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Whats Fair When it Comes to Taxes?

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Old 10-21-2011, 08:59 AM   #16
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Re: Whats Fair When it Comes to Taxes?

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my thoughts:


With all that said I personally believe that everyone who earns money should pay taxes. I also think everyone should pay the same percentage in taxes, which is absolutely not regressive as some say, its proportional. Donít worry under a completely proportional tax system the rich still pay more in taxes. I do not understand (although im open to consideration) why some people should pay a different percentage in tax then others. I will say that while I like flat tax plans and hybrid flat/fair tax plans like Cainís, I do think ďpassive incomeĒ should also be taxed the same as ďearned incomeĒ under a proportional system, so things like capital gains and qualified dividends would be taxed like everything else. As much as the estate tax sounds like a ďkingís taxĒ I would be up for taxing estates but only at the same equal rate as all other income. Im undecided on SS.
The bolded portion is the main thing I have a problem with. It's fashionable now to complain about the capital gains tax, but I actually have a real problem with it. Here's an example:

Let's say, for instance, I'm able to invest $10k of my after tax income in a given year. In that year I make $1k on my investments and I sell off my stock. I don't think I should then be taxed again because I earned $1,000 after I already paid taxes on the money I invested, and if I am, I certainly don't believe it should be at the same rate as I already had been for earning the money I invested.

Now, that example doesn't address folks like Warren Buffett who don't really do anything other than invest, but it illustrates the issue that lots of normal people could face. So, what would be a solution to this? Progressively tax higher capital gains earners? I'm not exactly sure, but I can tell you if the capital gains tax rises to the same level as my payroll tax, I'll probably be a little hesitant to invest any of my money.
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Old 10-21-2011, 09:38 AM   #17
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Re: Whats Fair When it Comes to Taxes?

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The bolded portion is the main thing I have a problem with. It's fashionable now to complain about the capital gains tax, but I actually have a real problem with it. Here's an example:

Let's say, for instance, I'm able to invest $10k of my after tax income in a given year. In that year I make $1k on my investments and I sell off my stock. I don't think I should then be taxed again because I earned $1,000 after I already paid taxes on the money I invested, and if I am, I certainly don't believe it should be at the same rate as I already had been for earning the money I invested.

Now, that example doesn't address folks like Warren Buffett who don't really do anything other than invest, but it illustrates the issue that lots of normal people could face. So, what would be a solution to this? Progressively tax higher capital gains earners? I'm not exactly sure, but I can tell you if the capital gains tax rises to the same level as my payroll tax, I'll probably be a little hesitant to invest any of my money.
You only get taxed on your profit which is new income. The billionaires hide their money from taxes using similar strategy with capital gains and it isn't fair at all.
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Old 10-21-2011, 09:59 AM   #18
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Re: Whats Fair When it Comes to Taxes?

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You only get taxed on your profit which is new income. The billionaires hide their money from taxes using similar strategy with capital gains and it isn't fair at all.
I know that, I still have a problem with it when it's on a smaller scale, though. I'm not saying that I necessarily have a solution to the problem, but I don't know that raising the tax is fair to the people who aren't able to put much in and don't end up earning much, either.
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Old 10-21-2011, 10:48 AM   #19
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Re: Whats Fair When it Comes to Taxes?

At this point... I don't even know any more. I've always felt a "Flat Tax" would be good because everyone would have to pay the same % of what they earn. There would be no complaining about how the rich get richer, the poor get poorer, and the middle class is what runs this country.

Then I've felt everyone has to eat so make a "Food tax". Everyone gets hit equally. Same for the most part with a "Gas tax". Everyone who drives gets hit equally.

I'm not a smoker and hardly a drinker but what pisses me off more is when they want to raise tobacco tax as if that will solve our problems. Lets make the smokers pay for everything. Another was VA's stupid idea a few yrs ago to attack the people who get DUI's. The Gov. had this brain storm that it costs like 60 mill to repair VA's roads and on average there was "X" number of drunk drivers a year and by taxing them extra VA would make the 60 mill easily. They reduced everyones taxes figuring the drunk drivers would carry the load, but most Judges didn't think the law was fair so they started throwing DUI cases out of court. VA quickly fell 60 mill in the hole. lol. Then after it was challenged in VA's courts it was considered unconstitutional. All the extra tax that drunk drivers paid had to be repaid back to them by the state. lol.
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Old 10-21-2011, 10:50 AM   #20
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Re: Whats Fair When it Comes to Taxes?

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I know that, I still have a problem with it when it's on a smaller scale, though. I'm not saying that I necessarily have a solution to the problem, but I don't know that raising the tax is fair to the people who aren't able to put much in and don't end up earning much, either.

Whatever problem you have with it is unfounded. You have 1k in new income, how you got it is irrelevant. If it helps think of the process investing in stock as having invested in a business and making a profit (exactly what you're doing actually). You will pay and you should pay taxes on those proceeds.
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Old 10-21-2011, 10:52 AM   #21
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Re: Whats Fair When it Comes to Taxes?

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I think the real question is the balance of having a closely knit society which values the free-market VS. the rising income/wealth disparity between the top and bottom of society(rising tide lifting boats unequally). At what point society so far apart in terms of socio-economic status that the society really isn't "one" anymore? Are taxes somewhat of an answer and if so, to what extend until we start moving towards big govt/socialism(sure some will say we are already there). If we are already there or we shouldn't try to correct this, what is it to be American? Are we all really equal with the same rights if life is a race and people starting in the "back" never will be able to catch up?
So I need to stay in a lower income bracket because my neighbors decide that they are OK making $35,000 a year? Why should I feel the need to hold myself back because others make the poor or wrong decisions? You also say people are stuck in the back and never catch up. Good thing not all people have this mind set or they would never make it in life. Its sad that people actually think that way because they then tell people on the bottom there is no hope for them only hurting them even more. I was told because I did not have a College Degree I could never get the job I have today. If I listened to those people then I'd be probably be stuck in a dead end job. How come the Chinese lady down the street could come here speaking no english and little to no money and now own three dry cleaners? The only dead end in America is the dead end that people allow to be put in or behind. Is it harder for some then others. Yes, see the chinese lady but if people have the will they can suceed.
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Old 10-21-2011, 10:52 AM   #22
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Re: Whats Fair When it Comes to Taxes?

To clarify... I know I mentioned I had a problem with Gov. picking on any one group, and by making a "Gas tax" it would only hit drivers, but... they could add a tax to people who ride the trains as well. Taxies and Buses would most likely pass their gas tax down to the common man by raising the rates so they would pay their fair share also.

The only ones not hit would be walkers and bike riders. I can live with that since they are doing their part to keep smog to decent level.
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Old 10-21-2011, 10:58 AM   #23
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Re: Whats Fair When it Comes to Taxes?

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So I need to stay in a lower income bracket because my neighbors decide that they are OK making $35,000 a year? Why should I feel the need to hold myself back because others make the poor or wrong decisions? You also say people are stuck in the back and never catch up. Good thing not all people have this mind set or they would never make it in life. Its sad that people actually think that way because they then tell people on the bottom there is no hope for them only hurting them even more. I was told because I did not have a College Degree I could never get the job I have today. If I listened to those people then I'd be probably be stuck in a dead end job. How come the Chinese lady down the street could come here speaking no english and little to no money and now own three dry cleaners? The only dead end in America is the dead end that people allow to be put in or behind. Is it harder for some then others. Yes, see the chinese lady but if people have the will they can suceed.
Your right. If people were told "you can't" or "never will" then they won't. You didn't listen to them good job. But what about the single mother with 5 kids who can't afford to pay for child care and work at McDonalds... the only place to would hire her? In VA when she goes to Social Services and asks for help or "assistance" they tell her she has a job or she makes too much money due to the job and they can't help her. So what does that mother do? She quits her job and then refiles and gets the full benifits for what they think a mother with 5 kids should get instead of simply supplementing what she was already making.

Our system of Gov. is bad from the top all the way down to the county level.
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Old 10-21-2011, 11:01 AM   #24
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Re: Whats Fair When it Comes to Taxes?

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Originally Posted by jdlea View Post
The bolded portion is the main thing I have a problem with. It's fashionable now to complain about the capital gains tax, but I actually have a real problem with it. Here's an example:

Let's say, for instance, I'm able to invest $10k of my after tax income in a given year. In that year I make $1k on my investments and I sell off my stock. I don't think I should then be taxed again because I earned $1,000 after I already paid taxes on the money I invested, and if I am, I certainly don't believe it should be at the same rate as I already had been for earning the money I invested.

Now, that example doesn't address folks like Warren Buffett who don't really do anything other than invest, but it illustrates the issue that lots of normal people could face. So, what would be a solution to this? Progressively tax higher capital gains earners? I'm not exactly sure, but I can tell you if the capital gains tax rises to the same level as my payroll tax, I'll probably be a little hesitant to invest any of my money.
Yeah i hear you and this is something I really struggled with when I was thinking about tax equality. I decided there are 3 types of jobs in this world. Sales, Sales Support and Government. Everything falls under those 3 categories. Investing is sales, youre buying something in order to sell it to someone else at a higher price. So the deciding factor for me is that the gain someone made from selling the business they started or from a stock they sold is effectively income in my opinion, merely by the fact it can be sold. So just like a vender paying income taxes on the bananas he bought with after tax money and sold for a profit I think a investor selling stocks or ownership in a company for a profit should be treated the same way.
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Old 10-21-2011, 11:11 AM   #25
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Re: Whats Fair When it Comes to Taxes?

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Your right. If people were told "you can't" or "never will" then they won't. You didn't listen to them good job. But what about the single mother with 5 kids who can't afford to pay for child care and work at McDonalds... the only place to would hire her? In VA when she goes to Social Services and asks for help or "assistance" they tell her she has a job or she makes too much money due to the job and they can't help her. So what does that mother do? She quits her job and then refiles and gets the full benifits for what they think a mother with 5 kids should get instead of simply supplementing what she was already making.

Our system of Gov. is bad from the top all the way down to the county level.
this is the one problem i was addressing in my orig post. when you actually look into all the programs a person is better off not working and collecting all the diff types of govt assistance than working a mcdonalds job or as a cashier at walmart.

a person is much much better off (and probably making the equivalent of 50-60k) if they claim unemployment, etc but work an under the table job. its a windfall really. pay close to nothing for housing, even if you stop paying rent the landlord has a tough time kicking you out b/c your sec 8, sell your food stamps at 50 cents to the dollar, free healthcare and dental for you and your whole family.

unless you make more than 50k why work a job you have to claim income on?
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Old 10-21-2011, 11:14 AM   #26
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Re: Whats Fair When it Comes to Taxes?

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I'm not a smoker and hardly a drinker but what pisses me off more is when they want to raise tobacco tax as if that will solve our problems. Lets make the smokers pay for everything. .
its my understanding that the tax of tobacco goes to help offset tobacco related expenses like lung cancer, cancer research, tobacco use awareness . . .which i think is a good thing. i could be wrong. i imagine it costs us alot of money for the older folks on medicaid who have been smoking for 60 years and get cancer . . .
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Old 10-21-2011, 11:17 AM   #27
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Re: Whats Fair When it Comes to Taxes?

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Your right. If people were told "you can't" or "never will" then they won't. You didn't listen to them good job. But what about the single mother with 5 kids who can't afford to pay for child care and work at McDonalds... the only place to would hire her? In VA when she goes to Social Services and asks for help or "assistance" they tell her she has a job or she makes too much money due to the job and they can't help her. So what does that mother do? She quits her job and then refiles and gets the full benifits for what they think a mother with 5 kids should get instead of simply supplementing what she was already making.

Our system of Gov. is bad from the top all the way down to the county level.
A women with 5 kids working at McDonalds gets plenty of assistance. That's not a good example but I get the point. At one time in this country the local churches and groups helped their own which made for a tighter community. Now the federal gov takes that role and uses it as an election tool driving a wedge in the community. When Bill Clinton and Newt reformed wellfair it forced mothers like that into programs that helped them obtain better jobs and off wellfair when they could care for themself. The program in VA was very successful and gave those mothers pride in providing for their families. That program has been distroyed over the years by both parties and its back to the wellfair programs of the 80s.
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Old 10-21-2011, 11:30 AM   #28
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Re: Whats Fair When it Comes to Taxes?

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Whatever problem you have with it is unfounded. You have 1k in new income, how you got it is irrelevant. If it helps think of the process investing in stock as having invested in a business and making a profit (exactly what you're doing actually). You will pay and you should pay taxes on those proceeds.
How should 401k's be handled then? This is before tax income that's earned compound interest for a number of years. I know it's taxed when it is paid out during retirement, but at what rate should it be taxed? Also, how would the "income" portion of it be determined?

I'm pretty ignorant to tax laws and such, so I'm asking for informational purposes, not to be combative.

I suppose I just never really thought about every bit of money I earn as income before; admittedly, I probably should have. It's just a way of thinking that needs to switch, but this is an interesting discussion, to me.
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Old 10-21-2011, 12:03 PM   #29
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Re: Whats Fair When it Comes to Taxes?

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Who told you life is fair? If it was fair we would all be well off, there wouldn't be children that go to sleep hungry at night or homeless veterans, or fund managers who pay 15% CGT on the hard earned money of others.

Get over your pursuit of perfection and fairness and start seeking sensibility and practicality. It doesn't seem fair to me to have the local grocery bagger pay $4 for a loaf of bread and 15% on their income tax and for the CEO of the grocery store to also pays $4 for a loaf of bread and 15% on their income tax. On the surface it looks pretty fair but while the CEO wipes his ass with $100 bills and is unable to notice a measly $4 the grocery store clerk will.

The cost of rent/mortgage and consumable goods are high and unless you want to live like a caveman someone making 30k can barely survive in this country. Bottom line is the clerk will consume most of his income on all the things one need to live a decent life while the CEO can't spend enough to on his neighborhood for eternity. As such they shouldn't be treated the same in matter of taxation.

Some will say, well, why should the CEO have to subsidize other people...to these people I say who is subsidizing the CEO and why shouldn't they pay more considering they benefit the most?
In school I was always taught that the reason people come to America is for opportunity. That America guarantees the pursuit of happiness for everyone but not a guarantee that everyone will be happy.

We are all born into different circumstances but just like you said life isnít fair. Just like its not fair that some people are harder workers then others, smarter, better looking, smooth talking, better athletically, more innovative or...... just good ole rich. Thatís just the way it is, some people are dealt better cards then others. Im not rich and I donít come from a rich family, but I donít think rich people should be punished just like I donít think a hard worker, athlete or model should be punished because of their lack of misfortune.

I think people who earn more money should pay more taxes because like you said they are benefiting the most. Thatís why I think a percentage is fair, as you earn more you pay more. I also think people at the bottom of the economic scale should be given more opportunity, kind of like they are now but through a more controlled process. So instead of giving someone a huge tax refund (relative to their income) at the end of the year to do what they like with, I think it would be more beneficial to provide them with tools through social programs that present individuals with opportunities to climb the economic latter if that what they choose to do. This would replace tax refunds and be in addition to the subsidies like housing vouchers and food stamps that many of us are already receiving. So more oppertunity for poorer people but its up to you to take advantage of it. Things will never be fair for everyone but i think treating everyone equally is start.
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Old 10-21-2011, 12:33 PM   #30
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Re: Whats Fair When it Comes to Taxes?

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How should 401k's be handled then? This is before tax income that's earned compound interest for a number of years. I know it's taxed when it is paid out during retirement, but at what rate should it be taxed? Also, how would the "income" portion of it be determined?

I'm pretty ignorant to tax laws and such, so I'm asking for informational purposes, not to be combative.

I suppose I just never really thought about every bit of money I earn as income before; admittedly, I probably should have. It's just a way of thinking that needs to switch, but this is an interesting discussion, to me.
401k contributions aren't taxed at all until they are withdrawn and there a lot of rules around it. For one thing you can borrow against it and not pay taxes or penalty on it so long as you pay it back within 5 years (except when buying a home). You are required to withdraw a minimum amount of it when you turn 70.5 (this requirement was suspended by congress for 2009 because of the economic downturn).

You are technacally suppose to be taxed on it at the tax bracket you were in at your last income generating position before retirement (It doesn't mean you can go get a job at McDonald's though to lower your tax bracket). There are some strategies you can employ to lower your taxes. For example, if you don't anticipate your tax bracket to be lower as you get older and near retirement it might be wise to convert your 401k to Roth IRA before you retire since isn't subjected to minimum distribution rules which could cost you in the long run.


Bottom line is the rules around 401k are quite generous and if you combine it with other financial instruments (i.e. whole life insurance) you can definitely lower your tax bill when you retire.
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