The IRS are Evil!

[Johnd]

700,000.00 a year pays more toward taxes than someone who earns 100,000.00

What do you mean by more? They are both in the same bracket (35%).

 

[Adam]

The average person who makes, say, 300k a year, pays:
35% federal tax (gross)...but wait. We must first deduct losses, deductions, depletions, depreciation, credits, etc., etc., etc. Whereby, we can now get the gross income down to say 50k.

As I'm not near 300K, I'm not familiar with all the loopholes, but everything that you mentioned there is available to the person earning 25K, isn't it? A question, not a statement.

 

[stratman]

Well, on the surface, that comment is accurate. But our tax system, though based on a sliding scale, is not a simple sliding scale.

The problem is (or so I've heard) that the average person who makes, say just 25k a year, pays:
15% federal tax (gross)
8% state tax (gross)
7.65% fica (gross)
say pays 7k in rent or home loan
and of the remaining $10,337.50 remaining, must purchase gasoline, heat, food etc. All of which is taxed, except for the food.
So you can see how one making just 25k per annum can be taxed 40%.

The average person who makes, say, 300k a year, pays:
35% federal tax (gross)...but wait. We must first deduct losses, deductions, depletions, depreciation, credits, etc., etc., etc. Whereby, we can now get the gross income down to say 50k.

One can easily see the inequities in the current tax structures.

Yes, but by the same token, the person making 25,000.00 a year also has deductions too. Losses, clothing (if used in work), dry cleaning, kids, etc. That's why I tell my friends always to check with a cpa before filing taxes, there are hidden deductions that accountants are aware of that can help you. If you go at it alone you could miss out.

 

[stratman]

What do you mean by more? They are both in the same bracket (35%).

My mistake, I thought 100,000 was 25 or 30% (my wife knows, she handles that department!)

 

[stratman]

Also, there many variables: are you self employed, are you an independent contractor, what type of work? All these can affect what you pay.

 

[MDS]

A flat 20% tax would actually be quite burdensome on lower income families as would a consumption tax instead of an income tax. Lower income families spend substantially all of their income on day to day basic living expenses and would have practically nothing left if there were a consumption tax. People in that situation, regardless of how they got there, cannot afford unexpected expenses of any kind (like my $462 water bill when I let the sprinkler system run twice a day every day for 3 weeks while I was on vacation. D'oh).

 

[Johnd]

As I'm not near 300K, I'm not familiar with all the loopholes, but everything that you mentioned there is available to the person earning 25K, isn't it? A question, not a statement.

Well, they're not "loopholes." They are exactly what the IRS has defined them to be: losses, deductions, depletions, depreciation, credits, etc., etc., etc.

The "problem" is most lower income filers have available, at best, what? A Homestead credit? What person making 25k per annum do you know has filed losses (short term, long term, portfolio) or depreciable assets? Therein lies the argument for a different tax structure.

 

[stratman]

Right, but if that tax can be adjusted for the needy then I think the system would be more equitable.

 

[MDS]

Speaking of the homestead exemption, now there's something that is worthless. My exemption is $15K. Big whoop. The effective property tax rate is 3.1%.

The majority of the property tax is for funding schools and I have no qualms about that because education is important. But why are property taxes so high when the lottery has supposedly contributed $9 billion over the last 9 years? [That's a rhetorical question, I know why. ]

 

[Johnd]

Speaking of the homestead exemption, now there's something that is worthless. My exemption is $15K. Big whoop. The effective property tax rate is 3.1%.

The majority of the property tax is for funding schools and I have no qualms about that because education is important. But why are property taxes so high when the lottery has supposedly contributed $9 billion over the last 9 years? [That's a rhetorical question, I know why. ]

Accountability. The GAO has some splaining to do Lucy.

 

[stratman]

Speaking of the homestead exemption, now there's something that is worthless. My exemption is $15K. Big whoop. The effective property tax rate is 3.1%.

The majority of the property tax is for funding schools and I have no qualms about that because education is important. But why are property taxes so high when the lottery has supposedly contributed $9 billion over the last 9 years? [That's a rhetorical question, I know why. ]

Here in Florida the exemption is 25,000.00 and if you're over 60 they give an additional 25,000.00 I don't know how you guys calculate your real state tax, here it's based on the millage each city and/or county charges, that's why expensive neighborhoods tend to pay more taxes.

 

[MDS]

Yes, I grew up in FL and still have friends and family there.

My sister's situation is the opposite of me in TX. Her property tax is only a few thousand whereas insurance is through the roof and nearly the same as my property tax. My property taxes are high (IMO) but insurance is cheap.

My insurance agent likes to joke that he rents his lot from the city for $10K per year.

 

[stratman]

Yes, I grew up in FL and still have friends and family there.

My sister's situation is the opposite of me in TX. Her property tax is only a few thousand whereas insurance is through the roof and nearly the same as my property tax. My property taxes are high (IMO) but insurance is cheap.

My insurance agent likes to joke that he rents his lot from the city for $10K per year.

WE lucked out in insurance, we have Amica and we only pay about 2500.00, this is the excception to the rule, again our house has some really good upgrades against storms. Our real estate taxes are so loopy, that regular folks can't afford to buy a home, the market notwithstanding.

 

[MDS]

It's all relative I suppose but I pay $600/year for insurance. My property taxes are 10 times that and will of course rise if the value of the house rises. Of course the 'value' of the house will always rise because the city can tax asset values - raise the appraised value and voila higher income for the city. I guess they really need it because they are slowly turning the entire place into a concrete jungle.

My sister paid $120K for her house about 8 years ago. The house across the street just sold and the couple paid $380K and took a 50 year mortgage. If they are like most people and pay their monthly payment for the entire term, assuming they live that long, they will pay $1.2 MILLION for the house.

 

[masak_aer]

Different taxes pay for different things. State taxes pay for the potholes in your neighborhood...income taxes...where do they go? Have some decency here for all politicians...as i mentioned earlier, i don't mind paying income taxes as long as there's some accountability of their spending.

 

[agarwalro]

but wait. We must first deduct losses, deductions, depletions, depreciation, credits, etc., etc., etc. Whereby, we can now get the gross income down to say 50k.

The tax accountant I worked with for the 2006 taxes was going to let me deduct the state tax on my plasma and receiver. Now that is a deduction I could use . Too bad I could not find the receipts in time... Not going to make that mistake again.

 

[MDS]

I'm no expert on the tax rules but I know that you can choose to deduct either state income tax or sales tax. If you spent a lot on big ticket items - like that plasma tv, appliances, or a car, the sales tax deduction can be more profitable than the state income tax deduction.

 

[stratman]

If you have a home office there are deductions you can take including computers, "displays", equipment and supplies, but again it's always better to talk to a CPA so you don't run afoul of Uncle Sam.

 

[Blue Dude]

A flat 20% tax would actually be quite burdensome on lower income families as would a consumption tax instead of an income tax. Lower income families spend substantially all of their income on day to day basic living expenses and would have practically nothing left if there were a consumption tax.

True statement. Check out http://www.fairtax.org though. One of the best features is that it ensures that you don't pay any tax on purchases up to the poverty line. The tax money is "prebated" at the beginning of the month for subsequent purchases. Any purchases above the poverty line are subject to taxation, but then again, that's the first tax you pay. In the current system, the very first dollar of income is subject to payroll taxes. Under the proposed system, the poor aren't taxed in any form.