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Taxes and the rich

Discussion in 'Business & Economics' started by Pandora, Jun 17, 2008.

  1. Pandora

    Pandora Well-Known Member

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    Can I get some help here? I am having a discussion of sorts with my boss at work on who pays more in taxes. I said I thought the very wealthy paid more in taxes, he said the rich did not pay their share in taxes. From everything I can find, the rich do pay more in taxes, perhaps he means % of income. But even that it seems they pay more.

    Here are some sites I have been looking at, trying to figure it out. Does anyone know much about the topic?

    And I don’t understand corporate tax. Isn’t that double taxing? Cooperation gets 2 billion dollars and then pays taxes on it, then they pay the employees and each of them pay taxes on it. Why does the entity pay taxes at all, why not just the people who are being paid?

    Thank you to anyone that can help me figure this out.



    http://www.american.com/archive/200...zine-contents/guess-who-really-pays-the-taxes

    http://www.realclearmarkets.com/articles/2008/04/the_rich_and_their_taxes.html

    http://www.ncpa.org/sub/dpd/index.php?Article_ID=13984

    http://www.straightdope.com/classics/a5_139.html
     
  2. BigRob

    BigRob Well-Known Member

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    Your boss clearly does not know what he is talking about if he thinks that the rich pay less in taxes. From both an actual dollar standpoint and a % standpoint, the rich pay more in taxes. The top 60 percent of taxpayers pay 100% of all income taxes.

    I notice that you said they paid more taxes, but his reply was they do not pay their "share". Depending on what he views as their "share" this could explain his claim (however misguided it is)

    Also, as I pointed out in another thread in the post Bush tax cut world, the rich shoulder more of the tax burden.

    All in all, the number of tax filers with zero or negative income tax liability rose from 30 million to 40 million, or about 30 percent of all tax filers. The remaining 70 percent of tax filers received lower income tax rates, lower investment taxes, and lower estate taxes from the 2001 legislation.

    Consequently, from 2000 to 2004, the share of all individual income taxes paid by the bottom 40 per cent dropped from zero percent to –4 percent, mean ing that the average family in those quintiles received a subsidy from the IRS. By contrast, the share paid by the top quintile of households (by income) increased from 81 percent to 85 percent.

    Expanding the data to include all federal taxes, the share paid by the top quintile edged up from 66.6 percent in 2000 to 67.1 percent in 2004, while the bottom 40 percent's share dipped from 5.9 per cent to 5.4 percent.

    The United States imposes a tax on the profits of U.S. resident corporations at graduated rates ranging from 15 to 35 percent. Most corporate income is taxed at the maximum rate. Corporate shareholders also pay individual income tax on dividends and on capital gains from sale of their shares. The maximum tax rate on both dividends and capital gains is currently 15 percent, but both are scheduled to revert to pre-2001 levels (ordinary income rates of up to 39.6 percent on dividends, a maximum rate on capital gains of 20 percent) after 2010.

    The corporate income tax is the third largest source of federal revenue, after the individual income tax and payroll taxes.

    Taxable corporate profits are equal to a corporation’s receipts less its current expenses (including wages and interest), deductions for the cost of inventory when goods are sold, and depreciation of capital investments. U.S. resident multinational corporations pay tax on their worldwide profits, but tax on the profits of their controlled foreign subsidiaries is deferred until those profits are repatriated (that is, paid back as dividends) to the U.S. parent corporation. U.S companies receive a tax credit, subject to various limitations, for foreign income taxes associated with their foreign-source income. U.S.-based corporations that are owned by foreign multinational companies face the same U.S. corporate tax rules on their profits from U.S. business activities as do U.S.-owned corporations.

    A corporation does not have to pay taxes on the wages that they give out as stated above, so it in effect avoids a double taxation.

    Corporations must be taxed at least to an extent to prevent individuals from accumulating tax-free income within corporations as almost anyone would do if that loophole existed.

    Many U.S. businesses are taxed as "flow-through" enterprises and are not subject to the corporate income tax. These include U.S. corporations organized under subchapter S of the Internal Revenue Code (S corporations), partnerships, and sole proprietorships. Instead their shareholders or partners include their allocated share of the businesses’ profits in their taxable income under the individual income tax, so the type of business you set up matters as well.

    Hope this helps.
     
  3. Pandora

    Pandora Well-Known Member

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    Yes this helps, thank you!

    We had talked about a flat tax where everyone pays lets say 10% of their income.

    He agreed that was a good idea just that he thought the rich were not paying as much in taxes as the middle class in income percent, and it was the rich who needed to pay more.

    I can only assume he means if Bill Gates earns 10 million dollars this year he is not paying the same 32 percent in taxes that a middle class family does while making 90 thousand in the same year.

    I don’t even know if its 32 percent. I don’t know what the tax is. I know I get more back than I paid because of earned income credit and child credits and I think that’s terrible. I take the check and I spend the money but I don’t think its right to give me more than I pay while some single guy is paying out the ….

    How can I find out what the tax rate is for a millionaire family as apposed to the tax rate of a family earning 90 thousand a year?

    I am not sure where to find that information.
     
  4. BigRob

    BigRob Well-Known Member

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    Generally, for the sake of simplicity, the tax brackets break down as follows:

    $0 - $8,025 = 10%
    $8025 - $32,550 = 15%
    $32,551 - $78,850 = 25%
    $78,851 - $164,550 = 28%
    $164,551 - $357,700 = 33%
    $357,701 - Above = 35%

    The way it is calculated however is a bit more in depth, but not really all that complicated, and this is a good general overview. Note that these are the numbers after the Bush Tax cuts.

    There are a lot of tricks to keep yourself in lower brackets, tax write-offs, etc, but those are not worth getting into here.
     
  5. Pandora

    Pandora Well-Known Member

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    This is perfect, exactly what I wanted. Do you have a government site this came from? Something I can send with the stats?
     
  6. BigRob

    BigRob Well-Known Member

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    I do not know a government site that this came from, I am sure it is on the IRS site. I did a quick search and found a tax calculator here.

    Here is the IRS site with tax stats.
     
  7. Pandora

    Pandora Well-Known Member

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    $0 - $8,025 = 10%
    $8025 - $32,550 = 15%
    $32,551 - $78,850 = 25%
    $78,851 - $164,550 = 28%
    $164,551 - $357,700 = 33%
    $357,701 - Above = 35%

    This is about what I thought it was, but I could not find the proof anyplace. I think every single person should have to pay taxes, even the poor. When you are paying for something, you are a part of it and it matters more to you. If you are not paying taxes then you don’t care how many stupid government programs there are out there, it never affects you when it comes to paying for it.

    If everyone paid 10 percent of their income that should be more than enough money to run the government and if its not then cut some of the stupid programs.
     
  8. BigRob

    BigRob Well-Known Member

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    Well keep in mind that those are just the brackets, with tax cuts and things such as that, the bottom bracket in reality does not pay any income tax, and actually gets paid by the IRS after the Bush tax cuts.

    They will have money withheld, but it all comes back in the form of rebates, and keep in mind the earned income tax credits and programs like the child tax credit.
     
  9. Pandora

    Pandora Well-Known Member

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    The very rich, do they have rebates and stuff that makes it where they pay no taxes or little taxes?

    I remember one story about some rich guy the libs hates who paid less than his secretary in taxes, I dont remember the story exactly but I figured it was an isolated case.
     
  10. BigRob

    BigRob Well-Known Member

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    You can get around some taxes by creating a charitable foundation (which you then control) or with off-shore accounts, IRA contributions are tax free as well, etc, and there are tons of tax deductions and write offs you can get. A swiss bank account for example is only a number, no names can be attached to it, and therefore no taxes can be applied. The government certainly does not give them rebates, as shown we are taxed at 35% rates, but there are ways to get around it. Depending on your stock options as well, you can hide income that way and let it drop you to a lower bracket, but when you cash them out you will will have to pay capital gains tax and then income tax.
     
  11. Pandora

    Pandora Well-Known Member

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    Then it seems the rich are paying more than their fair share. So I was right :)

    Thank you for all your help.
     
  12. BigRob

    BigRob Well-Known Member

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    I concur :D
     
  13. Dr.Who

    Dr.Who Well-Known Member

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    This is probably the story that inspired what you boss is talking about.

    A person who earns a lot of money as a salary will pay a certain percentage based on their bracket.

    Another person who makes a lot of money due to investments will pay a lower percentage because investment income is taxed at a lower rate than earned income.

    We could probably increase the tax rate on investment income but what would that do to all the retirement accounts in this country?

    So for anyone who is jealous of those who pay less than similarly paid people who earn income from work my advise would be to invest more.
     
  14. Pandora

    Pandora Well-Known Member

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    But even those who pay less on investment income pay at a higher rate than others. Why can't we all pay the same exact rate 10% or something or even better pay ZERO on earned income or income period and only pay taxes on what we buy. The rich could get soaked that way when they buy big cars and boats and houses, and the poor would pay little because they buy little. But we would all have the incentive to save and work.

    I think its terrible if some people pay at 0% some at 10% some at 15% and some at 20% and others at 35%

    And I think it was horrible when the rich paid 70%


    You have to be a part of something, part of paying for something to feel you have a vested interest in it. If everyone paid taxes equally we wouldn’t have so many stupid dumb retarded programs at tax payers expense, everyone would demand they shut down.



    On another note, I heard a news blip that Clinton when he was in office made a special deal for entertainers to pay less in taxes, I have tried to find more information about it on the net but I suck at finding stuff on the net. If it is true I want to read about it. It would make me understand why there are so many rich bleeding heart liberals in Hollywood.
     
  15. Dr.Who

    Dr.Who Well-Known Member

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    Clearly we need more balance and less of people just wanting someone else to be the payer.

    I like a flat consistent and low tax on income which is the same for all people. I would include a small standard deduction for everyone equavilant to the poverty rate. A low rate would not punish productivity.

    I like a low sales tax on all products except some basics like rice and beans and gas. A low tax would not punish our ability to provide for our families.

    I like accountabiliy in which what the gov gets would be published along with where it is spent.

    I like the idea that every tax should be related directly to the gov service it provides for. So sales taxes would be used to regulate sales of products. Income taxes would be used to regulate labor.

    I like a small government that would not need too many taxes to survive.

    I like no inheritance taxes. What a man makes he should be allowed to give to his children or to use on himself. That is the reason he is making the money right?

    I like the idea that any particular tax should be avoidable. Don't like the tax on tobacco, then don't buy tobacco. Don't like the tax on the war? Then fill out the form to divert that money to another government use.

    For starters.
     
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