6 ms·

I think it's also akin to the withholding tax. If people had to write a check every year, there would be outrage to the amount people are actually paying. Inste

I think it's also akin to the withholding tax. If people had to write a check every year, there would be outrage to the amount people are actually paying. Instead, they are grateful for the government "giving" them a tax refund!

schoen 10y ago
Maybe this is psychologically related to https://en.wikipedia.org/wiki/Loss_aversion#The_endowment_effect https://en.wikipedia.org/wiki/Loss_aversion#The_endowment_ef...
toomuchtodo 10y ago
I don't think so. 45% of Americans pay zero income tax, even accounting for withholding.
- quadrangle 10y ago
  Yeah, zero FEDERAL income tax but most of those pay for SS, Medicare, and state taxes. Those in a lump sum vs withholdings would still be a different experience.
  - toomuchtodo 10y ago
    That's not withholding though (as the parent referred to; withholding towards your federal income tax bill); as you mention, that's payroll taxes, which you're going to get in retirement back as entitlements. Consider what would happen if the IRS was efficient enough (through these automated tax accounting systems) to not get an interest free loan from working America for an entire year (ie dynamically modifying every pay period how much was collected in federal tax withholding based on estimated total year tax liability); the federal government would have to be more judicious about its cash flow. You'd think that's something Republicans and small government advocates could get behind. Go figure. "Fiscal conservatives" in name only. EDIT: For the pedantic: s/IRS/US Treasury/ in my comment.
    - quadrangle 10y ago
      "IRS gets a loan" is metaphorically true in a sense but really doesn't hold up to scrutiny. The IRS doesn't actually get money from taxpayers at all. The IRS is just the bureaucracy that determines things. The money that you "pay" in federal taxes is just dollars that are deleted out of existence so that the dollars created by federal spending don't create inflation. The federal government's "cash flow" is made up entirely of creating dollars out of nothing by spending and deleting dollars out of existence by taxing. The federal government doesn't "have" dollars. http://www.moslereconomics.com/wp-content/powerpoints/7DIF.pdf http://www.moslereconomics.com/wp-content/powerpoints/7DIF.p...
      - avmich 10y ago
        > The money that you "pay" in federal taxes is just dollars that are deleted out of existence so that the dollars created by federal spending don't create inflation. Does it mean that taxation in another country is different than taxation in US? Especially in a country where local currency has a fixed exchange rate to US dollar? They presumably can't create money that easily.
        quadrangle 10y ago
        Yes, it's TOTALLY different. The U.S. power globally is EXTREMELY tied to the use of the dollar internationally. Everyone else who uses dollars (or has currency pegged to the dollar) is under major economic control and influence of the U.S. Oil priced in dollars is huge. When the U.S. left the gold standard it was giant fuck you to all the countries who held dollars and could no longer exchange them for gold. The U.S. maintains and exercises military power globally in part to protect the dominance of the dollar. Note also that state/local taxes in the U.S. are completely different from federal because they can't just make dollars and can only spend dollars received through taxes (which are not deleted in that case) or received from federal spending (or in some cases through the state itself doing business in the market).
        pas 10y ago
  - hermitdev 10y ago
    The number of US citizens that pay federal income tax is closer to 35%. All forms of income tax ought be abolished. A consumption tax of around 18% would provide the same federal revenue. It would simplify tax reporting (i.e. reduce expenditures on tax reporting), and increase the tax base (people living on trust funds would pay in at a higher rater). Look into the "Fair Tax" for a well reasoned proposal for such a tax.
    - quadrangle 10y ago
      Are you counting non-earners like kids and retired folks in that 35%? Federal "revenue" is a mistaken concept. The federal government just deletes money via taxation in order to offset the created money from spending. The government doesn't need or have any dollars, they are the source of the fiat currency in itself. The entire point of any tax or spend decisions is to further some political objective. For example, we tax everyone in order to assure the fiat currency has value. We also tax to discourse certain behaviors. We tax to have some impact on who has how many dollars in order to address social issues.
    - avmich 10y ago
      Answering to one of replies. > Federal "revenue" is a mistaken concept. The federal government just deletes money via taxation in order to offset the created money from spending. The government doesn't need or have any dollars, they are the source of the fiat currency in itself. Does it mean that taxation in USA works differently than taxation in a country with currency tied to US dollar by a fixed exchange rate? In that country government can't, I assume, so easily print money and delete them.
      - quadrangle 10y ago
        replied in other thread https://news.ycombinator.com/item?id=13992751 https://news.ycombinator.com/item?id=13992751 but YES, different
- sandworm101 10y ago
  And sales taxes. And all sorts of fees to various governments. And parking tickets. And a host of fees associated with the criminal justice system. And lotteries/gambling. And and and. Nobody pays zero tax, except perhaps the most very wealthy "persons" (ie corporations) able to carry over bad years and write down previous losses/taxes against future income.
  - toomuchtodo 10y ago
    You've gone totally off the reservation. My argument was simply against parent's statement that Americans would be shocked if they saw their tax bill; I'll reiterate; hardly. A little less than half of America pays no federal income tax (after refunds are accounted for).
- whack 10y ago
  > "This statement, however, is obviously untrue since, if one cares to move one's eyes slightly down the page at the Tax Policy Center web site, one will find that 73.1 percent of all tax units (in 2015) do pay either federal income taxes or federal payroll taxes. In other words, plenty of people who don't pay the "income tax" pay taxes on income via the payroll tax. That income tax is assessed at a flat and regressive rate of more than 15 percent, once both worker and employer shares are included. (The employer share negatively impacts the employees' wages, of course.) In 2014, payroll taxes combined for a total of 34 percent of all federal revenues in 2014, or one trillion dollars. (Those who don't get a paycheck pay the aptly-named "self-employment tax" in its place.)" https://mises.org/blog/myth-half-americans-dont-pay-federal-taxes https://mises.org/blog/myth-half-americans-dont-pay-federal-...
  - toomuchtodo 10y ago
    Income tax is not payroll tax! Income tax -> Federal income tax (discretionary spending) Payroll tax -> Social security and Medicare (non-discretionary spending) Everyone pays into entitlements via payroll tax. Not everyone pays into discretionary spending (everything except social security and medicare).
    - MaysonL 10y ago
      Which is why the government borrows the SS and Medicare tax payments to use on other stuff and puts IOUs in the SS and Medicare trust funds.
      - toomuchtodo 10y ago
        The US government lends itself SS and Medicare funds because there is no safer asset class than US treasuries.
        spinlock 10y ago
        Bullshit. The government bond traded for SS and Medicare funds is not sold on the open market. It has got zero to do with the risk free rate of return. The government can default on all SS and Medicare payments without affecting any bond holders.
- MaysonL 10y ago
  Unless you realize that Social Security and Medicare taxes are actually income taxes: they go up directly the more you make.
  - toomuchtodo 10y ago
    No. Social security is only taxed on your first $127,200 of annual income. Anything over that is not assessed social security tax. Medicare is 1.45% of your income with no limit, and an additional 0.9% on income over $200k/year. I'm unsure where you would get the idea that those rates increase as your income increases.
    - fjdlwlv 10y ago
      Parent did not say rates increase.
      - rplst8 10y ago
        Not sure why you are getting down voted. The taxes are both rates, so they do increase in amount the more you make.
    - MaysonL 10y ago
      I was replying to someone who was saying that 45% of workers pay no Federal income tax, so the upper limit did not enter into consideration. For the mathematical concept of direct variation, which I meant, but did not quite explicitly call out, see: https://www.freemathhelp.com/direct-variation.html https://www.freemathhelp.com/direct-variation.html
- Broken_Hippo 10y ago
  I can't find a reputable source for this. A google search comes up with sources like Breitbart. The top source is marketwatch, which I can't remember if they've a slant or not. Even in that, it mentions that, "Note that this does not necessarily mean they won’t owe their states income tax". Of course, it includes a chart, but considering the other sources in the first page results, I'm not sure I can trust this source.
masklinn 10y ago
> If people had to write a check every year, there would be outrage to the amount people are actually paying. Historically the french have done pretty much that. In fact it was even more painful as the historical method was to provide advance payments by thirds (IIRC the first two thirds would be based on your tax estimate, and the last one would be the net, or a reimbursement in case of misestimation) so you'd send the taxman a check 3 times a year (or go to the bank for a wire). No more outrage than most anywhere else, just a lot of wasted time and necessity to plan for and remember to send your advance payments.
andyspicer 10y ago
Yeah, the psychology of that is fascinating. I don't give the bureaucrats credit for doing it for that reason though. I think they did it because they wanted the cash flow earlier. Nonetheless, it does a wonderful job at making people grateful that they've been given the gift of having a portion of the money that was taken from them returned.

schoen 10y ago

Maybe this is psychologically related to https://en.wikipedia.org/wiki/Loss_aversion#The_endowment_effect https://en.wikipedia.org/wiki/Loss_aversion#The_endowment_ef...

toomuchtodo 10y ago

I don't think so. 45% of Americans pay zero income tax, even accounting for withholding.

quadrangle 10y ago
Yeah, zero FEDERAL income tax but most of those pay for SS, Medicare, and state taxes. Those in a lump sum vs withholdings would still be a different experience.
- toomuchtodo 10y ago
  That's not withholding though (as the parent referred to; withholding towards your federal income tax bill); as you mention, that's payroll taxes, which you're going to get in retirement back as entitlements. Consider what would happen if the IRS was efficient enough (through these automated tax accounting systems) to not get an interest free loan from working America for an entire year (ie dynamically modifying every pay period how much was collected in federal tax withholding based on estimated total year tax liability); the federal government would have to be more judicious about its cash flow. You'd think that's something Republicans and small government advocates could get behind. Go figure. "Fiscal conservatives" in name only. EDIT: For the pedantic: s/IRS/US Treasury/ in my comment.
  - quadrangle 10y ago
    "IRS gets a loan" is metaphorically true in a sense but really doesn't hold up to scrutiny. The IRS doesn't actually get money from taxpayers at all. The IRS is just the bureaucracy that determines things. The money that you "pay" in federal taxes is just dollars that are deleted out of existence so that the dollars created by federal spending don't create inflation. The federal government's "cash flow" is made up entirely of creating dollars out of nothing by spending and deleting dollars out of existence by taxing. The federal government doesn't "have" dollars. http://www.moslereconomics.com/wp-content/powerpoints/7DIF.pdf http://www.moslereconomics.com/wp-content/powerpoints/7DIF.p...
    - avmich 10y ago
      > The money that you "pay" in federal taxes is just dollars that are deleted out of existence so that the dollars created by federal spending don't create inflation. Does it mean that taxation in another country is different than taxation in US? Especially in a country where local currency has a fixed exchange rate to US dollar? They presumably can't create money that easily.
      - quadrangle 10y ago
        Yes, it's TOTALLY different. The U.S. power globally is EXTREMELY tied to the use of the dollar internationally. Everyone else who uses dollars (or has currency pegged to the dollar) is under major economic control and influence of the U.S. Oil priced in dollars is huge. When the U.S. left the gold standard it was giant fuck you to all the countries who held dollars and could no longer exchange them for gold. The U.S. maintains and exercises military power globally in part to protect the dominance of the dollar. Note also that state/local taxes in the U.S. are completely different from federal because they can't just make dollars and can only spend dollars received through taxes (which are not deleted in that case) or received from federal spending (or in some cases through the state itself doing business in the market).
        pas 10y ago
- hermitdev 10y ago
  The number of US citizens that pay federal income tax is closer to 35%. All forms of income tax ought be abolished. A consumption tax of around 18% would provide the same federal revenue. It would simplify tax reporting (i.e. reduce expenditures on tax reporting), and increase the tax base (people living on trust funds would pay in at a higher rater). Look into the "Fair Tax" for a well reasoned proposal for such a tax.
  - quadrangle 10y ago
    Are you counting non-earners like kids and retired folks in that 35%? Federal "revenue" is a mistaken concept. The federal government just deletes money via taxation in order to offset the created money from spending. The government doesn't need or have any dollars, they are the source of the fiat currency in itself. The entire point of any tax or spend decisions is to further some political objective. For example, we tax everyone in order to assure the fiat currency has value. We also tax to discourse certain behaviors. We tax to have some impact on who has how many dollars in order to address social issues.
  - avmich 10y ago
    Answering to one of replies. > Federal "revenue" is a mistaken concept. The federal government just deletes money via taxation in order to offset the created money from spending. The government doesn't need or have any dollars, they are the source of the fiat currency in itself. Does it mean that taxation in USA works differently than taxation in a country with currency tied to US dollar by a fixed exchange rate? In that country government can't, I assume, so easily print money and delete them.
    - quadrangle 10y ago
      replied in other thread https://news.ycombinator.com/item?id=13992751 https://news.ycombinator.com/item?id=13992751 but YES, different
sandworm101 10y ago
And sales taxes. And all sorts of fees to various governments. And parking tickets. And a host of fees associated with the criminal justice system. And lotteries/gambling. And and and. Nobody pays zero tax, except perhaps the most very wealthy "persons" (ie corporations) able to carry over bad years and write down previous losses/taxes against future income.
- toomuchtodo 10y ago
  You've gone totally off the reservation. My argument was simply against parent's statement that Americans would be shocked if they saw their tax bill; I'll reiterate; hardly. A little less than half of America pays no federal income tax (after refunds are accounted for).
whack 10y ago
> "This statement, however, is obviously untrue since, if one cares to move one's eyes slightly down the page at the Tax Policy Center web site, one will find that 73.1 percent of all tax units (in 2015) do pay either federal income taxes or federal payroll taxes. In other words, plenty of people who don't pay the "income tax" pay taxes on income via the payroll tax. That income tax is assessed at a flat and regressive rate of more than 15 percent, once both worker and employer shares are included. (The employer share negatively impacts the employees' wages, of course.) In 2014, payroll taxes combined for a total of 34 percent of all federal revenues in 2014, or one trillion dollars. (Those who don't get a paycheck pay the aptly-named "self-employment tax" in its place.)" https://mises.org/blog/myth-half-americans-dont-pay-federal-taxes https://mises.org/blog/myth-half-americans-dont-pay-federal-...
- toomuchtodo 10y ago
  Income tax is not payroll tax! Income tax -> Federal income tax (discretionary spending) Payroll tax -> Social security and Medicare (non-discretionary spending) Everyone pays into entitlements via payroll tax. Not everyone pays into discretionary spending (everything except social security and medicare).
  - MaysonL 10y ago
    Which is why the government borrows the SS and Medicare tax payments to use on other stuff and puts IOUs in the SS and Medicare trust funds.
    - toomuchtodo 10y ago
      The US government lends itself SS and Medicare funds because there is no safer asset class than US treasuries.
      - spinlock 10y ago
        Bullshit. The government bond traded for SS and Medicare funds is not sold on the open market. It has got zero to do with the risk free rate of return. The government can default on all SS and Medicare payments without affecting any bond holders.
MaysonL 10y ago
Unless you realize that Social Security and Medicare taxes are actually income taxes: they go up directly the more you make.
- toomuchtodo 10y ago
  No. Social security is only taxed on your first $127,200 of annual income. Anything over that is not assessed social security tax. Medicare is 1.45% of your income with no limit, and an additional 0.9% on income over $200k/year. I'm unsure where you would get the idea that those rates increase as your income increases.
  - fjdlwlv 10y ago
    Parent did not say rates increase.
    - rplst8 10y ago
      Not sure why you are getting down voted. The taxes are both rates, so they do increase in amount the more you make.
  - MaysonL 10y ago
    I was replying to someone who was saying that 45% of workers pay no Federal income tax, so the upper limit did not enter into consideration. For the mathematical concept of direct variation, which I meant, but did not quite explicitly call out, see: https://www.freemathhelp.com/direct-variation.html https://www.freemathhelp.com/direct-variation.html
Broken_Hippo 10y ago
I can't find a reputable source for this. A google search comes up with sources like Breitbart. The top source is marketwatch, which I can't remember if they've a slant or not. Even in that, it mentions that, "Note that this does not necessarily mean they won’t owe their states income tax". Of course, it includes a chart, but considering the other sources in the first page results, I'm not sure I can trust this source.

masklinn 10y ago

> If people had to write a check every year, there would be outrage to the amount people are actually paying. Historically the french have done pretty much that. In fact it was even more painful as the historical method was to provide advance payments by thirds (IIRC the first two thirds would be based on your tax estimate, and the last one would be the net, or a reimbursement in case of misestimation) so you'd send the taxman a check 3 times a year (or go to the bank for a wire). No more outrage than most anywhere else, just a lot of wasted time and necessity to plan for and remember to send your advance payments.

andyspicer 10y ago

Yeah, the psychology of that is fascinating. I don't give the bureaucrats credit for doing it for that reason though. I think they did it because they wanted the cash flow earlier. Nonetheless, it does a wonderful job at making people grateful that they've been given the gift of having a portion of the money that was taken from them returned.