Master of Ossus rants about American IncomeTax

[Darth Wong]

why are people making $20k or $30k paying nothing, and is that consistent with your model of taxation and shared tax burden for educating children and making sure people are healthy?

I have never tried to raise a child on $20k or $30k in a society which has no socialized health insurance. I cannot comment directly about how difficult that is. But it seems to me that you're needlessly trivializing it by acting as though it is self-evident that these people can afford to pay more tax. At the very least, it would be nice if you provided some kind of justification for this position.

[Vehrec]

Would a five-dollar increase for all folks in that 30k bracket offset the loss of income from your many, many Americans who won't be additionally affected in your scheme? Otherwise it's a pretty worthless topic of discussion. A one cent increase won't affect people's way of life either.

When we're talking about 50+ million people who are paying nothing, I think it's reasonable to claim that even very small increases will have at least some impact. Concededly, it's pretty small if we're just talking about $5, but again the $5 fee is merely meant to illustrate. Personally, I think it would be reasonable to charge them $100, but would be unreasonable to hit people with a $2000 tax burden from out of the blue.

If the goal is just to remain revenue-neutral with the current system, then of course there will be an impact even if it's still a relatively small one.

So, that would be 5 billion dollars? Maybe enough cash for say, a couple of generals to fund some pet projects, or a few bridges to nowhere? I'm a bit fuzzy on how much the Government spends on its pork, but this doesn't sound like much in the grand scheme of things.

[erik_t]

Would a five-dollar increase for all folks in that 30k bracket offset the loss of income from your many, many Americans who won't be additionally affected in your scheme? Otherwise it's a pretty worthless topic of discussion. A one cent increase won't affect people's way of life either.

When we're talking about 50+ million people who are paying nothing, I think it's reasonable to claim that even very small increases will have at least some impact. Concededly, it's pretty small if we're just talking about $5, but again the $5 fee is merely meant to illustrate. Personally, I think it would be reasonable to charge them $100, but would be unreasonable to hit people with a $2000 tax burden from out of the blue.

If the goal is just to remain revenue-neutral with the current system, then of course there will be an impact even if it's still a relatively small one.

I consider this point to have been conceded. For the system to remain revenue-neutral, some sizable group of people is going to have their lifestyle adversely affected by increased tax. By your own words.

Now, whose lifestyle can afford to take that hit? Is it the comparatively wealthy or the comparatively poor?

Frankly, I don't think it's especially relevant who is paying what right now. The relevant point is that someone's going to have to pay more, and someone's lifestyle is going to take a hit.

[Master of Ossus]

I have never tried to raise a child on $20k or $30k in a society which has no socialized health insurance. I cannot comment directly about how difficult that is. But it seems to me that you're needlessly trivializing it by acting as though it is self-evident that these people can afford to pay more tax. At the very least, it would be nice if you provided some kind of justification for this position.

My dad can comment on how hard that was, and every time he had a $5 expense in the 1970's he just paid it and didn't get too concerned about it. Again, I don't see very many people who can't cut $5 out of their annual budget, and that includes people who are raising kids.

[Master of Ossus]

I consider this point to have been conceded. For the system to remain revenue-neutral, some sizable group of people is going to have their lifestyle adversely affected by increased tax. By your own words.

Now, whose lifestyle can afford to take that hit? Is it the comparatively wealthy or the comparatively poor?

Frankly, I don't think it's especially relevant who is paying what right now. The relevant point is that someone's going to have to pay more, and someone's lifestyle is going to take a hit.

That's fair, but I think that my argument works in a vacuum, as well. If our goal is to minimize total suffering generated by the tax burden in society, the goal should be to operate on the margin and evaluate who is hurt the least by each small increase. That's very difficult to evaluate, and so I think we have to look for proxies, such as by comparing the effects of each person (or group's) total tax burden and to see if there are gross disparities. I think that this is one of them: we have a significant fraction of the labor force that is paying nothing, even though we can observe the perceived impact that they face when they suffer from small monetary losses and can observe that it is slight. We have other people who are paying a significant amount of their income in taxes and we can observe that their perception of this burden is fairly high.

My objection to the Obama tax policy, then, stems from his significant increase of the tax burden on those with high incomes, while simultaneously lowering the burden on lower incomes groups, in spite of this change.

[erik_t]

That's fair, but I think that my argument works in a vacuum, as well. If our goal is to minimize total suffering generated by the tax burden in society, the goal should be to operate on the margin and evaluate who is hurt the least by each small increase. That's very difficult to evaluate, and so I think we have to look for proxies, such as by comparing the effects of each person (or group's) total tax burden and to see if there are gross disparities. I think that this is one of them: we have a significant fraction of the labor force that is paying nothing, even though we can observe the perceived impact that they face when they suffer from small monetary losses and can observe that it is slight.\

I think everyone agrees that the goal is to minimize some measure of suffering (although our metrics may differ). I think we all agree that, however we quantify it, it is difficult to measure.

I emphatically disagree that the tax liability, as a percentage of take-home income, is a meaningful measure of this.

I further ask that you cease this five-dollar-increase/"small monetary losses"/whatever else canard. You have accepted that, given the need to maintain the total revenue, it would take a much larger gain in personal tax liability, which would necessarily result in a slight impact on quality of life.

[Master of Ossus]

I think everyone agrees that the goal is to minimize some measure of suffering (although our metrics may differ). I think we all agree that, however we quantify it, it is difficult to measure.

I emphatically disagree that the tax liability, as a percentage of take-home income, is a meaningful measure of this.

But the perception of one's total tax burden is the integral of its marginal impacts, and so it's somewhat instructive at that level.

I further ask that you cease this five-dollar-increase/"small monetary losses"/whatever else canard. You have accepted that, given the need to maintain the total revenue, it would take a much larger gain in personal tax liability, which would necessarily result in a slight impact on quality of life.

It's a proxy for getting at the marginal burden, which would be the ideal metric for evaluating tax burdens.

[Andrew_Fireborn]

I'm... rather honestly surprised no ones trotted out basic, high school level MATH to show how fucking ridiculous MoO's arguments are...


Let's say... Everything is set to equal aside from income.

Housing: $500 a month, or $6000 a year.
Transportation: $350 a month, or $4200 a year.
Food: $300 a month, or $3600 a year

Now, who could more easily afford to loose 10% of their income in this scenario: someone making $30,000 or someone making $200,000?

Remember, you need those expenses, and I've most likely already low balled them for anywhere in reality, and that doesn't even factor in expenses due to unforeseen negative happenings.

[erik_t]

Yes, but the step you're omitting is that tax suffering per person is not simply a linear function of tax burden. The degree of nonlinearity can be argued, but I think we can agree that if Bill Gates were taxed 75% of his income, it would not cause as much suffering to Bill as it would for a middle-class family of four to lose 75% of their income.

[Broomstick]

If someone took 50% of the income of someone making, say, $100,000 a year in taxes that would leave them with $50,000, which they most certainly could live on. I could understand they wouldn't be happy about it, but they would NOT be left destitute. If, however, you take 50% of the income of someone making $10,000 a year they would be homeless and starving, unable to pay for even basic adequate food, shelter and clothing. THAT's why it's morally bankrupt to tax the very poor as much as the very rich. I'm sorry you don't understand that - you never struck me as being a moron before.

So are you actually going to stop strawmanning and answer the real question: why are people making $20k or $30k paying nothing, and is that consistent with your model of taxation and shared tax burden for educating children and making sure people are healthy?

I was addressing your comment about 5 figure incomes.

Since it was you who charged in claiming people making 30K a year didn't pay Federal taxes I'm not sure how you can accuse me of "strawmanning" or being in the wrong. Pointing out that 40% doesn't equal half of anything wasn't strawmanning either.

IF someone making some arbitrary amount - let's say $30k - has sufficient legal deductions that it reduces their Federal income tax liability to 0 why the fuck is that a problem? If it's because they're raising children, well, children are expensive and I want them adequately provided for. If it's because they're making massive donations to charity, well, charities provide social services such as soup kitchens, food pantries, and emergency housing that otherwise the government would have to pay for with tax money. If they're putting away money for decades in order to pay for their retirement so as not to be a burden on the state I don't see that as a problem. All of these things benefit society as much as additional tax revenue would.

Fact is, if you don't have those deductions and you make $30k a year you will pay taxes.

Let's look at this another way - when I made $50K a year I enjoyed some definite luxuries. Cutting my income in half deprived me ONLY of those luxuries (flying, eating out, lots of books and video games, trips to the movies, etc), I am still able to pay for my housing, food, gas, etc. IF, however, you cut my current income in half then I would not be able to pay for shelter, food, etc.

Here we go again - at $50k a year my monthly income was about $4200 (rounded). Take 10% away, that $420, which I certainly would notice, but it leaves $3780 to live on which, with fixed expenses of, say, $2000/month means I still have $1780 to spend on entertainment, investment, or just burn in my fireplace. Now, with the same fixed expenses but an income of $25K a year that's an income of $2100 a month. Oh dear - past fixed expenses I only have $100 with which to do anything above basic necessities. Take 10% of my income, $210, and that leaves me with $1890 to live on - $110 less that what I need to survive.

NOW do you see why raising taxes 10% on the lower end of the "5 figure income" spectrum can be a problem?

This is, of course, somewhat hypothetical even though based on my own experience but it should illustrate the problem with raising taxes on those who aren't wealthy.

[Master of Ossus]

Yes, but the step you're omitting is that tax suffering per person is not simply a linear function of tax burden. The degree of nonlinearity can be argued, but I think we can agree that if Bill Gates were taxed 75% of his income, it would not cause as much suffering to Bill as it would for a middle-class family of four to lose 75% of their income.

But does Bill losing 75% of his income equate to many, many people losing .01% of their income? At the very least, that's a much more difficult question to answer. I don't think we could expect Bill Gates and Warren Buffet to shoulder the entire tax burden of the US by themselves, and so I think there should be at least some level of spreading that occurs if just for the sake of fairness (even if they could, hypothetically, pay for the US government's budget).

[Beowulf]

For perspective:
Share of Individual Income Tax Liabilities 1979-2004


This is individual federal income tax liabilities (IOW, it doesn't include social security, state income taxes et al).

Data taken from the CBO

Note especially that the lines for the bottom two quartiles actually go negative. That is to say, the government, on average, pays out more to the bottom quartile than it takes in from them, in the form of refundable credits et al.

[Master of Ossus]

IF someone making some arbitrary amount - let's say $30k - has sufficient legal deductions that it reduces their Federal income tax liability to 0 why the fuck is that a problem? If it's because they're raising children, well, children are expensive and I want them adequately provided for.

And they could not be adequately provided for if the "taxpayer" was paying a very, very small additional fraction of their income to the US government?

If it's because they're making massive donations to charity, well, charities provide social services such as soup kitchens, food pantries, and emergency housing that otherwise the government would have to pay for with tax money.

So does the US government. Frankly, making donations to charities is as much a luxury as anything else, and it's usually one of the first things that people cut back on when they're really in trouble--the fact that this person is making donations, I would argue, is good evidence that they don't actually need the money that badly and can bear to "suffer" from some slightly higher level of taxation.

If they're putting away money for decades in order to pay for their retirement so as not to be a burden on the state I don't see that as a problem. All of these things benefit society as much as additional tax revenue would.

Neither do I, but I also don't think that some marginally higher level of taxation is going to make them "not a burden on the state" when before they would have been a burden.

[Irrelevant example snipped]

NOW do you see why raising taxes 10% on the lower end of the "5 figure income" spectrum can be a problem?

This is, of course, somewhat hypothetical even though based on my own experience but it should illustrate the problem with raising taxes on those who aren't wealthy.

1. Raising income taxes 10% on the lower end of the 5 figure income spectrum wouldn't be a problem at all, even for them, because they're not paying anything to begin with--that's the whole point of this thread.
2. I never claimed that raising taxes for the lower and middle classes doesn't create a hardship for them. I claimed that it's more reasonable to inflict some small level of hardship on that large body of people than it is to inflict a much, much higher and more concentrated level of hardship on a small subset of the populace.

Specifically, I think that there's a big issue with raising taxes on high income groups by 10%+ while simultaneously lowering taxes on everyone else. That's particularly true given that, even with the increase on high-income groups, the total taxes are insufficient to pay for the government's budget.

[erik_t]

Yes, but the step you're omitting is that tax suffering per person is not simply a linear function of tax burden. The degree of nonlinearity can be argued, but I think we can agree that if Bill Gates were taxed 75% of his income, it would not cause as much suffering to Bill as it would for a middle-class family of four to lose 75% of their income.

But does Bill losing 75% of his income equate to many, many people losing .01% of their income? At the very least, that's a much more difficult question to answer. I don't think we could expect Bill Gates and Warren Buffet to shoulder the entire tax burden of the US by themselves, and so I think there should be at least some level of spreading that occurs if just for the sake of fairness (even if they could, hypothetically, pay for the US government's budget).

Yes, I did not mean to imply otherwise. The tax burden should be spread in some fashion. However, you seem to be arguing that a spread function generated based on percent-of-income-taken-as-tax would be the same spread function generated based on some kind of overall tax-suffering metric. I do not accept a priori that these spread functions will be identical.

[Broomstick]

Beowulf, your chart is useless to me because of the colors used - three of those lines appear to be exactly the same color to me, apparently being in exactly that portion of the spectrum affected by my colorblindness. Could you please tell me, from top to bottom, which of those pretty colored lines represent which quintile so I can actually read the damn thing? I realize this isn't your fault, as you have no way of knowing that would trip me up, but it's frustrating to be presented with information I can't read.

[Broomstick]

1. Raising income taxes 10% on the lower end of the 5 figure income spectrum wouldn't be a problem at all, even for them, because they're not paying anything to begin with--that's the whole point of this thread.

That's specifically why I didn't say say take an additional amount of tax. I represented both parts of the example as if neither was paying tax and the effect of taking 10% of each. Which matches your "let's tax 'em an additional 10%" meme. Thus the example is not irrelevant, even if you would like it to be.

[Master of Ossus]

Beowulf, your chart is useless to me because of the colors used - three of those lines appear to be exactly the same color to me, apparently being in exactly that portion of the spectrum affected by my colorblindness. Could you please tell me, from top to bottom, which of those pretty colored lines represent which quintile so I can actually read the damn thing? I realize this isn't your fault, as you have no way of knowing that would trip me up, but it's frustrating to be presented with information I can't read.

They increase by the quintile involved, so the bottom one is the lowest income quintile, the second lowest is the second lowest income quintile, etc. until the top one is the highest income quintile.

[Master of Ossus]

1. Raising income taxes 10% on the lower end of the 5 figure income spectrum wouldn't be a problem at all, even for them, because they're not paying anything to begin with--that's the whole point of this thread.

That's specifically why I didn't say say take an additional amount of tax. I represented both parts of the example as if neither was paying tax and the effect of taking 10% of each. Which matches your "let's tax 'em an additional 10%" meme. Thus the example is not irrelevant, even if you would like it to be.

Uh, actually, in that case it's still irrelevant because nowhere have I advocated imposing such a high tax burden on the lower class. I've merely argued that I think they should face SOME positive tax burden, which your example doesn't get at, at all. Would you really find it impossible to cut out one dollar from your annual budget to pay some higher level of taxation?

[Beowulf]

Beowulf, your chart is useless to me because of the colors used - three of those lines appear to be exactly the same color to me, apparently being in exactly that portion of the spectrum affected by my colorblindness. Could you please tell me, from top to bottom, which of those pretty colored lines represent which quintile so I can actually read the damn thing? I realize this isn't your fault, as you have no way of knowing that would trip me up, but it's frustrating to be presented with information I can't read.

Hey, I'm color blind too. But anyway, the lines are approximately as you'd expect: lowest quintile is the lowest line, highest is the highest line, with the rest of them falling in order.

[Illuminatus Primus]

I have never tried to raise a child on $20k or $30k in a society which has no socialized health insurance. I cannot comment directly about how difficult that is. But it seems to me that you're needlessly trivializing it by acting as though it is self-evident that these people can afford to pay more tax. At the very least, it would be nice if you provided some kind of justification for this position.

My dad can comment on how hard that was, and every time he had a $5 expense in the 1970's he just paid it and didn't get too concerned about it. Again, I don't see very many people who can't cut $5 out of their annual budget, and that includes people who are raising kids.

So you really just want poor people to pay five fucking bucks out of a sadomasochistic desire for them to share in your self-righteous pain? I mean, grow up man. It wouldn't make any difference and they'd still be paying basically nothing, it just sounds better rhetorically, but the difference is meaningless.

[Illuminatus Primus]

Note especially that the lines for the bottom two quartiles actually go negative. That is to say, the government, on average, pays out more to the bottom quartile than it takes in from them, in the form of refundable credits et al.

Looks real mean and terrible until you consider the fact that poor and working class incomes have had almost no real growth or even shrank recently, while almost all growth is concentrated at the top. Your graph is what one would expect to see if tax burden is proportioned according to ownership of the wealth.

[Stark]

So you really just want poor people to pay five fucking bucks out of a sadomasochistic desire for them to share in your self-righteous pain? I mean, grow up man. It wouldn't make any difference and they'd still be paying basically nothing, it just sounds better rhetorically, but the difference is meaningless.

What makes that more amusing is his 'oh wah wah bad Obama reduced my income by 10%' in the OP. What a terrible crime; let's get people near the poverty line to do it!

[Master of Ossus]

Looks real mean and terrible until you consider the fact that poor and working class incomes have had almost no real growth or even shrank recently, while almost all growth is concentrated at the top. Your graph is what one would expect to see if tax burden is proportioned according to ownership of the wealth.

Indeed? We would expect people in the bottom quintiles to have NEGATIVE wealth?

If they can only pay $5, then make them pay $5. If they can pay $500 or $1000, make them pay $500 or $1000. If we need to increase taxes, we shouldn't increase taxes only to one subset of society, but should spread that as best we can, and if the poor feel they've been given the raw deal then they should at least be exposed to the choices that society has to face by paying some non-zero figure for their income tax.

[Master of Ossus]

What makes that more amusing is his 'oh wah wah bad Obama reduced my income by 10%' in the OP. What a terrible crime; let's get people near the poverty line to do it!

You seriously think we should just run around making 10% of people's after-tax income disappear, even as we leave a spectacular budget shortfall and give tax breaks to all other segments of the population?

[Rogue 9]

Okay, let's demonstrate just how much bullshit is involved in the line that low-income Americans do not pay income tax. I see that Crayz already posted his tax totals, but let's look at what a truly low-income return looks like. Allow me to paint a picture of my own tax return for the year 2007.

Adjusted gross income: $9,646.00 (And yes, I lived independently on that and managed to buy a car that year on top of it, though I didn't quite finish paying it off until early this year.)

Taxable income: $896.00 (The first $8,750.00 of your income is not taxable, so people making that amount or less do indeed pay no taxes.)

Total tax: $89.00

Total payments: $492.00

Refund amount: $403.00

Effective tax rate: 0.92%

So no, it wasn't very much, but I paid federal income tax on an income of less than $10,000. Incidentally, the year before I made $11,650 and paid $323 federal income tax; I don't have the full return for that handy, but it's noted in the carryover worksheet for 2007. I took every deduction I could get my hands on, which wasn't many as I have no dependents, and it didn't save me from income tax.

Incidentally, the state of Indiana taxed me $310 on the same income in 2007, though the state's threshold below which it doesn't tax you is $2,600 rather than $8,750, so my taxable income was much higher. The notion that people with low incomes pay no taxes is complete bullshit. I find it seriously fucking hard to believe that I paid income tax, but those making roughly double my income (that is to say, $20k or so) are paying nothing at all.