How do taxes work in USA - how plausible

Debate Room
1

It just doesn’t seem or “feel” right.

No one likes to pay taxes…in fact, we try to maximize our “deductions” and the larger part of society does this legally (not to avoid).

When I heard $750 to IRS in “personal taxes” - well my ears perk up. Really? WOW - sounds as legitimate as that fucking Nigerian Prince who needs money, or the latest crypto-coin offering, or the cat-fishing for money via heart-strings.

BUT is it “illegal or illegitimate”? Set aside Corporate Businesses. They operate under their own tax laws and deductions - I just wanted to wrap my mind around the whole $750 in personal income taxes. I’m not an American, so I just used our CRA.

Donald would have declared a personal income of around $17,000 (if he was Canadian in Alberta). This is his wage. This is his personal earnings. This is what is suppose to pay for his personal lifestyle like housing, phone, bills, vehicle, gas, insurance, food and clothes, entertainment, vacations…you know, the personal stuff you pay for out of your personal earnings.

This is what isn’t “sitting” right.

Is his mansion fully paid for, mortgage free? What about property taxes (maybe they’re really cheap)? What about insurance (home, vehicle,health, etc)? He may have eaten out a lot and put it as a business “expense”, but what about groceries and snacks for at home? How about his son’s food and clothing and activities (the underage one; does his wife work? Maybe her and his kid are dependents which may give him an extra $15k - BUT then, how do you pay for her stuff and her cars and insurance and lunches with friends).

No wonder he has no empathy for the “poor” -they make as much personal income as him.

2

When I was in my teens I often said “I want to be so rich that I don’t have to pay tax”

Are you seriously saying that a man as wealthy as Donald Trump might not need to pay personal income tax? THAT doesn’t sit right with me. Nor as it turns out, with the US tax department, which is investigating Donald AND his children for Tax Fraud.

3

That is more or less how it works here.

4

Probably her too now that I think about it. Pretty fucked.

As P.A.Y.E. taxpayer I paid taxes all of my working life. My taxes were deducted directly from my salary. Out system is progressive. No tax is payable for the first $17000, then it’s 35 cents in the dollar, then 42 cents. We have sometime had a problem with 'bracket creep" .This means the starting figures were not always adjusted in line with wage increases. l

5

We kind of do the opposite, for example:

FICA tax (pays for Medicare and Social Security) is 7.65% of the first $127,200 of your income.

Want to guess what the rate is for any income you have in excess of that value?

Hidden Answer

If you guessed 0%, you’re right! :woozy_face:

6

I don’t understand. Are you saying the US has a flat rate of income tax? That seems most unjust.

Pay for Social Security? I was under the impression that system is almost bankrupt.

Here our universal health care system is also called Medicare. It is paid for by a special 2.5% levy of one’s taxable income. There are exemptions for low income earners and welfare recipients.

I did basic economics in high school. The model we were taught was Keynesian.

Keynes said three things are needed for an affluent society.

(1) Full employment, which to Keynes was an unemployment rate of not higher than 8%.

(2) High Wages.

(3) High Taxation

Take a look at counties with advanced Social justice systems ,such as in Scandinavia or even the UK.

In addition of PAYE tax, Australia also has a 10% Goods and Services indirect tax.

I have never resented paying tax. That’s because in my lifetime, we’ve had a decent welfare and pension system, universal health care, and, while I was at university; free tertiary education. Even today, we have HECS (Higher Education Contribution Scheme) If you can’t afford tuition, you don’t have to pay immediately. Tuition becomes a debt which is deferred until your income reaches as set level. Then the debt is paid in instalments taken from your wages. The average debt is around $20,000.

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I realise Keynes is out of fashion. BUT remember the sub prime mortgage fiasco? If government had followed the current economic theory, the market would have been allowed to find its own level. Instead, governments all over the world bailed out the banks, and THAT is classic Keynesian economics.------I’m not criticising, simply observing. I’m in favour of whatever works. By that I mean saving ‘the bottom end of town’ from penury. Don’t give a fuck about the banks and insurance companies, but see them as necessary evils in our system.

7

Yup. That they are. Agreed.

8

No I’m saying the FICA payroll tax, is only applied to the first $127,200. Which means say someone like a doctor, who makes $127,200 pays the same amount (not percentage!) in FICA as someone who makes a billion dollars a year.

9

Let me put it this way:

  1. The FICA rate of the CEO where I work is approx .0009731%.

  2. The FICA rate for a janitor were I work is 7.65% (about 7500 times higher).

10

The income tax is very bad idea that has been made worse by successive generations of politicians. The income tax systems we have today are insanely complex and full of inequities and inconsistencies. This complexity and the associated compliance costs are a major disincentive to anyone thinking of starting a small business. So the system tends to push us toward wage work. That’s fine unless you think that entrepreneurship is important and desirable in an economy.

The enforcement of tax law is about as fair and just as the Spanish Inquisition, but I’ve found that the tax bureaucrats aren’t as kind and gentle as inquisitors. Tax bastards pick out small businesses and self-employed people at random and grill them. Tax law violations are the only crimes for which you have to prove your innocence. Large corporations can hire the best accountants and lawyers to protect themselves. Small businesses can’t afford that so they get racked.

And yes I’m talking from experience.

So I’m in favor of indirect taxation. The more you earn the more you spend the more you pay.

11

When I lived in the States I was hauled in for an audit. Downtown LA. Having got used to Australian tax at (back then) nearly 50c in the dollar I didn’t think that a Federal tax impost of 10% was unfair, So rather than fuck about I took 10% of my gross income (I.e before State taxes) and sent it to the IRS every year. A proportion of my income came from offshore and foreign companies which was a red flag to the IRS.

Anyway, told I was to be audited. Took my books to a tax lawyer in San Diego, who laughed at me and told me I should be in jail for stupid…

Attended my first interview with two IRS officials who straight up asked me how I did my taxes. I told them. Adding that at the Aussie rate of 45% I was getting the better part of the deal. Plus answered questions about these offshore payments (royalties, cruise operators etc) . It took 2 hours to go through my returns, I was offered cool drinks (soda) and cookies. No rubber hammers or shouting.

3 weeks later I was sent a check for $22,460 with a handwritten note recommending that I hire a tax accountant for subsequent years.

English tax office pursued me for 5 years over money I earned, and paid tax on to another country when not resident in the UK…fuck those fuckers. They didn’t get a penny.

12

Income tax was first introduced in England in 1799,@6d in the pound.(2.5%) It was meant to a temporary measure to fund the Napoleonic wars. The wealthy especially screamed blue murder.

Personal Income tax in Australia was introduced in 1915. Before that time, each of the colonies relied on customs and excise duties.

I think personal income tax is a very good idea, in principle. This is because theoretically, tax is paid in proportion of one’s earnings.

Although indirect tax is simpler and easier to collect, it’s unjust except for actual luxury items which only the rich can afford. For every day items, the poor and middle class end up paying a far greater proportion of their income in indirect tax than the wealthy.

It is my position that the redistribution of wealth is one of the functions of government. This can only be done justly if the rich pay a fair and equitable part of their income in direct tax. That has never seemed top be the case top me in Australia.

—and no, I can’t claim the administration of our tax system is any more just than our legal system. In each of these systems [at least] it has long been clear to me that there is one law for the rich and another for the rest if us.

13

We’ll have to agree to disagree on that one. In the countries I’ve inhabited, politicians have been primarily interested in redistributing wealth to themselves and their cronies.

IMHO the role of government is to maintain law and order (including protection of the environment) and defend the borders. They should forget about tinkering with social engineering until they can those two jobs satisfactorily.

17

It’s some kind of twisted distortion of Marx’s “from each according to their ability, and to each according to their needs” principle.

Though I don’t consider myself a Marxist, it’s a principle I have never been able to disagree with in any rational way.

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