Are our federal income taxes really so high?

Someone in another thread lamented his "high" taxes. But the federal income tax brackets have been diminishing and shrinking since Reagan. They are now down to historic lows and lower than tax rates in most other developed countries. And here we are with high national debt because there was insufficient revenue to pay for what was needed, and we have decaying infrastructure while some other countries have developed high-speed rail that floats on a magnetic cushion, and we have talk about cutting more programs ("austerity"). Of course it will be the needy who will feel such cuts most.

So we are really in desperate need to raise taxes. Austerity hasn't solved anything anywhere because you cannot cut your way to prosperity. And with higher taxes needed programs like infrastructure can be undertaken. Such a move will put money into the pockets of workers who need it and will immediately spend it, thus raising demand for those goods. And the first step is to raise the minimum wage up to what it would be if the minimum wage in 1986 had been thereafter incremented upward annually to reflect inflation. Then infrastructure projects should begin in earnest.

Eventually, after such programs put people to work in full-time jobs earning good incomes, tax brackets should be raised probably by about 20%. That would mean the 15% bracket would increase 20% to 18% and the 33% bracket would increase to about 40%. Likewise for the rest in between those. Then we need more brackets to be fair. I'd suggest maybe a 60% bracket for income over $400,000, and a 75% bracket for income over $600,000 and a 90% bracket for income over $1 million.

Alternate reasonable suggestions are welcome. The point is that revenue is needed. It is insane to maintain a "rich, developed nation", half of whose population lives in poverty and requires taxpayer supports to live.

 

Yet we set record amounts of tax revenues

We have a spending problem

 

huh?

Care to expand and explain that with data to back it up?

 

I know, it's a foreign concept, but don't spend more than you make. We'd all like a Ferrari, but it's not feasible.

 

Tax revenues are very low compared to our spending budgets and current debt level.

Tax revenues have also been constant as a proportion of GDPs over the last half century regardless of marginal tax rates. Therefore spending is the real problem.

Are marginal tax rates progressive enough? I think the growing wealth gap leads to a conclusion that it is not progressive enough.

 

Increasing the tax rate on a further progressive scale lends to a greater gap in wealth disparity. I agree that there is a spending problem along with tax complexity problem.

 

Government spending has tended towards a greater gap in wealth disparity. I do not understand how an increasingly progressive scale would lend to a greater gap in wealth disparity. You will have to explain that one to me.

 

You're being antagonistic, argumentative, and snarky. And you dodged and changed your story to do it. Penrod said "Yet we set record amounts of tax revenues"

So that was about revenues. Income. But now you switch to spending even though I asked you to expand on your statement about "record amounts of tax revenues".

If you can't be civil and answer questions, I'll be ignoring you.

 

I've seen many of your posts, and we are on opposite sides of most things.

But I have said many times on this forum that we should pay for the things we want from government. I mean, actually pay for them. I actually believe that is a fiscally conservative position, but mainstream "conservatism" doesn't agree with my view. They believe in keeping taxes low. Mainstream liberals hate the idea equally because they know that if we actually had to pay for our spending, there would be real pressure to cut programs. So there's the impasse. "Do not raise taxes" on one side; "Do not cut spending" on the other. So we neither raise taxes or cut spending, and the deficit goes out of control. We hear a lot about the deficit, and we hear a lot about "fraud, waste, and abuse", but all of that spending has a constituency, and deficit spending is how politicians avoid making tough decisions on spending.

Since you asked, here's what I think about taxes ...

First of all, as I said, we should raise enough taxes to pay for our spending - the idea everybody, on both sides, hates.

Second, I don't especially like income taxes on the poor and middle classes. They need that money much more than the upper classes do. In our society, there is an income level where life becomes comfortable. I don't know exactly where that is, but I would say that in a medium expensive state, that a single person with no dependents earning $70k a year has reached that point. A married couple with two children has reached that level at about $100k. That may sound like a lot to some of you, but it ain't the 1960s anymore, folks. So when an earner rises above that level, I think it's time to give back to society in the form of income taxes on the amount over those levels. And I believe the amount ought to be progressively higher as the income level is higher. For that high income earner, life is good, and it gets better and better as that income goes higher and higher. If a person has a 50% tax rate on everything over $1 million they earned, and they earned $2 million, that means that they get to keep $500k of that second million. I shall not be convinced that this is an unfair burden on that earner. And yes, I do believe that for the uber rich, that progressive rate should keep getting higher. These are the people who have benefited the most from our free, capitalist society, and so it follows that they should be thankful and be willing to pay the most to preserve it and give back.

Now having said that, I do believe we all should have some skin in the game. So what I am in favor of are federal sales taxes. These sales taxes would exclude unprepared food, medicine, electricity, fuel, rent, and sales of houses. So paying the tax would be basically voluntary. It would apply to non-essential items to live, and the buyer would simply buy them when they could afford them with the tax. So when the poor or middle class bought that six-pack, or that pack of smokes, or that prepared food, or the TV or I-phone, or those expensive Nikes, they'd be contributing.

I don't claim to have all the answers, but these are some thoughts for the discussion.

 

But when there's not enough to pay for our needs, some call for cutting spending. Ok fine, I agree that the defense budget is way over anything it needs to be and can be cut by about 30-40% and still be more than any other country spends, but the defense budget, by law, cannot be audited. I wonder why.

Agreed.

 

It's super simple; cut our military spending. Our armed forces are bloated to the point of absurdity.

 

Quite the opposite my dear friend! But that is over the long term. What is really addressed by progressive taxation is income disparity. Wealth disparity can be addressed by estate taxation. But that is a different thread.

 

How do you know liberals take that position? My own position is that it would be nice if we paid for everything but that a government under capitalism cannot run without debt of some level. It serves as a needed stimulus for the economy.

Correct! I agree with what you've said. Before retirement we had a gross income of $140,000/yr and it was definitely comfortable. We lived on half of the net and saved the rest for retirement.

Again I agree. So far I see no point of disagreement between us.

Well, of course the problem with the sales tax is that it hurts the poor disproportionately, which you attempt to prevent or at least minimize with your suggestion of exemption (which I would extend to other items). But a sales tax is the most expensive tax to manage. Enforcement requires more cost, and accounting confirmation is more costly and requires much more bureaucracy than an income tax. So it is very heavy on reporting and paperwork for businesses and government.

A sales tax is characterized by a strong inclination to tax evasion at the retail level. And since sales fluctuate with economic conditions, a sales tax fluctuates more than an income tax.

In the end, all taxes are income taxes because it requires income to pay them as it does to buy what is so taxed. Therefore it is fairer and more direct, I think, to just make it an income tax.

BTW, thank you for your very civil and honest discussion.

 

Everyone has the tax situation backward.

1) We have to "right size" government first. Cut out all of the unnecessary crap and privatize what we can. Get government as small as possible.
2) Then we should look to the American people to fund what's left of the government with a flat tax.

What we currently do is tax the American people as much as they will bear, and then see what we can do with all of the plundered booty. That's backwards.

 

-except you I guess.

Sounds nice. Now tell us what you would cut. What constitutes "unnecessary crap"? Privatizing has been proven a very bad idea. Are you at all familiar with privatized prisons and education?

Oh great. Give the rich the biggest break ever and nail the low income folks to the frigging wall.

...according to your assessment. I think government spends much more than that and racks up debt. Always has.

 

Look it up yourself. I did. Other than WWII, our tax revenues are higher as a percent of GDP than any other time frame. Don't be lazy. It's out there.

 

Good god man....20trillion debt.

 

Remember that LICE Trump claims Obama "gutted " our military. LICE chains he will nearly double our fighter and bomber wings and nearly double our naval ships. Oh really LICE where us the money coming from? LICE says he will cut taxes. OK great but again how will you for "rebuilding " our military? Fixing our infrastructure? Where are you getting the money for that LICE. ?

 

None of the "needed" revenue is likely to reach me, so no we don't really need higher personal income tax brackets. We simply need higher effective rates on corporations as well as transactional fee/tax/surcharge--whichever you prefer to call it--on stock transfers.

 

don't forget to include the fica taxes..15.3% and workers comp insurance tax..my rate is 29%..

 

I did. I don't know where you get your info but I can't seem to confirm what you said. I find this for example:
https://fred.stlouisfed.org/series/FYFRGDA188S

But then compare us to other countries. Here, take a look. Compare us to other countries. Sort this from high to low "Tax as a % of GDP". Our taxes aren't even as high as in Namibia! Not even as high as in Trinidad, Montenegro, Macedonia, Latvia, Guyana, or Moldova!!
https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP

 

Self employed really get screwed by FICA. No one with half a brain wouldn't circumvent that without incorporating an S type corp..........but that means more fees paid to the state not to mention more accounting fees, possibly legal fees as well. It's a scam. Government takes their slice whether it is state or federal. LWNJ's are truly clueless when it comes to taxation. One day they will kill the golden goose.......which by the way isn't the 1%ers.

 

Let me ask a simple question to allow Liberals to understand that this folly will never, EVER lead to an economic recovery for our country: Name one positive benefit to a middle class family for higher taxation. If you can name just ONE benefit, one beneficiary of Uncle Sam putting another surtax on your check, I'll be the most pro-tax heavy man in the world.

That's just it: There never will be one. Taxes are paid to Uncle Sam, ostensibly once upon a time for roads, bridges, etc. But really, no longer. Or to be more specific: For Local Government only. The feds could simply print through the Treasury. And so today, taxes are used as an inflationary control device, rather than to actually fund the government. Or for that matter, anything related to our civilian economies.

You want to make America great again? Let's start with a HUGE entreprenuial push inside of our country. We have 80% workers/20% Entrepreneurs. If we made it 60/40, we'd be more balanced, a hell of a lot of people would have a YUGE boost in income, numerous jobs would be created and the economic engine in the US would start running again.

 

Well, I think I know liberals. If we had to pay for our spending, the politicians would come under great pressure to cut spending. You tell me what spending the liberals would be willing to cut. And before you say "Defense" keep in mind that defense spending is only about 17% of federal expenditures, and cutting defense is going to come up against tremendous resistance from both liberals and conservatives.

I'm not going to argue the pros and cons of debt as a stimulus. I'm not carping about some small, manageable amount of debt, but we are headed toward a crisis at our present level of spending vs revenue. Look at this chart.

Our kids are grown and on their own, and my wife and I live on a similar amount. We don't feel rich, but we are comfortable and secure financially. We actually give away more money now than we ever have. We give it to worthy tax exempt organizations, and it's a great feeling to be able to do that.

The reason I like sales taxes is that you can protect the poor by excluding certain things like food. The other reason I like it is that it is voluntary in a sense because you pay it as you can afford it rather than the government simply taking it whether you can afford it or not as they do with income taxes. The other thing that would be possible with sales taxes is to make them progressive as well. Less expensive items could have a lower sales tax rate, and expensive items could have a higher rate or rates. I don't see what the big bureaucratic burden this would be that you mentioned. I would think this could all be done automatically in our digital, computer-driven economy. You are correct that all taxes are income taxes, but we are all Americans, and I think it's good that we all contribute and have some skin the game - a financial stake. But if a person is poor, we should not be taxing the essentials for life, which is what I like about sales taxes.

I did some quick research and math, using Washington State as the basis. They have a 7.5% sales tax (that excludes food) that brings in around $10 billion to the state. The math was simply checking Washington's population and then dividing the population of the entire U.S. by that number. The number was about 47. So if there was a 7.5% federal sales tax, that would bring in $470 billion (nearly half a trillion) to the government. That would help close the gap between revenue and expenditures, and it would have the effect of putting pressure on our politicians to be responsible and frugal.

You're welcome. I can get along with anyone who disagrees with me as long as we talk to each other in good faith and with mutual respect for one another. Black or white, rich or poor, liberal or conservative - We are all Americans. We're all in this together, come hell or high water. We're going to be a part of this country's success, or we're all going to go down with the ship together. That's how I see it.

Seth

 

Yes, you should be paying 10%-35% to your State and only 1%-3% to the federal government, instead of 10%-35% to the federal government and 1%-3% to the States.