Financial Samurai

Under our current Tax system there is no doubt the Govt. is practicing discrimination. Our constitution is supposed to protect us from that. “All Men Are Created Equal” not All Men are Created Equal except in the case that they earn more money than their neighbors. I don’t believe it is my responsibility to support my neighbors kids nor theirs to support mine. Nor for a single person to have to pay more just because they are single. Nor a divorced person who is supporting kids still to have to pay more because they are divorced (single). Heavily taxing corporations is an indirect tax on individuals since the cost is just passed on in the price of their products. A flat tax on EVERYONE with no minimum income, deductions, loopholes, nothing, is not only the only fair way of doing it and also would dramatically reduct the cost of administering the system. Get the Govt. out of the way and the economy will thrive and people who are willing to work hard not just go to work to collect a paycheck will prosper. This is supposed to be the land of opportunity not entitlement.

However, without other changes to the system a flat tax will not fix the broken mess we call our Govt. To start, a balanced budget amendment to the constitution would prevent the people in our Govt. from overspending to buy votes. Additionally, term limits to prevent these people to become career political elitists with no sense of reality. A complete ban on lobbyist and an outright ban on any political contributions from ANYONE to ANY candidate would stop the buying of favors. Every candidate should receive the same FLAT amount from the Govt. for their political campaign. That would show the voter how they manage money and also allow a broader field of candidates since you would not have to have big money backing to run for office. Once you serve your one or 2 terms max, you go back to your former life and work until you collect the same social security and Medicare benefits as the rest of the population. All pretty fair or “Equitable” to me.

Additionally, the levy of property tax is equally against the founding principles of our country. How can anyone justify the Govt. being allowed to step in and take property YOU worked and paid for if you don’t pay taxes. You NEVER own your property, the Govt. owns it and charges you to use it and even more for the right to spend your money to develop it. Then, when you die, the Govt. takes another big chunk of what you left behind, and were by the way already taxed on. Is this what our founding fathers envisioned? The Revolutionary War was fought for much less.

How can anyone think the current system is fair. The United States was founded on the principal of Democratic Capitalism. It is what made us the most prosperous nation ever known. Socialism has caused many world leading nations of past to loose their dominant position and is doing the same to us. The Tax system is one of the root causes.

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admin Reply:
February 6th, 2010 at 11:10 pm

Ed – Bravo! Well said and I appreciate your thoughts! I never thought about the ridiculousness of property taxes and the gov’t taking away your property if you don’t pay it. What a shame. I look at my property bill, and there are like 10 things some of the taxes go to pay towards, which I don’t use. Hmmm.

The only thing I disagree with you on is taxing people below the poverty line, even if that line was created by the gov’t. I think they’ve got it hard enough already no?

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Your version of the ‘poor man’ is … pardon the pun… inflated.

Family of Poverty level if below…

1 $ 903
2 1,215
3 1,526
4 1,838

A ‘poor’ single person in the USA earns no more than $10.800 a year if they’re single. 15% of that is $1,620. That leaves $9,180… or $765 a month to pay for all their expenses.

A ‘poor’ family of four would end up with no more than $22,056 before the ‘fair tax’. Remove 15% from that tally and you end up with $3308 less. $18,748 annually or $1562 a month to cover all their expenses.

Keep in mind these are the absolute top ‘poor’ (aka ‘Poverty’) earners. The 98+% of them who don’t even attain this level would earn even less. Right now that amounts to 40 million Americans.

Now let’s throw a guy like me into the equation. I’ve been fortunate enough to be in the six figure income level for the last five years. I went to excellent schools, got a top notch education at two private schools, and earned two graduate degrees that cost me almost nothing due to scholarships. I’m a genuine winner in this system and yes, I have earned it.

I’m also fortunate enough to have no addictions, no medical conditions, and a tightwad tendency that is more than likely genetic. My family of four has comfortably lived in the confines of a $30,000 to $40,000 annual income without wanting for more. I also graduated college with no debt and was given supplements by my own family when I was first getting established. Though I never used that money, it did enable me to qualify for a home which I only paid a small fraction of during my first few years in the real world. I rented out the two other bedrooms and subsisted on $3 a day in meal expenses. So I’m definitely a frugal fellow.

But on the flip side I also got a free ride through college, a new car, and a healthy stipend during my college years. I had an easy life before pursuing the more challenging life… and when it came time to be an entrepreneur I had a lot of support I could depend on.

So have I earned it? Perhaps… perhaps not. I went through other hardships in life and only God can eventually make that determination.

Have I had a ‘fair’ opportunity? No. I would consider my life’s journey to be far more than fair as far as education and income are concerned. I was a mediocre high school student. Only SAT scores and my parent’s ability to pay full tuition got me into a top tier school. I earned my way after that but my entire teenage years were mediocre as far as academics were concerned. I also received a wonderful income boost after college as well that made debt a non-issue.

If a wealthy upper-middle class suburban kid like me benefits from the current system, which already taxed my parents about half their gross income, what of the ‘poor’ folks when yours truly has his net income boosted by the mid-five figures. On a ‘FAIR TAX’ platform aren’t they and the folks living paycheck to paycheck going to pay more?

Have they receive a ‘fair’ education compared with me? How about their kids?

Did they have access to the same quality of teachers? The same private schools? The same supplements to get them through the challenging times in life?

How about the same level of health? The same sleepaway camps that gave me thousands of hours in athletic and extracurricular activities? The same opportunity to pursue drama, music, finance, history, economics, and all the self-guided subjects I pursued in my childhood simply by ‘buying’ whatever I wanted?

I had all these things that those 40+ million didn’t for one simple reason. Money. Money gave my parents the means to offer me opportunity. If I had been one of the 40 million instead of one of the 1%, none of that would have happened.

There are elements of the ‘FAIR TAX’ I like. Paying the same percentage for big ticket items. Adjusting the percentage so that we can have a balanced budget and a pay as you go system (okay, I can dream here). Destroying the current tax system for one that is simple and pursues the idea of fairness. I like all of those things except for one little thing between the lines…

People cheat… and as a well established member of the wealthy, I can tell you unequivocally that the wealthy cheat more than anyone else.

Disagree? Consider the tax code… and then consider this..

You want me to pay for the Mercedes? Screw that. I’ll get a dealer’s license which will end up costing far less than the taxes on one luxury car under a ‘FAIR TAX’ system. The title will never be in my name and my dealer tax will cost about $20. Not bad, eh.

You want me to pay for the addition on my home? Screw that. I’ll pay the contractor in cash.

That goes double for the food that I buy. Why the hell should I pay an extra twenty percent on my produce when the farmer a few miles from here will give me 20% more for free?

Come to think of it… I’m going to just start buying home related items at garage sales, friends houses, and barter for the rest. Hell, I’m saving 20%+ just off the top and I’m not even poor. I’m sure the ones who barely scrape by will find other new and exciting ways to avoid paying their fair share. Let’s face it. 20% of your pennies saved equal 20% of your pennies earned. Not to mention that the seller of all these wares will also keep an extra 20%.

We can do it either through one big ‘easy to avoid’ FAIR tax… or develop dozens of smaller taxes that largely reduce the incentive to be a compulsive tax avoider. I agree the tax system sucks. But anointing a fair tax will only benefit the financially parsimonious. Those who can pinch the most nickels are those that simply have the most nickels.

But better yet, I can help out other American citizens by simply paying a greater part of their burden so that they can more easily make ends meet and pursue a better life.

After all, it’s the American citizen (and foreign debtholder) who has enabled me to enjoy this great life. The teachers, firefighters, soldiers, musicians, artists, college professors, journalists, road pavers, ditch diggers, day care folks, and millions of other professionals may not make as much money as this auctioneer.

But they gave my father freedom from the tyrants of Germany and Russia… and a better life.

They gave my mother a college degree at a time when women weren’t supposed to be educated in that way.

They gave me, a completely hopeless kid with learning disabilities, the opportunity to become educated without having to worry about so much ‘competition’ when it came time for college.

They carried the burdens that gave me an easy life when it came to the $ sign. I may not be willing to donate directly to their cause voluntarily. I am a stingy bastard overall who enjoys working the system. But if you create taxes that are simple, small, and several, chances are I’ll be too focused on my family and my business to cheat my fellow citizens out of the opportunities they deserve.

Think about it… thanks for your inspirational write-up and I wish you all the best…

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Jerret Reply:
November 23rd, 2010 at 4:27 pm

“I can tell you unequivocally that the wealthy cheat more than anyone else.”

And you have proof of this….where?

I know “poor” people who take cash for odd jobs, NEVER report income, and all the while collect government assistance. I would also go so far as to say that anyone who is unwilling to get a job (despite being perfectly capable) and chooses to live on the government dole is a cheater.

Wealthy or not, there’s cheaters in every dimension of society.

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Financial Samurai Reply:
November 23rd, 2010 at 7:13 pm

Jerret, wealthy people are evil. Come on now!

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Financial Samurai Reply:
November 23rd, 2010 at 7:16 pm

I enjoyed reading your comment, however, do you mind distilling your thesis into one or two lines to help me and other readers out?

What exactly are you advocating? I’ve suggested an exception for a family of four making $25,000 or less to pay ZERO taxes. How come nobody sees that? Do people choose what they want to see?

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Thats a good post!!

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Flat tax systems do more than just apply one flat rate to everyone, they eliminate deductions, many exemptions, and tax credits. So, instead of a system like what we have now that taxes disposable income, you’re taxing everything. Tell me how its fair that the poor should have to pay taxes on the money they need for food and housing while the rich get a rate cut. Also, flat tax systems don’t tax investment income, so for many rich people this is cutting out a sizable chunk of their income….helping them out even more while the middle class carry the burden for them.

No, our current tax system isn’t perfect, but the flat tax is a carefully marketed and packaged deal for the rich. They make it sound very fair and simple to get you on board, while they get a tax break.

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admin Reply:
May 29th, 2010 at 3:37 pm

The “rich” are the ones with the most deductions, so how does that help them if deductions are removed?

What money the poor need for food and housing money are you talking about?

Let’s keep the investment income flat tax of 15 or 20%. That’s fine too.

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FYI -
http://www.businessinsider.com/america-take-example-on-hong-kongs-simple-and-efficient-flat-tax-2010-7

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@macarose
I think I love you?

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Sam, here’s my “Why you’re stupid” (just kidding!):

First, let’s agree there is a “floor” to economic life in America. That floor is somewhere around $20,000 per person, per year. That will give you about $1,700/month to pay for EVERYTHING in your life: car, rent, heat, food, some fun, surprise expenses, some savings. For much of the country, one can swing that, though living frugally. (Adjust the number accordingly if you like…but it’s somewhere around this and I’m going with it).

That’s the floor. ~$20,000/yr.

Now, the point is, that floor is roughly the same for any healthy adult with a heartbeat. Let’s compare two cases.

Case 1: Let’s say Abe is earning exactly “floor”. Now Abe gets taxed at 15%. Abe is left with $20,000 – $3,000 = $17,000. Now Abe is under the floor and NOT making enough to live on without some serious stress. Maybe he can tighten his belt, but it is felt as hardship. He is eking out a life $3k under the floor. His tax sacrifice has ganked him.

Case 2: Bob is making $1,000,000/year. Bob gets taxed at 15%, too. Bob is left with $1,000,000 – $150,000 = $850,000. After taxes, Bob is now $830,000 *over* floor. In fact, he can fit 41.5 “floors” into every year of his life; that is, he could support 41 and a half people at the same level that Abe *wishes* he had.

Both men were taxed at the same rate. But because of the floor effect, Abe “feels” a much bigger sacrifice; Bob a much smaller one. Bob can still buy a nice home in Boston and a BMW in the driveway *every single year after taxes*, while Abe is dumpster diving behind Albertson’s.

Therefore, the idea of progressive taxation is to increase the rate to try to bring everyone’s “felt sacrifice” into some semblance of fairness. In reality, the current 39.8% highest marginal tax rate (plus all sorts of tax sheltering) does not achieve this, but it is a symbolic attempt at it. In the 1950s, the highest marginal rate was 91%!

How’s this grab you?

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Little House Reply:
November 23rd, 2010 at 6:04 pm

@CM – What a great response. I agree that the flat tax doesn’t work for those that are eeking out an existence. It’s much too easy to complain about taxes when you have an expendable income to complain about.

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Financial Samurai Reply:
November 23rd, 2010 at 7:13 pm

Fair point, and I understand that point, which is why I wrote in the very beginning this:

“Gee whiz, last I checked, we live in America not North Korea. Why people believe it’s fair to tax one class of citizen a higher percentage than another confuses us. Is this not a pure form of discrimination? Fine, let’s agree that anybody below the poverty line of $25,000 for a family of four ($10,000 for a single person) are exempt from all income taxation.”

See the last line? I’m in agreement. We can call the “floor” $20,000/yr for a single person if you want. I’m fine with ZERO taxation on them. Everyone else, and hopefully zipcode adjusted aswell, let’s shoot for EQUALITY.

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cm Reply:
November 23rd, 2010 at 7:52 pm

I saw your poverty concession but wanted to lay out my case with those extreme points. But it doesn’t change my argument–because we then we begin a slope. Should we tax the person making $20,500 at 15% then? No, because that would put them under floor.

So that means we start taxing at 15% for those making $23,529, right? Call him Carl. Because that would leave Carl with just exactly “floor”. But now we have Carl living right on the edge, not building in much robust future security…and Bob with an enormous post-tax surplus. Carl wanted to get a bit ahead in life, maybe strive for a bit more, but the 15% has knocked him back to just getting by; while Bob is rolling in dough. They have not made an equal sacrifice.

Let’s try again with less extreme numbers. Dave makes $40,000 year, and Ed makes $400,000 year. If they are each taxed at 15%, Dave takes home $34,000 and Ed takes home $340,000. Dave is left just $14k away from Carl’s on-the-edge life, and knows it. Ed is $320k away from it, and knows it, too.

Though Dave isn’t hurting, the taxing smarts. It means he will retire later, always have his guard up about spending, possibly worry about the future. Ed, though, is so massively buffered that the taxing is not felt in the same way as Dave–it might be barely felt at all. They haven’t made an equal felt sacrifice to the society.

That’s arguably unfair. It’s like two people are asked to share the job of loading stones. Each man has to load 10 heavy stones. But one of the guys is strongman Magnus ver Magnusson and the other guy is Prince. It’s the same “flat tax” of 10 stones, and Prince isn’t physically at the “poverty line”, but Prince will be wiped out and Magnus will just be warming up.

By creating a sloped progressive tax, in which as you make more you pay, percentage-wise, that much more, we attempt to make the felt sacrifice about the same (though, as I said, it doesn’t come close to it in a world with billionaires and capped marginal rates).

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Financial Samurai Reply:
November 23rd, 2010 at 8:31 pm

Why is the same 10 stones? If the amount of stones is based on the strength or weight of Magnus and Magnusson, say 20%, then Maguns at 100lbs would carry 2 stones, and Magnusson at 200lbs would carry 4 stones. Pretty equal.

The $40,000 a year and $400,000 a year example is a win for both. And, if Dave at $40,000/yr wants more money and is unhappy, he will simply work longer hours and find new ways to make money. Do you not believe in the human spirit?

Brian Reply:
January 28th, 2012 at 1:10 pm

Let’s change the system only slightly from the original post: every dollar below $25,000 is not subject to tax. That way, like the current system we live in, no one ever pays tax on the first $25,000 they earn, ever. Then, there would be an incentive for someone making $24,000 to go ahead and work harder to make $26,000.

Moreover, the idea that everyone should feel the bite, to me, is a bit misdirected/misleading. To me, taxes are all about revenue for the government so that the government can perform certain tasks that otherwise wouldn’t be performed by private entities (or at least not as well). So the question should not be “how can we make everyone feel the bite of taxes?” but instead, should be “how can we make the government as much money as is needed, as fairly as possible?”

So let’s take millionaire Bob. Millionaire Bob makes $1,000,000 per year. Now, let’s assume that Bob is in a position in which, if he works a few more hours, he makes more money each year. Suppose he is taxed on a flat rate system. Bob now has an incentive to work even harder each year, because he receives the same amount per hour for his efforts. This is good for him, and it’s good for the government, because each hour he works harder, the government gets more money.

Now, switch to a progressive tax system without a cap. For each hour that Bob works extra, Bob receives less for his efforts. So at some point, the tax burden becomes so much that Bob throws up his hands and says, “Screw it, I’m going on vacation and I’m done working this year.” This hurts not only Bob, because he doesn’t get the money he could have earned by working, but it hurts all of us, because the government doesn’t get their cut of what Bob would have otherwise earned and distributed via taxes. This is exactly the opposite of what we want–we want people like Bob to work harder to give more revenue to the government. Let’s encourage him to keep working by not imposing a road block that ultimately causes Bob to throw up his hands and quit (or even worse, tax shelter his income in overseas accounts).

cm Reply:
November 23rd, 2010 at 8:24 pm

My last reply to you didn’t post. Lame. Maybe it’s tied up in review?

While I’m waiting for it to appear, the point of EQUALITY is about EQUAL SACRIFICE> 15% on a millionaire is nothing like the sacrifice of 15% on a guy making $45k, who is left a lot closer to the “floor”. That’s unequal. That’s the point of progressive tax slopes: creating an “more equal” sacrifice using proportionality.

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Maggie Reply:
January 26th, 2012 at 9:25 pm

Ed and Samurai Guy,

1. I know the federal government considers income above $25,000 for a family of 4, or $10,000 for an individual to be adequate, but really…. have you thought about that, or every tried to live on that amount? My annual expenses as a single person include about $3,000 for food (and I’m not talking fancy food here), $2,000 for gas, $0 for car payments (I have an old beater), $3,000 approx for utilities (electricity, water, sewer, trash pick-up, and phone), $6,000 for rent. So far, no money for clothing, health care, dental care, eyeglasses or contact lenses, vacation, emergency savings, or retirement savings. And I’ve already spent $13,000 ($3,000 over income of $10,000). If you added in car payments for a modest car, it could easily be $16,000 or more, and that’s living a poverty lifestyle with no chance to save or get ahead.

Triple the poverty income, and tax those who earn above $75,000 for a family of 4, or $30,000 for an individual, and you would make more sense.

2. There are lots of things on my tax bill that I don’t actually use either, but they matter. For example, assessments for schools, including community college. It benefits all of us, indirectly, if we have an educated and employable citizenry. We need to educate our children, that is a collective responsibility. And community college is a great start for those looking to go on to a 4-year program (without accumulating tens of thousands in debt), and also for those looking for specific job training.

3. Yes, captitalism has its good points (and its bad points). The nation whose people consistently rank as the happiest on earth is not a capitalist country though. It’s socialist. Denmark has a higher standard of living for the average citizen than we do, and much more of a safety net. Don’t knock it if you don’t know what you are talking about.

Financial Samurai Reply:
January 26th, 2012 at 9:44 pm

If someone or a couple only makes $25,000 a year, why would they have 2 kids? That doesn’t make sense, even if each kid does provide a $1,000 tax credit.

Socialism might be a solution to a brighter future. http://www.financialsamurai.com/2011/08/01/socialism-as-a-means-to-a-brighter-future/

Fedup Reply:
February 17th, 2011 at 12:00 pm

Still with a flat tax without loopholes (many rich people and corporations pay little or no taxes) I believe the money coming in would be greater than it is now.

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I think we should tax tall people more since they take up more space. Ever sit next to someone over 6 feet tall on an airplane? All arms and legs!

Anyone listen to Neal Bortz on the radio? He’s got the right idea with the Fair Tax. It’s a national sales tax that does away with the income tax altogether. No more IRS and no more hours spent maximizing your deductions.

Don’t get me started on real estate ransom, er, I mean taxes. I dislike real estate taxes more than I do our crazy income tax system. I purposefully bought a smaller house to keep my real estate taxes from being outrageous.

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Financial Samurai Reply:
November 23rd, 2010 at 7:10 pm

Sounds good Norman. So, what are your thoughts on my proposal for a Renter Tax? http://www.financialsamurai.com/2010/09/22/renters-should-pay-more-taxes/

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Sam, you have to remember that our economy is built on consumer spending. So, the government encourages spending by giving you tax breaks on debt (i.e. mortgage interest deduction, student loan interest deduction), but they tax you for savings (i.e. capital gains, interest income, etc.)

A flat tax would make rich people pay a higher dollar amount than poor people, when rich people should spend that extra dollar at a store, which in turn creates a job!

Just trying to play devil’s advocate here, I actually think a flat tax makes a lot of sense.

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Conceptually, I actually don’t have a problem with the flat tax at all. The main limitation is it tends to be regressive, which is why your concession is so important. It makes sense although it would probably be combined with other taxes too if someone actually had the guts and popularity to implement it.

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A big piece of what taxes are designed to do is provide services back to the taxpayer. If I’m working for minimum wage, and send my child to public school, paid for by my tax dollars, that’s a good use of the resources that I’m already paying for. If I’m uber-wealthy, and decide to send my child to private school, why should I be paying taxes for education that I’m not using? A low-income worker driving to work puts the same wear and tear on public roads as a rich worker, so why should the rich worker pay more. It costs the same to defend one American as it does another, so why should wealthy Americans pay more for these services?

The tax system is complicated, and, as rightly pointed out, there’s no one good answer that will please everyone. The flat tax system, however, penalizes on certain areas (like utility).

As a case in point, the article http://www.zerohedge.com/article/entitlement-america-head-household-making-minimum-wage-has-more-disposable-income-family-mak demonstrates that owing to our current tax system, a minimum-wage earner has more disposable income than someone working for 60k/year. They even demonstrate someone working one week out of the month at minimum wage still has about 80% of the disposable income of someone working the full month. 25% effort for 80% payoff? Sounds good to me. And why does this happen? Because our current system (and indeed, a flat tax system) uses the wealthy to subsidize the non-wealthy. It’s a shame that those with the greatest need of tax-funded services tend to be those with the least means to pay for it, but that’s a problem that neither a progressive nor flat tax will solve.

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scott Reply:
December 7th, 2010 at 9:10 pm

I’ll just chime in about education taxes. The reason everyone pays taxes for public education is because everyone benefits from it. The poor benefit by getting educated children and hopefully some opportunities that the parents have neither the time or energy to provide because they are working 2 or 3 jobs to get by.

The wealthy pay for public education because they want people working for them that can read and write. It would not be beneficial to hire someone who is illiterate even to mop floors and dust lamps. Everyone benefits from a public education system.

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Financial Samurai Reply:
December 7th, 2010 at 9:25 pm

I firmly believe that education is the key to wealth and a happy life!

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ProudDem Reply:
April 29th, 2011 at 6:58 pm

I wish that were true. I’m a 61 year old with a master’s degree in curriculum and instruction with elementary and secondary school administrator certification. I have also taught at the junior college level. I cannot find a job and have been applying and looking for almost a year. My 94 year old father is living with us, and our 30 year old daughter is, also.

I now work PART TIME for $10/hour. I’m not old enough to qualify for Soc. Security (didn’t want to retire until much, much later!) but not young enough to be hired again.

Education IS the key and I’m a huge proponent of education, but it does not solve all problems!

Financial Samurai Reply:
April 29th, 2011 at 7:09 pm

Hi ProudDem, are you a Democrat by any chance? What would you suggest we do to help people like you?

Also, may I ask after 30 years of work, whether or not your savings and investments have compounded to make you relatively well off and not in dire need of a job? Just trying to get perspective. Thanks

ProudDem Reply:
April 29th, 2011 at 8:23 pm

Actually, I was born and raised Republican! That is, until I was about 55.

I’m also not asking for help. I realize it may have sounded like I was. I just want to shed some light on those who think that the ones who aren’t currently employed are just lazy or not trying. I have applied for jobs for which I was immensely qualified, but younger people were hired while I didn’t even get an interview. I’m just stating facts that exist. It’s not always possible to get jobs in this economy, even if highly qualified.

I also started a non-profit company to assist youth and dislocated workers and oversaw several million dollar budgets and staffs as Executive Director. With the economy what it is, we plunged approximately $75,000 of our personal savings into it and can no longer support that endeavor.

My 94 year old father was the first in his family to attend college, earned two five year degrees in four years (total for both). He was self-employed in an occupation that brought in good money when he completed a project, but never had even a monthly salary to count on. My mother worked to pay for everyday expenses, but died when I was 18 and my sister was 17.

They both taught me my work ethic and my love for work! For that, I’m grateful.

You raised some other good questions and I’m glad to answer. Yes, we saved and invested, but lost a huge amount of money on our investments over the past several years.

My father was just placed in a nursing home this past week due to a stroke, after living with us for three years. His bill is just under $3000/month. His Social Security income is far from enough to pay for that.

Our daughter moved in with us while between jobs (one month) after having worked from age 14, including three jobs while at one time before completing college. During the time period prior to her insurance policy kicking in on her new job, she was hospitalized three times–to the tune of over $50,000. The last hospitalization was for a dislocated ankle and a trimalleor (sp?) fracture of the fibia. She is just now getting back to work–no income in the meantime–after almost three months following her surgery. It has taken her a while to get back on her feet (no pun intended).

No complaints–these things happen in life!

I dedicated my educational career working with low income families and continued working with low income groups in my non-profit venture (even when I was a Republican). I’ve met some exceptional people in my careers who will succeed because of the efforts of teachers and administrators and case workers who believed in them and exerted the extraordinary efforts to help them make it happen!

Financial Samurai Reply:
April 29th, 2011 at 9:22 pm

Thanks for sharing your thoughts and experiences! Life does indeed happen, and it seems like health insurance is TANTAMOUNT to protect us from financial ruin. Long term disability as well.

At age 55, why did you change to being a Democrat? My theory is that we are all democrats up to college, turn republican when we start working, and then turn back to democrats when we retire. Thoughts?

Except in Wisconsin. The teaching profession is going to take a big hit and when it does I hardly believe it will be choice profession.

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A Flat Tax is not ‘fair’ because it’s simply not flat. Taxpayers don’t come anywhere close to paying the same percentage. Every Flat Tax proposal that i’ve ever seen is nothing more than a progressive tax which shadows income redistribution. It’s a good idea in theory, but when you get right down to it, it’s almost absurd. You get a ton of new tax brackets and very few deductions. So let’s say a family of four only makes 30K a year and they end up paying no taxes at all (with the new tax bracket they have been placed in). Well they still get a child credit and EIC which entitles them to a refund, so now, they’ve actually ended up making money on this flat tax. (hence my income redistribution statement) Although i’m definitely not a fan of it, the only TRUE flat tax is Medicare. Every single dollar you earn is taxed, no exemptions/exceptions period. Why isn’t everyone jumping up and down to implement that?

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ProudDem Reply:
April 29th, 2011 at 7:56 pm

A family making approximately $40,000 annually (median income in America) will pay about 33% of their income for minimum housing expenses and another 17% for transportation, calculated at $3/gallon prices). Those two items alone capture 50% of their total income.
‘
A family making $1,000,000 annually can pay $85,000/year for housing and $57,000 for transportation. They will pay only 14.2% of their income for the same two items.

Add 15% tax rate for each family and the first family has exhausted 65% of their income, while the wealthier family has used only 29.2% of theirs.

Let’s say the wealthy family pays $33,600 (high estimate) for medical insurance, while the average family pays $6,600. That reduces the wealthy family’s income by 3.36%, but the median income family’s is lowered by 15.84%.

Let’s assume the $1 M income family spends $73,000 on food each year. That’s only 7.3% of their income. The average income family $4656 per year (a little over $1 per day for a family of four) on food. They’ll spend 11.18% of income on food.

Assume that the family of 4 making $1 M spends $12,000/year on clothing–still only 1.2% of their income. The median income family shops at garage sales and at thrift shops and manages to get by spending $600 annually on clothes for four. They’ll spend 1.44% on clothing.

At this point, the average American family has spent 94.9% of their income on NECESSITIES! They have exactly $2124.41 left of expendable income for emergencies, medical co-pays, savings, investments, college tuition savings, etc.

The wealthy family has spent only 56.46% of their income, leaving them with 43.54% left. The amount they have left to “play with” is a whopping $435,400.

I’M NOT SAYING THEY SHOULD . . . BUT, they could finance necessities for over 10,000 families who are making median income.

That’s why percentages don’t work! Costs are the same for everyone. Rising gasoline and food prices won’t appreciably affect the wealthy family, but could devastate an average family! One missed paycheck–due to layoffs, illness, etc.–could bankrupt an average family.

Assume the wealthy family invests $100,000 of their $435,400 expendable income and made only a measly 5%. They INCREASED their expendable income by another $5,000.

PS–to FlatTaxNotFlat: Medicare is a true flat tax. But, as you can see from above 1.45% for one family is far different than it is for another.

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Financial Samurai Reply:
April 29th, 2011 at 9:29 pm

You make valid points, but you they are all assumptions. What about the assumption that the wealthier family studied hard in school, didn’t screw around, went to graduate school, and has debt? Why should they get punished more than a family who did not try as hard? The top 25% of income earners pay 88% of all taxes, while 45% of Americans pay zero federal taxes… how about everybody pitch in since everybody benefits from gov’t services?

It is a CHOICE that a couple who only makes $40,000 a year have a kid or kids. Are the rest of us supposed to subsidize them if they are finding it harder to make ends meet by paying a progressive tax, which we have NO CHOICE but to pay but to go to jail? I think not.

We need to fight for EQUALITY every single day and so NO to discrimination.

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ProudDem Reply:
April 30th, 2011 at 4:50 pm

Yes, they are all assumptions, but they were well-researched assumptions.

I’m looking around my community and I can tell you that many people who make average salaries of just over $40 K (high for where I live) have been hard workers all their lives. Some have graduate degrees. You can’t flagrantly put all people into categories that don’t necessarily apply.

I used local figures to calculate the average salary family’s budget. It would be next to impossible to find decent rental property for the amount I allocated. One dollar per person daily for food? Try it sometime. $600/year for clothing a family of four? Even using almost ridiculously low figures, their income was almost depleted after paying only for necessities. Please tell me what you think they should cut in order to have enough to save or even pay for emergencies? Let me know what you come up with. I’d really like to know.

I guess I don’t understand the concept of “punishing” families who have succeeded. Personally, I am more than willing to pay more taxes and I don’t make anywhere near the salaries I’m talking about. I think it may boil down to the fact that I have worked closely with families far under the income for the average family–some of whom are extremely bright and hard working, but entered life into poverty. I know them. Their aspirations are as high as yours and mine. And, their aspirations for their children are also high. They just don’t have the financial capabilities to make it happen.

Thomas Jefferson addressed income inequality when he wrote, “Taxes should be proportioned to what may be annually spared by the individual.” It makes sense, doesn’t it? I totally concur. He also added, “Another means of silently lessening the inequality of property is to exampt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.”

What can middle class citizens (those making the median income of $41,644) annually be able to SPARE? The answer is not much when necessities capture close to 95% of their annual income.

When programs are being cut that benefit the poor and the savings is transferred to benefit the rich, that’s not EQUALITY. There has to be middle ground.

Interesting that you’d mention that people have a CHOICE about whether to have children or not. In the future, maybe not. Both families I outlined in my example has two children–about average, so I kept the comparison as even as possible.

Financial Samurai Reply:
April 30th, 2011 at 5:41 pm

Punishing is referred to the fact that the more one makes, the higher percentage of their income goes to taxes. That’s not equality, that’s discrimination.

Do you not believe in America, we have the power to make more money and lead better lives if we want to? If you are born into poverty, yes things may be more difficult. But, you won’t be paying more taxes with a lower income, you will be paying less.

Think about being born into poverty…….. you know what the solution is? To prevent poverty stricken people from having kids who are born into poverty. Instead, let’s help lift them out of poverty by providing more education and training.

Everybody has a choice to study hard and work hard. For those in high school who I noticed didn’t, well… they aren’t doing that great. But, that was their choice.

Just curious–why was my last post re: comparison between two different income families regarding flat tax implications not posted?

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We’re in agreement about the need for education & training. No one will fight harder than I for education and training!

Think, though, about your comment regarding the fact that the wealthy pay a higher percentage to taxes in relation to the budgets I sent earlier. Yes, the wealthy pay a higher percentage of income for taxes. But, that’s the ONLY area that they pay a higher percentage! (With the exception of Social Security, where their contriburtion is capped at $106,800, therefore paying a smaller percentage than anyone making less.)

The poor/middle class, though, pay MUCH higher percentages (in relation to their incomes) for BASIC NECESSITIES–and for much less in return.

They pay a HIGHER percentage of income for gasoline, housing, food, clothing, and insurance–all necessities for survival! That leaves them with precious little expendable income.

One of your questions I didn’t answer earlier–why did I change party affiliations at age 55? Sounds silly, but I read a bumper sticker that stated, “If you’re not appalled, you’re not paying attention.”

I started paying attention; doing my own personal research; studying history, etc.

Then came Katrina. I worked closely with some who were sent to my community and found some lifelong friends–actually hired one to work for me. He was a former chemistry teacher who is brilliant and a wonderful role model for youth! He’s still a dear friend.

I was there the day after they arrived until the day the last one left–almost eight months later. I met and grew to love people who would previously have scared me. I got to know their families and helped them find jobs, homes, furnishings, and clothing. We talked, laughed and cried together. Several spent Thanksgiving and Christmas with my family and friends at my home that first year.

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Financial Samurai Reply:
April 30th, 2011 at 8:13 pm

On Social Security. They pay up to $106,800, and therefore get the amount of Social Security returns up to what a $106,800 is paying. If they make a million, they aren’t getting $1,000,000 worth of SS income, they are getting $106,800 of SS income.

Do you not believe people can make more money if they want to? If not, what is inhibiting them in this great country of ours?

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Maggie Reply:
January 26th, 2012 at 9:45 pm

Not everyone has the same opportunities.
Let’s use two kids as examples: John has rich parents. He struggles in school, but his parents can afford after-school tutors and extra study materials, so he catches up, and learns ways to compensate for his learning diability.

Joe’s parents are struggling. His dad is a construction worker who was disabled in a work accident, and now lives off of disability payments (not much income there). Mom works also, but in a dead-end clerical job that doesn’t pay much, but it has health benefits the family needs, so she stays. Joe also has a learning disability. The school in his neighborhood has a poverty rate of 62% (62% of students qualify for free or reduced-fee lunch), and is overcrowded because the governor doesn’t think small class sizes are important. This community is especially hard hit, because the local factories (which had family-supporting jobs) closed and re-opened in China and Mexico. Sound familiar? The people who lost those factory jobs would like to work, but their skills aren’t easily transferrable to the other jobs that are available. (This is “structural unemployment” where the situation changes, and the available skills don’t fit the available jobs.)

Joe’s teacher is in her first year, and overloaded. There is no teacher mentoring program, and she has to be teacher, social worker, therapist, and more to meet the needs of her students.
She doesn’t have the experience, yet, to recognize that Joe has a learning disability, so he doesn’t get the help he needs. In spite of his hard work, his grades and test scores are below average. No college scholarships for Joe, so he goes to work out of high school. His future is not bright.

He did not have the same chances as John did. Don’t call him lazy because when he’s an adult, he earns less than John. Shame on you!

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Financial Samurai Reply:
January 26th, 2012 at 11:42 pm

Who is calling anybody lazy? What is your situation instead of making up fictitious examples?

The Tax inequality has created jobs, careers, businesses,etc. The Publishing industries as well as Logging, Paper, Computer Programing, etc all depend on Tax In-equality. All those finance related positions from Accountants, Lawyers, to companies that “Help” us complete our tax forms and file depend upon it. Am I wrong? No.
I am totally in favor of equal taxation because I believe there are opportunities that I am being robbed of because of the complexity of the rules and my inability to pay someone to point them out to me.
So, the question is this. Do we collapse many, many employment opportunities and have equal taxation or remain the same in “business as usual”?
I don’t like being taken advantage of because of my ignorance! However, I don’t have the strength to affect the livelyhood of many, many, many people. Am I weak and wrong I don’t know and I don’t mind being wrong, if I am. Can anyone other than God decide? People with the money will decide.

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OK – here is the thing . Imagine a place where everyone worked as hard as they could, and achieved as much as they could, based on their own potential. And they went into the job market, and only the best were hired. Aren’t there still going to be winners and losers? And you assume that people who make more money “work harder” in school and that is a “choice” that they made. Do you realize that the people you are talking about are maybe 14, 15, 16 years old when they make that choice? . And maybe they are not in the best of shape because of their upbringing. I know many “trust fund babies” who made terrible “choices” and still are
living the good life, and many very hard working people who started from nothing and are just hanging on.

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Financial Samurai Reply:
July 20th, 2011 at 1:47 pm

Yes, there is a super strong correlation with hard work, work ethic and developing wealth if you want it. You are saying 16 year olds don’t understand the importance of hard work and educatiOn? I find that very hard to believe. What about their parents? Failure at school often leads to failure at life. You do not see this correlation all around you?

Believe in people and their ability to think rationally. We are smarter than you think. Just because one slacks off or does t make it with whatever endeavor doesnt give them a right to not contribute, tax wise. Equality is always the best avenue.

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How about a compromise. Families making under 20,000 per year pay no tax. Those at 20-25,000 pay 5%. Those making 25-30,000 pay 10%. Those at 30-35,000 pay 15%. Those at 35-40,000 pay 20%. Everybody making over 40,000 pays 25%. The only deduction allowed is on home Mortgage interest and charity.

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Financial Samurai Reply:
August 11th, 2011 at 9:54 pm

Sounds like a good compromise to me!

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What about FICA? A flat tax might work in a vacuum, but not in reality. Not for poor and lower middle class people. A good chunk of their paychecks go already to payroll taxes and insurance premiums (for those fortunate enough to have coverage), which are not refunded at the end of the year like federal taxes. Is this system going to cover heath care and retirement, then? If so, I might think about it. Otherwise, no thanks.

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You should look at the fairtax proposal (www.fairtax.org). It’s a consumption tax rather than an income tax and there is a pre-bate which means that the poor don’t end up paying taxes. Used items are not taxed so if you want to buy everything used, you can certainly lower the amount of tax you pay. That’s a good thing because it reduces the amount of stuff that ends up in landfills. It’s not a perfect tax system but it’s better than what we have now.

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Financial Samurai Reply:
September 10th, 2011 at 10:44 am

Doesn’t the economy need us to buy as much stuff as our balance sheet affords to improve profits and get the economy rolling though?

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Financial Success for Young Adults Reply:
September 15th, 2011 at 10:57 am

Yes. Which is exactly why a consumption tax will never happen. Unless we go back to the gold system. Our economy is inflated with air and spending and our fiat money only means something if consumers are spending, and hopefully with money they borrowed that was used to create more fiat money.

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47% already avoid Federal Income Taxes. A family of 6 (2 parents/4kids) making 62,000 a year will receive a tax refund equal to or greater than what they paid in taxes throughout the year. When 53% (many of whom are not “Rich”) are paying the Federal Taxes for the other 47%…isn’t the debate about “poor/lower middle class” folks getting the IRS Shaft completely moot?

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The problem is not that we need a flat tax on income, it’s taxing income in general. Typically, those who are richer, intelligently know that income taxes in their tax bracket are higher than capital gains taxes. That is why they decide to generate passive income that is taxed at the lower rates. Those who make 200k income pay more than those who generate 200k passive income from what I understand.

So the real problem that needs to be solved is education. Let’s teach every one how to legally avoid taxes and vote with our ‘absent’ tax dollars in order to change the tax code.

(This would be a great #yakchat by the way. I love talking about taxes.)

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On the whole, I agree with you. Some version of the flat tax is the way to go. As you pointed out, taxing people who are below the poverty level are barely supporting themselves so there’s no point taxing them. So, I propose one correction to make it more equitable to everyone. Flat tax with a standard deduction that actually represents roughly what it costs just to survive in this country. Let’s say $20k for arguments sake and I’ll stick with your 15% tax rate though I think it would have to be a bit higher than that.
So:
Person A makes $20k
20k-20k=0×15%=0 taxes

Person B makes $50k
50k-20k=30kx15%=$4,500 taxes

Person C makes $100k
100k-20k=80kx15%=$12,000 taxes

No deductions for anything that has it’s own value (home, school, etc) but leave deductions for charitable contributions (but not political contributions) because America benefits from a healthy non-profit sector. All income (wages, capital gains, inheritance, etc) taxed the same.

It’s simple and equitable. Everyone could do their taxes on a 1040EZ. You could probably cut IRS staff and still double enforcement. The reasonable standard deduction is what turns a flat tax into a fair tax.

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Financial Samurai Reply:
September 15th, 2011 at 1:36 pm

Sounds good to me! The tax sector would have a fit though because this system would be way too easy!

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State of Reason Reply:
September 16th, 2011 at 1:21 pm

HA! No kidding. Unfortunately it would put a lot of tax preparers out of work. I’m sure they’d find something else to do though. The great thing is that you can sell it to conservatives as a flat tax and you can sell it to liberals by pointing out that the poor are paying a far lower effective tax rate. In my previous examples person A pays 0% effective rate, person B has a 9% effective tax rate and person C has a 12% effective tax rate. All while everyone has the same actual rate and gets the same standard deduction. I still think you’d need a rate somewhere in the upper 20 to lower 30% range but that sort of detail can be handled by policy people with far more info at their fingertips and far better math skills than I have.

Even better, you tax a huge amount of money that’s currently being hidden through all sorts of loopholes and tricks. I think you could probably apply this same system to businesses too and just have everyone on the same system but there may be good reasons I’m not aware of that it wouldn’t work for business.

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Mountain Man Reply:
January 26th, 2012 at 6:30 pm

Like Sam, I like your idea, and would have no problem with it, and on first blush most would also agree.

That is until people start thinking about things and others start talking.

Current taxes are, that a couple making $40k using standard deduction of $5950 each or $11,900, and basic exemptions of $3,800 each or $7,600= $19,500 in deduction and write offs.

They currently pay 10% on the first $17,400
and will pay 15% on the remaining $13,100

Again, their highest tax rate is 15% the same as your scenario describes.

The problem is, that the upper income earners are paying tax rates as high as 35%
AND YET others want them to pay MORE.

People want double standards (when it benefits them).
They look at actual or SUPPOSED tax breaks for the rich, and yet refuse to see their own.

Example, most anti-rich will talk about tax deductions the rich have. They claim the rich hide half of their income. And yet refuse to see their own.

A family with 2 kids earning $51K (the average income) have 2 standard deductions of $5,950 each, or $11,900 and then 4 personal exemptions of $3800 each, or $15,200 for a total of $27,100.

Just using the basic deduction and personal exemptions, thats over a 50% write off.

Now lets look at the rich person who makes $1 million. If he uses the same deductions, $27,100, thats 2.7% of his income.

The average person who writes off his home mortgage interest, writes off all his interest. The average person buys a house 3 times his income. If the average family income is $51K, the house is $150k.
Lets look at the rich man who makes $1M.
If he buys a house 3x his income, thats $3M
The problem is there is a limit of interest write offs on home mortgages of $1M. So even though the rich man makes 20x as much, he’s limited to a mortgage write off of less than 7x what the average person makes.

According to IRS stats.
The top 1% make 20% of the AGI, and yet pay 38% of all the federal income tax.
The bottom 50% make 12.26% of the AGI and yet pay 2.89% of all the income tax.

The top 1% pay an average tax rate of23.27%
The bottom 50% pay an average of 2.99%

And yet the poor claim the rich don’t pay enough.

When capital gains tax is discussed, 15% is always mentioned. And the poor or average always claim the rich don’t pay their fair share…though the average or poor NEVER pay a tax higher than 15%
Also, whats never mentioned is that capital gains earned in less than a years time are taxed as income at current income tax rates (as high as 35%)

Here’s the real issue. People want what THEY WANT, no matter the cost to someone else.

The government spends on average of almost $11k per student in public education.
According to IRS stats, the break off point for the top 25% is $67,280 AGI and they pay an average tax rate of 15.68%.

If we multiply $67,280 x 15.68% = $10,549.50

In other words, unless a family is making $67,280 after tax deductions, they aren’t paying enough in taxes to even cover the cost for one of their own childrens education.

But not everybody has a child in public schools.

Military spending is $687 BILLION, there are 310 million people in the US.
We ALL receive equal benefits of military protection in this country.
That means the cost of military protection for every man woman and child is $2200.

Simple numbers show that those in the bottom 50% don’t pay enough to pay their share of military protection.

As a society, we are demanding certain benefits from society. The problem is, the MAJORITY of society is demanding these benefits that they can’t afford for themselves, and so demand, that the minority pay for for being part of that society.

The majority of society claims they pay too much in taxes, or claim they pay their FAIR SHARE. And yet they demand that society should do more.
The problem is, this part of society is using a disproportionate amount of government spending, for their own giving.

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Maggie Reply:
January 26th, 2012 at 9:52 pm

If the taxes on the rich are so unfair to the rich, then why/how do the rich keep getting richer while the poor are getting poorer?

For the rich to complain about a system that is totally skewed to their benefit, is ridiculous.

Look at the facts, not the propaganda.

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Mountain Man Reply:
January 27th, 2012 at 12:19 am

Are you really so obtuse???

Lets look at facts.
First fact-There isn’t a money fairy fluttering around, waiving a magic wand and money suddenly appears.

First comes the work, then comes the money.

The average person works 40 hours a week.

I work 50-60 usually, sometimes 72-84, and a few times more. I’ve worked 5 days at 16 hour days. I’ve worked 24+ hour days.

If I got paid hourly what the average person does, I’d make more because I work more. Thats HOW rich get richer. Or in my case, the average get rich.

Since the work comes first, then the money.
I started working at 12 years old, in the 6th grade, with a paper route. I got up at 5:30 in the morning, 6 days a week to deliver papers. I did this for 4 years.

When I was a sophmore in HS I got a job at a local restaurant, as a busboy. Working that Friday and Saturday nights. I worked that job 2 years.

Then I got another busboy job my senior year of HS, and worked that 3-4 nights a week.

After HS I got a job working in a hotdog joint, while going to a community college 35 miles away. I worked that usually 30-40 hours a week WHILE going to school full time. During the summer or breaks I’d load up on hours, usually 50-60 hours a week. The summer after my freshmen year, I got a job at a log home building company. Between hotdogs and log homes, I was working 70 hours a week.

My parents were divorced after my freshmen year of HS and my dad wasn’t involved in my life. My dad didn’t pay child support, and my mom did the best she could working in factories. Because of that, there was NO money to send me to school, so I PAID my own way to school. That includes tuition, the commute back and forth and books.

My first job outside of restaurants, was working in a factory. I was still going to school, but finishing up for the most part. I still had 3 months left. I worked 6 days a week 10 hour days and went to school 3 nights a week.

My education, though nothing great, allowed me to enter a factory with a skill. A skill that allowed me to make a little more than the average person entering a factory.

Over the next 5 years I worked in a handful of factories and developed my skills further. I also continued to take courses at the community college.
My last factory job, I was 1 or 54 welders. 1 of 3 with Heliarc experience, and the only one who could weld aluminum and stainless.
I also had machine shop experience. Which allowed the company to transfer me into the machine shop when that department got backed up.
Everything was time studied, so every job had a tame frame to be done. In the welding department I was constantly either #1 or #2 for rate. I ALWAYS had the lowest rework.
Because of my knowledge and skills, I had the position of Master Welder. 5 Master Welders, and I was the youngest by 10 years.

I left factory work and got into construction. The pay is MUCH BETTER. I have been doing that for 23 years now.

About 6 years ago, things were slow, where I went back to find a welding job, just to make ends meet. I was hired because of my resume and my interview. NO welding test to see if I could back up my claims.

After 1 week of working there, the owner wanted to buy my contract out from the temp agency. It would have been an instant $2 an hour raise. I turned it down because I knew work in my construction field was going to break soon, which it did.

My point is, I was REAL good at my skills when I left factory work for construction. Over the years my skills have increased IMMENSELY. I am well beyond where I was 23 years ago. And I get paid for it.

Also, my job requirements today are vastly beyond anything I did in factories. The conditions I might have to work in might be 200 ft up in the air, with winds blowing 30-40 mph and temperatures just above zero (without the wind chill). Or I might be working in a steel mill, in the summer, with temps around 120 and having to wear fire retardent clothes over work clothes.

For all that they pay me a decent hourly wage.

When one job gets done I might get transfered to another job, while others get laid off, or I’ll get a call from a former employer or I’ll call a former employer, and get a job because of not just my skills, but my reputation as a worker.

Its all those things that add up to how much you make.

Because of what I did years ago, it trained me to work hard. I learned numerous skills. I get up real early and work real late. I work off hours. While others complain “how hard” their average job is, I just do my MUCH HARDER than average job, without complaining. When others complain about getting up at 5:30 or 6 am, I get up at 3:30 to 4:30, because thats what has to be done to get the job done.

I don’t have time for whinning and complaining or those who do. The VAST MAJORITY of people in this country or where they are at because of the decisions and choices they have made (or lack there of). Lifes hard. Deal with it.

Complaining ain’t dealing with it.

Now here’s some simple math. If you and I both make $10 an hour, but you work the average 40 hours and I work 60 hours. You’ll gross $400 in a week and I’ll gross $700.

If I go and develop skills that will pay me an extra $5 an hour, while you’re still making $400, I’m making $1050.

I then take those advanced skills to a harder and more knowledge andskill required job, where they pay me even more $$$.

While you’re complaining how your job sucks, I’m dealing with mine and getting it done. Because of my work ethic, I’m put in a position over other workers, making me more money.

Outside of work, you take your paycheck and live to the very limits of what it affords. I take mine and live below your lifestyle while I make the same as you. As my income increases, my lifestyle barely changes. (In fact I live in the same house I lived in 25 years ago. I buy and drive used cars)

I’ve educated myself on finance and investing. Making MANY mistakes along the way.
I take a portion of the income I earn and invest it. Planning for the future.

And that is how the rich get richer and the poor poorer. While the poor COMPLAIN about life, there are those of us who don’t want to stay poor, and do something about it. The rich live below their means and then invest the rest. The returns on their investments they reinvest and get more returns. Thats how you become rich and how you become richer.

You advocate a progressive tax system, because though you and I might have at one time made the same hourly, I work more hours, thereby getting more pay. And that pisses you off. If you make $400 and the government taxes you 20%, thats $80. If the government taxes me the same 20% but I make $2000 dollars, thats $400. Same percentage, different amounts.

I have often found that those who think that all work is equal are often the ones who do little on the job. Or little out of the job to improve themselves.

I am now approaching 50, and still I take classes or read to learn new things or improve what I do.

Lifes hard. That don’t bother me, I’ve always worked hard. I know its hard and accept it.
But…
Like John Wayne said: Lifes hard. Its even harder if you’re stupid.

No need making life any harder.

It’s too bad that I don’t have the time to read everyone’s comments, but there seems to be many advocates for the poor.

Maybe less money will be a greater incentive to do more, or make people really think about their decisions to have children.

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Advocating for the destruction of the state, one tax deduction at a time.

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Silly argument! Point #1 You can’t really tax the rich, their accountants graduated at the top of the class and work 16 hours a day for big bonuses. IRS hires from the bottom of the class and pays little and they work 8 hours a day max. Many years GE and Ford paid less in taxes than I did (I’m below the poverty line) #2 The “golden goose” hunt is doomed to fail, good friends who are very rich have had it and are building their “escape house” in Costa rica and they are not alone. #3 There is absolutely nothing wrong with high taxes…. if you get what you pay for. In Denmark tax rates can exceed 50%, but health care is free, transportation (by train) is ubiquitous and cheap, education is subsidized, so living is affordable on after tax dollars. (may be old information but the concept is still valid)

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Foosfan Reply:
January 27th, 2012 at 12:48 pm

John, Now you not only want the richs money you want more of it to pay for your healthcare, your transportation, and your education. That is the socialist governments in Europe. I do not live in Europe nor want to live in Europe. If you feel compelled to give away more of your money to subsidize everyone else I would ask that you consider moving instead changing outr Constitution in this country. As you can see in the last few days Europe is imploding. They are now figuring out that they cannot give everyone everything for as long as they want it. There is no money left at the top there to tax so its the bottom of these countries that is getting destroyed with taxes now. Be careful what you ask for because soon that hand you have extended to ask for my money will one day have to work 2 or 3 jobs to sustain the type of government you desire.

I do not want a Socialist government. People in this country have to learn to fend for themselves. We are losing our backbone.

Foosfan

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Ask Adam Smith, who proposed progressive taxation.

It is simple math, though, randomly claiming people are socialist doesn’t benefit your argument.

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I absolutely agree that a progressive tax is a right and proper approach to funding the activities that the government elects to engage in. If the framers of the constitution envisioned an income tax I’m sure it would be progressive, one more effort in their quest to avoid the development of an aristocracy this side of the pond. The devil is in the details and The sheer volume of our tax code provides too many details. I hope the effort in Washington can address this but I’m convinced it is a chore that will consume a LOT of time and co-operation…

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Hi Sam,
I’m catching up on the last few months of posts here :)
This topic was discussed among some friends earlier this year, and one example that came up: our military and defense. Working premise: without the military, foreign hordes will come in and loot the U.S. and all this talk of who pays what and how much in taxes, really it’s concerned with property and making sure we can all hold onto as much as we can (simply human nature) So…

Could taxes be simplified? paid similar to how wealth management firms might charge their clients: as a flat % of total assets being managed (or “protected”). My quick hypothesis is that this won’t disincentivize productivity, since a) people are inherently ambitious (or greedy, if you want to be a cynic :P) and b) you’ll have to rake in money to pay the following year’s tax, unless you wish to see your net worth drop.

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Financial Samurai Reply:
December 7th, 2011 at 11:59 pm

Hi Saad, good to hear from you. I do believe in the inherent greed and ambition of people. However, after a certain level of taxation… I say 50%, one no longer wishes to work as hard anymore since they are no longer getting the majority of their income.

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