Unequal Taxation

[Avesther]

I'm curious as to what lessons we can learn from the man in the parable of the talents (mina) who had 2, gone and made his master 2 more and was blessed for it. And then saw his master take the one from the poor and cowardly and give it to the servant who had 10 and then blessed him again saying in effect that he will take from the poor and give to the rich. Was that fair?

 

[Durruck]

It's not that the master was taking from the poor and giving to the rich. They talents/minas didn't belong to the men. They belonged to the master.

In essence, the parable tells us that if we are responsible with a little, we will be given more. If we are irresponsible with a little, than we will not be given more.

It's another one of those "God will only give you what you can handle" stories. If you can't be trusted with His stuff, He won't be giving you much of it to squander away. Invest the time, talents, money, resources, abilities that God gives you wisely.

 

[Avesther]

It's not that the master was taking from the poor and giving to the rich. They talents/minas didn't belong to the men. They belonged to the master.

In essence, the parable tells us that if we are responsible with a little, we will be given more. If we are irresponsible with a little, than we will not be given more.

It's another one of those "God will only give you what you can handle" stories. If you can't be trusted with His stuff, He won't be giving you much of it to squander away. Invest the time, talents, money, resources, abilities that God gives you wisely.

Exactly...and who owns our currency? I would assume the people do, and the people represented by the government takes and grants based on the same type of principles doesn't it? But not perfectly. Generally speaking, the person who works hard and earns $250,000 (I use that number because it is all I hear Barrack talk about) will get more tax incentives because generally, they have worked hard for it and have been responsible with their education and experience. Where as the sloth on the couch and welfare does not get any tax incentives, which is essentially the master taking from the one who was not responsible with what they were given. Generally speaking. Not talking specifics.

Anyway...side bar: I don't think God gives us only what we can handle, God gives us what he can handle. How else can God teach reliance on him? You don't strengthen a muscle by lifting a single sheet of paper, you build strength by lifting more then the muscle can handle until the muscle tears and rips and can no longer lift the weight. I think God does the same. We become stronger in faith because God gives us more then we can handle so that we learn to rely on him.

 

[Durruck]

There becomes a fine line with working out, and probably faith. If you push a muscle too far, it is possible to sheer it completely from the bone, in which case it may never recover. Push someone too far, they could break (faith, mentally, whatever). God won't push them too far that they get past that point.

 

[The Mighty Gerbil]

In essence, the parable tells us that if we are responsible with a little, we will be given more. If we are irresponsible with a little, than we will not be given more.

It's another one of those "God will only give you what you can handle" stories. If you can't be trusted with His stuff, He won't be giving you much of it to squander away. Invest the time, talents, money, resources, abilities that God gives you wisely.

Exactly...and who owns our currency? I would assume the people do, and the people represented by the government takes and grants based on the same type of principles doesn't it? But not perfectly. Generally speaking, the person who works hard and earns $250,000 (I use that number because it is all I hear Barrack talk about) will get more tax incentives because generally, they have worked hard for it and have been responsible with their education and experience. Where as the sloth on the couch and welfare does not get any tax incentives, which is essentially the master taking from the one who was not responsible with what they were given. Generally speaking. Not talking specifics.

Slightly off topic but not much: In reading that I can't help but also think of it in a broader sense not just with the rich or poor. If God won't give irresponsible people more should we vote to give our irresponsible government any more money regardless of where it comes from?

 

[Durruck]

Much like the proverbs, it's not a guarantee about faith or responsibility, but a generality.

 

[The Mighty Gerbil]

Much like the proverbs, it's not a guarantee about faith or responsibility, but a generality.

Right. Just saying the common sense attitude of not giving the irresponsible more before they become responsible seems to be supported by that parable.

 

[Durruck]

You're absolutely right. Just as a person fresh from college doesn't walk into a mega-corporation and apply to be on the executive board, we don't generally wake up with $100 Million and learn to be responsible with it.

So many times, I hear people say "if I had (whatever amount) then I'd start tithing, I'd donate to charity, I'd do this, I'd do that." The point is, if you're not willing to set aside little bits of your play money when you have very little, you're not likely to set aside anything when you have more, either.

Think of it like tipping your server. If the service is just okay, you may give 10%. If it's average/expected, you may give closer to 15%. If it's exceptional service, you may give closer to 20%. It doesn't matter if your bill is $5 or $500... you apply the same principles to the smaller amount as you do the larger.

 

[Odale]

I should really be studying... but...

... Generally speaking, the person who works hard and earns $250,000 (I use that number because it is all I hear Barrack talk about) will get more tax incentives because generally, they have worked hard for it and have been responsible with their education and experience. Where as the sloth on the couch and welfare does not get any tax incentives, which is essentially the master taking from the one who was not responsible with what they were given. Generally speaking. Not talking specifics.

You can't "generally" apply such beliefs onto everyone like this. It surely is possible that the person who makes over $250k per year did consciously make that level of income a goal while they were in college, but on the opposite side of that coin, someone else might also have had that goal but have had something tragic happen to them and are unable to make ends meet. Not all people who receive welfare are lazy people who slothenly lounge around their house all day. A welfare recipient might have kids who obviously have needs which require tending. If they can't work or can only handle a low-paying, low-effort job (which is what many of them do), how then can they provide for themselves, their kids, and pay rent/bills/debts etc?

People argue all the time that churches would do a much better and more efficient job than the government would, I want to know how this is possible. Not everyone goes to church so therefore not everyone tithes, and the church operates off of an already limited budget (limited when compared to the federal government). If our family from above lived in a low-income area (or even a middle class area with the economy the way it is) the church probably can't help them to the extent the way the federal government does.

...Anyway...side bar: I don't think God gives us only what we can handle, God gives us what he can handle.

Jesus couldn't even handle what God handles. When he was on the cross and God placed all of the sins of the world on his shoulders, he was in an insufferable amount of pain. If God did that to us we'd probably just die on the spot. He gives us the most he knows we can handle.

How do these things relate to equality in taxation?

 

[Patriot]

If they can't work or can only handle a low-paying, low-effort job (which is what many of them do), how then can they provide for themselves, their kids, and pay rent/bills/debts etc?

Why is this the government's problem?

and the church operates off of an already limited budget (limited when compared to the federal government). If our family from above lived in a low-income area (or even a middle class area with the economy the way it is) the church probably can't help them to the extent the way the federal government does.

If I was able to spend twice the amount I actually make I could put quite a bit more toward charitable causes. Problem is, no one can realistically do so. It is going to catch up with the government and the result is going to be painful.

Jesus couldn't even handle what God handles. When he was on the cross and God placed all of the sins of the world on his shoulders, he was in an insufferable amount of pain. If God did that to us we'd probably just die on the spot. He gives us the most he knows we can handle.

How do these things relate to equality in taxation?

(Ignoring all the theological issues of the statement above)The government is not God. Don't expect the same considerations.

 

[Avesther]

On the topic of unequal taxation, some interesting numbers

Top 3% of US income earners make 36% of the charitable donations.
Top 10% of US income earners pay 55% of the income tax brought in.

I think if you tried to make things representative, (ie 25% tax rate for everybody) the top 10% of income earners in the US would pay 10% of the income tax brought in. Who do you think would pay the missing 45%?

Per the Heritage foundation:

Top earners are the target for new tax increases, but the U.S. tax system is already highly progressive. The top 1 percent of income earners paid 38 percent of all federal income taxes in 2008, while the bottom 50 percent paid only 3 percent. Forty-nine percent of U.S. households paid no federal income tax at all.

Seems to me, that a straight shot 30% tax rate would amount to a tax savings for the rich and an additional tax burden for the working families.

 

[Sassamo]

Statistics have a way of twisting numbers into looking like anything we desire. It's just simple math. Suppose we have 10 people, 1 of them brings in 1,000,000 a year, while the other nine only bring in 100,000 a year(still a very considerable income in my opinion, but thats besides the point). Let's say we have a flat tax rate of 10%. Of the total 1,900,000 of income, they'll pay in 190,000, 100,000 of which comes from 1 person. In this scenario, we see that the top 10% of earners pay in 53% of the taxes.

That being said however, a flat tax rate would either reduce the richers taxes, or increase the poorers taxes. Personally, I like the system we have in place, for the most part. Everyone pays the same taxes, dollar for dollar. Someone making 100,000 a year pays the same amount of taxes as someone making 1,000,000 a year, for the first 100k anyway(not the real brackets, just an example). You only pay higher taxes on the money made in excess of each bracket. This way, those who have more money to spare, still have more in their account, while also shouldering a larger portion of the tax burden. I understand it might not sound 'fair' to some, but it sounds like a decent system to me. The only thing we need to do is tie up some of the loop-holes that are used to defalte someones taxes(can't blame them for using what the system allows, just need to fix the system). I believe this is what the AMT(alternative minimum tax) attempts to do, but I don't know much about that as it doesn't apply to me.

 

[Durruck]

The AMT is crap. I make an average wage, my wife slightly above average. We live in an average neighborhood, drive average cars. We tithe to the church, we claim very few other deductions (we don't surpass the 2% medical, 2% work expenses, etc). We only recently started getting into retirement investments, stocks, etc. The year we got married, we made around 50 grand. Nice money, probably less other people in our fields, but enough to be very, very comfortable.

Every year, we are within a few hundred dollars of having to pay the AMT. We are in the 25% tax bracket, nearly getting hit by something meant for millionaires? Considering that it was designed to make sure the rich pay "their share," I'm wondering how this can be a good system?

You only pay higher taxes on the money made in excess of each bracket.

It's still moving into a new bracket.

The only thing we need to do is tie up some of the loop-holes that are used to defalte someones taxes

This I agree with completely. There's a loophole that lets me claim a loss on long-term investments, ie, my retirement account (which are taxed at 15%) and I can use it against my wages (taxed at 25%), then just claim the growth on the investments later. The losses can be held indefinitely, so I can levy them against wages until the losses I "suffered" have been offset completely. It shuffles my gains and losses around, but essentially saves me 10% on my taxes, in $3000 blocks.

It may not sound like much, but it's $300 extra bucks in my pocket each year just because I moved some money in my retirement account from FundA to FundB, which holds all the same stocks and will perform nearly identically. Rather silly, if you ask me. But I'd be a fool to not take advantage of it.

 

[Avesther]

There's a loophole that lets me claim a loss on long-term investments, ie, my retirement account (which are taxed at 15%) and I can use it against my wages (taxed at 25%), then just claim the growth on the investments later

Does this work like this (using random numbers and simplifying it):

Year one:
Salary: $100,000
Loss in retirement account: $5,000

Tax on salary 25% = $25,000
Tax savings in retirement account 15% = $750
Net tax = $24,250

Year two:
Salary: $100,000
Gain in retirement account: $5,000

Tax on salary 25% = $25,000
Tax on gain 15% = $750
Net tax = $25,750

Total of two years:
Salary = $200,000 tax = $25,000 + $25,000 = $50,000 (25% of $200,000)
Retirement account = Zero net gain ($5,000 loss + $5,000 gain 0) tax = $0


If that is the way it works, then the tax loophole is really there to compensate you for diligently planning for retirement but experiencing bad investment years but those tax benefits disappear over the long run in that generally, investments increase over time.

And if it doesn't work that way...ignore me.

 

[Avesther]

Odale had brought up the question to a point I made about people who are rich moving their business (and by extension assets) out of the US if they felt they were being "over taxed". I took some liberty in my interpretation of the question and Odale is free to correct it if he feels I took to much liberty in it.

I was just listening to a local talk show and the discussion was on the IRS. Imagine that, a Calgary talk show discussing the IRS. The reason why is that the US tax act requires all US citizens (regardless of where they live) to file US tax returns with the US. And the reason why the US tax act has this requirement is not because law abiding citizens who pay tax in the country the reside in are avoiding tax, rather because very wealthy people move their taxable assets out of high tax jurisdictions like the US into tax havens like Switzerland and the Cayman Islands. For the most part, the US will give a foreign tax credit for tax a US citizen as paid to a foreign tax authority, which means for the most part, most Americans living abroad will not have to pay an US tax. But money in low to zero tax havens would attract higher tax on the investment income in the US, so now comes in the "numbered" accounts. The IRS wants to ensure those investment funds are being taxed, and if not or not high enough, the IRS wants that tax money in the US.

It all changed with the UBS bank granting access to the IRS to 4500 of their accounts, which had never been done before. In those 4500 accounts, the IRS found assets worth over 8 billion dollars. There is a lot of tax revenue from that, and it is estimated that there is at least another 50,000 accounts of note to look at in Switzerland. There are probably hundreds of billions of dollars worth of assets outside of the US. All moved there by very wealthy people in an attempt to avoid US taxes.

So yes, wealthy people move will move (because they have) their taxable assets outside of the tax system if they can.

Next, will they move their companies, if not job's, out of the US if they can? Certainly they can and do. Many American companies (like Apple) have their products made outside of the US because labour is cheaper and so is payroll tax cheaper. iPods are manufactured in Taipei and Shanghai, not in Silicon Valley California. The US needs the jobs but lets face it, can the average American afford a $1,500 iPod? Not anymore then the other 5 billion people in the world afford a $100 one. Would Apple still be in business if they couldn't (or their target audience) couldn't afford the local labour cost on an iPod? I think it is a safe assumption to say no.

But in moving the labour off shore, the US is missing on a source of tax revenue from the wages of the workers and off any payroll taxes the employers would have to make. While tax strategy is not the main factor in moving manufacturing labour off shore, it is a factor, as small as it may be.

 

[Durruck]

And moving production out of the country can likely be linked to the removal of import taxes (tariffs). When we open the borders to true a free market economy, we have to consider the possibility that it's cheaper to produce an item in a 3rd world country with cheap natural resources and labor rather than pay domestic workers 100 times as much, even at minimum wage.