> Out-of-pocket medical spending jumps once the money hits people’s bank accounts. It is a bad thing that tax withholding is one of the few ways Americans can have savings. When you live check to check this can be your only option.
That tax withholding is the only way that many Americans manage to save speaks more to a lack of self-control than anything else. If Uncle Sam can save a lump-sum for you by deducting from your paycheck, you could have done the same (in fact, better) with a bit of resolve and a bank account.
There’s this idea about poverty and cognitive control competing. It may be harder to save when you’re already poor
And typically lower-paid people have higher deductions on their taxes (versus withholdings) and usually get the larger refunds. So much so that they basically depend on it. That's why everyone is in such shock right now. Meanwhile, I've never been one to get a large refund at tax time. And I've always planned for my big annual expenses upfront (sometimes using an automatic bank account transfer to "incrementally save…
You choose how much is withheld. There is no versus. But I'm afraid the vast majority do not realize this and accept the default.
Achtoooly...
If you qualify for EIC or child tax credits you can't necessarily withhold low enough to avoid a refund.
Canadians with their great health care system seem to think that they need ~250K salary/year to feel comfortable [1]
So most people are either too desperate or aspiration too high that no government in the first world can make them happy.
That tax withholding is the only way that many Americans manage to save speaks more to a lack of self-control than anything else. If Uncle Sam can save a lump-sum for you by deducting from your paycheck, you could have done the same (in fact, better) with a bit of resolve and a bank account.
There’s this idea about poverty and cognitive control competing. It may be harder to save when you’re already poor
You will also easier end up poor if you have bad cognitive control.
> How is it the only option? It’s not but it’s a lot easier for many people if they don’t realize they have the money. > If withholding is less, what’s stopping people from saving the reduction? Reality. It’s no different then walking around town with a couples $20 bills vs walking around with your pockets empty. Sure you could just not spend any of it but it’s a hell of a lot easier if you don’t even have the option…
It's an extremely short term solution to make everyone feel happy and warm inside without any long term results. The lack of impulse control won't sudden vanish once the refund arrives, and they will be back in that situation again a few short months after.
> The lack of impulse control won't sudden vanish once the refund arrives
I see why you reason like this as the reality seems counter-intuitive. The cause is poverty the effect is harder times taking economic sound decisions. Not the other way around.
> Out-of-pocket medical spending jumps once the money hits people’s bank accounts. It is a bad thing that tax withholding is one of the few ways Americans can have savings. When you live check to check this can be your only option.
That tax withholding is the only way that many Americans manage to save speaks more to a lack of self-control than anything else. If Uncle Sam can save a lump-sum for you by deducting from your paycheck, you could have done the same (in fact, better) with a bit of resolve and a bank account.
> That tax withholding is the only way that many Americans manage to save speaks more to a lack of self-control than anything else. I understand that it may seem so. But, when there is millions of Americans in that situation then it is a systemic problem not a personal one. There is a lot of on-line resources about this topic. e.g. https://www.google.com/search?q=the+cost+of+being+poor
Yeah there was a great breakdown of this when the representative from Irvine, California grilled CEO Jaimie Dimon, a bank teller who lives in Irvine makes $15 an hour, basically such a person if they have their own apartment will be forced to choose between having food and having a phone. We have kept salaries frozen for so many decades that we have impoverished the majority of working people to a ridiculous level. Asking people to go get more education is a joke when PHD's often live in their vehicle or live within homeless shelters as part time adjunct staff.
There’s this idea about poverty and cognitive control competing. It may be harder to save when you’re already poor
You will also easier end up poor if you have bad cognitive control.
> You will also easier end up poor if you have bad cognitive control.
My personal experience is that many middle class people has little control. But, the effect on them is small. That clothes that they do not need or that extra vacations are not going to make them poor.
But, I am sure that in very extreme cases like gambling addiction middle class people can become poor.
And why not? I don't see any fundamental reason why your local taxes should be deductible for federal tax purposes.
Because you don't actually have that money. Suppose that the state and the federal government each had a 55% tax rate. Then you would make $1 and owe $1.10. You would owe more in taxes than you make, so you would quit your job. Of course, there is a simple way for the states to fix this -- move the taxes to the business side. Instead of having state income tax, have payroll tax paid by the employer. Then the employer…
You can imagine a 110% tax rate in any system.
This isn't an argument agains the system, unless the rate actually is 110%.
Anyone living in a state with high income and/or property taxes will likely pay more this year given the $10k cap on deductions for state and local taxes which was previously unlimited before the 2018 tax year...
And why not? I don't see any fundamental reason why your local taxes should be deductible for federal tax purposes.
Yeah, that all Americans pay the same federal income tax rates is just basic fairness.
I've never seen anyone who doesn't personally benefit from the SALT deduction argue for it.