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Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

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Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#181

Post by ascagnel_ »

putlake wrote: post #111
pcurve wrote: post #3

Makes my blood boil reading this, especially how poor republicans who have the most to gain through tax reform are consistently voting against their interest.

This is a condescending attitude. People vote against their interest all the time. The HN crowd is generally in the top 10% of income and they vote for Democrats who will raise their taxes.

If you look at it reductively, yes. The other way you can look at it is that you're paying more in taxes, and in doing so funding the improvement of externalities.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#182

Post by richardknop »

vasilipupkin wrote: post #104
maxxxxx wrote: post #101

Earlier quoted context omitted.

I don't think that's accurate. As of now the wealthy are pulling away quickly. This will continue if the majority of of workers' income (salary) is taxed higher than the income of investors.

yes, but those workers will at some point retire and live off their investment income, no?

Very few people actually do that. Majority rely on government checks when retired as they can't save / invest a sizable capital during their life working normal job to really be able to live on dividends from that.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#183

Post by the_gastropod »

vasilipupkin wrote: post #105
dmalvarado wrote: post #83

Earlier quoted context omitted.

But how do you save for retirement when most of your income goes to expenses? It's not the tax rate on investment that keeps the middle class from investing - it's a lack of funds.

that's a different issue. To the extent that they have funds and do investing, their ability to save for retirement will be hurt by raising taxes on investment income.

Retirement accounts (401k, IRA, 403b, etc) are unaffected by taxes on investment income (capital gains, dividend payouts, etc.) Maxing out those retirement accounts (~$23.5k per person) is far more than most people save each year. So I don't think raising taxes on investment income would impact retirement much at all.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#184

Post by ascagnel_ »

fortythirteen wrote: post #89
kazagistar wrote: post #81

Earlier quoted context omitted.

Where does the double come from? Each dollar only gets taxed once... only the profit gets taxed when investing, not the principal, right?

If you make capital gains tax the same as income tax, then you're making the situation worse for people who invest their actual income over trust fund babies, not better. It places another barrier on hard working people trying to move from middle to upper-middle or upper class status.

That doesn't explain how this person would have the same income taxed twice. Taxes are paid on gains, not the return of principal. Income would be taxed, and then the returns from the invested income would be taxed at a later date.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#185

Post by joshklein »

31reasons wrote: post #177

Can't we just have Sales tax only. People who buy more will pay more taxes. You can exempt certain items like food, education, healthcare. Why do we need complicated income tax model? In the Sales Tax Only model, wealthy investors can invest as much money as they like but they will only be taxed if they liquidate their stocks and buy a fancy car or a yacht. I am trying to understand why we need Income tax at all?

It's been over a decade since I studied the literature on this, but the dead weight loss caused by a tax at the point of transaction is larger; a case can reasonably be made that transactions that would otherwise occur did not due to tax.

Income tax removed before you receive your paycheck into your bank account has been demonstrated in psychological studies to be less onorous, and cause less behavior change (you don't ask for a lower paycheck because you don't like tax).

I'm sure I'm grossly oversimplifying, so someone with more economics education please chip in!

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#186

Post by hippich »

solotronics wrote: post #158
gnicholas wrote: post #82

Earlier quoted context omitted.

Working as a contractor for your wholly-owned company would never pass muster with the IRS. You might be able to avoid audit for a little while, but when this catches up to you it will be a huge mess. They would recast the transactions (they can do this) and you'd end up owing a ton of tax and penalties. Source: I'm a (former) tax lawyer.

no but instead of taking out the money to pay yourself, you just buy things as assets of the company therefore reducing tax exposure.. at least thats the way I have heard of.

assets are not expenses. (that's why it called assets)

some assets can be depreciated over years. some small assets (like printer, laptop) - can be written off in one year... but amount you would save on it is negligible.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#187

Post by PeterisP »

31reasons wrote: post #177

Can't we just have Sales tax only. People who buy more will pay more taxes. You can exempt certain items like food, education, healthcare. Why do we need complicated income tax model? In the Sales Tax Only model, wealthy investors can invest as much money as they like but they will only be taxed if they liquidate their stocks and buy a fancy car or a yacht. I am trying to understand why we need Income tax at all?

A sales-only tax (i.e. taxing consumption) means that the burden of taxation is disproportionally shifted towards the poor. A poor person consumes almost 100% of their income; a very poor person consumes more than 100% of their income (by going into debt), an upper-middle class person consumes much less than 100% of their income (they get savings, some investments, and big expenses like student loans and mortgage don't count for sales taxes), and a very wealthy person consumes just a small part of their total income, as most of their spending is essentially buying control of means of production and control of other people, which is not consumption and not affected by sales tax.

If all your spending is consumption, then all of that is taxable, and if much of your spending is to gain more income in the future (e.g. buying rent housing, or stock/control in companies) then that's tax-free - in essence it's a tax system that strongly facilitates a rich-get-richer, poor-stay-poor dynamic and increases inequality. And that's generally considered a bad thing for society.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#188

Post by URSpider94 »

TheAdamAndChe wrote: post #7
cgore wrote: post #2

Because politicians sell progressive income taxes as a way to screw the rich, when it actually just screws the upper middle class, since the actual rich don't have jobs to tax the income from.

There are many people making over $200,000/yr. With 20 years of investing $150,000 of that, it's incredibly easy to have over $6.5 million. I don't see why it can't be a two-pronged approach with both higher income taxes and wealth taxes. It's what was done in the 1950's, and there was still plenty of wealth then.

You can't save $150k a year if you make $200k per year. Your taxes on that income will be over $50k alone. And, even if they are small, you will have some expenses for food, shelter, clothing and transportation - and in most places to hold down a 200k job, you're going to need to half-decent wardrobe.

Re: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors

#189

Post by almonj »

Any person or group that manages to avoid paying taxes should be celebrated. The solution to this "problem" should not be that the wealthy pay more taxes, but that nobody should have to pay taxes since it is blatant theft that funds incompetent and evil people. Nothing that the government does is good. All money that goes to the government is either wasted or spent in ways that make society objectively worse. All functions of government can be replaced and improved by a free market system.
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