So, who pays taxes - really?

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  • 1 Post By Speckla

Really? Lots of you seem to believe, or atleast say you believe, that the "little guys" pay all the taxes and the rich just get all the "tax breaks."

Not true.

I know it's a common misconception, but it isn't true, no matter how many times "they" say it or how many times we repeat it, or how good it sounds.

As I believe I've linked to and posted before:

The latest release of Internal Revenue Service data on individual income taxes comes from calendar year 2006, a year in which the economy remained healthy and continued to grow, increasing individual income tax collections along with overall average effective tax rates.

This year's numbers show that both the income share earned by the top 1 percent of tax returns and the tax share paid by that top 1 percent have once again reached all-time highs. In 2006, the top 1 percent of tax returns paid 39.9 percent of all federal individual income taxes and earned 22.1 percent of adjusted gross income, both of which are significantly higher than 2004 when the top 1 percent earned 19 percent of adjusted gross income (AGI) and paid 36.9 percent of federal individual income taxes.

The top-earning 25 percent of taxpayers (AGI over $64,702) earned 68.2 percent of the nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86.3 percent). The top 1 percent of taxpayers (AGI over $388,806) earned approximately 22.1 percent of the nation's income (as defined by AGI), yet paid 39.9 percent of all federal income taxes. That means the top 1 percent of tax returns paid about the same amount of federal individual income taxes as the bottom 95 percent of tax returns.

http://www.taxfoundation.org/news/show/250.html


This is not a "biased" or "Rush kool-aid" site. It's just information. But people ignore it in favor of spouting their party's line.
Speckla
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You'd have to compare your income tax return vs. the amount you actually had taken from your paycheck.

Everyone actually pays taxes but some people end up getting it all back.

The Fair Tax would do away with income tax and everyone would pay across the board on goods and services. That would put the power in the consumer's hand and less power in the government's.

Income tax (the money the is refunded) is like giving the government an interest free loan. I have to pay interest on any loan that I take out. So maybe the government should pay interest on the return?
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Last edited by Speckla; 11-02-2008 at 08:23 AM.
I think I set it up so that I owe a little each year? I never get a refund, and I don't want one.
I have worked in corporate finance for over 20 years. If you think corporations don't get tax breaks, you are seriously misled.

And anyone who works pays FICA and Medicare taxes. However, if you earn over the threshold, you do not pay the same percentage of your income. For example, if you make under $102,000 a year, 6.2% of your income is withheld for FICA. But if you make $200,000 a year, for example, only 3.1% of your income is withheld.

And if you are self-employed, you have to pay twice as much in FICA as anyone else.

Speckla
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I have worked in corporate finance for over 20 years. If you think corporations don't get tax breaks, you are seriously misled.

And anyone who works pays FICA and Medicare taxes. However, if you earn over the threshold, you do not pay the same percentage of your income. For example, if you make under $102,000 a year, 6.2% of your income is withheld for FICA. But if you make $200,000 a year, for example, only 3.1% of your income is withheld.

And if you are self-employed, you have to pay twice as much in FICA as anyone else.
Originally Posted by oreosmakemehappy
Because you don't have an employer to match it.
The Fair Tax would do away with income tax and everyone would pay across the board on goods and services. That would put the power in the consumer's hand and less power in the government's.
Originally Posted by Speckla
Hooray for the Fair Tax!!!! Anything to lessen the power of the Imperial Federal Government!
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I also like the FairTax as long as it comes with a "prebate" to reimburse the cost of taxes on poverty level spending, so that it is a progressive tax and not a flat tax.

I think most people agree that the tax system should be progressive (with rich people paying a higher percentage than poor people) - the question is, how much of a "spread" is fair. Should the poorest person pay 0% and the richest person pay 30%? Or 10 to 15%? All excellent questions. Personally, I think it's fair for the poorest person to pay 0% as long as they're working. I remember what it's like to be a struggling college student working two part-time jobs and only eating 5 days a week because I couldn't afford the 7-day meal plan. I think it's totally fair for me to be taxed at a higher percentage now so that I could make it over that hurdle back then - and so that others can too.

Ironically, last year when I made $65,000, I owed about 35% of that in taxes (including FICA ... I lump it all together). In 2008, I'll make about $100,000 but I'll only owe 22% of it in taxes. So maybe our tax system isn't as "progressive" as people might think. (My tax is lower this year because of mortgage interest + pre-tax SEP-IRA contributions.)
Speckla
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All people already pay a sales tax (state and federal). 7% percent where I live. Everyone pays this on the things they buy from food to shoes.

So I pay 7% on goods and services + taxes out of my paycheck. A Fair Tax would make the amount of taxes I pay lower.

I'm not in a higher tax bracket and I get back nearly all that I pay into taxes but not all of it.

I worked two jobs while in college. I lived on ramen noodles and balogna sandwiches. I spent about $20 or less a week on food. It wasn't the healthiest but I didn't go hungry.

Last edited by Speckla; 11-02-2008 at 02:54 PM.
[quote=Rheanna83;775147]Really? Lots of you seem to believe, or atleast say you believe, that the "little guys" pay all the taxes and the rich just get all the "tax breaks."

Not true.



This year's numbers show that both the income share earned by the top 1 percent of tax returns and the tax share paid by that top 1 percent have once again reached all-time highs.
The top-earning 25 percent of taxpayers (AGI over $64,702) earned 68.2 percent of the nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86.3 percent). The top 1 percent of taxpayers (AGI over $388,806) earned approximately 22.1 percent of the nation's income (as defined by AGI), yet paid 39.9 percent of all federal income taxes. That means the top 1 percent of tax returns paid about the same amount of federal individual income taxes as the bottom 95 percent of tax returns.
Higher income, higher tax assessed. Duh

If 86.3% of federal income tax (4 out of 5 dollars) is paid by taxpayers with AGI over 64,702 but under 388,806 as your quote says, then it's the medium wage earner not those with the highest incomes who pay the lion's share of income tax.
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Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes - Bloomberg

The earnings wind up in island havens that levy no corporate income taxes at all. Companies that use the Double Irish arrangement avoid taxes at home and abroad as the U.S. government struggles to close a projected $1.4 trillion budget gap and European Union countries face a collective projected deficit of 868 billion euros.
How many middle class people's wages have to be gouged to make up for what Google (and certainly other large corporations like them) is hiding? How is it fair that they basically take away services (via tax dollars) from the country in which they're based?
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I'm not good with numbers, and therefore taxes, but I know that I sure pay them, and lately, I make nothing. Well, next to nothing.

It makes me sick that the system is so unfair that wealthy people (besides Warren Buffet) actually say, "Tax me! I deserve it!"

I literally get sick every April. I can't even go to the accountant anymore for my appointment, ever since she scoffed at my being a writer during lean times, and recommended a job at Wal-Mart instead.
I'm not good with numbers, and therefore taxes, but I know that I sure pay them, and lately, I make nothing. Well, next to nothing.

It makes me sick that the system is so unfair that wealthy people (besides Warren Buffet) actually say, "Tax me! I deserve it!"

I literally get sick every April. I can't even go to the accountant anymore for my appointment, ever since she scoffed at my being a writer during lean times, and recommended a job at Wal-Mart instead.
Originally Posted by ninja dog
WTF!?!?
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Yeah.

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