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Fair means different things to different people.  While the low income person thinks it is fair that high income people pay a significantly higher rate, the high income earner may not think it is fair to pay that much while the person not paying anything in taxes keeps voting for more services and higher taxes on the wealthy.  There is only so far you can skew the revenue generation before it breaks down and the wealthy leave (see CA,NY, et. al.).  Something like 47% don’t pay anything in federal income taxes.  They pay other taxes, but not income.

 

I thought dividing the total revenue needed from income taxes by the number of tax payers would be a fair system.  Really get the legislators to think on how much was spent relative to earnings of the masses.  But, it would never generate much revenue and be extremely painful to low wage earners.  With that as a baseline, a flat % tax becomes much more lucrative.  It’s fair in that everyone pays the same percentage.  Raises substantial amounts of revenue.  Is easy (maybe too easy) to implement and doesn’t disincentivize earning.  Sometimes hard to justify taking on additional work or responsibilities for diminishing returns.  “Where did my overtime money go?”

 

The flat tax Steve Forbes ran on was something like 17% with a large standard deduction.  Not that much more for the middle class, and the bottom 20% or so paid nothing.  Adding a high standard deduction makes a flat tax progressive.  It’s just that there is only 1 step.  Eliminating all the tax loopholes, credits, exemptions, etc. could result in some wealthy individuals paying more.  Mitt Romney paid right around 15%....he would have paid more with a flat tax.  The current structure puts the huge step in rates right in the middle of the middle class.  It flattens out for the upper middle class before jumping again for the top < 1%.

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2 hours ago, UNDERGROUNDF250 said:

(39% Federal) + (14% CA State tax) =53% tax rate! That leaves the wage earner 47%. That's Not Fair, I don't care how much someone makes...

I hope some day we will figure out a tax system that is Fair to all...

 

That's not how marginal rates work. 

 

The top Federal tax bracket is 37% not 39% and it is only on income over $518k for single or  $622k for married couple. So income below $518k/$622k are taxes at lower rate. 

 

Similarly, the top CA tax bracket is 12.3% and only on income over $599k for single or $1.2m for married couple. 

 

And that's before deductions and credit. No one pays that much income taxes. Don't be so gullible. 

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10 minutes ago, bzcat said:

 

That's not how marginal rates work. 

 

The top Federal tax bracket is 37% not 39% and it is only on income over $518k for single or  $622k for married couple. So income below $518k/$622k are taxes at lower rate. 

 

Similarly, the top CA tax bracket is 12.3% and only on income over $599k for single or $1.2m for married couple. 

 

And that's before deductions and credit. No one pays that much income taxes. Don't be so gullible. 

He may be referring to proposals to raise the top federal marginal rate back to 39%.  Tax code is complicated.  There is the 3.8% investment tax that gets added on top of the capital gains rate or marginal income for short term gains.  Then throw in the 26 to 28% AMT.  Additional Medicare tax.  
 

You asymptotically approach the marginal rate as income goes up.  With all the complications of the tax code, It is no wonder the ultra rich have teams of tax accountants to take advantage of every opportunity.  And they can deduct that expense.  So yeah, they don’t pay that much.  Its the upper middle class that gets soaked.

 

I thought CA had some sort of additional surcharge on the wealthy above the 12.3% rate to make it around 14%.  Couldn’t find it so they may have dropped it.

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4 hours ago, slemke said:

With all the complications of the tax code, It is no wonder the ultra rich have teams of tax accountants to take advantage of every opportunity.  And they can deduct that expense.  So yeah, they don’t pay that much.


That's why I laugh at the people mad at Donald Trump for not paying any taxes. He has teams upon teams of accountants to make his tax bill as low as possible and it's 100% within the tax code to do so thanks to the loopholes. The system is the problem, not the taxpayers. 

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1 hour ago, fuzzymoomoo said:


That's why I laugh at the people mad at Donald Trump for not paying any taxes. He has teams upon teams of accountants to make his tax bill as low as possible and it's 100% within the tax code to do so thanks to the loopholes. The system is the problem, not the taxpayers. 

The problem is when people get greedy and think they're above the law, playing chicken with the taxman is very dangerous.

In a tax investigation, the first thing the accountants do is throw their clients under a bus, they must to avoid charges themselves.

From there, it tends to unravel fairly quickly...... especially when correspondence shows who instructed what was to be done...

 

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6 hours ago, fuzzymoomoo said:


That's why I laugh at the people mad at Donald Trump for not paying any taxes. He has teams upon teams of accountants to make his tax bill as low as possible and it's 100% within the tax code to do so thanks to the loopholes. The system is the problem, not the taxpayers. 

 

Uh, a lot of high income earners are very good at income tax evasion which is a crime. Trump is under suspicion for all kinds of fraud and tax evasion. So the problem to some extent are taxpayers who try to game the system. Al Capone allegedly murdered over 100 people, but went to jail for tax evasion. Many billions of tax revenue is lost every year to income tax evasion. 

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