Lets take the cliff

[packsaddle]

Ok, I'm in agreement.

[fred8033]

Scoutingagain... ...

 

I'm referring to this extension that added a tax to recapture the 2% cut. http://www.irs.gov/uac/Payroll-Tax-Cut-Temporarily-Extended-into-2012

 

------------------

 

Tax analysis is not simple.

 

But ... even before that change, the Bush tax cuts had $11,440 paid in social security for their income. That's 10.4% ... their 4.2% and the company match of 6.2% ... which in my view is still their taxes paid because it's part of the cost of the employer paying that person. It's just reported in the employers taxes, not the worker's taxes. IMHO, it should be listed also on the earners W2 as it's part of the cost of employing the person. The company doesn't see a single difference between paying the tax and paying it out as pay to the person. It's just cost of that person.

 

Before the Bush tax cuts, it was 12.4% FICA plus the 2.9% Medicare. That's 15.3% or $16,830 of payroll taxes for that person. Then add income tax on top of that.

 

Higher earners don't pay FICA over that amount because SSA program was not designed that way. FDR promised it would never exceed 3% each for earner and company and it was capped at the first $3,000. One main reason is that high earners don't benefit from SSA for all their income. They are maxed out. SSA was designed to be financed thru payroll taxes. Payroll taxes is the FICA tax, not the income tax.

 

It was designed with a limit. Originally it was 1% each (worker, company) on first $3000 of income. Then it went to 3% of income income in 1949. Then 6.2% for atleast 30+ years until the recent Bush era tax cut.

 

................

 

If people want ALL income to be FICA taxable, then one of two changes should occur.

 

---- Every retired person gets the exact same amount independent of what they paid in. So some people might actually get more income AFTER they retire. This is a change in program concept. Before it was you pay in to get paid out.

 

---- Every person should get income based on all the income that was taxed. Pay in on more you should get more out.

 

Without one of these changes, the program would just not be logically consistent.

 

................

 

As for the rest over $110,000, they pay income tax on that amount and at a significantly higher level. So a family earning $25,000 has a marginal tax rates of 10% and 15% on their income and an effective income tax rate of ZERO. A family earning $110,000 has marginal rates of 10% thru 20%. Income over $110,000, your tax rate is 28% to 35%. The top rates more then make up for the FICA change.

 

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Anyone making a slight against people earning money that they don't pay their fare share are just showing the ugly green face of jealousy.

 

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I must admit that I'm a flat tax person. I like the concept of payroll taxes and believe the income taxes should be eliminate and we should change the payroll taxes (FICA, Medicare, etc) to a flat 20% for everyone on all income and 10% on the employer side.

 

................

 

I'm barely in the top 15% but I find the "tax the rich" position ugly and offensive. People claiming that the rich don't pay their fair share are generally uninformed of the specifics. Now if you want to say they need to pay more ... fine. But to say they don't pay their fair share is just offensive.

 

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I find it interesting that the Bush tax cuts were overwhemingly mocked by the Democrats originally and now the "Bush" tax cuts are being defended and Republicans are being demonized for putting them at risk. The short term memory is amazing.(This message has been edited by fred8033)

[scoutingagain]

Well I have to admit the "recapature" tax is news to me. If I read the link correctly it was written before the payroll tax cut was extended for the rest of 2012 and indicates high earners will have to pay the "recapture " tax in 2013 when they file. However it seems as if it only applies to income above $18,350 for the first two months of 2012, it may not reach $2200. Essentially a marginal tax increase on income above the rate of $110K/year. A lot of folks in this income bracket are in for a nasty suprise when they file next year. I don't know that they pay their fare share or not, but I'm not shedding tears for those in this situation.

 

I too would love to see a flat tax, no deductions, all income treated the same, interest, dividend, capital gains and wages all taxed at a single rate.

 

SA

 

 

[Beavah]

Anyone making a slight against people earning money that they don't pay their fare share are just showing the ugly green face of jealousy.

 

So Warren Buffet is jealous of you and me, eh? Well ain't that somethin'!

 

I reckon there's a certain amount of "those to whom much is given, much is expected" that applies.

 

I know lots of well-off folks, and by any reasonable standard Mrs. Beavah and I live comfortably. Lots of 'em inherited their wealth, and so I'm not overly impressed with 'em. Pretendin' that they're "job creators" or that their wealth is earned is a bit of a lark.

 

For da rest of us who did earn our own way, we didn't do that alone. We were beneficiaries of public infrastructure and da work of others to a greater or less degree. I benefited from an education, and continue to benefit from public infrastructure which strongly supports my profession. I benefit from GPS systems in my and Mrs. Beavah's cars and our phones; I benefit from da FAA and air traffic control more than most because of my hobby and doin' more travel. That's all public infrastructure that benefits me but not folks of limited means. I eat out more than average, I expect, so I also benefit more from health inspectors and regulators. On and on.

 

So I'm just fine payin' more. I'm gettin' more service and benefits. Right now I don't think I'm payin' my fair share, so I dutifully dedicate a bigger chunk of income to charitable work. I don't reckon we older folks are payin' anywhere near our fair share for da benefits we're gettin' (or soon to get) from Medicare.

 

Don't think I'm jealous, though. Just think those to whom much is given, much is expected.

 

Beavah

 

[fred8033]

Beavah ... I fully agree with "to whom much is given, much is expected." IMHO, that's a faith and moral decision. I'm 100% fine with that and I try my best to honor that with my time, my effort and my money.

 

But I'm not okay with philosophies that say "tax the rich" and "they need to pay their fair share". It's the philosophy of blame the other guy. I just don't like those philosophies at all. Democrats have gone a long way from Kennedy's "Ask not what your country can do for you. Ask what you can do for your country." Now, Kennedy's quote is more like "Ask what others can do for your country." FDR's SSA concept of everyone paying in to get support later in life is now regressing into a general tax, not an insurance program at all.

 

I guess when 47% of the population has zero tax liability and another 26% get more out then pay in, there is nothing that's fair. Morally, those who have much should be do more. Sure. But governments that legislate morals are dangerous and better be prepared to create re-education camps and execute those who disagree. And from what I read in the press these days or hear on NPR, there is alot of hatred toward those who disagree. Of course, many conservatives bring it on themselves with some of the worst candidates and policies I've ever seen. But I get scared of the "take from the other guy" concept.

 

....

 

Warren Buffet ... in 2010 Buffet ONLY paid $7 million in taxes, about 14% on roughly $50 million of income. Is that fair? He also owns 23% of his investment company and that company paid $5.6 billion in income taxes in 2010. Fair? I don't know, but I have a heard time saying he didn't pay enough.

 

As for Mr. Buffet, there's a good man who feels responsibility to help others. But I'm amazed that the case example of him and his secretary was not torn apart more. Investment income versus wage income. How much does his secretary earn? Over $100,000 probably, if not over $150,000.

 

http://www.forbes.com/sites/paulroderickgregory/2012/01/25/warren-buffetts-secretary-likely-makes-between-200000-and-500000year/

 

 

Anyway, we can go round and round on what's fair. Referencing Buffet is a classic debate techniques right out of "The Art of Being Right". We can pull single cases out from each side to argue points and then never establish what's fair.

 

....

 

Back to scouting and our youth leaders.... I've seen many youth leaders stand up in front and tell others what to do. The best few have been the ones who set the direction and then get invested in working to get it done and thus leading others in doing it too. So when Buffet puts his own money where his mouth is and gives the government another $5 million a year consistently for say 10 or 20 years, then I'll start listening.

 

Yeah, he's donating to charity. I know many rich people who do exactly the same thing.

 

Instead, let's see him give it to the government.

 

 

[Beavah]

So then yeh agree that not everyone who says da wealthy aren't payin' their fair share are green with envy?

 

As with anything, da silly 47% thing merits diggin' a bit deeper, eh? We all know a big chunk of that was caused by da Bush tax cuts, which should be phased out across the board.

 

But dig a bit further and yeh realize that if da corporations and individuals makin' record profits were to increase da general pay of their workers at 1/10th the rate they've been increasin' da compensation of executives who lead companies to bankruptcy, then there wouldn't be any issue, eh? They'd be payin' plenty of tax. We could make a flat tax work quite well.

 

Yeh see, I spend more time than I'd like with various business execs, eh? I'm not convinced that very many of 'em merit their current compensation. Who is really addin' value to a computer company? Da exec, or da engineers down in da R&D labs? Who is really addin' value to the clothier? Da board members or da designers and folks who are makin' and shippin' the clothes?

 

Yah, sure there's a problem when the exec is payin' 17% on compensation in da 8 figures, da engineer is payin' 26% on compensation in da high 5 figures, and the workers aren't payin' anything. Some of that's da tax code. Most of that's a corrupt and ineffective corporate board that isn't doin' compensation fairly.

 

Address da increasin' compensation foolishness and yeh won't have da tax disparity. For a healthy society without da state intervenin' too much, da private sector has to behave with ethics and honor on its own.

 

Beavah

 

[fred8033]

Beavah, ya just like arguing.

 

Exec salaries are rallying cry for the "tax the other guy" cause. And an exec with an eight figure income would be at the 35% (39% after the cliff) tax rate. He could only achieve a rate around 17% if it was mostly from capital gains. But you know that. And ya know why people argue that capital gains should be a lower rate.

 

If you have a solution for CEO pay, great. Put it on th table and let's see if it could become the law of the land.

 

I don't have the answer for executive pay, but you don't create a tax system for 330 million people based on the income of 100 people and then call it fair to the rest.

 

Sit and complain about the other guy if ya want. It's just a grumbling distraction.

 

 

[packsaddle]

The person who works his or her ass off to make ends meet pays tax at a higher rate than the person whose investment accrues dividends and he/she merely sits on his/her ass while the other person works his/her ass off to pay that dividend to the investor.

I understand this part.

What seems odd about this situation is that the person who works his/her ass off thinks this is fair. Interesting.

[Beavah]

Beavah, ya just like arguing.

 

Yah, sure, it's why I'm in da field I'm in.

 

And an exec with an eight figure income would be at the 35% (39% after the cliff) tax rate. He could only achieve a rate around 17% if it was mostly from capital gains.

 

Yeh do realize that executive compensation is put together as a package, right? A package where typically direct compensation is a fraction of da total compensation, most of which is in options, retirement contributions, and other investment vehicles. And of course company perqs so yeh don't have da same expenses for buyin' you own car as da engineer who actually designs da products yeh sell. Add in access to other financial vehicles and legal advice that ordinary folks don't get, and I don't know a major firm CEO who pays more than 20%. In fact most would be embarrassed to be payin' 20%.

 

You're right that executive compensation is just an exemplar of deeper ethical rot at da board of director and financial services level. It's a symptom, and perhaps a contributin' factor, but it's not da cause or da major player.

 

For da major players, all yeh need to do is look at da roots of the last crash, and almost any capital firm that's makin' more than 10% annualized.

 

For a healthy economy, yeh need a fairly compensated, economically active broad middle class in order to generate demand. Da concentration of capital in a small number of hands, with incentives for paper production of wealth rather than actual manufacturing of goods and services, is a recipe for long-term economic weakness and social unrest.

 

There's nuthin' new about that, eh? Da conservative position has always been that there is an obligation to treat workers well. When that breaks down, though, yeh get a natural response of muscular unionism and governmental intervention which tends to be anti-capitalist. Just raisin' taxes on da 1% is an admittedly poorly thought out solution.

 

Now, ordinarily some of this is dealt with by a crash, eh? Da pattern in crashes is that capital gets wiped out, which tends to level da playing field a bit. Da poor default on their loans (small loss for them). Da leveraged financier gets wiped out. It also teaches folks some humility. Da problem in da last crash is that we bailed 'em all out, with no penalty and no prosecution. So we created a massive wealth transfer from da worker to the financier on top of da general trend of capital to accumulate.

 

It's no wonder that almost a half of our population of fellow citizens doesn't have da wherewithal to pay even a modest tax, while corporations are makin' record profits. That is a real problem, eh? But it ain't a problem with da tax code.

 

Beavah

(This message has been edited by Beavah)

[scoutingagain]

"So we created a massive wealth transfer from da worker to the financier on top of da general trend of capital to accumulate."

 

Not to mention the tranfer of risk from the financier to the taxpayer.

 

SA

 

 

[HICO_Eagle]

I'll go you one better Beavah. Before we retreat from the rates that kicked off the enormous 2 decade growth spurt, how about we return to federal government spending as a percentage of GDP from that era? That's right, cap total federal obligations at what they were in 1999 or 2000 (1992 would be better but I'll settle for 2000) plus a reasonable inflation rate (2.5-3%). That's all they get, divided however they wish. Get rid of all the legalisms that force us to let foreign companies bid for US federal contracts.

 

President Obama is the biggest nutter out there when he talks about financial hardships from "cutting" (really reducing his planned increase in spending) 1/350th of 1%. He talks about balance AFTER Harry Reid and Nancy Pelosi skewed the scales not by placing their thumbs on it but by jumping onto it full force. We'd be running a surplus right now if 2004 budget plus inflation had been continued to today -- even more so if the 2000 budget had been followed.

 

The whole tax rate issue is a red herring to keep the media and us from talking about how we are spending 40% more than the government is taking in, how spending increased PRECIPITOUSLY after the 2007 Congress took office. A 10% increase in the marginal rate will do very little -- and if anything is likely to reduce total tax revenues (federal revenues INCREASED after Bush repealed the Clinton tax increases).

 

I think Obama WANTS to go over the cliff so he can 1) declare a fiscal national emergency and try to get emergency powers, 2) blame the ensuing triple dip recession on Republicans rather than take the blame for his reckless feckless ignorant fiscal policies, and 3) devalue the dollar (and hence the debts he's incurring). Or have you not noticed that, for all his bluster about Republicans, he hasn't made ANY good faith attempts at negotiation? He talks about Boehner needing to come to the center but his definition of center is severely skewed as he has absolutely refused to talk about any real spending cuts (except on the military).

 

It's actually pretty easy to balance the budget. I've done it using the tools put online by both the WSJ and NPR (both of which I felt were skewed against cutting programs and neither of which allowed me to cut agencies or expenditures that aren't even authorized under any article of the Constitution). The cuts I made and taxes/fees I imposed would actually improve the overall economy in the long run to boot. I thought Clinton's and Gingrich's Enron-style accounting was bad but it doesn't even hold a candle to the insane Obama-Pelosi-Reid accounting that continues to borrow so it can spend 40% more than it takes in then declares it cut spending.

 

The federal budget has had cancerous growth for the last 8+ years (yes, that includes some of Bush's presidency even prior to Pelosi-Reid). I sure hope none of the Personal Management counselors on this forum are advising their Scouts to budget this way.

[Beavah]

Before we retreat from the rates that kicked off the enormous 2 decade growth spurt, how about we return to federal government spending as a percentage of GDP from that era?

 

Yah, hmmmm.... we sorta had a 1-decade growth spurt in the 1990s with a higher tax rate. We had whiplash in da last decade, not a growth spurt. I'm generally in favor of limiting federal revenues and expenses to a fixed percentage of GDP, at least as a matter of principle.

 

Do yeh realize that your proposal requires repealing Medicare prescription drug coverage completely? That was da entitlement boondoggle of da all-Republican government that led to part of that "precipitous" increase in spendin' yeh mention.

 

We'd be running a surplus right now if 2004 budget plus inflation had been continued to today

LOL. Yeh also would have required massive cuts in Medicare, Social Security, Veteran's benefits, and defense, which have all grown faster than inflation.

 

federal revenues INCREASED after Bush repealed the Clinton tax increases

False. Da federal revenues declined dramatically after da GWB tax cuts. As yeh would expect from, you know, arithmetic.

 

As for da rest, I'm a conservative. I'm sympathetic to da principles of some of what yeh say. I think as a conservative, though, we have an obligation to be thoughtful, balanced, and honest. Yeh need to find some different news outlets that give yeh a more balanced perspective so that yeh aren't fooled by folks from one particular lobbyin' group.

 

Beavah

 

 

 

[HICO_Eagle]

I'll see your arithmetic and raise you with facts and analysis. You made the same mistake many do by confusing marginal tax rates with actual tax revenues. Your arithmetic is off because it doesn't account for how tax rates affect economic activity. The CBO shows tax revenues were declining as a percentage of GDP since the high of 2000 when the Jobs and Growth Tax Relief Reconciliation Act was passed in 2003 and continued to decline for one year as the new tax rates took effect then grew again dramatically until 2007.

 

In terms of actual total revenues, the Federal Government took in approximately $1.8T, stayed steady then rose slightly to approximately $2.0T in 2003-2004 then climbed steadily to roughly $2.7T in 2007. That revenue growth was post-dot-com so didn't benefit from the economic spur of a completely new industry like Clinton/Gingrich received. The post-2003 revenues also didn't benefit from spectrum sales the way Clinton's and Gingrich's budgets did.

 

In the meantime, federal expenditures grew exponentially (yes, including an unpaid Medicare Part D from Bush that was widely criticized by fiscal conservatives). It's all there in black and white and red and blue in a chart from the St. Louis Federal Reserve Bank (Federal Government Current Receipts and Current Expenditures, 1947-2012, 2012research.stlouisfed.org).

 

I realize you like playing the country lawyer but even Matlock recognized the power of actual facts and figures.

[scoutingagain]

"that was widely criticized by fiscal conservatives).

 

The Bush Tax cuts were also criticized by fiscal conservatives, notably McCain, Rudman and Stockman.

 

Republicans economic cycles for the past generation have been to cut taxes then increase deficit spending. Of course that creates short term economic spurts and then becomes unsustainable and the economy crashes. The last two deep recessiions, the early 90's after Reagan and the late 2000s after Bush's foley. The idea that Republicans represent fiscal responsibility is laughable. Don't favor Tax cuts and then say we need the world's most expensive military, most expensive health care system and can't make any changes to Social Security and Medicare. The Democrats are at least intellectually honest in that they believe in tax revenues for the programs they want.

 

Now we're stuck with extrodinary peace time deficits and have to begin paying it back. The reason to increase taxes on the wealthy is not necessarily because they don't pay their fair share, it's because that's the only place to get the money from. The poor have no money, and the middle class is tapped out. The only group that has benefitted from the tax and economic policies of the last 35 years has been the wealthy, disproportionately. The rest have at best held their own or have seen a decline in their standard of living. So it's either beging to pay the debt we as a nation have incurred by voting in leadership that have brought us here, both Republicans and Democrats or continue to kick the issue down the road for our children and grandchildren to deal with.

 

As of today it seems we're headed for the cliff, at least for the short term. Folks are waiting for the markets to react to create a sense of urgency for our so called leadership in Washington. However the collective wisdom of the markets appear to be treated the "cliff" as a minor bump not the economic disaster the media is predicting.

 

There's really not much different from an economic standpoint from the cliff or any of the proposals that have been put forward. They all represent increased tax revenues and cuts in spending on the order of $1-2$ trillion bucks.

 

SA

 

 

 

 

[Beavah]

Yah, I'm just in awe of da House Republicans, eh?

 

Boehner for reasons that were just baffling tried to call a vote on a go-nowhere bill. And then he couldn't even get da votes for his own bill! So to cap it off, he sent everyone off on Christmas holiday while da President and Senate were cancelling their holiday plans to try to get work done.

 

That pretty much sinks it, eh? Unless President Obama does his preemptive surrender thing, which would be both politically and economically foolish, da House Republicans are takin' us over da cliff. What a hoot.

 

Da interesting question after that is whether da voters tossed enough of these nitwits to avoid them takin' da country into default when da debt limit comes up again next year.

 

Beavah