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The Many Ways The State Taxes The Poor

Tyler Durden's picture




 

Submitted by Julian Adorney via the Ludwig von Mises Institute,

Most defenders of the state assume that government services help the poor. And, sometimes, some poor people do benefit financially from government programs. But there’s a hidden cost: taxation and mandatory programs (Social Security, for instance) that hurt the needy by restricting their choices. Government taxes away income that low-income households could invest in improving their lives. At the same time, state-sponsored benefits create incentives that keep the poor trapped in poverty.

Many assume that government barely taxes the poor, but the reality is otherwise. The poorest fifth of Americans pay 16 percent of their incomes in taxes (including federal, state, and local). One in six dollars they earn goes straight to the government. For a family living at the margin, those taxes can be the difference between food on the table and hungry children.

Admittedly, a big chunk of government expenses is for programs designed to help the poor. But even when this money actually helps — and it rarely does — it’s important to note the pernicious effects of taxation. Consider: every dollar of taxes is one dollar that a worker must give to the government first, regardless of whether that dollar could help him feed his family or improve his livelihood. If a poor man is faced with the choice of paying taxes or starting a business, he had best choose the former, otherwise he’ll go to jail.

This is true for the wealthy as well. But poor people live closer to the margin. More of their money is taken up with fixed bills like rent and food. This leaves them less discretionary income to, for instance, invest in a business. Because their pool of discretionary income is smaller, taxes cut deeper into it.

Mandatory government programs, such as Social Security and Medicare, compound the choice-restricting effects of taxation. Social Security, for instance, forces people to save for retirement regardless of whether or not that money could be better spent in another way.

Saving for retirement is generally a good idea; most people anticipate needing a monetary cushion to see them through their golden years. But it’s not the best approach for everyone. The young woman with terminal cancer, for instance, probably won’t be around to enjoy the fruits of Social Security. She can best maximize her happiness by spending that money now, whether it’s on fun experiences, or on taking care of her children, or on better medical treatment. Similarly, for the destitute man who can afford to either save for retirement or feed his children, it takes a heartless bureaucrat indeed to force him to do the former. Yet that is precisely what Social Security does.

Many poor people eventually want to start a business or learn new skills. Both take start-up capital. Imagine that John, a retail worker barely making ends meet, wants to learn to code so that he can find a better job. Most learn-to-code programs, such as Code School, aren’t free. Investing in such a program could significantly increase Johdn’s value and salary, allowing him to improve his finances both now and later. But faced between paying 7 percent of his paycheck to Social Security, or investing that 7 percent in learning new skills to build a career, John has to choose the former or go to jail.

Each individual has his or her unique circumstances. For some, saving for retirement right now might be smart. For others, that money could be better spent on something else. By mandating retirement savings, government robs individuals of the freedom to make their own decisions.

I’ve focused on Social Security, but other government programs have the same effect. Obamacare requires that people buy insurance or pay a fine, even if insurance isn’t in their best interests. Medicare forces the poor to put aside part of their money today to pay for their health care costs in old age — regardless of whether or not that decision is best for the man or woman in question.

But what about programs that give the poor money, like the Supplemental Nutrition Assistance Program and unemployment benefits? Even these programs create perverse incentives, trapping men and women who use them in poverty.

Because government assistance has built-in cutoff points, it creates de facto high marginal tax rates for the poor. If Jane makes $10,000 per year at McDonald’s, she might rely on programs like Medicare and welfare to make ends meet. But imagine she has the option to switch industries and take an entry-level job in a new career (for example, marketing) that pays $25,000 per year. If she takes the new job, she could end up bringing in $2,540 less on net. She might get $15,000 more from her employer, but she’ll lose $17,540 through a combination of higher taxes and reduced government benefits.

For Jane, the economically rational decision is to keep flipping burgers and not move to a new position. Government incentives reward her for staying in a dead-end job. By obeying these incentives, she misses out on all the promise inherent in a real career. People in marketing tend to be in demand in almost every company, and have more choice in where they want to work. They can earn promotions and climb the corporate ladder. These options aren’t available for a fast-food worker. Government programs give Jane the financial incentive to stay in her current position, restricting her long-term options.

Government programs, well-meaning or not, serve to trap the already downtrodden. By contrast, the market creates freedom and options and promotes upward mobility.

 

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Tue, 10/28/2014 - 18:20 | 5387628 OW My Balls
OW My Balls's picture

King George III lives!

Tue, 10/28/2014 - 19:05 | 5387822 max2205
max2205's picture

Lincoln didn't free anybody

Tue, 10/28/2014 - 19:12 | 5387839 Pool Shark
Pool Shark's picture

 

 

Author doesn't even mention the Earned Income Credit. Without a discussion of the EIC, his entire analysis is BS. The EIC more than offsets any of the FICA payroll taxes for the 'poorest' earners.

If he really wants to beef about something, Sales Taxes are the most regressive of all...

 

Tue, 10/28/2014 - 19:17 | 5387860 TeethVillage88s
TeethVillage88s's picture

EITC Growth:
--------
IRS, Total Outlays—Internal Revenue Service, under Treasury, 2013 = $103.3 Billion (Boom)
IRS, Total Outlays—Internal Revenue Service, under Treasury, 2000 = $38 Billion
IRS, Total Outlays—Internal Revenue Service, under Treasury, 1998 = $33.2 Billion (??? What? For what??)
---------
IRS, Payment where earned income credit exceeds liability for tax Outlays 2013 = $57.5 Billion (?What?)
IRS, Payment where earned income credit exceeds liability for tax Outlays 2000 = $26 Billion
IRS, Payment where earned income credit exceeds liability for tax Outlays 1998 = $23.2 Billion
--------
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax Outlays 2013 = $21.6 Billion (?What?)
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax Outlays 2000 = $806 Million (Million)
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax Outlays 1998 = Zero.....
--------

Tue, 10/28/2014 - 20:01 | 5388047 Money_for_Nothing
Money_for_Nothing's picture

EIC is mostly a scam to keep big city political machines in operation. It is an accident if it helps anyone. Similar to SS disability. It is a way to minimally feed, clothe, keep in drugs and alcohol the masses that would cause problems otherwise.

Wed, 10/29/2014 - 07:44 | 5389123 TheGreatRecovery
TheGreatRecovery's picture

Yes.  And EIC also subsidizes overpopulation. 

If I were President, I would act to remove EIC, and, furthermore, to remove "dependent credits for having children" from the income tax form.  If you want to have 8 children, go ahead, but I'm not going to tax everyone else to give you a break for having 8 children, when there are already 7 billion people on the Planet.

Tue, 10/28/2014 - 20:17 | 5388098 Earl Slaughter-...
Earl Slaughter-- Truck Driver.'s picture

@ Pool Shark:

"...his entire analysis is BS."

It's a thinly disguised hit-piece on safety-net programs. Fuckers like this should be forced to gargle on broken glass and to have their fingers chopped off for dishonest crap like this.

I mean sweet jesus, how many families have been saved by SSI, SSD and Medicare? And I mean regular middle-class families, especially when dealing with aged relatives?  No, safety-net programs ensure a mean and bare level of survival, and it's sad fact that these programs actually "compete" with employers that offer poverty-level wages.  

The author is an asshole.

Tue, 10/28/2014 - 21:34 | 5388335 plane jain
plane jain's picture

Not with you on the violence, but otherwise agree that it is an attack on the safety net programs.

Social Security isn't a retirement plan, it is a tax. It was sold as social insurance against poverty in old age, but that isn't how it functions now. 

Wed, 10/29/2014 - 07:20 | 5389094 graspAU
graspAU's picture

Right. It is a tax and any payments you get are a gratuity of Congress, not insurance, and there is no contract, no account for you. It was sold as insurance though:

In 1953, a subcommittee of the House Ways and Means Committee conducted hearings for the express purpose of settling the question of whether social security was contractual in nature; see Hearings of November 27, 1953 entitled "The Legal Status of OASI Benefits," (Part 6). The witness at the hearing was Dr. Arthur J. Altmeyer, who held several offices in the Roosevelt administration. He was a member of the first Social Security Board, and by 1946 became the Social Security Commissioner, retiring in 1953. During this hearing, various parties stated that social security was not a contract:

At page 918:

"Mr. Altmeyer: * * * There is no individual contract between the beneficiary and the Government.
"Mr. Dingell: Congress knew that, did it not?
"Mr. Altmeyer: Yes, of course. I am sure it did.

* * *
"Chairman Curtis: The individual * * * has no contract? Is that your position?
"Mr. Altmeyer: That is right.
"Chairman Curtis: And he has no insurance contract?
"Mr. Altmeyer: That is right."

At page 937:

"Chairman Curtis: We came to an agreement on one of our major premises, that this was no insurance contract, and the words did not come from me. They were volunteered by Mr. Altmeyer."

At page 968:

"Mr. Winn: * * * Mr. Altmeyer, there being no contractual obligation between the Government and the worker, it follows, does it not, that the benefit payments under title II of the Social Security Act are merely statutory benefits which Congress may withdraw or alter at any time?"

At page 969:

"Mr. Winn (reading): ‘These are gratuities, not based on contract * * *. Moreover, the act creates no contractual obligation with respect to the payment of benefits. This Court has pointed out the difference between insurance which creates vested rights, and pensions and other gratuities, involving no contractual obligations, in Lynch v. United States, (292 U.S. 571, 576-577)."

At page 994:

"Mr. Altmeyer: I have answered your question, sir. If you will refer to section 1101, you will find, as you read into the record, that there are no vested rights, that Congress may create different rights * * *."

At page 996:

"Mr. Winn: We have also established that there is no insurance contract between the Government and the worker within a covered wage whereby the rights and obligations of a party are set; that is correct, is it not?

"Mr. Altmeyer: No. You did not establish that. That has been self-evident since the law was passed in 1935."

At pages 1013-14 (the Chair's concluding remarks):

"Chairman Curtis: Mr. Altmeyer, it is apparent that the people of the country have no insurance contract. That does not mean that I do not want to do my full part to do justice to them and to carry out and make good on the moral commitment that has been made to them. Yet, notwithstanding the fact that they had no insurance contract, it remains true that the agency under your direction repeatedly in public statements, by pamphlets, radio addresses, and by other means, told the people of the country that they had insurance. I think a number of people were misled by that."

Wed, 10/29/2014 - 07:52 | 5389145 TheGreatRecovery
TheGreatRecovery's picture

Thanks.

And I think that's also why the government can tell a 70-year old Vietnam War Veteran, "you can get your SS check here, or you can move to Mexico or France or Israel or Japan or Zimbabwe and get your SS check, but you can't get your SS check if you move to Vietnam".  (Because, you see, the USA is STILL actually at war with Vietnam, and perhaps always will be, because Vietnam caused the USA to "lose face", which is something that imperialists cannot tolerate.)

Tue, 10/28/2014 - 21:50 | 5388383 Earl Slaughter-...
Earl Slaughter-- Truck Driver.'s picture

...but I'll play along.

"In 2012, Social Security beneficiaries paid a total of $45.9 billion in income taxes on their benefits. The Social Security Trust Funds, from which benefits are paid, received $27.3 billion, while the Medicare Hospital Insurance Fund (HI) got $18.6 billion." (Source-- AARP)

Maybe he's arguing that the benefits should be tax-free? After all, this is the insurance and benefits that most of us have contributed towards throughout our working lives. And I'd agree with that. 

The super-wealthy have a cap on payroll taxes, because they aren't going to face the same fears that most of us have to deal with: grandma needs 24/7 care? Write a check. Hurt on/off the job? Retire early. See the average Joe try to do the same without Medicare, Medicade or SSD.

Why should we pay taxes on monies that have already been taken from us in the form of taxes?

We're all victims of excessive and dishonest taxation. How many of our tax dollars go to things that most of us would describe as morally, ethically, and wholly against our self-interests, let alone the common interests that most of us share? Do you pay taxes as in break out the checkbook, or are they taken from you at the cash-register and out of your paycheck without your consent? Willing tax-payer or victim of Big G's extortion-racket?

I don't want to bail-out the big-banks, pay for illegal wars or buy steak & lobster dinners for congrass-critters, but I'll chip in to see that no grandma gets put on an ice-flow and that persons don;t choose a .38 cal relief plan as to not burden their families.

That Big G forces this upon us is like ass-rape with favored Corps taking sloppy-seconds.

Wed, 10/29/2014 - 09:12 | 5389340 RKDS
RKDS's picture

But Mittens told everyone the poor don't pay any taxes!  A tone-deaf plutocrat wouldn't lie to us, would they!

Tue, 10/28/2014 - 20:31 | 5388146 Stevious
Stevious's picture

Except in New Hampshire, where a person, working part time, at 24 hours per week, making ~$8/hour earns about $9000.  Now this person lives in a house given to them his/her parents, and as is often the case in NH where there is zero income tax, and zero sales tax, ends up owing abou $8,000/year on property tax. So that person to continue to live there will pay almost 90% in taxes.

 

Of course the person with a million dollars income pays more in taxes, since they live in a nicer house, let's say $16,000/year. Well, that person pays about 1.6% in taxes. 

 

Now that's regressive.

Tue, 10/28/2014 - 23:32 | 5388644 Pool Shark
Pool Shark's picture

 

 

Hate to break it to you, but people who work part time at $8.00/hour don;t one houses.

They pay rent.

 

Wed, 10/29/2014 - 07:55 | 5389156 TheGreatRecovery
TheGreatRecovery's picture

But I think he said the worker had inherited the house from his parents.  To me, this is a great illustration.  I can leave my child my house, but then the State will take it away from him by charging confiscatory ad valorem taxes.  Which, again, makes me wonder, what the heck is New Hampshire DOING with all of my child's money?

Wed, 10/29/2014 - 07:53 | 5389151 TheGreatRecovery
TheGreatRecovery's picture

What the heck does New Hampshire DO with all that money?

Tue, 10/28/2014 - 22:33 | 5388521 daveO
daveO's picture

Worse than that. When he was killed, by the banskters, the US still didn't have a central bank or income tax. His death was almost the starting point for real US enslavement. 48 yrs later, the currency was taken over by the banksters and the income tax was started. Is there a single US tax slave who can buy their way out of bondage today, short of renouncing citizenship?

Wed, 10/29/2014 - 07:57 | 5389158 TheGreatRecovery
TheGreatRecovery's picture

I think Lincoln once was quoted to say, "I have the South before me, and the bankers behind me, and I am more afraid of the bankers than of the South".

Wed, 10/29/2014 - 03:07 | 5388862 CASTBOUND
CASTBOUND's picture

my best friend's sister makes $80 /hour on the internet . She has been laid off for 7 months but last month her paycheck was $13987 just working on the internet for a few hours. visit site... www.Yelptrade.com

Wed, 10/29/2014 - 06:17 | 5389022 goldsaver
goldsaver's picture

Hate to break it to you but $13987 net a month, assuming a 35% tax liability and no state tax at $80 an hour works out at 60 hours a week. Not a bad gig but quite a bid more than a few hours

Wed, 10/29/2014 - 09:21 | 5389372 CoolBeans
CoolBeans's picture

OK, troller...but the things she has to do would shock some young ladies' sensibilities.

Tue, 10/28/2014 - 18:20 | 5387630 dow jones 20000
Tue, 10/28/2014 - 20:35 | 5388161 Occams_Chainsaw
Occams_Chainsaw's picture

Long coffins bitchez!!!!!!!!!!!!!!

Tue, 10/28/2014 - 18:22 | 5387639 Freddie
Freddie's picture
Texas Republican John Cornym is for Obama Amnesty.  So much for Texas is such a great place pro Liberty BS.

 

Breaking News: US Senator John Cornyn (R-TX) (contact info at link below) just announced on Univision his support for Dream Act and Immigration Reform Amnesty for Illegal Aliens! follow link for details and his phone number contact info....

TX. SEN. JOHN CORNYN DECLARES SUPPORT FOR DREAM ACT AMNESTY
http://www.alipac.us/f12/tx-sen-john-cornyn-declares-support-dream-act-amnesty-313588/#post1443268

ALIPAC NOTE: Please contact Senator Cornyn and share with him your views regarding his newly announced support for Dream Act and Immigration Reform Amnesty for millions of illegal aliens!

Contact John Cornyn at 512-494-8535
https://www.facebook.com/Sen.JohnCornyn
@JohnCornyn

The ALIPAC Team
www.alipac.us

Tue, 10/28/2014 - 18:32 | 5387669 hedgeless_horseman
hedgeless_horseman's picture

 

 

Cornyn is also a big supporter of the Ukrainian coup d'etat and resulting slaughter of innocent air travelers.

Tue, 10/28/2014 - 19:38 | 5387958 TeethVillage88s
TeethVillage88s's picture

Is the Dream Act:

Where we forgive:

- Obama for ACA, Affordable Care Act?
- Obama for Amnesty of Illegals, Debt of Illegals, Health Care Debt of Illegals, tax Liability of Illegals, the Illegal Work of Illegals, or the Illegal Crossing of Borders by Terrorists & Illegals
- A Secret Program to introduce new elements into the USA to include Labor, Indentured Servants, Consumers, new competition for low skilled & construction jobs with US Citizens & Labor Force
- A secret Program to introduce new economic factors to include disease, filling hospital beds, consumption of Big Pharmacy Drugs, Gasoline Consumption, Textile Consumption, Walmart Type Big Box Consumption, and Payday Loans
- A secret Program to boast Housing and Apartment Demand
- A Program to Suppress US Labor Rates
- A Scab Program to supplant Unions

Or a State Sponsored Program to bring foreign workers across the border to apply for citizenship in order to work and drive vehicles since you have to have a vehicle in the USA to work?

Who the hell knows the answers?

Tue, 10/28/2014 - 18:49 | 5387723 kchrisc
kchrisc's picture

 

Dear Senator Treason from Texas,

Please don't commit more treason like you did by voting "yes" on NDAA 2012, the FISA Amendments Act of 2007, and to Reauthorize the Patriot Act in 2006.

Don't continue to be a treasonous tool of the neo-cons and banksters.

This time support the people. I'm begging you--please, please, please!!! Sugar on top, and all!

One of the sheeple.

P.S. I'll invite you over to a BBQ someday to show you my gratitude.

An American, not US subject.

 

http://www.freedomworks.org/content/senator-john-cornyns-top-ten-bad-votes

Tue, 10/28/2014 - 19:55 | 5388016 TeethVillage88s
TeethVillage88s's picture

Here we are at Midterms.

But we know Government has given up legal duties:

- Congress Gave up War Powers
- Congress Gave up Budget Powers
- Congress Gave up Legislative Powers to Lobbyist
- GAO Gave up powers of Oversight
- CBO Gave up Mission of publishing Cost Benefit Analysis
- SEC & FINRA & FTC Gave up their Missions
- DOJ & FBI Gave up their Mission of Justice in Finance
- President Gave up his Constitutional Oaths
- John McCain & Lindsey Graham are Liars
- Nancy Pelosi and Harry Reid are Fraudulent Nabobs
- Lois Lerner is a Tool
- Eric Holder is Fascist

- Auditing is a Dead Art in the USA
- Banking Trust took over all Anti-Trust Legislation

And we know that if Congress holds Legislative powers they can over turn presidential actions, impeach the president & others, and despite what congress says they can correct wars, accounting, auditing, financial ratings, torture, suppression of coal energy, even fund filters for coal energy, can fund alternative energy distribution points for lower cost truck or car transportation and shipping, can fund national stock piles for crops or commodities, can build stock piles for rare earth metals... can establish or reestablish national values for utility type public resources to cushion economic shocks.

But what do I know... Seems like emergency planning... for a government that pretends to plan... but which never funds solutions to terrorism or pandemic threats.

FTG.

Tue, 10/28/2014 - 21:57 | 5388412 kchrisc
kchrisc's picture

"-Congress Gave up War Powers
- Congress Gave up Budget Powers

..."

With respect, but the Constitution does NOT provide for the ability of CONgress to "give up," relinquish, surrender, etc. any powers.

The "law of the land" still applies, so long as we demand that it does.

An American, not US subject.

 

"Obey the Constitution, or heed the guillotine."

Tue, 10/28/2014 - 21:36 | 5388342 plane jain
plane jain's picture

Texas is majority minority and most of that minority majority is Hispanic.

Tue, 10/28/2014 - 18:25 | 5387650 ShrNfr
ShrNfr's picture

"At the same time, state-sponsored benefits create incentives that keep the poor trapped in poverty." - All I have to say to that is that it serfs them right.

Tue, 10/28/2014 - 18:29 | 5387663 hedgeless_horseman
hedgeless_horseman's picture

 

 

I did not see any mention of The Stupid Tax, aka Lotto!

Tue, 10/28/2014 - 18:38 | 5387695 nmewn
nmewn's picture

Do they have to show ID for that? ;-)

Tue, 10/28/2014 - 19:15 | 5387850 Pool Shark
Pool Shark's picture

 

 

No, that's the 'Flat Tax' on the mathematically-illiterate...

 

 

Tue, 10/28/2014 - 18:34 | 5387677 kchrisc
kchrisc's picture

The government Shit-Swirlie:

Businesses do not pay taxes, their customers do.

As taxes cause product prices to increase, sales decline.

As sales decline, a business either substitutes capital for labor and employs fewer workers or dies and eliminates all of its workers.

Government then raises taxes to support more un-, under- or non-employable workers.

Rinse and repeat.

An American, not US subject.

 

"Can I have a Swirlie to go?!"

Tue, 10/28/2014 - 18:47 | 5387732 TeethVillage88s
TeethVillage88s's picture

Trying to support your statements. All taxes end up being passed on just as you say. Plus we can't easily determine our tax rate for products, hard products... from mining or harvesting they all pay energy tax, property tax, production tax, sales tax, fuel tax, inventory tax, value added tax, employment tax, FICA tax, School tax, millage tax, state tax, county tax.....

Speaking of Taxes interesting looking at recovery from the Recession between Individual Tax Revue & Corporate Tax Revenue. I may not be as well read as others. Maybe someone can explain how Individual Taxes took a Dive, then recovered but Corporate Taxes Did not???

Corporate Income Taxes Receipts 1998 = $ 188.7 Billion
Corporate Income Taxes Receipts 2002 = $ 148.0 Billion (Recession)
Corporate Income Taxes Receipts 2006 = $ 353.9 Billion
Corporate Income Taxes Receipts 2007 = $ 370.2 Billion
Corporate Income Taxes Receipts 2008 = $ 304.3 Billion
Corporate Income Taxes Receipts 2009 = $ 138.2 Billion (Recession)
Corporate Income Taxes Receipts 2012 = $ 242.3 Billion
Corporate Income Taxes Receipts 2013 = $ 273.5 Billion

Individual Income Taxes Receipts 1998 = $ 828.6 Billion
Individual Income Taxes Receipts 2002 = $ 858.3 Billion (Recession)
Individual Income Taxes Receipts 2006 = $1.044 Trillion
Individual Income Taxes Receipts 2007 = $1.163 Trillion
Individual Income Taxes Receipts 2008 = $1.146 Trillion
Individual Income Taxes Receipts 2009 = $ .915.3 Trillion (Recession)
Individual Income Taxes Receipts 2012 = $1.132 Trillion
Individual Income Taxes Receipts 2013 = $1.316 Trillion

Tue, 10/28/2014 - 22:13 | 5388481 kchrisc
kchrisc's picture

With respect, however, you are over analyzing it. Over analyzing it provides nooks and crannies for the tyrants to hide in, and take advantage of.

Demand that they obey the Constitution. It is that easy.

Failing that, begin to withdraw your support by way of Quitting paying, Quitting obeying, and Quitting playing.

An American, not US subject.

 

1) The Constitution was never formally removed as the "law of the land," and therefore is still the law of the land. They can create and shuffle around legal documents all they like, but they carry no weight until the contract between the people and states that created the US government is formally removed.

2) Fraudulent-reserve banking is nothing more than theft by fraud. The Federal Reserve, the DC US' central bank, is not provided for in the Constitution, and therefore is Unconstitutional. Therefore, the Federal Reserve is nothing more than a criminal cabal of theft Unconstitutionally put in place to plunder the American people and country.

3) America resides in us, the American people. America is what we say, and expect, it to be. We should expect America to be governed by the republic that was created by the Constitution between the states. We should not desire to, or acquiesce to, being governed by the criminal syndicate that has now taken up occupation over the American people and country.

America resides in us, and is of us. Do not accept; do not conform, to the occupation, but demand that the occupation end, and along with it, the Fed.

Wed, 10/29/2014 - 07:17 | 5389089 TheGreatRecovery
TheGreatRecovery's picture

Corporations are making more money than in 2008, but individuals are making less money than in 2008.

Wed, 10/29/2014 - 07:40 | 5389120 Refuse-Resist
Refuse-Resist's picture

Interesting.

 

My question:  Why are corporations taxed on their net income, and individual slaves taxed on their gross income?

Wouldn't it be nice to be able to deduct rent, power, telecom, transportation, insurance,food and energy expenses from your gross income and then only pay FIT on the net?

For most Americans that would be a ZERO FIT tax obligation.

I know when I was trying to support a family on $65k gross, my  net income after all expenses was about $500 per month.

That's a lot of bullshit and stress to put up with to pretend that I'm earning $5k per month.

If I were Refuse-resist Inc I would n't owe shit.

 

 

Wed, 10/29/2014 - 09:46 | 5389411 RKDS
RKDS's picture

Because corporations are special?

I'll catch some flack for going partisan here but the Republican message is not just depressing but should outrage Americans.  It's basically that any rule or cost automatically makes doing anything impossible.  Can't just dump poison into the river?  Waaaah I'll be ruined!  Have to actually pay workers for working?  Waaaah I'll be ruined!  Taxed like everybody else?  Waaaah I'll be ruined!  Therefore, mommy government must protect them from all consequences and provide them with resources, all on somebody else's dime of course, so that they can "succeed" and be "exceptional."  That's the message of the party that "loves" America?  With friends like that, who the hell needs enemies?

Tue, 10/28/2014 - 18:52 | 5387751 Really20
Really20's picture

The problem would be solved by a low but unconditional basic income for all individuals set at about 20% of the GDP per capita. Those whose income lies below basic would not have to pay any taxes, but the incentive to work would remain because the same basic income would be provided to everyone regardless of their wealth or income. Such a program could replace most other forms of government assistance, excluding healthcare which in nearly every stable and civilized country is provided at no or nominal cost by the state.

Tue, 10/28/2014 - 21:41 | 5388365 plane jain
plane jain's picture

Simple, fair, doesn't pit the people against each other by age (seniors vs. children) or by race, doesn't give a cut to the bankers (EBT cards). So I'm not holding my breath.

Tue, 10/28/2014 - 19:15 | 5387855 Silverhog
Silverhog's picture

Biggest tax on the brain dead is lottery tickets. Thank you MA for this gift that just keeps giving.

Tue, 10/28/2014 - 20:52 | 5388210 Muppet
Muppet's picture

Worse tax is inflation.   It taxes all held assets, not just earnings.  At 2%, a retiree with $1M in savings is robbed $20,000 every single year....   Thats like driving a new car off a cliff every year.   

Inflation is Government borne to both force savers to invest their savings and deflate current debts for future generations.   Inflation unquestionable harms savers but yet benefits debtors.  

Inflation is a covert and huge  tax.   We do not need inflation but incredibly, no one thinks to question it.       

Tue, 10/28/2014 - 19:28 | 5387915 himaroid
himaroid's picture

BS.

I will pay 16 cents for as many dollars as you will give me.

(which greatly overstates the tax contribution anyhow)

Author also left out earned income credits and a ton of other benes.

I could go on and on, but you guys already know this is a bleeding heart's

idealogically slanted tripe. 

They are not intended to be tax payers.

They are intended to be socialist supporters.

Tue, 10/28/2014 - 21:42 | 5388371 plane jain
plane jain's picture

Are you referring to the article? Because it seemed libertarian if anything...government interference in private financial decisions.

Tue, 10/28/2014 - 19:34 | 5387931 rwe2late
rwe2late's picture

The math behind

what's 'unfair' to the wealthy according to the wealthy:

 

1) with 90% of the total above subsistence income,

the 10% rich allegedly pay 50% of the income taxes (but escape much of the other regressive taxes like SocSec),

(Too much taxation of the wealthy they say!)

 

2) For each $1  per capita the government spends on the 90%,

the government hands out over $1000 per capita to the wealthy 10% and especially to the TBTF top 1%..

 

(Too much welfare given to the poor they say!)

Fri, 10/31/2014 - 17:47 | 5399847 Muppet
Muppet's picture

Interesting view.   Seriously.   You should expound on this sometime.   You seem to suggest that for each $1 collected, the Gov't "hands out of $1000" to the top 10%.   That'd be interesting to see detailed.  I'm not so sure.

Tue, 10/28/2014 - 19:38 | 5387953 Silver Bullet
Silver Bullet's picture

The earned income tax credit is a joke. Both sides extol how great it is, and if only more would qualify how much better off the working poor would be.
Bullshit.

Good luck buying a car, house, or really anything with an earned income tax credit on top of $15,000 a year.
I'll tell you where it goes.
The JD Byrider's of the world are where earned income tax credits go to die.

EITC is just a way for rich people in Washington to pretend like they are actually helping the lives of their constituents. They aren't.

Tue, 10/28/2014 - 21:23 | 5388300 MeBizarro
MeBizarro's picture

BS and there isn't a single study thata would support this nonsense.  Exactly been one of the few policy developments that non-partisan economist hacks on the left and right agree on since it generally promotes work, reduces gov't enrollment in varoius aid programs and doesn't penalize things like savings.  

The best and most direct way to address poverty in this country would be go radically increase the size the EITC, adjust it for local living conditions, and then index it & increase it to CPI annually.  At the same time, take a scythe too many of the overlapping and disconcerted welfare programs for housing, food, etc and dramatically reduce both their expenditure and size.  It is a pipe dream but it would dramatically streamline the federal gov't and budget at the same time too just not push more money up.  Also reduce the epic financial gimmickry and opagueness in that portion of the budget.  Doesn't address the gaping $1T+ defense budget but it would be a start and would attract enough from the left & right to make it at least interesting.    

Tue, 10/28/2014 - 21:32 | 5388330 Silver Bullet
Silver Bullet's picture

Bullshit, tell that to our ever decreasing labor force participation rate.
Try eliminating the EITC, 2/3 of food stamps, housing subsidies, etc and put that towards a government subsidized wage, not a dehumanizing $3,500 every April, "Here ya go! Go back to your section 8 housing!"

You'll see huge reductions in welfare rolls, an actual increase in labor force participation rates, more homeownership.

Whatever, I'm sure I'll get thumbs downed from left and right on this one.

Tue, 10/28/2014 - 21:49 | 5388400 plane jain
plane jain's picture

Sounds a lot like the proposal upthread for a minimum income...20% of individual GDP, or whatever is agreed as subsistence, index to inflation is a good plan too. Eliminate the multitude of programs and their attendant bureacracies, probably save money overall.

Foretold in some sci-fi FWIW. The masses on the dole, surviving not thriving, some still hustling to better themselves. Side effect of mass mechanization.

Wed, 10/29/2014 - 00:45 | 5388751 Silver Bullet
Silver Bullet's picture

That's exactly what it is. But the guaranteed income per person is at least 30 years off in this country.
A proposal that anyone who is willing to work 40 hours a week won't have to live hand to mouth can be achieved now.
Everybody wins:
left gets a $15 hour wage floor
right gets reduced welfare rolls

It also jives with our new low wage economy.
Left ain't gonna create middle class jobs, nor will the right.

If anyone has a better idea, I'm all ears.

Wed, 10/29/2014 - 09:08 | 5389330 Daddio7
Daddio7's picture

By willing to work ; do you mean a CCC job or do we block immigration, tariff imports and force corporations to build factories here and employ people to make consumer goods in America? There is not near enough work for every able bodied American to have a 40 hr a week job.

Tue, 10/28/2014 - 20:06 | 5388059 limacon
limacon's picture

This about to change.

See what happened to the cost of labour after the Black Death

http://andreswhy.blogspot.com/2014/10/the-new-black-death.html

Tue, 10/28/2014 - 22:35 | 5388527 Vuke
Vuke's picture

Relax.  If Ebola was as contagious as the Black Death half or Liberia and Sierra Leone would be dead by now.

Tue, 10/28/2014 - 20:20 | 5388109 fibonacci's claus
fibonacci's claus's picture

remember when gangsta rap was cool???  right after ole north ran that cocaine rat line into LA and hooked all the black folk on crack.  remember that nwa tune "fok da poolice?" 

we need new versions of that song:

"fok the nsa"

"fok the irs"

"fok the ..."

right?

Tue, 10/28/2014 - 21:31 | 5388323 q99x2
q99x2's picture

The IRS took the baby.

Tue, 10/28/2014 - 21:36 | 5388344 Omen IV
Omen IV's picture

Just a stupid article - eliminate SS and then what - 80% of American have less than $70000 in assets - without SS how do they survive - invest ?
With a return of less than 1%

Silly lady - must work for Peterson

Tue, 10/28/2014 - 21:39 | 5388359 kolya111
kolya111's picture

One problem with this article, which I otherwise agree with, is that there are not enough $25,000 marketing jobs for all the burger-flipping Janes of the world to take one. 

Tue, 10/28/2014 - 22:04 | 5388452 ucde
ucde's picture

I couldn't decipher a strong idea within this article other than to acknowledge that subsidizing the poor has downsides. It seemed to be ambivalent as to whether subsidies for the poor should be cut, or simply modified to really help them.

The connections made between increasing benefits programs and increasing taxation of labor (second to last paragraph) takes our current tax policy as a given. If the burden of taxation were shifted off labor and onto our new aristocrat class, we could have social programs without disincentivizing upward mobility as in the theoretical "Jane" example. 

Tue, 10/28/2014 - 22:19 | 5388496 yrbmegr
yrbmegr's picture

Memo to whoever:  the federal government is not the only government in this country, and it's not the only government that taxes.  State and local spending is about 20% of GDP and federal spending is about 20% of GDP.  Exclusive focus on federal spending as the root of all evil is misguided.

Wed, 10/29/2014 - 07:42 | 5389127 Refuse-Resist
Refuse-Resist's picture

Yep. And it should be noted that most people don't really consider how their local and state governments are funded.

Until they run into a speed trap or a DWI checkpoint after having a glass of wine with dinner.

BAC .05?  MADD would gladly see you flayed alive for this awful crime against humanity.

 

Wed, 10/29/2014 - 06:40 | 5389044 viator
viator's picture

We give you $10,000. You give us your vote.

Wed, 10/29/2014 - 07:37 | 5389111 TheGreatRecovery
TheGreatRecovery's picture

Sales taxes also hurt not-so-rich families, especially where they are capped on large purchases.  Say, at $5,000.  With that cap, when a not-so-rich family purchases a $5,000 used car, and pays 7% sales tax, they pay $350.  At the same time, a rich family purchases a $100,000 car, and pays 7% sales tax BUT THAT SALES TAX IS CAPPED SO THAT THEY ONLY PAY on the first $5,000, so they also pay $350.  I think that's called "a regressive tax".

Similarly, many cities are now replacing parts of ad valorem taxes with "fees".  The not-so-rich family living in a $70,000 house pays the same "fees" for garbage collection, water "user fee", sewer "user fee", stormwater utility "user fee", and so forth as the rich family living in a $7,000,000 house pays.  Again, these "fees" replace ad valorem revenues, and therefore amount to direct subsidies of luxury houses, and the rich who purchase them, and also the builders and realtors who sell them, by not-so-rich families.

Furthermore, some rich families purchase $7,000,000 houses in risky places like right-on-the-beach, where their infrastructure will get FEMA-subsidized "recovery" after a hurricane, or in the middle of a forest, where their infrastructure will get for FEMA-subsidized "recovery" after a forest fire.

Furthermore, some States now have State housing insurance companies, which can insure $7,000,000 houses built in risky places where private insurances "would charge too much".  These State housing insurance companies seem to have a hard time breaking even, so the State invents "fees" which are added to EVERYONE ELSE'S insurance bills, to subsidize the State insurance company, which, again, insures the luxury houses built in risky places.

Nickel and diming the not-so-rich to support the rich.

I believe the list could be easily expanded.  It's hard for the not-so-rich to argue with "sales taxes" and "fees" without appearing to be "cheap", so "sales taxes" and "fees" will be used, and increased, to subsidize the rich.

Wed, 10/29/2014 - 07:39 | 5389116 TheGreatRecovery
TheGreatRecovery's picture

Machiavelli: "in every City, there are two groups of people, the rulers and the ruled.  The rulers are constantly inventing new ways to steal from the ruled, and the ruled are constantly think of new ways to avoid the new thefts by the rich".

Wed, 10/29/2014 - 08:50 | 5389260 Platypus
Platypus's picture

Another completely misleading, poorly researched, sensationalist article on ZH. They should change the title Tyler Durden to Tyler TURDen or Tyler DORKen. As already pointed below EIC can add around 3.5 grand per year for a low income family of 4,  ( thats 300 per month) plus food stamps another 400 per month, ( thats almost 5 grand per year) plus 150 cash each month to help with utilities ( thats around 2 grand per year). Depending on your situation that family of 4 will qualify for free or almost free rent ( threw another 10 grand per year) and add on top of that free medical insurance through  medicaid. So depending on how their health is and the rent, you can calculate around 20K up to 50K of government money for the poor each year. Those articles ZH write are trash !!!

Wed, 10/29/2014 - 09:14 | 5389345 CoolBeans
CoolBeans's picture

Platy - Seriously?  Your argument just supported what the article is saying:  There is no incentive to do better because at the bottom rungs they make more with entitlements.

Wed, 10/29/2014 - 09:47 | 5389437 Platypus
Platypus's picture

You are wrong my friend. The article is trying to say that all those benefits backslash on the same people they intend to help. THATS WRONG. It backslash on me...... the middle class guy.

Wed, 10/29/2014 - 09:25 | 5389382 Chipped ham
Chipped ham's picture

So they can live in section 8 "housing"? So they can get treated in clinics where funding and these treatments are limited by poor reimbursement from Medicaid? Your "almost 7000 per year" with rising prices is negligible for this family of four.

Your screed says nothing of the pride and self worth garnered from a hard and successful day's work. And with that hard work the ability to improve your situation. If this family settles on almost 7000 there is none of this. What there is however is a feeling of despair knowing that this is as good as it can get because of income limits described above.

That you can even think in terms of these benefits actually helping the poor tells us that your belief in government is superior your belief in individual self determination.

If the government "aid" weren't there most people would be much better off.

Wed, 10/29/2014 - 09:41 | 5389426 Platypus
Platypus's picture

Clinics? What are you talking about? Medicaid can be used in regular hospitals and or regular doctors offices. Food stamps can be used in any supermarket. cash they get, can be used to pay any utilities. And I forgot to mention child care on my post. they can even have free cell phones.

Wed, 10/29/2014 - 09:01 | 5389307 Miner
Miner's picture

My niece is very excited about her new job.  She works 20 hours per week in a warehouse for $12.50 per hour.  They offered her a full time position, but she'll lose her SNAP, TANF, Lifeline, Student Financial Aid, Childcare, and Medicare benefits if she goes full time.

I had to walk away to keep from shouting obscenities.  It's not her fault.  She's in the system we designed.  Godfuckingdamnit.

Wed, 10/29/2014 - 14:49 | 5390917 goneYonder
goneYonder's picture

Utilitarianism is the steaming pile of dung creating much of the stench in this world. I don't give one tiny piece of horse dung whether taxes hurt or help anyone.

Principles guide right action. Since taxes are quite simply robbery, they should be abolished - period.

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