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Your real tax rate: 40%

articles.moneycentral.msn.com

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Re: Your real tax rate: 40%

#21

Post by gte910h »

Retric wrote: post #18
cullenking wrote: post #5

As a person who wants to pay as little tax as possible (until of course, they start spending the tax money in ways that I see fit, which don't include blowing things up), I have always been against the concept of a single national sales tax, or a flat tax. However, more and more I am realizing that the benefits of axing most of the IRS (wow, talk about administrative overhead) would actually effectively lower everyon…

wow, talk about administrative overhead) would actually effectively lower everyones tax burden by several percentage points. ??? Where is the savings? The IRS is a tiny fraction of US government spending. Edit: IRS $12.15 billion in 2010, total federal expenditures $3.552 trillion . So it's 1/3 of 1% of the federal budget.

I believe he's talking about compliance with income tax regulations on the non-governmental side. Accountants, tax prep, etc.

Re: Your real tax rate: 40%

#22

Post by ojbyrne »

btilly wrote: post #10
cperciva wrote: post #2

Canada is quite similar: In 2006, from $14k up to $88k the combined Federal+BC income taxes, payroll taxes, and sales tax credits worked out to a flat rate of 26% plus or minus $250. (Above $88k the rate goes up, but mostly due to a cap on the amount which can be "hidden" in retirement funds.) Graduated tax rates plus low-income tax credits equals a flat tax.

Really? Effective US tax rates are about a third higher than Canadian rates? I find that difficult to believe, but I'd be greatly amused if it was true.

I moved from a job in Canada to a job in the USA with a similar salary in the US. The deductions from my paycheck were noticeably higher. Sales tax was slightly lower.

Re: Your real tax rate: 40%

#23

Post by nck4222 »

Retric wrote: post #20
nck4222 wrote: post #16

Man, those percentages in the chart at the end are really whacky. Someone making $75,000/year pays a higher % tax their entire life than someone making $200,000/year? Someone making $20,000/year (at 30) pays almost twice the % as someone making $50,000/year (at 30)? That doesn't seem right.

SS is 12.4% and it stops at ~120k / year.

Ah, that makes sense. Is that 120k/year for couples or just singles?

Re: Your real tax rate: 40%

#25

Post by Retric »

gte910h wrote: post #21
Retric wrote: post #18

Earlier quoted context omitted.

wow, talk about administrative overhead) would actually effectively lower everyones tax burden by several percentage points. ??? Where is the savings? The IRS is a tiny fraction of US government spending. Edit: IRS $12.15 billion in 2010, total federal expenditures $3.552 trillion . So it's 1/3 of 1% of the federal budget.

I believe he's talking about compliance with income tax regulations on the non-governmental side. Accountants, tax prep, etc.

I pay 120$ a year for someone else to do my taxes, I make ~80k per year. So add 1/6 of 1% so we are now up to 1/2 of 1%. Anyway, there is going to be a cost to administering any tax so while simplifying things may save money it's never going to zero.

PS: I could see a simplified tax code saving people 20 billion a year, but good luck implementing that.

Edit: For example, CC transaction fees cost more than current transition costs, so a sales tax would have higher compliance costs.

Re: Your real tax rate: 40%

#26

Post by ojbyrne »

nck4222 wrote: post #16

Man, those percentages in the chart at the end are really whacky. Someone making $75,000/year pays a higher % tax their entire life than someone making $200,000/year? Someone making $20,000/year (at 30) pays almost twice the % as someone making $50,000/year (at 30)? That doesn't seem right.

SS and FICA are very regressive. It's interesting that the lowest rates roughly correspond with the median income - as if the rates were tailored to get the lowest rates to the majority of the voters, while screwing (relatively) much smaller groups at the ends of the scale.

Re: Your real tax rate: 40%

#27

Post by patrickgzill »

cperciva wrote: post #19
btilly wrote: post #10

Earlier quoted context omitted.

Really? Effective US tax rates are about a third higher than Canadian rates? I find that difficult to believe, but I'd be greatly amused if it was true.

Well, it depends in part on what you include. The 26% I mentioned is for income taxes, payroll taxes, and (income-based) sales tax credits; but Canadians also have to pay a federal sales tax of 5% and provincial sales taxes (typically around 7-8%) on most purchases. I believe the total tax burden ends up being fairly similar between the US and Canada -- while Canada spends far more (per capita) on social services and…

Canadians also pay much more for gasoline than Americans. Of course, not all of this is in taxes.

To check this: find a "gas buddy" site for a place in Canada, then find one for the nearest US city/town close to it (to control for price disparity due to shipping).

Multiply cost per liter by 3.6 to get equivalent US Gallon; then adjust it by current exchange rate.

Example: lowest for Vancouver, BC: http://www.vancouvergasprices.com/ is currently 106.9 per liter ($1.069 CAD) , times 3.6 = $3.85 CAD , about $3.66 per US Gallon in USD.

Closest city on the US side is Bellingham, WA, lowest price there is $2.82, or about US $ 0.80 difference per gallon.

Assuming a fill-up is 12 gallons, that is ~$10 per tank difference.

Re: Your real tax rate: 40%

#28

Post by run4yourlives »

The main issue is that we're still taxing income, instead of taxing consumption.

We (no matter the country) could save billions in administrative costs simply by moving all tax to point of sale style VATs. (As a sidenote this does not mean that something like the FairTax proposal is a good example of this concept.)

Re: Your real tax rate: 40%

#29

Post by mcknz »

It's not like the entire tax goes into a black hole -- it would be interesting to see what the return is on the average tax rate: how much benefit is derived from state, federal, and city services (roads, water, security, libraries, parks) and benefits (unemployment, social security, disability).

Re: Your real tax rate: 40%

#30

Post by pragmatic »

run4yourlives wrote: post #28

The main issue is that we're still taxing income, instead of taxing consumption. We (no matter the country) could save billions in administrative costs simply by moving all tax to point of sale style VATs. (As a sidenote this does not mean that something like the FairTax proposal is a good example of this concept.)

Can you explain how this is different from the FairTax and why a sales tax style VAT would be better?
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