<p>I never said you should feel guilty. You should feel good about yourself.</p>
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<p>That would be fine with me.</p>
<p>The point about making money work for you is stressed in The Millionaire Next Door.</p>
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<p>I guess my comment was more in general. I know you did not say this.</p>
<p>It is just, that I really resent the fact that US tax code is used for behavior modification and to some extent for income re-distribution. </p>
<p>Most of my assets are not liquid. The liquid assets that I did have (through saving over many many years) went away after we had to rebuild our home due to foundation issue (instead of walking away like some people would do). So, I work for living and it bugs me how much of my income goes to income taxes and then I have to hear that I don’t pay enough taxes.</p>
<p>And I do get what you are saying regarding people not making enough money to survive on/have a nice life/etc. I feel compassion towards them. However, I came to accept that there will always be poor people. To me, the questions is: what percentage of the population. I don’t think that “taxing the rich” is the solution to decrease that percentage. (We obviously disagree on this, but it is OK. It takes all kinds of people to make the world go around).</p>
<p>We do disagree on some issues.</p>
<p>Using the tax code is an efficient way to help people and redistribute wealth. And wealth is distributed in both directions, not just to the poor.</p>
<p>If you make you money by labor, yeah the tax code isn’t too kind. Despite the rhetoric, capital is taxed at rates less than labor in this country. Capital receives more favorable treatment than labor in the tax code.</p>
<p>As a society, we don’t pay enough federal taxes in this country. Federal taxes as a share of the economy are lower now than they have been in
our lifetimes. This doesn’t mean that there aren’t individuals out there that are paying enough. There are individuals paying enpugh taxes. We live in a country where two people who make the same amount of money can pay very different taxes. I have been complaining about this for a long time. I know what I am talking about because I am a huge winner with this tax code. A large part of my income for 30 years has been capital gains. I think it is bs. It is not good for the economy. It is not fair. And no, I am not going to give the money back. 
I worked less, not more, because of the favorable treatment in the tax code and I kind of need that money now. When I read that people are going to work less if the top two tax rates go up 5 percent, I think, "Really? That still leaves taxes low compared to what they have been for the last 60 years. I agree with Buffett and Rattner and others, what a bunch of nonsense.</p>
<p>Lerkin, what do you want to see the tax code look like?</p>
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The government has accepted voluntary payments to the Treasury for years. If you felt you weren’t paying enough in taxes, nothing stopped you from choosing to paying more.</p>
<p>This is how I want it to be:</p>
<p>No deductions for mortgage interest, 401K, child care, tuition, student loan interest, etc.; no refundable or non-refundable tax credits. IMHO, it is not a role of government to tell people what kind of behavior is preferable. All types of income are taxed (including employer health insurance contribution and 401K match).</p>
<p>I do agree that it will be a huge burden for the poor to pay income taxes, so the poor (whatever the definition is) should pay zero income taxes (but also they should not receive any of the refundable tax credits). </p>
<p>Ideally I would like to see one tax rate for those required to pay taxes - 15%. However, I am open to something like two or three tier system: 5-10%, 10-15%, 20% for extremely high incomes (not 250K everyone is talking about). Why cap at 20%? - because I believe in keeping the fruits of someone’s “labor” (definition of labor is loose here) where they belong - with that someone. The rate is the same regardless how income is generated.</p>
<p>A separate issue is passive losses - These I think should be either suspended until the generating vehicle starts realizing profits or disposed of (subject to material participation of the owner). This should be regardless of the overall income.</p>
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<p>The idea is that favorable capital treatment helps increase the opportunities for creating more jobs as there’s an additional incentive to expand plant, equipment and labor. One of the problems is that companies are using more equipment than labor given tremendous (perhaps exponential) increases in productivity. Another problem is that the tax incentives are used in non-beneficial (to society) ways like trading.</p>
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<p>Philosophically pure.</p>
<p>But it would take power out of the hands of the Executive and Legislative Branches and that’s never going to happen.</p>
<p>It would also decrease the need for accountants.</p>
<p>And tax lawyers.</p>
<p>Some might think that to be good. And some not.</p>
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<p>The power that they should have never had!</p>
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<p>The invention of computers eliminated the need for typewriter makers. Such is life. It is called progress. I am sure the lawyers and accountants, if they are smart enough, will find a way to adapt. And maybe will become productive members of society (no intent to offend anyone, it is a joke. And in the interest of full disclosure I used to freelance as a tax preparer and my mom is an accountant).</p>
<p>Notrichenough, that is not going to solve society’s problems is it? I am sure you feel good saying nonsense like that.</p>
<p>Lerkin, historically, like the last 60 years or so, federal taxes were about 18 percent of the economy and federal spending was 21 percent. When the economy recovers those numbers are probably close to what we can get to again. Right now federal taxes are about 15 percent of the economy. We are not going to get where we need to get with your numbers. You are going to have to increase those rates. ;)</p>
<p>The real reason capital gains taxes are so low is the wealthy want capital gains taxes low. The wealthy have a lot of power and luckily some of us benefit by the scraps.
I have read the arguments why capital gains taxes should be low to zero, but the arguments don’t hold water. History does not show a correlation between low capital gains taxes and economic growth.</p>
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<p>Or… we can decrease spending.</p>
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<p>I’ve read those too. And I don’t think that capital gains should be zero. They should be taxed the same as all other income, provided we lower highest income tax rate. </p>
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<p>A little bit out of topic, but I think my story supports your statement (provided that the capital gains taxes are not extra-ordinary high). When I was in my 20s, in the age of dotcom boom and IPOs, I learned a very expensive lesson: that investment decision (to sell) should not be a tax decision (short term vs. long term capital gains). If I had to do it all over again, I would absolutely sell the stock I had and pay short term capital gains. I eventually sold that stock at the huge loss. This 2011 tax year was the year I was able to finally deduct the last bit of those losses.</p>
<p>Another lesson is never let a gain turn into a loss.</p>
<p>Lerkin, I look at reality. Federal government spending is more likely to go higher as a percentage of gdp not lower. As the population ages, the elderly need more services. The public paid for their social security. It’s not a gift. Medicare has been partially paid for, and it is a big problem. The private insurance sector is a bigger problem.</p>
<p>Anyway, federal govt spending is not going to be cut much below 21 percent. It hasn’t for 60 years no matter who ruled the country.</p>
<p>SS, Medicare, defense, and interest on the debt are approximately 80 percent of federal govt spending. 20 percent is other items that make up 5 percent of the gdp. If you cut the other items 20% that is 1 percent of
gdp. You still have to raise taxes. </p>
<p>By the way, cutting government spending may just shift costs from the government to you. The costs don’t necessarily disappear. For example,
cutting medicare and shifting those costs to individusls increases the individuals cost of health care. These are not my numbers. These numbers are studied by non-partisan organizations. Cutting medicare
may lower a person’s taxes but increase his/her cost of health care more than is saved by lower taxes. I am pretty confident that cutting medicare will be a net loss to most Americans. I am 99.95 percent sure about that. The public sector payment system is cheaper than the private sector payment sector. </p>
<p>For the record, My daughter used to work for United Health Care. I used to trash organizations like UNH and Anthem when my daughter worked for UNH. I see no reason to stop trashing these organizations now.</p>
<p>[Did</a> Social Security and Medicare Crash the Economy? | The Exchange - Yahoo! Finance](<a href=“http://finance.yahoo.com/blogs/the-exchange/did-social-security-medicare-crash-economy-002638924.html]Did”>Did Social Security and Medicare Crash the Economy?)</p>
<p>I like the above link. Since I no longer work for a high frequency trading firm, I can look more objectively at a transaction tax. I still think I dislike the tax.</p>
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I’m not the one who is morally outraged that I don’t pay enough in taxes. Perhaps instead you donated the excess to local organizations that directly help the less fortunate, rather than to the government. That would help solve society’s problems, at least at your local level.</p>
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Considering that the Fed collects as much in FICA taxes as it does in income taxes, a flat rate of about 15% with no cap like FICA has on the the employee side, should be more than enough, especially with few or no deductions. Add in corporate taxes and the rest, and there you go.</p>
<p>I’d like to see dividends taxed as regular income, although corporations should get a deduction for the dividends they pay, so they are not double-taxed. That might unlock some of the giant piles of cash many companies are sitting on.</p>
<p>Capital gains should be taxed at regular rates, unless directly purchased from the company which means they are providing capital to the company. I think there should be an inflation adjustment as well.</p>
<p>What about an inflation adjustment for labor? Most wage increases are eaten away by inflation. </p>
<p>Government costs rise because of inflation, just like the private sector costs so if you don’t tax inflation the government is going to be short what it needs to run.</p>
<p>Notrichenough, your proposal would be a tax increase for the poor and middle class, a tax decrease for the upper middle class, and probably a wash for the wealthy. How nice of you. :)</p>
<p>Dstark,</p>
<p>am I the only one who sees the problem that we spend so much on medicare, SS and defense? To me the solution is not to increase revenues, the solution is to find the way to cut spending.</p>
<p>I disagree with you about public vs. private payment system. I think we missed the opportunity to do a real health care reform that would have lowered health care costs for everyone. </p>
<p>Basically to me it comes down to comprehensive reform concerning all aspects of government spending and government involvement.</p>
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A large exemption, say $30K or so, would allow the poor and lower middle class to avoid paying very much in income tax, just as they do now. This would require raising a flat tax rate to 18% or so, maybe 20%. </p>
<p>Of course, if you don’t believe in a flat tax, you can add graduations however you like. It doesn’t take a 39.6% top rate to balance the books, that is confiscatory IMO.</p>
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No they didn’t. Yes it is.</p>
<p>But we’ve had this discussion before.</p>
<p>Lerkin, the private spending - public spending Discussion about health care was a fact. The public sector is cheaper. That is a fact. You can disagree all you want. I have no idea why people want to believe things that aren’t true. I am not into that, but whatever.
What would you like to see cut, Lerkin?
Maybe we would agree…</p>