danivon wrote:

Archduke Russell John wrote:

By the way, according to our Turbotax printout we paid an effective tax rate for 2011 of 8.9%. We ain't rich.

I guess not, if you were out of work for much of that year. What kind of tax rate were you paying in a year when you were fully employed?

Yeah, I tried to get people to talk about their taxes in a couple of threads in the past and was met with an echo. People here don't like to talk about that. Yet, I think its critical to informed decision-making, so I'll share:

From 2003-2009 my household's effective federal income tax rate was between 23.6 and 28.4%. Effective tax rate is the federal income tax you paid divided by AGI (Adjusted Gross Income), which is your income before most deductions. In 2010 and 2011, our tax rates went to 17.7 (same as Buffet's!) and 13.1. While we've always had wage and salary income, the major difference in the periods is that the source of income shifted from mostly wage and salary to mostly investments.

There's an expression, "working hard or hardly working." As I've said many times, we bizarrely tax the former a lot more than the latter.

More reason to tax everything at the same rate w/o deductions...

Well, let's test that, bbauska. ARJ, how would it have affected your household to be paying an effective rate more like 20% in 2011?

Let's see who ARJ would vote for if one candidate wanted 20% effective tax rate, and the other a 10%.

Perhaps that is a more realistic question?

danivon wrote:So, because you don't want to take an objective view, it can't be viewed objectively?

Nobody views taxes fairly. The tax you pay is unfair because it is too much. The tax others pay is unfair because it is too little. That's the point.

danivon wrote:Firstly, I was responding to you saying how the 'dollar amount' was important, not the rate, so I was showing how the same amount makes a difference to different people. Moving the goalposts is so tiresome.

Well by that I meant the total amount the wealthy person pays in and of himself not that it was equal to a poor person. I thought that was pretty clear by the context. However, I forgot your tendacy to be overly literal. Sorry about that.

danivon wrote:I guess not, if you were out of work for much of that year. What kind of tax rate were you paying in a year when you were fully employed?

I'll look.

bbauska wrote:Let's see who ARJ would vote for if one candidate wanted 20% effective tax rate, and the other a 10%.

Perhaps that is a more realistic question?

Both would be calling for his effective tax rate to go up.

And it's no more or less realistic than mine.

Archduke Russell John wrote:Nobody views taxes fairly. The tax you pay is unfair because it is too much. The tax others pay is unfair because it is too little. That's the point.

Well, maybe that is your view, but it's not mine. I don't think I pay too much tax. And grown-ups should be able to take a slightly more broad view than that. Just because a lot of people are too self-absorbed to view taxes objectively does not mean that taxes are unfair. Anyway, I don't think you are even correct about your own position. You are concerned about how much rich people pay, and we know it's often much more than you do, and particularly was in 2011.

Archduke Russell John wrote:Well by that I meant the total amount the wealthy person pays in and of himself not that it was equal to a poor person. I thought that was pretty clear by the context. However, I forgot your tendacy to be overly literal. Sorry about that.

Thanks for the snark. The point is that tax should be based on ability to pay. The rich pay more in dollar amounts, but then again they can more easily absorb it. Those on middling or low incomes can less easily do that.

Besides, the 'context' was in response to geojanes talking about how some wealthy people pay a lower rate of tax than working people, and that CGT means that could be a lower rate than someone else on the same income (and thus a lower dollar amount) depending on whether the income was earned through investment or through effort. Potentially, CGT could mean someone on a high income from investments payin less in dollars than another person on a significantly lower income from work. Especially if the former can also use previous losses as a trade off, or can utilise other tax avoidance techniques.

i'm not sure how to come up with an equivalent figure for 'effective tax' for myself. We are not taxed as a household, but as individuals (and I don't know what my gf's income or annual taxes are), and I pay about 16% of my total gross income in Income Tax (20% of my taxable income).

geojanes wrote:From 2003-2009 my household's effective federal income tax rate was between 23.6 and 28.4%. Effective tax rate is the federal income tax you paid divided by AGI (Adjusted Gross Income), which is your income before most deductions. In 2010 and 2011, our tax rates went to 17.7 (same as Buffet's!) and 13.1. While we've always had wage and salary income, the major difference in the periods is that the source of income shifted from mostly wage and salary to mostly investments.

My effective federal income tax rate is zero. Yes, zero. It's complicated as to why, but it's zero.

Nevertheless, I don't view taxes selfishly. If taxes on me went up, I would adjust.

I think I'm like most Americans, who believe everyone should pay "something."

Archduke Russell John wrote:Nobody views taxes fairly. The tax you pay is unfair because it is too much. The tax others pay is unfair because it is too little. That's the point.

Yeah, you may think this way, but please don't attempt to speak for others.

Doctor Fate wrote:My effective federal income tax rate is zero. Yes, zero. It's complicated as to why, but it's zero.

Nevertheless, I don't view taxes selfishly. If taxes on me went up, I would adjust.

I think I'm like most Americans, who believe everyone should pay "something."

I'm sure that your harping on the half of Americans who don't pay tax is related to the fact that you don't pay tax and you believe you should.

That's cool. I didn't get into the issue of tax "fairness" until I personally benefited from rules designed to benefit the rich, realizing that the tax rate you pay is often directly proportional to how hard you work, not how much you make, which I think is wrong.

geojanes wrote:

Doctor Fate wrote:My effective federal income tax rate is zero. Yes, zero. It's complicated as to why, but it's zero.

Nevertheless, I don't view taxes selfishly. If taxes on me went up, I would adjust.

I think I'm like most Americans, who believe everyone should pay "something."

I'm sure that your harping on the half of Americans who don't pay tax is related to the fact that you don't pay tax and you believe you should.

Just being honest.

That's cool. I didn't get into the issue of tax "fairness" until I personally benefited from rules designed to benefit the rich, realizing that the tax rate you pay is often directly proportional to how hard you work, not how much you make, which I think is wrong.

I disagree with you on the matter of how investment income should be taxed, but that's because I believe the more you tax an activity, the less of it you get. If you double capital gains taxes, people will look at other means of making money. Will it end capital investment? No. However, if it has even a fractional effect in this economy, that's a bad thing.

Having checked what AGI is, gross income with some expenses and pre-tax deductions taken off (in my case, mainly my pension contributions), it turns out I was close - my effective tax rate (Income Tax only) is 17%.

Interestingly, while that's half of the number Purple reported as the 'mean' UK Income Tax rate, I am some way above the UK median income level. Which does add to my thoughts that the 'mean' tax rate is a pretty useless indicator.

Doctor Fate wrote:I disagree with you on the matter of how investment income should be taxed, but that's because I believe the more you tax an activity, the less of it you get. If you double capital gains taxes, people will look at other means of making money. Will it end capital investment? No. However, if it has even a fractional effect in this economy, that's a bad thing.

However, geojanes is saying it should be taxed at the same (or similar at least) rate as taxes on earned income from working or using assets to run a business. Do you think that there is currently a distoring effect on the balance of the economy because for some people the marginal tax rate on doing more work is a lot higher than that on increasing unearned income?

danivon wrote:

Doctor Fate wrote:Do you think that there is currently a distoring effect on the balance of the economy because for some people the marginal tax rate on doing more work is a lot higher than that on increasing unearned income?

What do you mean by "the balance of the economy?"

I do think if the capital gains rate goes up, particularly by the rate Obama is proposing, investors will, at the very least, more carefully calculate whether investing is a worthwhile endeavor. Investment is something to be encouraged, especially during a sluggish economy (at best).

I mean, how much actual work is being done, as opposed to speculation. If 'work' is taxed at a higher rate than 'investment', then it surely has an effect on how people approach both activities.

There is a corollary with 'broadening the base'. This means lowering the point at which people start to pay Income Tax. Which means increasing the marginal rate of tax on 'work' for a section of the population. Thus reducing the incentive for people on a fairly moderate salary to do more work, and "if it has even a fractional effect in this economy, that's a bad thing", to coin a phrase.