4 ms·

I don't see why state taxes wouldn't be federally deductible. Roughly: if I work 6 hours, I have to work an additional hour a day just to earn money to give to

I don't see why state taxes wouldn't be federally deductible. Roughly: if I work 6 hours, I have to work an additional hour a day just to earn money to give to the state; you're suggesting I should work an additional 15 minutes to earn money to give to the feds just because I earned the money to give to the state. Absolutely I shouldn't be paying taxes on money earned just to pay taxes. It's not like I'm "shielding my earnings", because those earnings are earned specifically to get confiscated - you want me to earn more just because someone else took my money.

smsm42 9y ago
With the same logic, every expense should be deducted. If I work additional hour to give money to the landlord/clothes store/pub owner, why should I work additional 15 minutes to give money to the feds just because I earned money to give to the landlord/clothes store/pub owner? Because tax is charged on the income, not on money left in your pocket after paying everybody else. That's why it is income tax, not wealth tax or savings tax or any other tax.
- ctdonath 9y ago
  Taxes are fundamentally different from other expenses. I'm not opting to purchase a service (or not, just saving the money) when paying taxes, I'm facing the implication of a gun to my head (the ultimate enforcement of government power). No other expense comes directly from simply how much I earn, and is not compulsory based thereon. If there's going to be deductions at all, the first should be taxes paid to other levels of gov't.
  - smsm42 9y ago
    I do not see how compulsory nature of the expense matters in this particular case. You need to eat to live - should food expenses be deducted? What if you're sick and need to pay for medicine - should that be deducted? You need to be clothed to go on the street - should clothing expenses be deducted? You can find argument for many of those, but ultimately the decision is arbitrary based on preferred policy by state. If the state police would favor improving the clothing situation of the population - you may very well get clothes deduction. Depending on what the government wants to promote or suppress, you may get various policy deductions.
    - dragonwriter 9y ago
      > You need to eat to live - should food expenses be deducted? Reasonably necessary ones should be, or a value to cover them rolled into blanket deduction everyone gets, sure. > You need to eat to live - should food expenses be deducted? That's why there is a medical costs deduction. (It only cuts in at costs above 10% of AGI, which is a bit wonky, though.) > You need to be clothed to go on the street - should clothing expenses be deducted? Same answer as for food.
    - ctdonath 9y ago
      Income earned for mundane food/clothing/shelter/healthcare costs SHOULD be deductible. That's basically what the poverty line is: the minimum income necessary for basic sustenance in national standard culture. If you're functioning at that level, you shouldn't pay taxes - precisely because you can barely care for yourself & your own, so you shouldn't be compelled to pay for others (with a bureaucracy siphoning off a significant percentage for themselves). Insofar as sales taxes are a thing, all documentable taxes paid should be refunded if your income is below the poverty line[1], and even those above that line should be able to deduct "mundane sustenance" costs including taxes paid. [1] - exactly how the transition from "below poverty line" to "above" should be handled, to mitigate the tax cost transition, will require a bit more thought than this casual comment. Suffice to say we pay representatives to sanely figure out such things.
      - smsm42 9y ago
        > Income earned for mundane food/clothing/shelter/healthcare costs SHOULD be deductible That gets into a rabbit hole pretty quickly. What's mundane? Am I allowed to shop in Whole Foods or only eat at McDonalds? What if I care about my health - should I be penalized by taxes for wanting to eat heathy (and therefore more expensive) food? What if I don't eat a lot but I must buy very expensive clothes because of peculiar set of allergies? Managing all those would make each tax return like a PhD thesis and make handling 300M of those infeasible. > If you're functioning at that level, you shouldn't pay taxes That is what is happening for low income people in US right now. Lowest quintile pays virtually no federal income tax. > , all documentable taxes paid should be refunded if your income is below the poverty line Since it's impossible to prove who bought certain thing, this would be huge motivation for abuse. Do you want to pay 10% sales tax on $100K car or pay a poor person $500 and have them "buy" that car, get the tax refunded and save $10K? Of course, you say, there are title records. For cars. Which need now to be checked (welcome another thousand of government employees, with their salaries, pensions, etc.). And how many expensive things don't even have formal ownership registration? These things get very complex and expensive to handle very quick. > That's basically what the poverty line is Poverty line is usually defined as percentage of median income. This is largely arbitrary and handwavy, and used because people need to use something. But it's a flimsy base for the tax policy. > exactly how the transition from "below poverty line" to "above" should be handled, This is called "poverty trap". It's a well-known phenomenon, especially in a welfare state. > Suffice to say we pay representatives to sanely figure out such things. We do pay them, and pay them very well, but their delivery on the "sane" part is very short of the desired, so far.
- dragonwriter 9y ago
  > With the same logic, every expense should be deducted. That's essentially how business taxes work, so why not?
  - smsm42 9y ago
    Why income tax is not "free cash" tax? I guess because it's massively easier to tax income than "free cash" and more exceptions you allow more avoidance you get. Most countries don't even have this system of deductions US has - there's just income tax, which usually is paid automatically by wage deduction, and some kind of sales/VAT tax for businesses, and very little opportunity to deduct any personal expenses. US uses deductions as policy tools, so they need a lot of it. But that's in no way the only way possible.

smsm42 9y ago

With the same logic, every expense should be deducted. If I work additional hour to give money to the landlord/clothes store/pub owner, why should I work additional 15 minutes to give money to the feds just because I earned money to give to the landlord/clothes store/pub owner? Because tax is charged on the income, not on money left in your pocket after paying everybody else. That's why it is income tax, not wealth tax or savings tax or any other tax.

ctdonath 9y ago
Taxes are fundamentally different from other expenses. I'm not opting to purchase a service (or not, just saving the money) when paying taxes, I'm facing the implication of a gun to my head (the ultimate enforcement of government power). No other expense comes directly from simply how much I earn, and is not compulsory based thereon. If there's going to be deductions at all, the first should be taxes paid to other levels of gov't.
- smsm42 9y ago
  I do not see how compulsory nature of the expense matters in this particular case. You need to eat to live - should food expenses be deducted? What if you're sick and need to pay for medicine - should that be deducted? You need to be clothed to go on the street - should clothing expenses be deducted? You can find argument for many of those, but ultimately the decision is arbitrary based on preferred policy by state. If the state police would favor improving the clothing situation of the population - you may very well get clothes deduction. Depending on what the government wants to promote or suppress, you may get various policy deductions.
  - dragonwriter 9y ago
    > You need to eat to live - should food expenses be deducted? Reasonably necessary ones should be, or a value to cover them rolled into blanket deduction everyone gets, sure. > You need to eat to live - should food expenses be deducted? That's why there is a medical costs deduction. (It only cuts in at costs above 10% of AGI, which is a bit wonky, though.) > You need to be clothed to go on the street - should clothing expenses be deducted? Same answer as for food.
  - ctdonath 9y ago
    Income earned for mundane food/clothing/shelter/healthcare costs SHOULD be deductible. That's basically what the poverty line is: the minimum income necessary for basic sustenance in national standard culture. If you're functioning at that level, you shouldn't pay taxes - precisely because you can barely care for yourself & your own, so you shouldn't be compelled to pay for others (with a bureaucracy siphoning off a significant percentage for themselves). Insofar as sales taxes are a thing, all documentable taxes paid should be refunded if your income is below the poverty line[1], and even those above that line should be able to deduct "mundane sustenance" costs including taxes paid. [1] - exactly how the transition from "below poverty line" to "above" should be handled, to mitigate the tax cost transition, will require a bit more thought than this casual comment. Suffice to say we pay representatives to sanely figure out such things.
    - smsm42 9y ago
      > Income earned for mundane food/clothing/shelter/healthcare costs SHOULD be deductible That gets into a rabbit hole pretty quickly. What's mundane? Am I allowed to shop in Whole Foods or only eat at McDonalds? What if I care about my health - should I be penalized by taxes for wanting to eat heathy (and therefore more expensive) food? What if I don't eat a lot but I must buy very expensive clothes because of peculiar set of allergies? Managing all those would make each tax return like a PhD thesis and make handling 300M of those infeasible. > If you're functioning at that level, you shouldn't pay taxes That is what is happening for low income people in US right now. Lowest quintile pays virtually no federal income tax. > , all documentable taxes paid should be refunded if your income is below the poverty line Since it's impossible to prove who bought certain thing, this would be huge motivation for abuse. Do you want to pay 10% sales tax on $100K car or pay a poor person $500 and have them "buy" that car, get the tax refunded and save $10K? Of course, you say, there are title records. For cars. Which need now to be checked (welcome another thousand of government employees, with their salaries, pensions, etc.). And how many expensive things don't even have formal ownership registration? These things get very complex and expensive to handle very quick. > That's basically what the poverty line is Poverty line is usually defined as percentage of median income. This is largely arbitrary and handwavy, and used because people need to use something. But it's a flimsy base for the tax policy. > exactly how the transition from "below poverty line" to "above" should be handled, This is called "poverty trap". It's a well-known phenomenon, especially in a welfare state. > Suffice to say we pay representatives to sanely figure out such things. We do pay them, and pay them very well, but their delivery on the "sane" part is very short of the desired, so far.
dragonwriter 9y ago
> With the same logic, every expense should be deducted. That's essentially how business taxes work, so why not?
- smsm42 9y ago
  Why income tax is not "free cash" tax? I guess because it's massively easier to tax income than "free cash" and more exceptions you allow more avoidance you get. Most countries don't even have this system of deductions US has - there's just income tax, which usually is paid automatically by wage deduction, and some kind of sales/VAT tax for businesses, and very little opportunity to deduct any personal expenses. US uses deductions as policy tools, so they need a lot of it. But that's in no way the only way possible.