Please tell me how a progressive tax is more fair? Fair to who?
Please tell me how a progressive tax is more fair? Fair to who?
Duh. To those who are uninformed, don’t pay taxes, get free stuff from the government and hate the rich, of course.
sigh, I was hoping for a head exploding pro taxation response. Well here’s my thought, why should I work harder and improve my earnings if the gov’t is going to take it all away. Perfect example, where I work there’s a person that won’t work weekends “because the gov’t is going to take it all anyway”.
sigh, I was hoping for a head exploding pro taxation response.
Choosing between progressive over flat isn’t necessarily “pro” taxation. A flat ~25% tax is still a hell of a tax vs., say, a progressive 0-40%. Making up the 25%. Not sure what the exact number would be to be revenue neutral vs. the current progressive system.
Perfect example, where I work there’s a person that won’t work weekends “because the gov’t is going to take it all anyway”.
Great example! But I know a two really wealthy guys who work non-stop. Boom! Got you there.
Well, I can counter that I can remember 2x in my life that I received a raise and the net result was less take home pay because the rate was right on the bubble. Really sucked, here ya go, good job, here’s your smaller paycheck, we deserve that raise more than you.
sigh, I was hoping for a head exploding pro taxation response. Well here’s my thought, why should I work harder and improve my earnings if the gov’t is going to take it all away. Perfect example, where I work there’s a person that won’t work weekends “because the gov’t is going to take it all anyway”.
My thoughts exactly. But, if we’re gonna’ do this, we really should do it the Al Sharpton way. When we get caught, we can laugh at how stupid the 'merikan public really is.
sigh, I was hoping for a head exploding pro taxation response. Well here’s my thought, why should I work harder and improve my earnings if the gov’t is going to take it all away. Perfect example, where I work there’s a person that won’t work weekends “because the gov’t is going to take it all anyway”.
All that is an example of is a lazy person making excuses because they don’t want to work weekends.
So-called “progressive taxation” is for people who don’t understand percentages 
.
our weekends are 100% OT and that individual said it didn’t make a difference to the check. Oddly, I try to get an extra weekend in when I’m free because it’s a nice bit of mad money LOL.
sigh, I was hoping for a head exploding pro taxation response. Well here’s my thought, why should I work harder and improve my earnings if the gov’t is going to take it all away. Perfect example, where I work there’s a person that won’t work weekends “because the gov’t is going to take it all anyway”.
All that is an example of is a lazy person making excuses because they don’t want to work weekends.
Also a person that doesn’t understand how income tax returns work.
Well, I can counter that I can remember 2x in my life that I received a raise and the net result was less take home pay because the rate was right on the bubble. Really sucked, here ya go, good job, here’s your smaller paycheck,
I don’t get it. (honestly). The new rate would only apply to the incremental bit of income that pushed you over into the new bracket. All the other income would be taxed exactly the same. In a pure progressive tax it’s a mathematical impossibility to earn less take home with any increase in pre-tax income (excepting a >100% tax rate).
In the extreme example let’s say you make $50K and the new bracket kicks in at anything >$50K. And the new tax rate is a mind-boggling 100% tax. They take everything over $50K. And you earn $5K OT. They’d take the entire $5K. But your take-home wouldn’t decrease.
Something else must have happened to your paychecks?
sigh, I was hoping for a head exploding pro taxation response. Well here’s my thought, why should I work harder and improve my earnings if the gov’t is going to take it all away. Perfect example, where I work there’s a person that won’t work weekends “because the gov’t is going to take it all anyway”.
All that is an example of is a lazy person making excuses because they don’t want to work weekends.
Also a person that doesn’t understand how income tax returns work.
Two Canadians who think they know US income tax law better than Americans who pay US income taxes. Interesting.
The progressive tax is not fair. Neither is a flat tax. What is fair is that we all pay the same amount.
I once saw a conservative cartoon that explained it pretty well (although it oversimplified it a bit, and of course glossed over some key points).
Assume you have three people living in a culdesac, and they agree that they need to buy a gate for the culdesac. The three people make $40,000 a year, $80,000 a year, and $150,000 a year. The gate costs $30,000. What is the most fair way to pay for it?
a) They each pay $10,000 for a gate that they will use equally?
b) They each pay 11% of their annual income (a flat tax) such that they pay $4500, $8900, and $16600 respectively?
c) One person pays $0, one person pays $4,000, and the third person pays $26,000 (a progressive tax)?
Using this simple model, everyone paying the same amount would be the fairest method. In 2013, the US collected 2.7 trillion in taxes and there were about 243 million people that were taxable. This amounts to about $11,000 per person. So under the fairest method, everyone should pay $11,000.
But that $11,000 would have to be collected per person. So for the typical American Household in the US, that would mean that 44% of their income would dog to federal taxes (each adult would pay $11,000 = $22,000 out of their $50,000).
What about a single person who works at Walmart or McDonalds? They make about $14,000 a year and would have to pay 79% in federal taxes to cover the $11,000 they owe.
Then there’s people like my cousin, who is super conservative and loved complaining about how much he hated the progressive tax system. He did this while he was in medical school. So, instead of the $0 he paid in taxes while in school for 8 years, he would shave had to pay $88,000 in taxes. In order to do that he would have had to work a significant amount, while working his butt off in medical school (on a side note, when I pointed this out, he said that he should have to pay taxes because his daddy made a lot of money and paid a lot of taxes).
The whole point here is that the fairest system, the one where everyone pays the same, just isn’t feasible. So already we have to take into consideration not just what is fair, but what is reasonable and feasible within a society. We could, on the one hand, make everyone get jobs as soon as they turn 18, which would likely be very low paying jobs, and then soak them for 79% in taxes, forcing them to live in extremely impoverished conditions. We could do that, but it would be to the detriment of society as a whole. Or, we could have some sort of progressive system such that the more you can pay, the more you do pay.
Having said all of that, I personally feel that the current system is too progressive, and that the bottom 50% are not paying their fair share.
Additional note: every single time I’ve had this conversation, it gets responded with, “but if we all pay the same rate, blah blah blah.” No, the same rate is not “fair.” All it is is a mathematical gimmick to make people think that its fair because we are applying the same multiplier to our incomes.
Two Canadians who think they know US income tax law better than Americans who pay US income taxes. Interesting.
Its actually sad that they understand it better than most Americans.
I’ve worked with people who honestly think that working over time puts them into the next bracket and that their entire check will get taxed at a higher rate. They reinforce this belief when they get some huge bonus one day, like $10,000, and see a huge chunk of taxes being taken out, not realizing that they will get most of it back on their return.
Well, I can counter that I can remember 2x in my life that I received a raise and the net result was less take home pay because the rate was right on the bubble. Really sucked, here ya go, good job, here’s your smaller paycheck, we deserve that raise more than you.
Uhhh, that’s pretty much impossible with our system of taxation. Only the income above the specific threshold is taxed at a higher rate. Google progressive and/or marginal taxation.
Well, I can counter that I can remember 2x in my life that I received a raise and the net result was less take home pay because the rate was right on the bubble. Really sucked, here ya go, good job, here’s your smaller paycheck, we deserve that raise more than you.
Yes, but then you get to put 18% of your earnings into an RRSP, get the tax refund, roll that over, pull the RRSP out without penalty in the HBP as a down payment on a house and then sell that house 10X in your life, with the capital gains on your primary residence being tax free… Someone who may be “hurt” by a flat tax - low income - doesn’t have those opportunities…
Now, if you’re talking about raising exemptions, getting rid of deductions, etc…
That is one of the best analogies/explanations I have seen. But, when we dissect the analogy, it starts to fail.
First, 3 people living next to one another with that discrepancy in income is very rare. Second, in that case, all equally benefit from the gate. All use the gate the same. All want the gate.
In the real world, it doesn’t work that way. In the real world, we do not all use the same amount of govt resources. As your analysis shows, in the real world, we could not divide the amount of taxes so that everyone pays the same.
I understand the issues with a flat tax. I also understand the issues with progressive tax. I would propose a hybrid wherein everyone pays taxes, but, still at a progressive rate. You have to have everyone paying taxes so that everyone has a stake in how our money is spent. We have to stop this system where nearly half pay no federal income tax and the bulk of govt income is dependent on income taxes.
Two Canadians who think they know US income tax law better than Americans who pay US income taxes. Interesting.
Its actually sad that they understand it better than most Americans.
I’ve worked with people who honestly think that working over time puts them into the next bracket and that their entire check will get taxed at a higher rate. They reinforce this belief when they get some huge bonus one day, like $10,000, and see a huge chunk of taxes being taken out, not realizing that they will get most of it back on their return.
Agreed. But, neither understand it as well as they think they do and both are biased by their own gov’s taxing system.
Well, I can counter that I can remember 2x in my life that I received a raise and the net result was less take home pay because the rate was right on the bubble.
That isn’t a problem with progressivity, that is due to discontinuities in the implementation of the tax code. You do understand the difference? Did your friend have a 401K plan that was maxed out? If you find yourself in that situation, you just increase your pre-tax income. Of course, this goes away at higher levels, but other breaks are available for extremely high earners…
I understand the issues with a flat tax. I also understand the issues with progressive tax. I would propose a hybrid wherein everyone pays taxes, but, still at a progressive rate. You have to have everyone paying taxes so that everyone has a stake in how our money is spent. We have to stop this system where nearly half pay no federal income tax and the bulk of govt income is dependent on income taxes.
Our marginal federal income tax rate is ridiculous (I am expecting <10% for '14), but I agree 100% with this. We have a household income well over 2x the national median, but after maxing all available tax-deferred retirement and healthcare expense vehicles, we also qualify for significant education credits, FSA dependent care credits…Every year when I do my taxes, I feel a little guilty; then again we are deferring a massive portion of our income and 40%+ of the population pays zero taxes. Why the hell do people who pay no taxes (or for their own healthcare, etc.) have any say in how the taxes are spent?