Tax Time Again
A couple of weeks ago, Mittens (that's for you Creighton) was destroyed in the South Carolina primary by Newt, and one of the main reasons, in my opinion, is that he was unwilling to share his tax information when called out on it by his opponents. After losing the primary, he did come out and release his info and we all learned something that we already new...Mitt has a lot of money. We also learned that for the amount of money he has, he sure pays a pretty low tax rate, around 15%. Upon learning this, much of the media tried to turn this into a crime against the country, showing us yet another shining example of how corporate greed is destroying America. Fortunately, this was an unfounded argument and didn't stick, and in reality I was kind of proud of Mitt for astoundingly low tax rate. The way I see it, he is just like any other good American I know. We all have to pay taxes, but we try to pay as little as we possibly can. So, kudos to you Mitt for finding your way through the loopholes that litter our current tax system, I wish I knew more of them.
I have recently begun gathering all of my information for the last year to be able to file my taxes. 1098-T for school, W-2 or is that a W-4 that I used for work study this last summer. Do I file a 1040, 1040EZ, or is there some other number and letter combo that could work better for me? And what in the world do all of those numbers and acronyms mean anyways? My father in law is helping us out with our taxes again this year via his friend who is an accountant. Did you know that even though I grossed approximately negative $90,000 last year between mine and my wife's schooling, we somehow owe taxes on part of that loan money? I don't understand it and I probably never will. Then we learned that I can deduct the cost of my computer (that I bought before I was in medical school) from my taxes this year, plus other books or "supplies" we "needed" for school. So, like we Mitt, we are slowly trying to chip away at what I can give back to the government for all they do for me.
Then, a couple of days ago, I found an article from the NY Times outlining the story of James Ross. He is a self proclaimed "1 percenter" who is a lawyer and now runs an investment firm in New York. The surprising part of his story is that last year he paid 102% of his taxable income to taxes!! Are you kidding me?? Sure, many people will say that we shouldn't fill sorry for a multi-millionaire who has to pay a lot in taxes, which I don't exactly feel sorry for him, but I do think there is a fundamental flaw in a system that even has the possibility to have people pay over 100% or even close to 100% of their taxable income. (Here's a link to the article http://www.nytimes.com/2012/02/04/business/at-102-his-tax-rate-takes-the-cake-common-sense.html )
So let's sum this up. Basically, Romney was able to make millions and pay just little bit back in taxes because most of his money came through investments. Mr. Ross had to pay back most of his money because his was based on an "earned income", that is, he worked for his money and I will have to pay however much in taxes for taking out student loans (from the government who is also getting interest on those loans). So tell me this, why is it that we find it appropriate to tax the life out of people who are working hard for their money, doctors, lawyers or other professionals, but allow those people who just invest the money they have and let there money work for them get away without paying even half of what the rest of us pay? I feel that one of the best ways we can get our country and our economy back on track would be to just do a flip flop. Let those people who are out making jobs and working hard for their money, enjoy the money they earn. As for the investors, let's use their money to fund the many government programs that are both useful and sometimes necessary for the people lower on the economic totem pole.
I'd love to hear any ideas or any comments from all of you that are smarter than I am when it comes to this stuff.
I can already hear the defenses mounting.
ReplyDelete"That income has been taxed at several levels already, when is enough enough?
"Raising the capital gains tax (from 15% to 20%) will crush the economy, kill jobs, inspire jihadists, start global warming, and all hell will break loose, it literally will be the end of the world."
Just kidding you guys!
Would I lose any sleep over Mitt Romney, Warren Buffet, and the likes paying 20% instead of 15% on their income that comes from investments? No. Would even they lose sleep? I doubt it. Do I think it will solve the problem? Not even close. I don't know what the exact numbers are, but I highly doubt raising the capital gains tax from 15% to 20% will all of the sudden make up the 1.5 trillion dollar gap that currently exists in the federal budget. We have significant spending cuts and/or tax increases to make in order to get out of the red. When you have a budget deficit of 1.5 trillion, trying to tackle that is impossible without seriously pissing off just about everyone in the country, but someone's gotta do it.
By the way, I don't think you should have to pay taxes on student loan money and I'm really wondering if you actually have to. As for the guy paying 102% of his taxable income, I had to read that story twice and I still don't get it. Because it said overall he is only paying 20% of his income in taxes. I guess I just don't get the difference between income and taxable income. Maybe he just had like a bajillion dollars in itemized deductions he was making? I don't know.
ReplyDeleteI was actually thinking that this post makes a great case for a flat tax. I'll admit that I know far less about taxes than my accountant wife does, but a flat tax is appealing to many because there would be no more loopholes with the much simplified tax code (meaning revenues would increase) and everyone would pay the same percentage no matter how much $ you make (isn't that fair?). In absolute dollars, the rich would pay much more and the poor would pay much less.
ReplyDeleteCreighton's right about the NYT article - it was misleading. The key word was 'taxable' income, meaning what was left over after he itemized several deductions. Cry me a river.
Creighton's also right about solving the problem. I'm too lazy (as an armchair politician should be) to go look this up, but I remember reading somewhere that even if you taxed the top 1% at 100% of ALL their income, and assuming they all stayed in this country enslaved to Uncle Sam, that the additional revenue would have only paid for a tiny sliver of Obama's porkulus package. This means that this would do absolutely NOTHING to solve our long term debt/deficit issues.
If that is a fact, I have a really hard time understanding why the left is so insistent that jacking up taxes on the rich ("common sense" and "spreading the wealth around" as Obama calls it, "class warfare" and "Robin Hood economics" as the right calls it) is the only answer to all of our fiscal woes. Creighton's right, important voting demographics (seniors especially) will be furious, but unless one of the political parties decides to actually LEAD by seriously addressing long-term entitlement, tax, and spending reforms, our debt/deficit problem isn't going anywhere. It's only going to get worse, and both parties will share the blame.
So, why hasn't Pres. Obama proposed any reforms to medicare in three years? And why hasn't the Senate proposed any budget in three years? I prefer to think about things other than taxes, Can you tell?
ReplyDeleteThat is a fantastic question. I spent probably 2 hours (that I should have spent studying pediatric cancers, but there's always tomorrow right?) reading about federal budgets vs. family budgets, Paul Ryan's "Path to Prosperity" budget proposal, and several conservative and liberal blogs about the federal budget. I then decided that hot having taken one economics class in my lifetime is really hampering my ability to understand all of this and be able to talk about it in an intelligent way.
ReplyDeleteIt looks to me that Pres. Obama proposed a budget each year but Congress voted against it each time. In fact if I remember right, his 2012 budget proposal was defeated 97-0. Ouch. Paul Ryan's alternative budget (the path to prosperity) had a slight majority in the house but died in the senate like 43-57ish. Medicare is a hot button issue. Senior voters are usually the most active voters, and a group that neither party wants to anger. Most people over the age of 65 and receiving medicare benefits are very protective of it (google image "get your government hands off my medicare" for some ironic fun. "Fat kids mcdonalds" brings up some fun images as well). So how do you tackle medicare reform and keep your job? Seems tough to me, and that's why I think we should have term limits for all members of congress.
H-yeah there should be term limits for all members of congress. Ron Paul's plans of cutting $1 trillion in 1 year might be a little extreme, but they're certainly in the right direction. People need to realize that the more programs and roles the federal government assumes, the less say they ultimately have in how things are run, because the decisions are made by a bunch of dirt-bag career politicians in Washington rather than the people from their own communities in local and state governments. Ideally, the federal government should handle defense and foreign affairs, and everything else could be handled elsewhere. While major reductions in the federal umbrella are improbable in the foreseeable future, having term limits for congress might have a bigger effect than we realize. Imagine if most our congressmen had recently come from real jobs and knew they would soon have to go back to real jobs and deal with the legislation they passed.
ReplyDeleteSo if you're argument is to get back to just having the federal government taking care of national defense and foreign affairs (my guess is that the federal government would only need about 7-800 billion dollars to do that) what do you propose happen with medicare, social security, education funding, infrastructure spending? I'm not disagreeing with you, I'm just wondering what your replacement plan would be (maybe it would be none?)
ReplyDeleteI totally agree with DeBus. Term limits would keep things changing in washington instead of having the same old stuck in their ways politicians making decisions for the country. After too much time in washington, they seem to forget that there is more to the US than Washington politics.
ReplyDeleteMy only problem with the flat tax is I think it puts too much of a burden on the poor. If you could exempt those living in poverty from paying, and maybe have a progressive increase until a certain point, say a family of 4 making $60,000 a year or something, then I could get behind it.
ReplyDeleteI know everyone calls it redistribution of wealth, and it definitely is, but I appreciate the earned income tax credit and child tax credit. When you're poor like us, it's nice to get a check like that once a year to help cover some expenses. I know it's unpopular amongst the very conservative, but it helps us a lot and I really don't have a problem paying a higher tax rate once I'm out of medical school for that same reason.
I have a very (and I mean very,) conservative friend in medical school here at the U. I really don't think you could find a more hard line conservative than this guy. Dare I say he's even more conservative than Rush Limbaugh. He and his wife took their earned income credit tax return and child tax credit and paid it back to taxpayers in their families. They sent checks to their parents and older siblings who paid taxes. While he and I certainly don't see eye to eye on just about everything (except abortion and fiscal responsibility) I respect he lives what he believes.
I know this is apples and oranges here, and I can definitely understand where you're coming from, but does a 10% tithe put too much of a burden on the poor? There is redistribution of wealth in the church - fast offerings and other funds - but the key difference is that that redistribution is entirely voluntary. Everyone has the same 10% 'burden' if you will, but the more needy (member and non member alike) are taken care of by the voluntary charity of those who are more fortunate. Also, isn't it nice to know that the stewards of your tithes and offerings appropriately treat those funds as sacred? In these ways, it would be nice if the government could be like the church. (this is Devin, btw)
ReplyDeleteIf the nation were run by God I would say okay, let's do it. Lots of people struggle to pay tithing but at least they have the promise from scripture saying that the Lord will "open you the windows of heaven, and pour you out a blessing, that there shall not be room enough to receive it." The government can't quite live up to that promise. I wish that they could.
ReplyDeleteIf a flat tax we're instigated, either our revenues would go down significantly or there would be a larger burden on the middle class. It doesn't bother me that rich pay a little more in taxes (they pay around 35% while middle class pay 20% or so?) and someday I'll be hopefully be in that tax bracket and for me, 35% is okay. Especially when I think about all the investments (as I view them, not entitlements) the government has made in me.
When you do reach "that" tax bracket, I wouldn't be surprised if you were singing a different tune, with all the student loans you'll still have to pay back. Unless of course, you followed the dishonest example of some of your doctor colleagues who find some loan repayment program that lets them only pay a tiny fraction of their very high income for so many years towards their loans. At the end of that time whatever remaining balance will be automatically forgiven, no matter how much remains. This hoses the taxpayers whose dollars made it possible that your student loans were backed by the government in the first place. In that sense, the government isn't investing in you, other honest tax paying citizens are. They are the ones who get hosed when no one wants to pay back all the money they borrowed to finance their education, and will cut corners to get out of their repayment obligations. I hope you won't be one of those doctors.
DeleteSorry for the tangent. In any event, at the rate the government is burning through $ (not to mention all the demonizing of the rich that has been going on), I'd bet you'd be THRILLED to have a tax burden as low as 35% by the time you're done with your residency and making the big bucks.
I've heard of that happening, it is sad. There are loan repayment programs if you go work in a rural area but I know a cardiologist here in Bountiful is doing exactly what you said, and it does seem dishonest to me. One of the doctors I know really well bought a smaller older house and makes 4x the minimum payment on his loans and mortgage every month to be debt free in like 6 years or something and I always figured I would do something like that. But you're right, I'm keeping my fingers crossed for 35% at maximum but I don't know how likely that will be.
DeleteNice. What is truly sad is how government-backed loans through FAFSA and the like are one of the main reasons why the cost of education has ballooned. Just as in health care, when someone else is paying the bill there is no incentive for providers to keep costs down. Sucks for people like me, who pay out of state tuition for three years and has limited mobility in the job market due to my loan repayment obligations. I'm fortunate to have a good job with a reputable firm, but with roughly 150k in student loans to repay, it makes little financial sense for me to transfer back West when my salary would be 25-30k/yr. lower. This doesn't mean you'll be seeing me at an Occupy rally anytime soon blaming the rich for all of my financial problems.
DeleteCreighton, in your case, the government is making an investment in you. Even though you may be living on Food Stamps, benefitting from Medicaid, CHIP, or WIC, you will eventually pay back into the system at your 35% tax rate than you have taken out of it. Thus, you are a good investment. However, many people will never qualify as "investments". There are many who live on government subsidies, but will never give back. Of course, I don't expect the entitlement programs to work as loans that must be repaid before we die, nor do I expect that everyone that uses them be able to crawl out of their state of poverty and be able to financially contribute to the entitlement programs. This is where the church's idea of welfare works so well. Instead of giving sustenance, they promote self reliance. Even with a fully functioning welfare program, the church is able to stay debt free (you could argue that they don't pay for sky rocketing healthcare bills, and they don't in the quantity that the government does). However, the big difference is that if you must stay on the church welfare for an extended period of time, you are asked to help out the church with your time or your talents. That maintains in peoples mind that this is not just a hand out, but that they are still working for it and retaining their self reliance. And most people are happy to give back for the things the church helps them with. Now can you imagine what would happen if the government asked similar things of its welfare recipients? What if, after you have been on government welfare for a year or two, you had to start volunteering 1 saturday a month at a homeless shelter, or some other government program in order to remain on welfare? I feel like their would be anarchy. People would sue, march, occupy or whatever else to rid themselves of the oppressive efforts of the government, then sit back when all is said and done, and ask for their monthly stipend. So, the difference between entitlement and investment, is in the mindset of the person and their willingness to give back to the society that is helping them through their tough times.
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