. The government incentivizing a faster natural born population base isn’t the only way to address an anticipated labor supply/demand imbalance.

 

[Thunder Good-Oil]

We'll never go to a flat tax or national sales/consumption tax because either would require our government to give up the power to manipulate behavior through tax policy.

Not as long as the established powers (career politicians for example) maintain their powers. There could always be a movement to get back to the original plan of a government for the people and by the people. That shouldn’t be a foreign concept.