dave@lsuc.UUCP (David Sherman) (02/13/85)
In article <445@ahuta.UUCP> 45223wc@ahuta.UUCP (Bill Cambre) writes: || Now if we had ||tax reforms to a simple tax code where everyone just paid x%, I believe ||fewer people will cheat and we will all be happier knowing everyone pays ||relatively the same percentage. But that's another discussion. It sure is. A fixed percentage causes hardship for those with low incomes. The progressive system of brackets and marginal rates is perceived as the "fairest", and is used in both the U.S. and Canada. That isn't what makes the tax systems complex, though. In both countries, the tax system is used for an extraordinary number of policy objectives which have little or nothing to do with raising revenue (e.g., subsidizing particular industries). On top of that, there are legitimate reasons for complexity in the system to avoid double taxation or unfair results in things like corporate reorganizations, individuals earning income through a corporation, etc. The marginal rates are the least of your worries. Dave Sherman The Law Society of Upper Canada Toronto -- {utzoo pesnta nrcaero utcs}!lsuc!dave {allegra decvax ihnp4 linus}!utcsrgv!lsuc!dave
mcb@styx.UUCP (Michael C. Berch) (02/14/85)
In article <399@lsuc.UUCP> dave@lsuc.UUCP (David Sherman) writes: > ... A fixed percentage causes hardship for those with > low incomes. The progressive system of brackets and marginal > rates is perceived as the "fairest", and is used in both the > U.S. and Canada. Perceived by whom? I can't agree. There is something democratically satisfying about the idea that both moreAAND less fortunate people pay the same percentage of their gross income to the government to support its basic services. I think there is even economic justification for a "regressive" tax, e.g. 20% on the first $15,000, 15% on the next $30,000, etc., on the grounds that higher-income people simply don't consume government services at a linearly-proportional rate. Does a person earning $100,000/yr consume FIVE TIMES as much tax-supported public services (police/fire/school/defense/ environment/etc.) than a person earning $20,000? No way. Yet he will pay (without cheating or abusive shelters) more than five times as much tax. Now I don't think that a regressive tax is likely to be enacted, but a flat tax would at least be a step in the correct direction. Once we get away from the idea that taxes should be used to redistribute the national income and achieve broad policy objectives, and return to the original justification for taxes, which is to provide revenue to run the government on, I'll pay my share with a smile. Michael C. Berch {akgua,ihnp4,sun}!idi!lll-tis!mcb ...!idi!styx!mcb mcb@lll-tis.ARPA
hammond@petrus.UUCP (02/14/85)
> In article <445@ahuta.UUCP> 45223wc@ahuta.UUCP (Bill Cambre) writes: > || Now if we had > ||tax reforms to a simple tax code where everyone just paid x%, I believe > ||fewer people will cheat and we will all be happier knowing everyone pays > ||relatively the same percentage. But that's another discussion. > > It sure is. A fixed percentage causes hardship for those with > low incomes. The progressive system of brackets and marginal > rates is perceived as the "fairest", and is used in both the > U.S. and Canada. > ... > Dave Sherman You're slightly unfair, he did mention in the next paragraph deducting the first y dollars of income, which makes it a slightly progressive system, presumeably, if you make the y large enough (say 5k/exemption) then low income taxpayers pay nothing. I'm not sure a progressive system is fairer! It came about in the US because when it was first started, it really only hit the upper class. With inflation a good deal of the middle class has moved into the progressive region. Also, in the US social security is a very regressive system, it only taxes the first $38000 (at 7%) of income. Rich Hammond
john@genrad.UUCP (John Nelson) (02/15/85)
Frankly, I think the graduated tax system penalizes those who make more money and thus discourages free enterprise. It seems to me that it would be better to tax at a fixed rate, to encourage investment and spending of income, rather than creating a rather artificial system of tax shelters.
makaren@alberta.UUCP (Darrell Makarenko) (02/15/85)
> Now I don't think that a regressive tax is likely to be enacted, > but a flat tax would at least be a step in the correct direction. > Once we get away from the idea that taxes should be used to > redistribute the national income and achieve broad policy > objectives, and return to the original justification for taxes, > which is to provide revenue to run the government on, I'll pay my > share with a smile. Spoken like a true rich man.
dave@lsuc.UUCP (David Sherman) (02/17/85)
In article <287@petrus.UUCP> hammond@petrus.UUCP writes: ||It came about in the US because when it was first started, ||it really only hit the upper class. With inflation a good ||deal of the middle class has moved into the progressive region. That's the fault of your system for not having inflation adjustment built it. It's part of our Income Tax Act, and happens automatically in Canada every year. (For example, when the brackets were realigned effective 1982 to provide for approximately 50% maximum, you hit that level at $53,376 after all deductions. For 1985 it's $62,160 - and that's with brackets which were slowed down for two years as part of our anti-inflation program.) I understand the reasons indexing has never been desired in the U.S. is because Congress wants to look good every two years by "lowering" tax rates in an election year. Dave Sherman -- {utzoo pesnta nrcaero utcs}!lsuc!dave {allegra decvax ihnp4 linus}!utcsrgv!lsuc!dave
dave@lsuc.UUCP (David Sherman) (02/17/85)
In article <110@styx.UUCP> mcb@styx.UUCP (Michael C. Berch) writes: ||Perceived by whom? I can't agree. There is something ||democratically satisfying about the idea that both more AND less ||fortunate people pay the same percentage of their gross income to ||the government to support its basic services. Perhaps I'm writing from a different tradition. Although I'm in a high bracket, I don't really object to paying proportionately more in tax than those with lower incomes. Canadian society, perhaps more than that of the U.S., has a strong social tradition which, while retaining (mostly) the capitalist system, believes that all of society is entitled to certain basics. Hence we have government health plans for all, generous (probably too generous) welfare and unemployment insurance, and so on. The cost has to be borne somehow, and those with low incomes need them more than I do to eat. Dave Sherman -- {utzoo pesnta nrcaero utcs}!lsuc!dave {allegra decvax ihnp4 linus}!utcsrgv!lsuc!dave
phil@amdcad.UUCP (Phil Ngai) (02/18/85)
> Once we get away from the idea that taxes should be used to > redistribute the national income and achieve broad policy > objectives, and return to the original justification for taxes, > which is to provide revenue to run the government on, I'll pay my > share with a smile. > > Michael C. Berch What's wrong with using taxes to achieve policy objectives? Surely you would agree it is a good thing for the government to encourage the use of alternative energy sources? In stimulating a new market, the government can either give direct subsidies or tax breaks. I don't see much difference. Actually, I prefer having the tax breaks so I don't have to deal with as many government agencies. -- This is my opinion, I guess. Phil Ngai (408) 749-5720 UUCP: {ucbvax,decwrl,ihnp4,allegra}!amdcad!phil ARPA: amdcad!phil@decwrl.ARPA
hrs@homxb.UUCP (H.SILBIGER) (02/18/85)
For all those who complain about the progressiveness of the tax system, and the resulting "high" taxes, I recommend the following excercise. Add up all the taxes you paid, federal income, state income,state sales, real estate, etc. Add up your total income, including wages, dividends, company savings plan, stock market gains, etc. Now calculate your overall tax burden! I went through that excercise, and found although my marginal federal tax rate is over 40%, my overall tax rate was 21%. Note that my principal income, with two wage earners, is from salaries. I have no tax shelters (except for IRA), don't cut any corners in figuring my taxes, have no tax-free bonds etc. The above "overall" tax rate would even be lower if I added in the cost of the fringe benefits such as health insurance, pensions, etc. paid for by my employer. I really don't object to a tax rate like that, to pay for living in this society. I do object to the excessive amounts spend on defense that we don't get our money's worth for, and would like to see it spent on items that would really strengthen our country, such as the infrastructure education, and human resources. Herman Silbiger
2212zap@mhuxm.UUCP (putnins) (02/18/85)
> In article <399@lsuc.UUCP> dave@lsuc.UUCP (David Sherman) writes: > > > ... A fixed percentage causes hardship for those with > > low incomes. The progressive system of brackets and marginal > > rates is perceived as the "fairest", and is used in both the > > U.S. and Canada. > > Perceived by whom? I can't agree. There is something > democratically satisfying about the idea that both moreAAND less > fortunate people pay the same percentage of their gross income to > the government to support its basic services. > > I think there is even economic justification for a "regressive" > tax, e.g. 20% on the first $15,000, 15% on the next $30,000, > etc., on the grounds that higher-income people simply don't > consume government services at a linearly-proportional rate. > Does a person earning $100,000/yr consume FIVE TIMES as much > tax-supported public services (police/fire/school/defense/ > environment/etc.) than a person earning $20,000? No way. Yet he > will pay (without cheating or abusive shelters) more than five > times as much tax. > Consider the arguement that the person making 5 times as much income has 5 times as much to loose if his house burnt down (no fire department), if he was robbed (no police), or if the country was overtaken by a foreign power (no defense). Besides, taking your arguement to an extreme, we would have to abolish all public welfare/service programs, since the family getting $10K/year in public assistance "owes" that much to the governmnet.
jhull@spp2.UUCP (Jeff Hull) (02/19/85)
In article <417@lsuc.UUCP> dave@lsuc.UUCP (David Sherman) writes: >That's the fault of your system for not having inflation adjustment >built it. >I understand the reasons indexing has never been desired in the >U.S. is because Congress wants to look good every two years by >"lowering" tax rates in an election year. One problem with indexing is the selection of the measure of inflation. Official US govt. statistics say the aggragate inflation since 1970 is 138%. Based on what? Many of the basic "necessities" (well, in the US they are necessities) have gone up over 200%. And, to take just one example, a Datsun 240Z was $4400 in 1972 (I think is was 72, the first year they were introduced here). Today, the comparable Datsun 300ZX is over $19000. I.e., over 430%. What do you base the indexing on? -- Blessed Be, Jeff Hull {decvax,hplabs,ihnp4,scdrdcf,ucbvax} 13817 Yukon Ave. trwrb!trwspp!spp2!jhull Hawthorne, CA 90250
dgh@sun.uucp (David Hough) (02/19/85)
In article <687@amdcad.UUCP> phil@amdcad.UUCP (Phil Ngai) writes: > >What's wrong with using taxes to achieve policy objectives? >Surely you would agree it is a good thing for the government to >encourage the use of alternative energy sources? In stimulating >a new market, the government can either give direct subsidies >or tax breaks. I don't see much difference. Actually, I prefer >having the tax breaks so I don't have to deal with as many government >agencies. > > Phil Ngai (408) 749-5720 > UUCP: {ucbvax,decwrl,ihnp4,allegra}!amdcad!phil > ARPA: amdcad!phil@decwrl.ARPA What's wrong is that the most important feature our tax system might have has been lost, and it is not now PERCEIVED as JUST or FAIR. Economists may legitimately argue about whether it IS just or fair, but it's pretty generally PERCEIVED otherwise. A major reason for this perception is that the tax code is enormously complex, and those who have the means need not pay income taxes if they choose not to. Ordinary working people do not have the means and the system is not voluntary for them. Politicians often pretend that the "loopholes" were some sort of accidental oversight, but one person's loophole is another person's device to achieve legitimate policy objectives. There is scarcely a clause in the IRC that does not have a vociferous constituency whenever anyone threatens to reform it. To conclude, a very simple flat tax with no deductions, no credits, and only a simple per capita exemption would be correctly perceived by everyone. Graduated rates would be acceptable too (to me at least) as long as the simplicity were retained. David Hough
kalm@ihuxw.UUCP (James ) (02/19/85)
> I'm not sure a progressive system is fairer! > It came about in the US because when it was first started, > it really only hit the upper class. With inflation a good > deal of the middle class has moved into the progressive region. > Also, in the US social security is a very regressive system, > it only taxes the first $38000 (at 7%) of income. > > Rich Hammond Be careful about pointing out that FICA is regressive. This is the area of Federal taxes that has no "loopholes" (read: opportunities for a tax refund). Unless, of course, you believe that you're going to see that money again, ha-ha! One hope is that by the time I'm 65 I'll receive a pay check in December with no FICA deduction, Maybe I can start an IRA with the extra amount received. Let's not give the government the idea that we'd like to see FICA become progressive. -- Jim Kalmadge - AT&T Bell Labs IH 4b409 8-367-4325 (312) 979-4325 ihuxw!kalm
kalm@ihuxw.UUCP (James ) (02/19/85)
> I went through that excercise, and found although my marginal > federal tax rate is over 40%, my overall tax rate was 21%. > > The above "overall" tax rate would even be lower if I added > in the cost of the fringe benefits such as health insurance, > pensions, etc. paid for by my employer. > > I really don't object to a tax rate like that, to pay for > living in this society. I do object to the excessive > amounts spend on defense that we don't get our money's > worth for. > Herman Silbiger I might as well put in two cents worth: I agree, only if the money being spent on non-defense concerns was not MOSTLY (Yes, I said MOSTLY, not entirely,) WASTED. ("Providing jobs" is NOT necessarily 'not wasteful'). The government is impartial in this respect: It can waste money on anything. (NO form of government does ANYTHING right) -- Jim Kalmadge - AT&T Bell Labs IH 4b409 8-367-4325 (312) 979-4325 ihuxw!kalm
phil@amdcad.UUCP (Phil Ngai) (02/20/85)
> the tax code is enormously complex, and those who have the means > need not pay income taxes if they choose not to. > Ordinary working people do not have the means and the system is not > voluntary for them. I file the long form every year and don't believe that people who don't pay income taxes are getting away with something. I'm sure they got in that position by taking a real loss of some kind. It may be no money from their pocket to the IRS but it's money out of their pocket. Come on, it's easy not to pay income tax. Just don't have any income. Big deal. As for what the average citizen thinks, those turkeys think it's great when they get an income tax refund. I think I did something wrong when I get a refund because the government has had use of that money interest free all year. > To conclude, a very simple flat tax with no deductions, no credits, > and only a simple per capita exemption would be correctly perceived > by everyone. Graduated rates would be acceptable too (to me at least) > as long as the simplicity were retained. > > David Hough You obviously don't own a house. The mortgage interest deduction is probably even more of a sacred cow than Social Security. (well, it is to me!) And I claim there are benefits to society in encouraging home ownership. Real property (land) owners are less likely to want to mess up the system. Indeed, they are the system. Surely you've seen what renters can do to their apartments. I'd be interested in your opinion of all this after you become a home owner with a wife and 2.3 kids. You might find your opinion changed. -- This is my opinion, I guess. Phil Ngai (408) 749-5720 UUCP: {ucbvax,decwrl,ihnp4,allegra}!amdcad!phil ARPA: amdcad!phil@decwrl.ARPA
mag@whuxlm.UUCP (Gray Michael A) (02/20/85)
> > I think there is even economic justification for a "regressive" > > tax, e.g. 20% on the first $15,000, 15% on the next $30,000, > > etc., on the grounds that higher-income people simply don't > > consume government services at a linearly-proportional rate. > > Does a person earning $100,000/yr consume FIVE TIMES as much > > tax-supported public services (police/fire/school/defense/ > > environment/etc.) than a person earning $20,000? No way. Yet he > > will pay (without cheating or abusive shelters) more than five > > times as much tax. > > > Consider the arguement that the person making 5 times as much income has > 5 times as much to loose if his house burnt down (no fire department), if he > was robbed (no police), or if the country was overtaken by a foreign power > (no defense). Besides, taking your arguement to an extreme, we would have to >abolish all public welfare/service programs, since the family getting $10K/year > in public assistance "owes" that much to the governmnet. That argument is an argument for a wealth tax (such as a property tax), not for a flat or progressive income tax. It is perfectly possible to earn $100,000/year and have nothing to show for it -- i.e. nothing for the police, fire dept, or military to protect. It is also possible to have lots of possessions and pay very low or no taxes, especially when income is mostly in the form of long-term gains or tax-free investment dividends. (Following paragraph somewhat tongue-in-cheek) As long as we're talking regression, why not just have a head tax? $4,000 from each of 250,000,000 Americans would cover the current budget, and make a large payment on the national debt besides. The marriage penalty would cease to exist, but population growth would dramatically decline if children cost an extra $4,000/year each! No one would be able to complain that someone else was pating lower taxes. Corporations would not be taxed at all, so the cost of doing business would decline, and so would prices. Tax accountants would have to find useful employment. Those who failed to pay would simply be drafted into the military or public service jobs until their $4,000 was worked off each year, and wouldn't be allowed to vote. (End of tongue-in cheek part) By the way, there's been a lot of criticism of corporate tax rates in this group. What good does taxing corporations do? They pay their taxes out of income, you know, which comes from the consumers who buy their products. Individuals pay all the taxes in the end. Worse, these taxes are hidden and hard to guess at. Right now, billions of dollars are spent needlessly in figuring ways to reduce taxes and making business plans in the face of fluctuating tax climates. Hundreds of thousands of private and public sector jobs exist that have no other purpose than shuffling paper related to paying and collecting taxes. These workers produce nothing consumable. If corporations weren't taxed, most of these people could do something productive, and the standard of living would rise. Mike Gray, BTL, WH
dfi@ihuxo.UUCP (Dan Iuster) (02/20/85)
> Frankly, I think the graduated tax system penalizes those who make more > money and thus discourages free enterprise. It seems to me that it would > be better to tax at a fixed rate, to encourage investment and spending of > income, rather than creating a rather artificial system of tax shelters. Or how about taxing dividends and investment income at a higher rate than ordinary income (read real work). This would be an incentive for people to work and be creative rather than live of somebody's elses work. Otherwise, in the extreme case, you could have everybody investing and nobody working. -- ~~~~~~~ / \ Dan F. Iuster / - o \ ihnp4!ihuxo!dfi ( ) | ( ) AT&T Bell Laboratories \ \_/ / ih 6n-427, x2994 \_______/ "Have a nice Day"
slack@wxlvax.UUCP (Tom Slack) (02/20/85)
> > Once we get away from the idea that taxes should be used to > > redistribute the national income and achieve broad policy > > objectives, and return to the original justification for taxes, > > which is to provide revenue to run the government on, I'll pay my > > share with a smile. > > > > Michael C. Berch > > What's wrong with using taxes to achieve policy objectives? > Surely you would agree it is a good thing for the government to > encourage the use of alternative energy sources? In stimulating > a new market, the government can either give direct subsidies > or tax breaks. I don't see much difference. Actually, I prefer > having the tax breaks so I don't have to deal with as many government > agencies. > If the government had not discouraged alternative energy sources for so long it would not have to encourage them. I also prefer the tax breaks to subsidies. The point is that we have a constitution which states what things that the Federal Government should get into and also states that other things not mentioned are specifically left up to state and local governments. Most "policy objectives" are in the categories of things that should not be decided pro or con at the federal level. People should be free to decide these things. Sure I might agree that it is nice to have this or that tax break to get people to do this or that thing. But should I have the power to enact it? That is wielding power that no group of people should have (no, not even majorities, and our system is not run by majorities either). Tom Slack
slack@wxlvax.UUCP (Tom Slack) (02/20/85)
> > I think there is even economic justification for a "regressive" > > tax, e.g. 20% on the first $15,000, 15% on the next $30,000, > > etc., on the grounds that higher-income people simply don't > > consume government services at a linearly-proportional rate. > > Does a person earning $100,000/yr consume FIVE TIMES as much > > tax-supported public services (police/fire/school/defense/ > > environment/etc.) than a person earning $20,000? No way. Yet he > > will pay (without cheating or abusive shelters) more than five > > times as much tax. > > > Consider the arguement that the person making 5 times as much income has > 5 times as much to loose if his house burnt down (no fire department), if he > was robbed (no police), or if the country was overtaken by a foreign power > (no defense). Besides, taking your arguement to an extreme, we would have to > abolish all public welfare/service programs, since the family getting $10K/year > in public assistance "owes" that much to the governmnet. A person who recieves a transfer payment from with out creating a good does in reality owe that money to those that the transfer came from. It is really taxpayers money, property that they owned that was taken away and given to the people on welfare. Economic justification does not mean policy. We must weigh all factors when deciding what to do with public funds. But do not loose sight of the basic concept that tax money (for whatever purpose the goverment uses it for) is our money. It is not magically created by the FED, it is earned. There is no free lunch. I however agree that regressive taxes are particularly bad. When can we get rid of Social Security. Tom Slack
mcb@styx.UUCP (Michael C. Berch) (02/21/85)
> Consider the arguement that the person making 5 times as much income has > 5 times as much to loose if his house burnt down (no fire department), if he > was robbed (no police), or if the country was overtaken by a foreign power > (no defense). Besides, taking your arguement to an extreme, we would have to > abolish all public welfare/service programs, since the family getting > $10K/year in public assistance "owes" that much to the governmnet. No. We are talking about INCOME taxes, not PROPERTY taxes. Local property taxes that fund property-based services are quite correctly ad valorem, though to be completely correct there should be a per capita portion to fund per capita items like local hospital services, police protection of public events, and suchlike, and an ad valorem portion to fund services that increase in cost along with real or personal property, such as fire protection. The ad valorem portion should probably also be regressive, but it is (in California at least) essentially flat, e.g., "$X per $100 of assessed valuation". I say "essentially" since properties are assessed when transferred (and upon certain other events) since the enactment of Art. XIIIa of the Calif. Constitution ("Prop. 13"), leading to varying taxes among similar properties. -- Michael C. Berch mcb@lll-tis.ARPA {akgua,allegra,cbosgd,decwrl,dual,ihnp4,sun}!idi!styx!mcb ...!idi!lll-tis!mcb
msb@lsuc.UUCP (Mark Brader) (02/21/85)
> You obviously don't own a house. The mortgage interest deduction is > probably even more of a sacred cow than Social Security. (well, > it is to me!) And I claim there are benefits to society in > encouraging home ownership.... Interesting point, because we've never had that deduction in Canada. The short-lived Clark government was going to introduce it in 1980, in a limited way, but failed to, and the topic seems to have been dropped. I wonder what other countries do. Canada encourages home ownership with a tax shelter called an RHOSP, which is vaguely like the American IRA but you have to spend the money on housing. It's a bit halfhearted with various sorts of limits, but ours probably saved me and my wife about Can$3000 to $4000 over six years or so before we bought, which is enough to notice. (For retirement we have RRSP's, more like IRA's and less rulebound than RHOSP's. The acronyms stand for Registered * Savings Plan.) Mark Brader
dgh@sun.uucp (David Hough) (02/21/85)
In article <701@amdcad.UUCP> phil@amdcad.UUCP (Phil Ngai) writes: > >I file the long form every year and don't believe that people who >don't pay income taxes are getting away with something. I'm sure >they got in that position by taking a real loss of some kind. >It may be no money from their pocket to the IRS but it's money >out of their pocket. Come on, it's easy not to pay income tax. >Just don't have any income. Big deal. > Do you have any rental real estate? If so you get to "depreciate" it against other income even when the real estate is increasing in value. This means (in case anyone not familiar with this is reading) that you get to pretend to have a loss, which you use to reduce your taxable income, without sustaining any real economic loss. If you sell the rental real estate, you do have to pay tax on the income you depreciated, but it will likely be at the long term capital gain rate (20%) instead of the ordinary income rate (50%). What's the moral justification for this? I claim there's none. There is no real loss of any kind. >> To conclude, a very simple flat tax with no deductions, no credits, >> and only a simple per capita exemption would be correctly perceived >> by everyone. Graduated rates would be acceptable too (to me at least) >> as long as the simplicity were retained. >> >> David Hough > >You obviously don't own a house. The mortgage interest deduction is >probably even more of a sacred cow than Social Security. (well, >it is to me!) And I claim there are benefits to society in >encouraging home ownership. Real property (land) owners are less >likely to want to mess up the system. Indeed, they are the system. >Surely you've seen what renters can do to their apartments. > When I was a student I was a renter and I though the tax code was a ripoff. I now own three houses and I STILL think the tax code is a ripoff. I don't know of any religion with a holy book that proclaims that landowners are better than tenants. So the breaks in the tax code for real estate ownership serve no moral purpose, although silly justifications are available from any realtor. The breaks in the tax code for real estate ownership are simply the Establishment looking out for itself; almost all Congressmen own real estate and have since the beginning, so they don't even need to be convinced. >I'd be interested in your opinion of all this after you become a >home owner with a wife and 2.3 kids. You might find your opinion changed. > Phil Ngai (408) 749-5720 If anything, now that I have accumulated a family and some assets, I am much more aware of how the tax code is structured to keep the tax burden on the middle class while allowing the rich to pay taxes only if they want to. I don't object to taxing the middle class; the middle class ALWAYS pays the taxes. (Again, for those who are new, the poor don't have much to pay in taxes and the rich never pay taxes unless they choose to.) What annoys me is the pious facade of progressive taxation. So I advocate a system in which it is clear on whose shoulders lies the burden. David Hough
ron@brl-tgr.ARPA (Ron Natalie <ron>) (02/22/85)
Just be glad this isn't Italy. They just came up with a real great tax strategy. Due to inflation, they've found that owning a sailboat classes to being an annual income of $12,000 dollars a year and tax you on it annually. At least in the US you only get hit up on the appreciation when you sell something. -Ron
mat@hou4b.UUCP (Mark Terribile) (02/24/85)
>Or how about taxing dividends and investment income at a higher rate >than ordinary income (read real work). This would be an incentive for >people to work and be creative rather than live of somebody's elses >work. Otherwise, in the extreme case, you could have everybody investing >and nobody working. Seems to me we live in a society where it makes more sense to spend money and go into debt, with interest taken as a deduction, than it does to put money in the bank, and have your compounding shot to hell by income tax. Take a look at a set of compound interest tables sometime. If you are being taxed at an overall rate of about 30% in the US your marginal tax rate is much, much higher. And if you take 11% interest at a marginal tax rate of 40% you get a real interest rate of less than seven percent. The doubling time for 11% is about 7.1 years. For just under 7% it's over ten years. Given the fact that the US reinvests less of its GNP than most of the other industrialized nations, it would seem like a better idea to remove the tax on relatively small amounts of personal savings and remove the deduction for interest payments on most loans (with a possible exception for mortgage on a primary residence) The interest deduction has a rather strange effect. If I take out a four year loan on a car, the first year my interest payments (as opposed to payment of principle) will be relatively large, and, being deductible, will increase my disposable after tax income more than the interest in the last year of the loan. What kind of sense does this make? -- from Mole End Mark Terribile (scrape .. dig ) hou4b!mat ,.. .,, ,,, ..,***_*.
dave@lsuc.UUCP (David Sherman) (02/26/85)
The basis for mortgage interest not being deductible in Canada
has nothing directly to do with houses. Interest in general
is not deductible unless it's interest on money borrowed for
the purpose of producing income which is subject to tax.
So interest on personal loans, charge cards and personal house
mortgages is all ineligible for deduction. (There is no tax on
the gain resulting from the sale of a house which is your principal
residence.) On the other hand, interest paid on a loan which you used
to buy shares or a rental property is deductible. This principle
is called "matching", and doesn't apply in the U.S. as far as
interest is concerned.
Dave Sherman (yes I am a tax lawyer)
Toronto
--
{utzoo pesnta nrcaero utcs hcr}!lsuc!dave
{allegra decvax ihnp4 linus}!utcsri!lsuc!davemark@cbosgd.UUCP (Mark Horton) (02/26/85)
In article <493@ahutb.UUCP> seb@ahutb.UUCP (s.badian) writes: > In Sweden, where taxes are ridiculously high, many people >would rather get more vacation than get a raise. The time off is worth >more to them than the little money they get after taxes. My father in law has a similar viewpoint. When he works on a holiday, he has a choice of receiving double pay or an extra day off. He takes the extra day off, because "they haven't figured out a way to tax my extra day off."
dnc@clyde.UUCP (Don Corey) (02/27/85)
> One problem with indexing is the selection of the measure of > inflation. ... What do you > base the indexing on? How about indexing taxes to Congress's salary? -- Don Corey AT&T Bell Laboratories WH 2A-140 (201) 386-2349 ihnp4!clyde!dnc
wmartin@brl-tgr.ARPA (Will Martin ) (02/27/85)
> > "Progressive taxes are bad because they take away incentive to > > work hard and earn more" I've noticed this effect in myself. Not so much in work, but in other income-producing activities, like finding interest-paying checking accounts. Back when my wife and I both worked, and we had a larger total income than now, I recall thinking specifically that I much preferred a checking account that provided services at no cost to me than one which paid me some amount of interest on the balance. Now, the tax impact on such interest payments is less, but I still prefer to receive services than to receive monetary return on which I must pay tax. (Of course, as to this specific example, it is harder now to find either...) Will
devine@asgb.UUCP (Robert J. Devine) (02/27/85)
>> "Progressive taxes are bad because they take away incentive to >> work hard and earn more" > > How many people do you know that have decided to reduce their > work effort because it wasn't worth it due to the tax system? > > No one has ever demonstrated the truth of the quote on the > first line. Would you turn down a chance to earn $5000 more if > you could only get to keep $2500? > > If anyone out there can refer me to a legitimate controlled > study that gives some credence to that quote, please post it. > > Herman Silbiger I think it has been demonstrated that people DO reduce their work effort for work that is heavily taxed. They then increase the amount of effort is ways that are less taxed. Witness tax shelters, money spent on tax accountants & lawyers. Bob
dave@lsuc.UUCP (David Sherman) (03/01/85)
In article <441@spp2.UUCP> jhull@spp2.UUCP (Jeff Hull) writes: ||In article <417@lsuc.UUCP> dave@lsuc.UUCP (David Sherman) writes: ||>That's the fault of your system for not having inflation adjustment ||>built it. ||One problem with indexing is the selection of the measure of ||inflation. Official US govt. statistics say the aggragate inflation ||since 1970 is 138%. Based on what? Many of the basic "necessities" ||(well, in the US they are necessities) have gone up over 200%. The Canadian method is to use the annual increase in the Consumer Price Index published by Statistics Canada, using the figure for September 1984 to fix the indexing for 1985, and so on. The CPI is based on a "basket" of consumer goods, and of course is only an approximation of the effect of inflation on any individual. -- {utzoo pesnta nrcaero utcs hcr}!lsuc!dave {allegra decvax ihnp4 linus}!utcsri!lsuc!dave
neal@denelvx.UUCP (Neal Weidenhofer) (04/27/85)
> The above "overall" tax rate would even be lower if I added > in the cost of the fringe benefits such as health insurance, > pensions, etc. paid for by my employer. > > Herman Silbiger Now add in the taxes that others pay and get passed on to you in one way or another. For example: Extra taxes your employer has to pay that you might otherwise see in your salary, "employer's share" of social security, unemployment tax, etc. Taxes that get passed on in the prices you pay, what part of the price of a loaf of bread goes for the baker's income tax, the supermarket's? (Not exactly in the same category but while I'm at it:) The government spending your tax money SPECIFICALLY TO RAISE YOUR COST OF LIVING, farm supports, etc. Last time I tried to estimate this, I gave up after I passed my marginal bracket percentage (about 50%). I'd like to see how you come out. Regards, Neal Weidenhofer "The law is for protection Denelcor, Inc. of the people" <hao|csu-cs|brl-bmd>!denelcor!neal