Is Income Tax Fair?

[mpw]

Prompted by a comment in another thread I was wondering who thinks “Income Tax” isn’t fair.
As I understand it in theory someone earning a good wage, and therefore paying the top rate of Income Tax(IT), in the UK is paying 40% in IT. Therefore if they’re working a standard 5-day week they don’t actually earn anything for themselves until Wednesday as Monday’s and Tuesday’s earning go straight to the taxman.
Should there be an upper limit to your tax bill?
Why should a hard working individual pay so much more than someone who can’t(through no fault of their own perhaps) earn as much?
Is the high tax burden down to centralized Government trying to provide too many services to too high a standard?
Should people be forced to take more responsibility for themselves?
Who should pay the most in taxes, the wealthy because they can or those who use or cause the need for the services provided by tax receipts?

[pulsewidth947]

Heres my 2¢.

My mum was recently offered a promotion, which would (on paper) have given her an extra £10k a year. She didnt take it as that would have put her in another tax bracket, where she'd still be earning the same as what she's currently earning, but with a much more stressful job.

I do agree that people that get paid more should pay more tax, but I think there needs to be more levels of tax, for the above reason. Also the tax should be related to the work you do, although this could never happen for a few reasons.

Another example - (correct me if i'm wrong) but someone quoted to me that Tony Blair gets a salary of £150,000 pa. Minus tax that ends up being £90,000. For a very stressful job, thats not a lot of money (of course he gets other benefits to make up).

[iGary]

It's stealing, quite simply.

[mad jew]

If done properly I agree with it but getting the right balance between social security payments and tax thresholds is tricky (glad I'm not the treasurer :p ) and doesn't necessarily work. Like so many things, it's great in theory...

Nevertheless, I'm glad I live in a country with income tax. Admittedly that's easy to say since I'm a poor student. :(

[Lyle]

Nevertheless, I'm glad I live in a country with income tax. Admittedly that's easy to say since I'm a poor student. :(A lot of young people think redistribution of wealth via the income tax is a grand idea until they get out into the working world and start making some money. ;)

[mad jew]

A lot of young people think redistribution of wealth via the income tax is a grand idea until they get out into the working world and start making some money. ;)


Only a few more years and I'll know what you're talking about. Ahh... You've gotta love tertiary education. :D

[Kushiro]

Tricky one. I think it's fair that someone who earns a larger salary should pay more in taxes (in terms of the amount of money that actually changes hands), but I think tax brackets are inherently evil (ok, perhaps just not very nice). I've always been a proponent of flat taxes--people who make more will pay more, but there would be no more "I can't take the promotion/raise because I'll end up loosing money" sort of situations. Also, it would simplify the tax code and perhaps force some of the truly rich to actually pay their fair share. C'mon Gates, show me the money!

[wordmunger]

In the U.S., income tax isn't fair because anyone earning over $50,000 pays as much or more than the 400 wealthiest taxpayers in the nation (http://www.washingtonmonthly.com/archives/individual/2005_06/006434.php). That's what's unfair about income tax, not the concept of income tax in general.

[dobbin]

It's stealing, quite simply.

:D ha ha I like that. Stealing. Thats exactly what it is :D

Actually, I think the current tax system is fair enough, that the more you earn, the more you pay. Once you get to the higher rate bracket (approaching £40K pa) then you are reasonably well off and should easily be able to afford the tax burden if you manage your finances well.

If we had the same level of tax for everyone then I guess (and it is only a guess) that it would be about 30% and that would really hit people on low incomes very hard, whereas higher earners would be £1000s better off. Thats never going to happen. The only change I can foresee happening in the near future is a small increase on the lower level (~1%) and maybe a slightly larger increase in the higher level (maybe 2-3%).

[Applespider]

My mum was recently offered a promotion, which would (on paper) have given her an extra £10k a year. She didnt take it as that would have put her in another tax bracket, where she'd still be earning the same as what she's currently earning, but with a much more stressful job.

Hang about, you only pay the 40% on the earnings over the threshold so she should have still had at least £6K more a year.

Income tax is a necessary evil to keep society functioning. After all, if the rich don't pay their taxes, then a lot of essential services would disappear.

Income tax isn't particularly fair around that 40% threshold bracket which is increasingly easy to hit if you live in London. I'd like to see a London weighting to your tax allowance so that you're allowed to earn an extra £5-10K before you get whacked with the 40%.

If not, then I think those between the current £35K to £60K should pay no more than 35%, those between £60-250K pay the current 40% and the super-rich earning more than £250K should pay 45%. After all, thanks to the super-rich being able to afford top accountants and invest to avoid lots of taxation, they generally end up paying a smaller % of their overall income than the rest of us!

[dobbin]

"I can't take the promotion/raise because I'll end up loosing money" sort of situations.

I don't understand how this situation can arise :confused:

[in the UK] you pay the lower rate on the amont below the threshold, and the higher rate on the amount above the threshold. Therefore any increase in salary, whether large or small, will mean in increase in your take-home pay.

You don't suddenly get charged 40% tax on your whole salary if you earn £1000 over the higher rate threshold. You pay the lower rate on most of your salary and then 40% on the £1000.

Or am I missing something?

edit: Applespider beat me to it.

[Nickygoat]

Prompted by a comment in another thread I was wondering who thinks “Income Tax” isn’t fair.
As I understand it in theory someone earning a good wage, and therefore paying the top rate of Income Tax(IT), in the UK is paying 40% in IT. Therefore if they’re working a standard 5-day week they don’t actually earn anything for themselves until Wednesday as Monday’s and Tuesday’s earning go straight to the taxman.
Should there be an upper limit to your tax bill?
Why should a hard working individual pay so much more than someone who can’t(through no fault of their own perhaps) earn as much?
Is the high tax burden down to centralized Government trying to provide too many services to too high a standard?
Should people be forced to take more responsibility for themselves?
Who should pay the most in taxes, the wealthy because they can or those who use or cause the need for the services provided by tax receipts?
I think income tax isn't fair because I have to pay it:D.
You're not quite right in the idea of paying 40%. It only applies to the top rate. Every year you have a tax free allowance (identified by your tax code - this year for most people it's 000489L), currently £4895. After that you have 10% to pay on the next £2020. Then 22% on the next £29380, then 40% over that. The higher tax bands only apply to money earned over that limit. So if you earn £50000 you only pay 40% on £18600 (50K - £31400).
I think it's right that if you earn more you should pay more. Society has a duty of care to those less fortunate - it's what's supposed to make us civilised. This is why the tax rate changes periodically under different governments. Labour believes that all of us should pay to help the less fortunate, the Tories, generally, believe that lower tax rates encourage people to work by giving them more money in their pocket. The UK has seen a gradual reduction in direct taxation in favour of a move to indirect taxation - general tax rates have come down, to some of the lowest in Europe, but other taxes (road tax, fuel duty, tobacco duty, alcohol duty etc.) have gone up, to some of the highest in Europe. I don't have a car so why should I pay for the people who do is the general ethos. Some countries, notably Denmark, have managed to achieve the goal of having both high direct and indirect taxation without causing a revolution (remember the Poll Tax?).
Yes there should be an upper limit on taxation. The Laffer Curve (http://en.wikipedia.org/wiki/Laffer_curve) explains it prettuy well. It may now be discredited but the Labour government in the '70s put in eye wateringly high taxes and saw the collapse of business - who wants to work if 80% of your money goes to the government? It reduces incentive and encourages people to look at ways of avoiding tax altogether. Where that rate should be I don't know.
EDIT: beaten to it multiple times - I should learn to type faster :p

[mpw]

...Actually, I think the current tax system is fair enough, that the more you earn, the more you pay. Once you get to the higher rate bracket (approaching £40K pa) then you are reasonably well off and should easily be able to afford the tax burden if you manage your finances well...

Why is that fair?
Does a person earning £50k cost the government more? I can't see how.
Why should they be rewarded for all their hard work by being required to fund their neighbour's unemployment benefits?

...easily be able to afford the tax burden if you manage your finances well...

If you happen to be well paid but have poor management of your finances would you be allowed to reduce your tax burden because you bought a car instead of spending that money on taxes?

[rainman::|:|]

It depends on what you want from your government: A socialist union, where people are taken care of, and lots of services are provided, then yes it's fair IMHO. If you're a libertarian, government-should-be-nothing type, you'd say it's stealing, you work hard to take care of yourself and so should others. Simple as this whole concept is, Americans at heart are still debating whether our government should be a socialist union or a near-anarchy, it just gets disguised as other issues. Once that debate is settled, we can move on to income tax.

[kingcrowing]

in some states (in america) theres no income tax, like florida, but other taxes are higher to make up for it, but since half the people who live there are either old and lived on a fixed income, or super, super rich and buy huge @ss houses and cars, it makes up for it...

however i do believe its wrong the way they do it, because as said before, my dad (whose a sr. software analyst at General Dynamics) pays roughly the same % of taxes as bill gates and donald trump... now is that fare???

[mpw]

…You're not quite right in the idea of paying 40%. It only applies to the top rate. Every year you have a tax free allowance (identified by your tax code - this year for most people it's 000489L), currently £4895. After that you have 10% to pay on the next £2020. Then 22% on the next £29380, then 40% over that. The higher tax bands only apply to money earned over that limit. So if you earn £50000 you only pay 40% on £18600 (50K - £31400)….

Yeah I do understand that you don’t actually pay the full 40% on 100% of income but was trying to play Devil’s advocate. ;)

That said over here in Jersey that’s changing in a couple of years, in the name of progress (thanks to the EU), we’ll be taxed at one rate. The lower incomes will have an un-taxed allowance after which they’ll pay tax but once you earn over another level that un-taxed portion is to be eroded to a point at another level where you will indeed pay tax on 100% of your earnings.
Figures aren’t set in stone but are going to be something like;
£10k tax free then 20% tax on income from £10k-£40k. Then if you earn over £40k you’ll pay, say, 20% on income from £8k-£50K, then £6k-£60 and so on until you’re earning £80+ when it’ll be a straight 20% thank you with nothing tax-free.
That’s partly why I started the thread ‘cause of these changes to my local taxes.

[CanadaRAM]

You can debate which formulae are fair and which are not.

The real question is, what is the alternative? The government needs $X billion per year, week or hour to operate. How would it get that if not through income tax? High taxes on consumption (sales tax) simply create a black market economy. Head taxes (flat rate taxes) are wildly unfair to low income earners. Increased taxes on property and businesses increase the cost of living by inflating the price of goods and services.

Theres no good answer.

In most countries, income taxes are progressive, so that the % rate of tax is lower at low incomes and higher at high incomes.

[iGary]

You can debate which formulae are fair and which are not.

The real question is, what is the alternative? The government needs $X billion per year, week or hour to operate. How would it get that if not through income tax? High taxes on consumption (sales tax) simply create a black market economy. Head taxes (flat rate taxes) are wildly unfair to low income earners. Increased taxes on property and businesses increase the cost of living by inflating the price of goods and services.

Theres no good answer.

In most countries, income taxes are progressive, so that the % rate of tax is lower at low incomes and higher at high incomes.

At least you get healthcare.

[Nickygoat]

At least you get healthcare.
Not a very good one though ;) The UK govt has been underspending it's Income Tax revenues for the NHS for years - both Labour and Conservative (although the Tories were worse). The recent injections of large amounts of capital haven't yet had a massive impact.

[Don't panic]

yes, it's fair.
but it should be based on a continuous formula, not on a 'bracket' system. that would avoid the paradox mentioned above

[Nickygoat]

Yeah I do understand that you don’t actually pay the full 40% on 100% of income but was trying to play Devil’s advocate. ;)

That said over here in Jersey that’s changing in a couple of years, in the name of progress (thanks to the EU), we’ll be taxed at one rate. The lower incomes will have an un-taxed allowance after which they’ll pay tax but once you earn over another level that un-taxed portion is to be eroded to a point at another level where you will indeed pay tax on 100% of your earnings.
Figures aren’t set in stone but are going to be something like;
£10k tax free then 20% tax on income from £10k-£40k. Then if you earn over £40k you’ll pay, say, 20% on income from £8k-£50K, then £6k-£60 and so on until you’re earning £80+ when it’ll be a straight 20% thank you with nothing tax-free.
That’s partly why I started the thread ‘cause of these changes to my local taxes.
That bit wasn't aimed at you :p
Are you in favour of the new tax rules or not? I hadn't heard about these so it's all new. And why is it to do with the EU?

[wide]

Heres my 2¢.

My mum was recently offered a promotion, which would (on paper) have given her an extra £10k a year. She didnt take it as that would have put her in another tax bracket, where she'd still be earning the same as what she's currently earning, but with a much more stressful job.

I do agree that people that get paid more should pay more tax, but I think there needs to be more levels of tax, for the above reason. Also the tax should be related to the work you do, although this could never happen for a few reasons.

Another example - (correct me if i'm wrong) but someone quoted to me that Tony Blair gets a salary of £150,000 pa. Minus tax that ends up being £90,000. For a very stressful job, thats not a lot of money (of course he gets other benefits to make up).

That's true about Tony Blair, but once he is out of office he will make millions just by talking to corporate audiences and doing sponsorships etc. Look at Bill Clinton--he made $5 million last year (surely not all from being a lawyer). Heck, NYC's old mayor Rudy Giuliani made $3 million.

Anyway, I thought that once you get into a higher tax bracket, only the amount of money you make that is in that bracket is taxed 40 percent. I know that's how it works with estate tax in the U.S.

I'm not so sure I disagree with income tax...keeping a country running requires a lot of money. Estate tax, on the other hand, taxes money that has already been taxed. Hopefully it will be repealed in August.

[CanadaRAM]

Should people be forced to take more responsibility for themselves?
Who should pay the most in taxes, the wealthy because they can or those who use or cause the need for the services provided by tax receipts?
These are the fundamental questions that differentiate a totally "free market" society and a social welfare society.

(I'll digress a moment to point out that the "free market" proponents who want people who can't get jobs to pay their own way for medical and the fundamentals of life, don't blink an eye when asking for tax breaks and government funding for sports stadiums, automobile factories etc. and use any and all political, regulatory and legal (sometimes extra-legal) means to damage their opponents and maintain a competitive edge)

So, one line of thinking is to "empower" people by "allowing" them to administer their own pension investments and medical coverage (incidentally creating additional profit opportunities for the private sector). For the 50% or thereabouts of the population without a positive cash flow, education about the financial system, dedication and self discipline, and access to honest and competent private financial services, just what do they think will happen?

Think this through -- if our society insists that people "take more responsibility" (code word for "pay privately") for medical treatment, retirement benefits and social services, that creates a class of people who are not merely disadvantaged, but who will be literally starving and dying in our cities.
Do we want tent cities beside our garbage landfills with 10,000 people whose hope for survival for another day is to find something not completely rotten or that can be sold for 10 cents? That's the reality in many countries.

What about a user pay system? That implies a flat tax for everybody -- the wealthy pay the same dollar amount as the poor. Wait, that's too harsh, so let's say there is a means test so the poorest of the poor are exempt. Wait, what about legitimate exemptions for disability, children, etc. OK, we're back to essentially the same system most of us have now, exept the primary objective of this approach is to have the wealthy pay less by removing the progressive % applied to higher earnings. Simple math. If the wealthy have their dollar amounts rolled back, the poor pay more. Who do you think that will benefit/injure the most, someone who saves enough for a new set of tires for the Escalade, or someone who has to pay an extra 30% of their disposable income (after rent food and the essentials of life, which are not tax deductible, unlike the likely business expense deduction of that Escalade)?

The concept of the people who "cause" the expense for hospitals, social services, pensions, education having to pay for these in greater proportion to those who don't "cause" the expense is social Darwinism at its worst.
It's not like having to pay airport user fees to board a plane to my vacation spot; the necessities of life are not options.

Do the wealthy who propose this type of measure (and I have yet to hear a member of the working poor suggest that they should be shouldering a larger share of the tax load) seriously think that they have paid their fair share of the roads, airports, schools and universities, and community services that they and their families consume and enjoy? What a laugh.

[mactastic]

I think the more appropriate question is: Is it fair that the fire department shows up at your house when it's on fire?

[Dros]

I make a good salary and I'm happy to pay income tax.

I appreciate what that money does to make society better. And I feel a responsibility to help those less fortunate than myself. The government tries to manipulate monetary policy so inflation is low. They do this by slowing growth, making sure that the number of unemployed competing for jobs keeps salary increases to a minimum. So our healthy economy comes at a cost - some people are unemployed. While some are 'lazy', many are not and it could happen to any of us. So I appreciate the safety net, as well as all the other services the government provides.

Sure, I wish the government could be more efficient about it, and think it is worth pushing for reform.

[mpw]

....Are you in favour of the new tax rules or not? I hadn't heard about these so it's all new. And why is it to do with the EU?

Prior to the 2nd World War Jersey had a Income Tax of something like 2% and that paid for what the government needed to provide. After WW2, and 5years of Nazi occupation the Income Tax was increased to a massive 20% but there has never been a tax on income earned in Jersey by those abroad so people from the UK and elsewhere opened Bank accounts in Jersey and benefited from zero tax.

The EU decided in the late 90’s this was a devious mechanism to steal from the member states whose citizens chose to Bank here rather than in their home countries where taxes were both higher and often changed rates due to unstable government etc.

The EU put enormous pressure on the governments of Jersey (and Guernsey, the Isle of Man and Gibraltar) to make changes that they would accept as fair, their argument being over the fact that our, historic, tax laws provide differently for domicile and non-domicile people and companies.

Because the finance business has been our main industry for 30years 15,000 of the 45,000 workforce work in the industry and a lot of the rest wouldn’t work without it we couldn’t afford to battle any financial or trade sanctions that the EU might impose.

What they wanted was for us to tax the non-domicile people and companies, basically they could then say this was fair and there would less of an advantage to those people to conduct investment outside the EU. What we decided to do was to level the playing field as they wanted by reducing the tax on local businesses to zero the same as non-domicile business. Now their argument of an un-level playing field holds no water but the advantage to businesses is even greater.

However as local businesses no longer pay Income Tax changes will be needed to maintain the current levels of expenditure, hence they’re gonna try and steal my earnings! :eek:

Oh the short answer is the EU are €unt$!

[aloofman]

I'm not so sure I disagree with income tax...keeping a country running requires a lot of money. Estate tax, on the other hand, taxes money that has already been taxed. Hopefully it will be repealed in August.

This old complaint about the estate tax is mostly a red herring. Almost every kind of tax is applied to money that's already been taxed in another way, at least indirectly. Sales taxes, property taxes, payroll taxes, hotel taxes, you name it, all come out of taxed income that you earned in one way or another. So if you're making that argument, then you should be against all those other taxes too, not just the estate tax.

The reality is that only a tiny percentage of households (the very richest) ever pay an estate tax. Unless you're one of those, nobody's taking money from you when you die. Except maybe the funeral director.

[mpw]

1st Things 1st CanadaRAM, I actually agree with a lot of what you’re saying. I’ll admit that some of my ideas would, I believe, work here but not universally.

…The concept of the people who "cause" the expense for hospitals, social services, pensions, education having to pay for these in greater proportion to those who don't "cause" the expense is social Darwinism at its worst…

My idea of taxing those that “cause” the expense would be a higher tax on cigarettes to pay for healthcare issues that their use causes. Maybe a higher tax on fuel to pay for the damage to the roads etc. One of my favorite ideas would be that when you crash your car and the rescue services attend to patch you and the road up your insurance pays the cost rather than the tax payer. I don’t have a problem with the tax-payers paying for breast augmentation for someone after breast cancer but why should tax-payers money be spent on breast enlargement for some women?

…Do the wealthy who propose this type of measure (and I have yet to hear a member of the working poor suggest that they should be shouldering a larger share of the tax load) seriously think that they have paid their fair share of the roads, airports, schools and universities, and community services that they and their families consume and enjoy? What a laugh…

Right now I’m the working poor and would certainly like to see a system introduced that is capped so when I’m earning millions I don’t have to give it all away to pay for benefits to people who haven’t paid their way at all. I don’t mind feeding those poorer than me but it pisses me off when I got to pay for their steak.

Again I’m getting local here but my employer rents a parking space for me that happens to be next to the welfare office and I get really annoyed when I turn up in my little hatchback and some guy who’s collecting his welfare check has parked his convertible in my space.

A girl I went to school with got pregnant at 15 then again at 17 when she was 23ish she worked for me. She told how when she went to the welfare office to ask for help finding better paid work now her kids were at school they encouraged her to give up her part-time work for me because she could earn more on welfare with no job than to work part-time (I was paying a low but above average wage for basic retail work). Credit to her though she stuck with the job went to school a couple of days a week and got a very good job in a bank and now looks after her kids better than she ever would’ve on welfare.

Maybe I digress and these are arguments about the spending of taxes not their collection.

[aloofman]

Why is that fair?
Does a person earning £50k cost the government more? I can't see how.
Why should they be rewarded for all their hard work by being required to fund their neighbour's unemployment benefits?


That sounds good, but as a practical matter it's very hard to fund a very large government with a flat tax. At least in the U.S. (the only tax system I'm really familiar with), most people accept the principle that wealthier people can afford to pay more in taxes, as unfair as that might seem. Whether you agree with it or not, the more problematic issue is how you would flatten income taxes even if you wanted to. Rich taxpayers pay so much more in raw tax dollars that flattening it out would push a disproportionately large tax burden on poor people and the middle class. Every politician knows that this would never fly. The reality is that taxing a relatively small number of taxpayers is much easier than raising taxes on all the rest.

I don't know how taxes are set up in most other countries at the national level. But here the total tax burden really doesn't vary drastically as a portion of income when you include payroll taxes, sales taxes, and other levies. People are paying about the same overall rate (give or take a few percentage points) of their income in taxes, they're just taxed in different ways by different goverments/agencies.

In general though, my biggest objections come not from paying taxes but what the government wastes it on. Subsidies for huge corporations. Weapons even the Pentagon says it doesn't need. Locking up people who need drug treatment instead. Unwinnable wars that don't make us safer. All of these things, to me, are more outrageous than paying taxes.

[Peterkro]

This is all a bit theroetical to me as I think capitalism is a complete load of garbage,but as the system stands the very rich generally speaking don't pay much in the way of tax("tax is for little people"Huffington I think)look at the Vesty family or the dirty digger in the UK for examples.

[tristan]

A lot of economists recommend that we switch to consumption based taxes, i.e. no income tax, but higher sales and property taxes. First, it would ease collection and administration (because the government doesn't have to track what everyone in the country makes), and second, it would promote savings, which would create more investment capital. I don't think this will happen, but I'd like to see it. I think it would be very fair, especially if you exempted some essentials like groceries.

[mactastic]

Not Huffington. Helmsley (http://www.thatsweird.net/gaffes_blunders21.shtml)

[Peterkro]

Not Huffington. Helmsley (http://www.thatsweird.net/gaffes_blunders21.shtml)
Thanks memory and age don't go together to well with me.
:o

[ham_man]

Assuming it is a flat tax, I think that an income tax can be fair. But when you start using tax brackets, then it becomes tricky...

[savar]

Prompted by a comment in another thread I was wondering who thinks “Income Tax” isn’t fair.

I think income taxes are outdated. It's time to move to consumption taxes only. It makes a lot more sense, because you reward people who save... also, the rates would vary depending on the type of commodity. Food and other essentials would have very low or zero tax, luxury goods would have a much higher tax rate.

It would be so much simpler to administer and would provide proper incentives.

[wordmunger]

I think the more appropriate question is: Is it fair that the fire department shows up at your house when it's on fire?

Obviously not.

After all, thousands of fire-free households pay for the few houses that burn down. What could be more unfair than that.

Police are unfair too, after all, very few of us are actually victims of crime. Why should the many pay to protect the few?

;) ;) ;)

[Jaffa Cake]

I'm not saying a word against income tax. My girlfriend works for HM Revenue and Customs so if I say anything bad about it I'll get my ass kicked. ;)

[mactastic]

Obviously not.

After all, thousands of fire-free households pay for the few houses that burn down. What could be more unfair than that.

Police are unfair too, after all, very few of us are actually victims of crime. Why should the many pay to protect the few?

;) ;) ;)

Exactly. The whole system is unfair. Unless it's your house on fire, no?

[mpw]

Exactly. The whole system is unfair. Unless it's your house on fire, no?

Is it unfair to ask the home-owner to have insurance to pay, at least a contribution, for the fire service?

[MongoTheGeek]

As for making more money and taking less home, that is possible in the US. There is something called the Alternative Minimum Tax which applies if you earn more than X. So if you start earning about X you pay the AMT which could be more than the difference.

On the Laffer Curve, whenever I hear about it I think of Ben Stein giving the lecture in Ferris Bueller's Day Off. That is what he was teaching btw.

I would prefer to see a consumption tax rather than an income tax. That would tax all sorts of people who have the old money and just live off of it. Whether or not you want to link it with an refund of the poverty level taxes is up to you since for me I think its a push.

The tax system in the US is probably more about social engineering than it is about collecting money. Think that the entire state of Kentucky working for a full year is needed just to calculate what people need to pay. Pretty surreal huh?

[mactastic]

Is it unfair to ask the home-owner to have insurance to pay, at least a contribution, for the fire service?

I dunno, is it unfair to ask people to pay at least a contribution out of their wages for things like military protection, or elections?

[Dont Hurt Me]

I dunno, is it unfair to ask people to pay at least a contribution out of their wages for things like military protection, or elections?Problem is Govt wants to tax everything from taxing your car year after year to taxing you if you want to go fish. Government is to the point where they want money for everything. Even dreamed up false wars like Iraq. Thank you Republican party and D.S. Democrats that will be 300 billion. Our country was founded on freedom from oppresive taxes and yet here we are again, want to smoke that cig? we are going to tax it really hard because thats a sin, where does it stop? It doesnt. Thats the problem. Tax after Tax after Tax after Tax, Oh you want to Die? That will be another Tax.

[mactastic]

Problem is Govt wants to tax everything from taxing your car year after year to taxing you if you want to go fish. Government is to the point where they want money for everything. Even dreamed up false wars like Iraq. Thank you Republican party and D.S. Democrats that will be 300 billion. Our country was founded on freedom from oppresive taxes and yet here we are again, want to smoke that cig? we are going to tax it really hard because thats a sin, where does it stop? It doesnt. Thats the problem. Tax after Tax after Tax after Tax, Oh you want to Die? That will be another Tax.

Well at this point I'm not interested in if our tax system has been abused. The question was, "Is income tax fair?"

And you know, those rotten businesses want to charge you to use their products. They even want you to pay for worms if you want to go fish. And god forbid the creek the fish are in in on private land... they'll want to charge you for access to the creek as well! Oh, and you want to die? That'll cost you as well. ;)

[wide]

This old complaint about the estate tax is mostly a red herring. Almost every kind of tax is applied to money that's already been taxed in another way, at least indirectly. Sales taxes, property taxes, payroll taxes, hotel taxes, you name it, all come out of taxed income that you earned in one way or another. So if you're making that argument, then you should be against all those other taxes too, not just the estate tax.

I shouldn't necessarily be opposed to those taxes. The estate tax taxes money that has already paid income tax, sales tax, property tax, payroll tax...all taxes. In my opinion, the reason we need property tax is because in order to own property is to ensure that we own it. It's to make sure the city can repave the streets once they start to crumble. It's for sanitation. It's to improve the infrastructure. Once you're dead, you don't need any of those things. Your money is being taxed so that you can lie in a grave that will probably be torn up in 300 years to make way for some big, tall building?

[zimv20]

the percentage tax rate on the so-called Death Tax is in the single digits up to estates of $3.5 million. estates worth under $1 million are not taxed.

anyone here going to get screwed by those numbers?

link (http://en.wikipedia.org/wiki/Estate_tax#United_States)

[Nickygoat]

Assuming it is a flat tax, I think that an income tax can be fair. But when you start using tax brackets, then it becomes tricky...
But think of all the unemployed accountants that that would create :p
Wasn't it Steve Forbes who was using that as an election promise (2000?) - 17%, no exemptions. A number of Far Eastern countries have adopted that system - seems to be working so far.

[anonymous161]

Income tax by its very nature is unfair. Uncle Sam: You must tell us exactly how much money you made this year or you are a criminal. Oh, you went out and made more money? You must be punished. State of Oklahoma: Wait for us! Wait for us! We must punish you too! And by the way, we raised income taxes three times this year so you owe X amount of dollars more. We'll take a check.

Consumption tax would promote saving to some extent, but it would also make the average person feel like they have more money to spend on goods and would link government earnings more directly to the health of the economy.
I prefer a consumption tax if for no other reason than I don't want to inform the government of the amount of money I earn in a year. The billions that could be saved in tax collection overhead are just a bonus.

[zimv20]

our economy is a consumer economy. doing anything to promote savings over consumption would be at cross purposes with keeping the economy going.

[anonymous161]

I agree, you don't want everyone to save. But I think that consumption tax would increase savings among some (perhaps the poor, who need to save) and increase consumption among those with more disposable income. If a person who made $20 an hour actually got to take home $20 instead of $16, they would certainly have more money to spend.

[skunk]

our economy is a consumer economy. doing anything to promote savings over consumption would be at cross purposes with keeping the economy going.To fail to consume is unpatriotic.

[anonymous161]

To fail to consume is unpatriotic.

If US citizens could get some of this $450 billion or so that has been spent on Iraq, we could save more and spend more.

[miloblithe]

our economy is a consumer economy. doing anything to promote savings over consumption would be at cross purposes with keeping the economy going.

That's not really true. A lot of economists feel that the US is too much of a consumer economy and that not enough money is saved and therefore transferred to investment. The theory is this: Let's say that Americans decide to save 1% more of their earnings in their savings accounts. Corporations can then borrow that money from banks for investment in new equiptment, improving productivity in the long-run. There is no actual loss in total consumption (and therefore in GDP; GDP equals consumption plus investment plus government spending plus exports minus imports) because the 1% more that households are saving is being spent (invested) by corporations, with better long-term effects (that extra power plant, or factory, or better-trained workforce will help us out in the future more than the fact that we bought more computer games, or CDs, or whatever in the present. The US has a very low investment rate compared to Europe and Japan and other economies. This worries some people who think that this means that those countries will be increasingly more competitive in the future as their productive capacities expand faster than do ours. Of course, the US also has more accumulated capital stock than those countries. It seems likely to me that as they catch up to the US that their consumption rates will go up and investment rates will go down , but I really don't know enough about it and that's just speculaiton.

Of course, the problem with the theory is whether or not corporations will actually borrow and spend that money. If consumer spending goes down, corporations might get worried and not project sufficient revenues in the future to justify larger investment. If no one is going to spend that money, then that's a problem because it will lead to a recession unless government steps in and makes up for the loss in consumer spending with increased government investment (or consumption).

[zimv20]

That's not really true. A lot of economists feel that the US is too much of a consumer economy and that not enough money is saved and therefore transferred to investment.
i agree w/ those economists. i do not think our rampant consumer economy is a healthy thing and it will eventually collapse.

but for now, it's consumer-driven and, until the collective we (including the fed) can gradually move to a healthier model, we best keep the consumer spending up.

imo, any transformation to another economic model must be led by the fed balancing its budget and paying down the national debt, and not by first radically altering the tax structure to something that encourages savings.

[anonymous161]

I just don't see where having more money in your pocket is going to encourage saving over spending in America. Let's be serious. If the average American has $20 in hand, he is going to spend it. If he has $50, he is going to spend it faster. Sure, price of a hamburger would go up quite a bit, but the fact that gasoline has gone north of $2 national average hasn't changed anyone's driving habits, so I don't see the end of income tax and higher sales tax hurting the economy. It's all academic anyway, because the government is never going to go for something that might decrease its size or influence.

[miloblithe]

i agree w/ those economists. i do not think our rampant consumer economy is a healthy thing and it will eventually collapse.

but for now, it's consumer-driven and, until the collective we (including the fed) can gradually move to a healthier model, we best keep the consumer spending up.

imo, any transformation to another economic model must be led by the fed balancing its budget and paying down the national debt, and not by first radically altering the tax structure to something that encourages savings.

I agree. I think this ship is too big to change course suddenly. Slowly increase the savings rate. Slowly pay down some of the debt (when we can) to something more healthy like Britain's 40% of GDP (ours has gone from like 59% under Clinton to 63% under Bush).

[miloblithe]

I just don't see where having more money in your pocket is going to encourage saving over spending in America. Let's be serious. If the average American has $20 in hand, he is going to spend it. If he has $50, he is going to spend it faster. Sure, price of a hamburger would go up quite a bit, but the fact that gasoline has gone north of $2 national average hasn't changed anyone's driving habits, so I don't see the end of income tax and higher sales tax hurting the economy. It's all academic anyway, because the government is never going to go for something that might decrease its size or influence.

Think bigger. When I made $35,000 a year, I saved a lot less than I did when I made $50,000 a year. Now I make $15,000 a year (in grad school) and I am running a deficit.

The government can also encourage saving by adjusting policies, like raising interest rates.

[anonymous161]

Think bigger. When I made $35,000 a year, I saved a lot less than I did when I made $50,000 a year. Now I make $15,000 a year (in grad school) and I am running a deficit.

The government can also encourage saving by adjusting policies, like raising interest rates.

Perhaps, but does that apply to the average American? A growing number of people carry high credit card and mortgage debt with little or no financial security outside of a 401k and a term life policy. I am not saying that people wouldn't save more, I just don't know if it would be the exception or the rule.

Also, people would take home more money, but most everything would cost more, so the average person could end up spending more of their income in taxes but feel better about it because by directly purchasing items they would be "in control"

[mactastic]

Think bigger. When I made $35,000 a year, I saved a lot less than I did when I made $50,000 a year. Now I make $15,000 a year (in grad school) and I am running a deficit.

The government can also encourage saving by adjusting policies, like raising interest rates.

See here's the problem. Ok, so people start saving. You keep the money in your pocket like a smart consumer. Tax revenue plummets. But has the government stopped needing so much in taxes?

IOW, are we talking about the same amount of taxes, just being collected differently, or are we talking about less tax revenue overall? And what does that mean for the services our taxes pay for?

It would seem silly to me to overhaul the tax system this dramatically just to change the people from whom you collect the tax money. And if we're talking about actually lowering the amount of revenue the government collects then perhaps we need to look at what we will be giving up in exchange for more money in our pockets.

Fraud and waste in government won't go away just because we give them less money. Corporations don't get any more honest the slimmer their profit margins get either for that matter.

[aloofman]

I just don't see where having more money in your pocket is going to encourage saving over spending in America. Let's be serious. If the average American has $20 in hand, he is going to spend it. If he has $50, he is going to spend it faster. Sure, price of a hamburger would go up quite a bit, but the fact that gasoline has gone north of $2 national average hasn't changed anyone's driving habits, so I don't see the end of income tax and higher sales tax hurting the economy. It's all academic anyway, because the government is never going to go for something that might decrease its size or influence.

It's not a matter of putting more money in people's pockets. It's a matter of what the government can do to encourage people to do good things with it? There are millions of Americans who have 401Ks available to them but don't use them, or don't contribute much to them. Some people just don't like to save. And this hurts them when it comes to affording a home or investing for retirement. And people who can't buy homes and don't have retirement savings are much more likely to need government assistance.

I don't think anyone is advocating that everyone act Chinese and save half their earnings, just that they save more than 1%, or whatever the savings rate is now. The fundamental reason that China has a massive and growing trade surplus with us is that they save as much as possible while we spend as much as we can. That has to change eventually.