Duffbert's Random Musings

1 - You can't possibly believe that someone who makes $6000 can afford to lose $230, can you? That's 500 bucks a MONTH, total, for all expenses. Unless you're living with Mom and Dad (and they're paying your way in life), there is ZERO room for taxation there. And thanks to part-time McJobs (part-time because the employer wants to avoid the legal ramifications of hiring full-time workers), there are actually people out there trying to get by on wages like those. Don't try to give me (or anyone else, for that matter) any claptrap about the "self-worth gained through contribution". Starvation-level wages involve starvation more than anything else, an increasing the intensity of the ol' hunger pangs does nothing for anyone's self-worth.

2 - Death, Microsoft, and taxes, right?


- Julian

3 - Heh,

You touch on am important point Jerry: ~50% of federal revenues come from payroll taxes which stop being assessed at ~$90,000. So the story is a little 'misleading' at best.

As to the morality of legislating charity, you could consider it in light of its benefits to both you as an individual and society as a whole. If someone has (say) unemployment benefits to fall back on when they become unemployed, they are less likely to steal your car in order to feed their starving children. Socialism as Rational Self Interest!

4 - Having been there, I know there are always better jobs to apply for, though they may not be as fun. But, to address your objection directly, Stan, I would suggest this is more a problem with education than with taxes. Employers pay Mcwages because there is always someone willing to work for those wages.

My biggest reason for being a proponent of equal taxation is removal of the perception of favored status. Right now, the low wage earners look at the high wage earners and presume there are huge tax advantages they don't know about. And the high wage earners look at those paying no taxes + government hand outs and get a little disenchanted with their hard earned contribution to the system being given away.

If everyone pays based on the same forumla, nobody can hold wage status and tax levels against or over anyone else at another level. It's a two way street, not just a self-worth booster.

But realistically, most of these jobs do go to kids working through highschool, so it's no big deal. If someone is trying to make a living flipping burgers and expects better treatement because they didn't get the education or didn't apply themselves, well, I think they're probably screwed.

Honestly, there are less glamorous jobs out there than McD's that pay better. People just aren't willing to do them (hence another can of worms, migrant labor). I wasn't making ends meet for a while there working part time at Office Depot. Night shift at a factory was HARD as a second job, but it paid a lot better, and eventually got me over the hard time and I was able to go back to the single job... and when I did, I had a greater appreciation for what really hard work was about, applied myself, and got a promotion and more pay.

Largely, I think we're talking about folks who simply dont' know they can do better for themselves, and having been stuck in that rut, I know it's hard to see out of. So more than government hand outs and low wages, we're talking about ignorance. And you combat ignorance with education, not welfare.

Anyway... I'm going to have mercy on Duffberts blog now...

5 - Colin -

The highest tax rate for individuals this year was 35%. I think corporate tax rates were higher, but I'm not sure exactly what they were.

The 59% in the story above is related to estimates that the top 10% of wage earners in America carry 59% of the tax burden, not that they pay 59% of their earnings in federal taxes.

There are a large portion of Americans who don't pay any federal income tax as well, either because they don't earn any income (or claim that they don't), or because they get back all the money they put in due to things like the "Earned Income Tax Credit" and the child tax credits and similar incentives. Is it 40%? Beats me. I've heard that tossed around before, but I have no idea. I'll bet it's a lot more than most people think though.

Here's a table that would support some of the numbers in the story above (although I'm sure plenty of people would find things to argue about):

http://taxpolicycenter.org/TaxModel/tmdb/TMTemplate.cfm?DocID=541&topic2ID=40&topic3ID=41&DocTypeID=2

- Julian

6 - And that's where the flat tax idea falls down, really. The cutoff has to slide around a bit.

My life's story is hardly typical, but it is a long way from impossible as well -- I have had to struggle as a fry cook, and have been homeless and jobless for a time as well. My current computing career comes as a direct result of buying a used sub-$100 (Canadian, so that's about, what, sixteen dollars American at the time of purchase) 486SX-25 machine and obsolete computer books from the local thrift shop while I was working as a Footwear Reflection/Refraction Enhancement Technician (that's shoe-shine boy, for those of you who can't follow) twelve hours a day for tips only and living in a ten-foot-square room in a transient hotel. I taught myself what I needed to know, and I know damned well that that's not something everyone is capable of -- and shame on anyone who believes without thinking that bettering one's lot in life is an option available to all and sundry. I have good reason to believe that if you are reading Duffbert's blog, you have been blessed with talents and abilities that seem absolutely magical to more than nine-tenths of the rest of the world. (Ever dealt with end users?)

There are, and always will be, people who will not make and will never have a chance to make a lot of money. Would you deny them a family life merely because they can't do for a living what you do? No? Then you need to accept the possibility that a poor person with dependants might have an absolute need to keep a bit more of their income than one without. (Or you can raise the cutoff high enough that a single working poor person might be able to enjoy the benefits of the money they are not paying in taxes -- but that you are paying for them.) Progressive taxation with reasonable deductions is the only fair income tax system.

The question, really, is what constitutes a reasonable deduction? All of the moneys "earned" in the Cayman Islands or the Bahamas? The price of that Escalade you're using for business purposes only (right)? Or maybe we could stick to the real basic costs of raising and caring for a family -- a basic deduction from the gross for dependants, real, inevitable medical expenses, and so forth. There should probably be an adjustment for housing costs as well (New York City needs minimum-wage workers as much as Bugtussle, Tenessee does, and I'd bet that there's some difference in basic shelter costs between them).

7 - Well shoot, I didn't realize we were talking politics and religion here. I thought we were just talking numbers. I'd better sit back and let you guys duke it out...


- Julian

8 - Liar, liar, pants on fire...

http://www.arches.uga.edu/~davidk/

9 - Ouch. Jerry, I'm a liberal, not a moron. You know me better than that, I thought. At least credit me with speaking the English/American language correctly. Simple and absolute majority are synonyms. The definition of "absolute majority" is one more than half of the votes (as opposed to a relative majority, which means the number of votes more than the second-place finisher, for example). Don't take my word for it - look here: http://www.thefreedictionary.com/absolute%20majority
or here:
http://www.wordreference.com/english/definition.asp?en=majority

The numbers you list from the IRS to describe who pays how much are ballpark averages, right? Because we all know that the person who makes 25k doesn't pay exactly the same amount of income tax as the person who makes 60k. They are in the same bracket, which means they pay the same percentage, but the absolute dollar values vary quite a bit. I know *my* withholding takes quite a hit every time I get a big bonus.

By the way, this liberal's argument in favor of Social Security and Medicare is not based on charity, but rather on the premise that it is in society's best interest, not merely the individual's best interest, to have a safety net so that people don't hit rock-bottom. Whether the numbers and policies currently in place around welfare actually serve that purpose or not is the $64,000 question. But I base my political philosophy on logic, not on morality. I think society is better off without skid row. Charity? Honest, I'm just *not* that nice a guy...

10 - Wow, Tom, you *did* stir something up here! Just like I did the other day on my blog. :)

Being religious does not necessarily make you a better or worse person than anyone else. Do people *actually* think that atheists cannot have ideals that are equal to or better than someone of faith?

11 - This is the great thing about blogs... I thought this would attract no comments whatsoever. Instead, it vaults to second most popular thread, right behind whether Microsoft people should speak at IBM/Lotus conferences!

12 - I see both sides. Progressive tax is conceptually fair. Flat rates might *sound* fair but in terms of proportion of 'survival' money, bread line earners hanging desperately onto the lowest rung of Maslow's hierarchy are punished by flat rates. Every cent of tax hurts more keenly. Over and above the 'fairness' aspect, a strong and disenchanted segment of the population getting resentful about their lot is not something a society wants to have to deal with. History has been fairly unequivocal about that. Of course, the flip side also applies, in that ridiculously high marginal rates are also punitive and disincentivise people from earning (or earning in that country).

So I'd say I like the idea of flat-ish progressive rates which are simple, transparent and LOW. There are countries (like Canada, I'm led to believe ), where high tax rates meet with high standards of government delivery, but in my own experience ridiculously high tax rates end up getting wasted on fatcat politicians and dreadful bureacracy and state inefficiencies. I have to believe that putting more money back in the hands of society means more economic growth for all, and that this would leave people at least slightly more inclined to help those in need. The issue of whether selfishness will prevail is a fair question, but I don't think we really know how "charitable" a society would be if there wasn't the implicit thinking that the "government will sort it out". I have to imagine that we wouldn't be completely selfish gits, by virtue of the fact that we're not completely opposed to the idea of charity in principle. I think there are many dynamics we haven't thought of, simply because almost no governments are that hands off anymore.

I also have to take issue with the 'work harder' ethic. It just ain't that easy, and there are many people who work themselves to death just to keep their heads above water. Sure, some are just lazy, but for every poor layabout, there are many trust-funded wealthy layabouts. It's just not that simple to slice and dice. To make sweeping statements isn't fair. I don't think one can pronounce judgement on those less fortunate than us without having walked a few miles in their shoes.

13 - Of course, I'm apparently enough of a moron to forget to fill in my name...

<*snicker*>

14 - I don't know Rob, you may be on to something... MS could probably wipe out the national deficite, feed the hungry, clothe the poor and still turn a profit through their much lauded business practices.

ACK! I just proposed a socialist economic policy! I think I need a drink.

Come to think of it, they do give an awful lot to charity, at least some of the officers of the company do... good lot, some of them. *sniff*

Overall, I think a flat tax would be best. Let's chew on that. Think of the mountains of revenue that would be generated, and then even the poorest among us would know the dignity of paying their fair share, no longer taking a free handout, no longer feeling so dependent, knowing they to have contributed their 10 or 12 %. Are ya with me lads? Can we get behind a flat tax rate, bipartisanly?

15 - Huh. Looks like maybe someone who knows his work was playing a prank on him. I got the idea he was pretty much 'anti big money' from skimming his bio, though it's hard to be certain... just a guess.

I think I have an idea for a more complete 'flat' tax system. Instead of a %, how about tax based on log10? This is a gradually scalar value that is unique for each income level and increases only slightly as income increases. Guys making very little still pay into the system, and given the nature of capitalism, folks making loads of money don't quite get disproportionatly hozed.

Income*LOG10(Income)/100

Hence:

Income..........Tax..........Effective Tax
6000..........226.69..........0.04
12000..........489.5..........0.04
25000..........1099.49..........0.04
50000..........2349.49..........0.05
250000..........13494.85..........0.05
500000..........28494.85..........0.06

It's flat in the sense that it is the same formula applied to all, giving the concept of equal treatement under the tax code. But it isn't burdensome at any level. Would it cover the cost of running government?

Ah... that's where we get to start cutting social programs. This goes to my idea of tax 'votes'. When you file, you pick from the list of federal social programs to divy your tax dollars among. In order for it to be simple, the list would need to be short - so only the really NECESSARY programs would make the list. Any program that didn't enjoy sufficient public support would simply attrophe.

I agree with the sentiment that standard deductions need to remain, but this too holds room for improvement. The idea that we give child tax credits is kind of backwards. Why not just lower tax to begin with? Then a child tax witholding would make more sense. You simply KEEP more up front, when you really need the cash, and arn't stuck waiting for your tax refund a year later.

Fortunately, we've had some welfare reform which limits the amount of time one can remain on welfare and requires active job seeking or skill building to extend the dole. Seems fair. I know I need a kick in the butt when I'm feeling depressed and down and out. It's easy to get in a rut, speaking from experience, and not have the will to go train or search. So this is a good thing, a 'for your own good' kind of idea. Granted, there will always be exceptions such as disability, but anyone physically and mentally capable should not be on the dole.

16 - Why should someone making a large amount of money be punished for making a large amount of money? The government, Democrats and Republicans, realized that if they charged a tax people would have to pay it. Thus if they charge the richest 20% they would get a little money and if they charges the lowest 20 % they would get no money at all. So let us charge the middle 60% the largest portion to get maximum amount of funds. Why would you not try to become part of the top 20% and get out of the middle? If I work hard and make ovet 250000 a year why do I need to share my wealth and prosperty with any one outside my family?

17 - Sorry, Rob. I thought you were sensationalizing with that "absolute" bit. Hadn't considered the alternate less obvious meaning.

Those numbers were provided on a tax preparation website as being supplied by the IRS as the actual amount witheld. If it's scalar, that tax prep business is in a world of hurt for misrepresenting the data as they were meant to be guiding small business owners in figuring their tax for those lucky enough to pay by the month or quarter.

As for Charity, I am that nice of a guy - I just hate it when the state enforces it as I think it pretty much kills the spirit of giving for many folks. Giving out of generosity to ease the woes of those who are bottoming out generates good will between the recipient and the giver. Enforcing it creates a 'leach' and 'leached off of' relationship, in my experience. Consequentially, I'm more inclined to give my disposable income to charities that focus on changing social situations through education more than those that put a free lunch on a table. If we had a society that was, gasp, based on Christian ideals of charity and morality, we'd have a lot fewer folks bottoming out and a lot more willing to give to those who were legitimately poor and down-trodden. Taking strictly a humanistic approach removes the higher ideals that are supposed to motivate and guide the charitable activities to begin with, and then you'r just left with compulsory welfare, which is mostly unpalitable to all but those that recieve it. In the reformist mode of thinking, one which embraces the higher ideals, those who are more fortunate feel like it is their privelage to give to those less fortunate as a tribute to God. Atheists and liberals have tried so hard to scourge out the God in our society that we've been left with no option but state welfare at the expense of the taxpayer: every tax payer. And even then, it's well below what a Christian who has accepted the teaching of the tithe would be giving. Would you, as a welfare director, rather have 10% of my gross income or the .062 + .0145 you're currently getting?

18 - Now all we need to do is combine those three. Say:

Tax Micro$oft to Death!

<*snicker*>

PS As an aside to anyone who doesn't know me (explicitly not Julian, not Tom, and not Jerry, 'cause you guys know better): It's a joke! I'm just being snarky! Playing with words! Not proposing government policy! Really!

19 - Rob,

Dude, you crack me up. 40% is nearly an absolute majority? Huh? I think a *simple* majority would be 51%... an absolute majority would more more like 90-100%.

Just for clarification, Americans pay taxes in brackets. You have a federal Income tax, which is bracketed. Here's the breakdown.

Income Range..........Annual Withholding
$0.00-$8,000.00..........$0.00
$8,000.00-$22,300.00..........$0.00
$22,300.00-$64,750.00..........$1,430.00
$64,750.00-$118,050.00..........$7,797.50
$118,050.00-$185,550.00..........$21,122.50
$185,550.00-$316,650.00..........$40,022.50
$326,100.00-(no limit)..........$86,404.00
(figures provided for the 2003 tax year by the IRS, ie - what you paid last year, and the numbers used this year while figuring last years taxes)

So, if you make less than $22,300 annually, you pay no federal Income Tax. FICA, as you point out, is different.

For W4 and W2 wage earners, SS and Medicare are paid at these percentages: Medicare: .0145 Social Security: .062. If you are self employed, those are doubled as you are paying both the employee's and the employer's portion. Everybody pays this, to my knowledge. Let's consider this scenario:

Joe Wagearner makes $10 an hour.
He'll gross $19,200
He'll pay $0 in federal income tax.
He'll pay $8498.16 in combined Medicare and SS.
He'll take home $10,701.84.


Depending on his situation, family, dependents, he could get some of his Meidcare and SS back.

Obviously, the problem isn't the Federal Income Tax rate, it's Medicare and Social Security... Welfare. If we did away with Medicare and SS and simply required folks to open a savings account and put even HALF of what they currently pay as FICA in their life time into these accounts, we'd all be in better shape... including those who are totally dependent on family members or charitable organizations for means and sustenance as there would be more money floating around to GIVE to charitable causes rather than having it yanked away before you even see it.

Liberals are often the first to decry attempts to legislate morality? Why then do they insist on legislating charity is a good idea?

Regardless of the actual % of Americans in each bracket, you can see that the more you make (in $'s) the more $'s you pay. Personally, any time any bracket gets a tax break, I think it's a good thing and anyone who cries "fowl!" probably is entitlement minded, believing hard work is a myth and all needs should be provided by the state.

Now, looking over those numbers, you can grimace at the raw cash some folks pay in taxes, at the top end, more than any of us make in a year (likely) or you can look at the first column and be very angry you arn't making as much as all the brackets above you. If you're in the later frame of mind, I suggest you get out and work hard to build some skills to get a better job. Really, this is the land of unparalleled opportunity. But, people still have a right to blow their earnings on beer, cigarettes and cable TV.

20 - Jerry, if all Christians were inclined to give 10% of their gross income to those less fortunate, the world would be a much better place. Unfortunately, too many people of *all* faiths don't practice what they preach. Since the majority of the people in the world follow a religion, and since all religions I'm aware of (at the least: Christianity, Judaism, Islam, Buddhism, and even the god-less heathens known as Pagans...) list charity towards others as a major goal, one would think there would never be any need for welfare. Yet it exists, and not just in the US.

It has been my experience that *most* people who consider themselves members of a religion don't follow that religion's precepts as thoroughly as their leaders would like them to. Many Catholics eat meat on Fridays in Lent, don't go to Mass every week and on Holy Days of Obligation, and don't participate in the Church's charitable missions. How do I know this? Easy, my whole family is Catholic and I went to Catholic high school and a Jesuit college. Nearly all of the people I know consider themselves to be Catholics in good standing, yet very few of them would meet your (or my) criteria as a truly good and devout Christian.

I guess my point is that, while I would like to live in a world where people practiced what they preach, I don't believe that world exists. Call my a cynic, but I think I'm just being realistic. If the only welfare system were a voluntary system based on religions organizations, most members of those organizations would loudly praise the system while giving little or no actual money into it. I'm not belittling the good work done by religious charities - but what they accomplish comes in spite of the fact that a minority of the members of that religion actually participate.

21 - Um, Tom, you *do* know that those numbers don't have any significant resemblance to the reality of the American tax code, right? 40% of American citizens do *not* pay zero % of their income in taxes, and the richest 10% do *not* pay 59% of their income. You just like it 'cause it's clever, right? 'Cause it is. Clever, that is. But that's *all* it is.

22 -

I find it interesting that nobody is discussing the corporate tax part of Colin's question. Is that because none of us have personal experience in that area? Speaking only for myself, I have no idea what the corporate tax structure is. And Julian's one of the smartest people any of us are ever likely to meet, but even he doesn't have the corporate tax info floating around in his mind.

Put into the context of the pending Presidential election - what does this mean for Kerry's recently announced plan to "fix" the corporate tax loopholes and penalize "off-shoring" jobs? Will people tune him out because none of us know jack about corporate taxes, or will that ignorance work in his favor because he'll be able to say anything he wants without any common sense to act as the 'check and balance' in the voters' minds?

23 - Colin,

Bear in mind that the table Julian references is generated by a *conservative* think tank. It is not generated, for example, by the government (either the IRS or the GAO would be an alternative source for that sort of statistical analysis) or an objective third party, much less a *liberal* think tank. So there's a tiny bit of bias in their statistics. The numbers they list *seem* clear, but any college sophomore knows how easy it is to lie with seemingly valid statistics.

The reality is that the middle class (those in the 30%-90% income level) pay the majority of the tax burden in the US. Is our tax policy regressive? Yes, it absolutely is designed to tax rich people more than poor people. The way the wealthiest 2% of the people in the country earn 98% of the income in the country dictates that they will also pay a disproportionate tax rate (the use of the 10% break point is an interesting tactic, because the numbers don't change significantly between 90% and 98%, but 10% of the population being considered extremely wealthy *sounds* better than 2%). Is it 59% of the total tax burden? No. If it were that high, we would never need to raise taxes on the middle class at all - we'd simply tweak the upper class tax rate by a tenth of a percentage point and our tax increase would be settled. In any event, the point is that when you take 35% of an enormous number you get more money than when you take 30% of a small number. So yes, wealthy people 'donate' a lot of money to the government.

FYI, one of the things I termed 'clever' about Tom's (well, Bas's, I guess) story was the implication that many Americans (at 40%, very nearly an absolute majority) pay no taxes. The message therein is that those of us who do (and every US citizen reading this blog does) are in the minority, and should have more sympathy for the wealthiest 10% than for those slackers in the lower 40% who pay nothing. The analogy is clever, but the statistical dishonesty is much more clever. The number of Americans who pay no income tax is nowhere near as high as the story would have you believe, but the way the story is written leads one to accept the numbers automatically. As I said, very clever. Not, however, essentially honest or truthful. I grew up in the lower middle class (*much* lower - my family fell *well* inside the lower 25%, not just the lower 40%), but I've never known anyone who didn't pay at least 25% of their income in taxes, and most Americans pay closer to 30%. My parents *certainly* didn't get out of paying taxes just because they didn't make a lot of money. And I've got the ketchup sandwhich memories to prove it. So you might say I take the implication that the lower income brackets don't bear any tax burden a mite personally...

For reference, lest you all think I'm *still* one of the slackers who doesn't have to pay taxes, I am currently in the highest tax bracket possible (by my calculations - it's tax return time, so I ran the numbers recently - I paid just over 41% in federal taxes - but I include FICA and Medicare in that number - the income tax itself was in the high 30s). I don't begrudge the higher rate, though, because I *know* what it feels like to be one of the people paying the lower rates, and I'll take the higher income and higher rates every day of the week.

24 - *giggling*

25 - For interest's sake, what is the marginal (highest) tax rate in the USA, and what's the corporate tax rate (is it a flat rate?)

26 - Just a quick search of the IRS site... Here are some stats from 2001:

http://www.irs.gov/pub/irs-soi/01in03ts.xls

Kind of hard to find information on that site, and I really don't feel like digging around on there right now. Here's one of the link pages I ended up at, if anyone has a little more time on their hands:

http://www.irs.gov/taxstats/article/0,,id=96625,00.html

There's probably some corporate tax info on there too, but I didn't look.

- Julian

27 - I really touched a nerve here, huh?

28 - I'm still just amazed at what came out of this posting!

29 - Yes, Cap't... very clever...

30 - OK... I'll contribute to my own thread here, but not nearly to the detailed extent of my friends.

I've always been for a flat tax arrangement. Set a base somewhere which says you don't pay if you make less than x (say $15000 just to throw out a number). After that, it's a flat 10% (once again, just a number). I've never been against someone making (or having) a lot of money. Pay your 10% and move on. It's your reward for working hard to earn it. If you earn less, then do something to improve your situation, knowing the government isn't going to suck up a disproportionate share of your increased earnings in taxes.

Disclaimer... I've been on the "comfortable" side of the financial equation for awhile now. While I always would like to make more, I've never had to struggle as a fry-cook anywhere. So for me to say "improve your lot and earn more" is somewhat easy, as that's what I did. If I'm making $50K and pay $5K in taxes, I think that's fair. If my neighbor is earning $500K and pays $50K in taxes, I think that's fair too. If my other neighbor (it's a diversified neighborhood) is struggling by on $12K a year, it probably isn't fair to tax them $1.2K. I don't know what the cutoff is, but it has to be somewhere...