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There's a potentially dangerous line that the US is approaching where, factoring in all the exemptions, credits, and deductions, a majority of the population wi

There's a potentially dangerous line that the US is approaching where, factoring in all the exemptions, credits, and deductions, a majority of the population will not be paying income taxes at all. Thus, a majority of the population will be deciding (via their votes) how much and on what the taxes of the minority will be spent. The only saving grace, if you can call it that, is that the people who actually place the votes (senators and reps) are themselves almost exclusively from that well-off minority.

tptacek 16y ago
This is pretty disingenuous. I've held low-wage jobs, and so have most of the members of my immediate family, and taxes took a serious bite out our paychecks. You are referring to the federal income tax, as many people do in debates like this, but lower-middle class people pay a much greater percentage of their income in payroll taxes than do wealthy people; the "income tax" debate is misleading.
- mattmcknight 16y ago
  That's only because payroll taxes were sold as a retirement plan contribution for yourself. The idea is that you get all of that money back plus interest. Sadly, it's not run that way. People have the let the money be spent on other items for years, and now they are retiring and it's not there.
  - tptacek 16y ago
    It isn't? Social security is solvent assuming no funding changes until 2037.
    - bd_at_rivenhill 16y ago
      In an accounting sense, but it will start drawing from income sources other than payroll taxes as soon as outlays exceed those incomes, which will happen a lot sooner. The trust fund is an accounting fiction, and a debt to yourself is not an asset.
    - byrneseyeview 16y ago
      "Solvent until..." is a contradiction. If you're solvent until you have to pay your bills, you're broke.
      - tptacek 16y ago
        The "solvent..." part of that assertion isn't severable from the "... without changes to..." part.
- jmulho 16y ago
  A person making $20,000 pays the same US federal payroll tax rate as a person making $100,000 (7.65% in 2010, 5.65% in 2011). This tax pays for Social Security and Medicare (retirement income and retirment healthcare). Federal income tax pays for most of everything else: national defense, public safety, infrastructure, education. In 2009, 47% of US households paid zero federal income tax. We are close to the point where the voting power of non-tax payers exceeds that of tax payers - the point at which people can make decisions they don't have to pay for. Name your issue: foreign wars, Wall Street bailouts, universal healthcare, bridges to nowhere, prescription drugs for seniors, cash for clunkers. I don’t know about you, but I want the people making those kinds of decisions to have some skin in the game. It is not at all disingenuous to have concerns about this.
  - yummyfajitas 16y ago
    A person making $20,000 pays the same US federal payroll tax rate as a person making $100,000 (7.65% in 2010, 5.65% in 2011) Correct me if I'm wrong, but I thought the federal payroll tax was about 15%. Your employer is only allowed to list 7.65% on your pay stub/W2, but that's a different thing.
    - dangrossman 16y ago
      The employer is paying half of it.
      - tptacek 16y ago
        That doesn't mean much. First, if employers didn't pay it, they could increase compensation (either directly or via health benefits). Second, freelancers and temp workers pay both sides.
  - tptacek 16y ago
    First, payroll taxes cost twice as much as that. Second, payroll taxes are capped; you stop paying them after ~100k. Third, your overall point is bankrupt. Regardless of what particular bucket of money their taxes are paid into, working people at all income levels are stung by our tax rates, which are in turn lower than virtually every other western industrialized nation. It is simply not the case that the working class has no skin in the game.
pnathan 16y ago
I like the idea of taxing all income at a fixed and flat rate, no exceptions, no exemptions, credits, deferrals, whatever. It's a terrible idea, but it is also, by definition, perfectly equitable.
- argv_empty 16y ago
  That depends on whether the law of diminishing marginal utility applies to money.
MichaelSalib 16y ago
You realize that many of the exemptions, credits and deductions disproportionately benefit well off people, right? I mean, something like the home mortgage interested deduction is off no use to many homeowners because they don't earn enough to itemize deductions. Plus the deduction saves you more money the bigger and more expensive your house is....
_delirium 16y ago
A lot of the decline in lower-end taxpaying has been just due to a decline in how much money they make, though, so it's hard to do much about it without either: figuring out how the lower end can make more money, or actively decreasing the tax system's progressivity. In the 1970s, the bottom 50% typically earned around 17-20% of total income, and paid around 6-9% of total taxes. Today, they earn around 11% of total income, and pay around 2% of total taxes. With no change in progressivity, sure, that should've been around 3 or 4% rather than 2%, but that's still not much. It's hard to tax income that doesn't exist!

tptacek 16y ago

This is pretty disingenuous. I've held low-wage jobs, and so have most of the members of my immediate family, and taxes took a serious bite out our paychecks. You are referring to the federal income tax, as many people do in debates like this, but lower-middle class people pay a much greater percentage of their income in payroll taxes than do wealthy people; the "income tax" debate is misleading.

mattmcknight 16y ago
That's only because payroll taxes were sold as a retirement plan contribution for yourself. The idea is that you get all of that money back plus interest. Sadly, it's not run that way. People have the let the money be spent on other items for years, and now they are retiring and it's not there.
- tptacek 16y ago
  It isn't? Social security is solvent assuming no funding changes until 2037.
  - bd_at_rivenhill 16y ago
    In an accounting sense, but it will start drawing from income sources other than payroll taxes as soon as outlays exceed those incomes, which will happen a lot sooner. The trust fund is an accounting fiction, and a debt to yourself is not an asset.
  - byrneseyeview 16y ago
    "Solvent until..." is a contradiction. If you're solvent until you have to pay your bills, you're broke.
    - tptacek 16y ago
      The "solvent..." part of that assertion isn't severable from the "... without changes to..." part.
jmulho 16y ago
A person making $20,000 pays the same US federal payroll tax rate as a person making $100,000 (7.65% in 2010, 5.65% in 2011). This tax pays for Social Security and Medicare (retirement income and retirment healthcare). Federal income tax pays for most of everything else: national defense, public safety, infrastructure, education. In 2009, 47% of US households paid zero federal income tax. We are close to the point where the voting power of non-tax payers exceeds that of tax payers - the point at which people can make decisions they don't have to pay for. Name your issue: foreign wars, Wall Street bailouts, universal healthcare, bridges to nowhere, prescription drugs for seniors, cash for clunkers. I don’t know about you, but I want the people making those kinds of decisions to have some skin in the game. It is not at all disingenuous to have concerns about this.
- yummyfajitas 16y ago
  A person making $20,000 pays the same US federal payroll tax rate as a person making $100,000 (7.65% in 2010, 5.65% in 2011) Correct me if I'm wrong, but I thought the federal payroll tax was about 15%. Your employer is only allowed to list 7.65% on your pay stub/W2, but that's a different thing.
  - dangrossman 16y ago
    The employer is paying half of it.
    - tptacek 16y ago
      That doesn't mean much. First, if employers didn't pay it, they could increase compensation (either directly or via health benefits). Second, freelancers and temp workers pay both sides.
- tptacek 16y ago
  First, payroll taxes cost twice as much as that. Second, payroll taxes are capped; you stop paying them after ~100k. Third, your overall point is bankrupt. Regardless of what particular bucket of money their taxes are paid into, working people at all income levels are stung by our tax rates, which are in turn lower than virtually every other western industrialized nation. It is simply not the case that the working class has no skin in the game.

pnathan 16y ago

I like the idea of taxing all income at a fixed and flat rate, no exceptions, no exemptions, credits, deferrals, whatever. It's a terrible idea, but it is also, by definition, perfectly equitable.

argv_empty 16y ago
That depends on whether the law of diminishing marginal utility applies to money.

MichaelSalib 16y ago

You realize that many of the exemptions, credits and deductions disproportionately benefit well off people, right? I mean, something like the home mortgage interested deduction is off no use to many homeowners because they don't earn enough to itemize deductions. Plus the deduction saves you more money the bigger and more expensive your house is....

_delirium 16y ago

A lot of the decline in lower-end taxpaying has been just due to a decline in how much money they make, though, so it's hard to do much about it without either: figuring out how the lower end can make more money, or actively decreasing the tax system's progressivity. In the 1970s, the bottom 50% typically earned around 17-20% of total income, and paid around 6-9% of total taxes. Today, they earn around 11% of total income, and pay around 2% of total taxes. With no change in progressivity, sure, that should've been around 3 or 4% rather than 2%, but that's still not much. It's hard to tax income that doesn't exist!