Tax Refunds Explained...

[Stereodude]

If you don't understand the Democrats' version of tax refunds, maybe this will help explain it:

50,000 people went to a baseball game, but the game was rained out. A refund was then due.

The team was about to mail refunds when a group of Congressional Democrats stopped them and suggested that they send out the ticket refunds based on the Democrat National Committee's interpretation of fairness.

Originally the refunds were to be paid based on the price each person had paid for the tickets. Unfortunately that meant most of the refund money would be going to the ticket holders that had purchased the most expensive tickets. This, according to the DNC, is considered totally unfair. A decision was then made to pay out the refunds in this manner:

People in the $10 seats will get back $15. After all, they have less money to spend on tickets to begin with. Call it an "Earned Income Ticket Credit." Persons "earn" it by having few skills, poor work habits, and low ambition, thus keeping them at entry-level wages.

People in the $25 seats will get back $25, because it "seems fair."

People in the $50 seats will get back $1, because they already make a lot of money and don't need a refund. After all, if they can afford a $50 ticket, they must not be paying enough taxes.

People in the $75 luxury box seats will each have to pay an additional $25 because it's the "right thing to do".

People walking past the stadium that couldn't afford to buy a ticket for the game each will get a $10 refund, even though they didn't pay anything for the tickets. They need the most help. Sometimes this is known as Affirmative Action.

Now do you understand?

If not, contact Representative Nancy Pelosi, Senator Ted Kennedy or Senator Hillary Clinton for assistance.

 

[ddrueding]

lol

 

[Gilbo]

Warren Buffett needs no introduction. Considering the ridiculous wealth he's accumulated you'd think he'd have very strong personal incentives to agree with Stereodude. However, the reality, and the reality (vs. the perception) regarding taxation is different.

We did an informal office survey by looking at the total tax footprint versus the total income. I earned 46 million and paid a tax rate of 17.5%. My rate was the lowest, the average was 33%, and my cleaning lady paid 40%. The system is tilted towards the rich. The Forbes 400 total net worth has gone from 220 billion to 1.54 trillion, an increase of 7-to-1. You see in legislature that there is lobbying carried on by the powerful over issues such as the estate tax and carried interest for private equity investments.

The fact of the matter is that there is a very clever, byzantine system in place in the U.S. at the moment that does not serve any objective, rational purpose. Warren again:

We need to flatten income and payroll taxes, and those making under $30,000 shouldn’t be bothered.

Let’s imagine that 24 hours before you are born, a genie comes to you and tells you devise a social and economic system. The only catch is that after you designed the system, you would choose a paper from a barrel which would determine your demographics. What objectives would you want? You need to devise a system that creates prosperity. It needs to be a meritocracy, to put the right people in the right place. It needs to have a strong education system, and throw off lots of goods and services. It also needs to not discriminate against women or minorities. Even though the per capita GDP is $47,000, 20% of the population makes less than $20,000. We need to eliminate that fear of sickness or old age. A tax code is the codification of a country’s values. But you can’t kill the golden goose of prosperity.

Warren Buffett may be the finest business man of the century. He is also shockingly humble and forthright. If he says the U.S. tax system is wrong, I'll trust him on it. I've never heard him dissemble on anything. He is also better at understanding this problem, unarguably than anyone else in the states.

And one last economic tid-bit to shock the naive, indoctrinated Republican sheep (which does not include you Stereodude, but refers to the general army of them out there running all over the internet):

I think the best way to stimulate the economy is to give money to the poor. They will spend it. Don’t give it to guys like me.

This guy knows more about business than every Republican politician in congress and the Senate combined. Real business, not the funnel-money-from tax-payers-into-your-personal-accounts-because-you're-buddies-with-elected representatives-style business practiced by the associates of Republican party members.

The fact is, the Republican party gets elected on a corporate welfare platform. The Democrats for all their faults are economically the lesser sin. At least their welfare system is forthright, honest and helps people who need it more (Which any glance at the government budgets of the last 25 years would tell even the most simple-minded, critical reader.) However, if it's not clearl, I agree with Buffett that anything other than a flat tax on income above a reasonable minimum required for a decent standard of living is welfare of one type or another.

 

[Howell]

However, if it's not clearl, I agree with Buffett that anything other than a flat tax on income above a reasonable minimum required for a decent standard of living is welfare of one type or another.

I like Warren Buffet and agree with him. Also, could you finish what you were thinking in your last sentence.

Statistically and culturally speaking, the lower class is/are spenders, the middle class is/are savers and the upper class ia/are investors.

http://www.amazon.com/Unheavenly-City-Revisited-Edward-Banfield/dp/0881335290/ref=pd_sim_b_title_1

 

[RWIndiana]

lol, good post StereoDude. It's too true.

 

[ddrueding]

Excellent summary Gilbo. I've heard Warren Buffet speak a number of times, and he seems to have a good grasp of the situation (go figure).

 

[Stereodude]

Warren Buffett needs no introduction. Considering the ridiculous wealth he's accumulated you'd think he'd have very strong personal incentives to agree with Stereodude. However, the reality, and the reality (vs. the perception) regarding taxation is different.

So what? Maybe he feels guilty about his wealth?

It's all a crock. Warren pays so "little" taxes because he uses legal tax loopholes. Mainly Tax Free municipal bonds. If he feels so "bad" about how little money he pays in taxes he should stop using loopholes to reduce his tax burden. However, I don't see him doing that, so I'm not sure what to make of his claims that the system is unfair when he manipulates the system so he can pay less in taxes. There is nothing stopping Buffet's cleaning lady from using the same tax shelters that he uses.

The fact is the bottom 50% of wage earners (those making ~$30k or less) basically don't pay taxes. They pay all of ~4% of the tax burden, and the top 50% pay ~96% of the tax burden. How much more "unfair" can we make the system?

The fact is, the Republican party gets elected on a corporate welfare platform. The Democrats for all their faults are economically the lesser sin. At least their welfare system is forthright, honest and helps people who need it more (Which any glance at the government budgets of the last 25 years would tell even the most simple-minded, critical reader.) However, if it's not clear, I agree with Buffett that anything other than a flat tax on income above a reasonable minimum required for a decent standard of living is welfare of one type or another.

So you think the scenario I mentioned above with the baseball tickets is a good example of how things should be run? I'm all for a flat tax on income over a certain amount. That would be more fair than what we have now. However, that's not good enough. We have a progressive tax system that increases the percentage the more you make instead of a flat tax. If you tax rich people unfairly they will find a way to hide their money from the taxes. It's human nature. That's why tax revenue goes up when you cut taxes.

 

[Stereodude]

Excellent summary Gilbo. I've heard Warren Buffet speak a number of times, and he seems to have a good grasp of the situation (go figure).

I disagree. Buffet is another liberal hypocrite. He wants to change the very system that he's busy taking advantage of. Why doesn't he lead by example? Why doesn't he let the gov't tax his money instead of hiding it in tax shelters?

 

[ddrueding]

People will try to avoid paying taxes regardless of the system or how much they are supposed to pay. Buffett not using a loophole doesn't fix the problem. Bringing it to the attention of the public so it can be closed is the more effective method. Any tax plan more than a few pages long is too complex and will contain loopholes. Our current tax system is massively broken.

 

[Stereodude]

Buffett not using a loophole doesn't fix the problem. Bringing it to the attention of the public so it can be closed is the more effective method. Any tax plan more than a few pages long is too complex and will contain loopholes. Our current tax system is massively broken.

No, it doesn't fix he "problem" (if you can really call it one), but he wants the gov't to be able to take more of your money, all the while he's ensuring they don't take more of his.

 

[ddrueding]

I disagree. Buffet is another liberal hypocrite. He wants to change the very system that he's busy taking advantage of. Why doesn't he lead by example? Why doesn't he let the gov't tax his money instead of hiding it in tax shelters?

If he didn't use any shelters or deductions and payed exactly the declared percentage, how much extra money would the government get? Compared to having those shelters and deductions removed, making sure that everyone pays what they are supposed to?

 

[Stereodude]

If he didn't use any shelters or deductions and payed exactly the declared percentage, how much extra money would the government get? Compared to having those shelters and deductions removed, making sure that everyone pays what they are supposed to?

So, he can't stop using shelters at the same time as bringing attention to it? He can only bring attention to tax shelters and loopholes if he uses them?

 

[udaman]

If he didn't use any shelters or deductions and payed exactly the declared percentage, how much extra money would the government get? Compared to having those shelters and deductions removed, making sure that everyone pays what they are supposed to?

I can feel a jtr rant coming up right about now . How about those Dem plans to tax oil companies, now that they are making record profits and price of petrol is @record high of $100/barrel, with pump prices supposedly to hit $4/gal (we've heard this one before too, it's an election year so we know Bad, bad, Bush will somehow manipulate world wide oil demand to make sure the price goes down just before the elections, lol). And why isn't in priced in Euro, lol?

I tell you it's all a conspiracy led by Castro

 

[jtr1962]

I disagree. Buffet is another liberal hypocrite. He wants to change the very system that he's busy taking advantage of. Why doesn't he lead by example? Why doesn't he let the gov't tax his money instead of hiding it in tax shelters?

Buffett does contribute an enormous amount to charity. He probably feels by keeping more of his money via tax shelters then more goes to the charities which do a better job helping whoever they are helping than the government would. I'd do the same in his position. I'd probably keep a few hundred thousand to live decently on, then give the rest to a few worthy charities. And make sure the government's take was as little as possible.

You're missing Buffett's main point though. The tax system is broke when billionaires can find loopholes which result in their paying less percent of their income in taxes than a maid. And no, these loopholes aren't open to everyone. A lot of tax shelters require substantial minimum investments. And they don't write off the FICA tax. A low wage worker pays 15.3% just in FICA tax, starting from the very first dollar they make. Millionaires often don't pay FICA taxes at all if 100% of their income is from investments. Even if they do, earned income over about $100K is no longer subject to FICA tax. Back in 1989 when I was making $280 a week, fully half of it was going to taxes, carfare, union dues, mandatory health insurance payments, etc. Considering that with travel time work consumed about 55 hours a week, I was netting a big $2.50 an hour when all was said and done. And this was fair? The crappy deal employees get is one major reason I decided on self-employment not long after that.

 

[jtr1962]

I can feel a jtr rant coming up right about now .

Not really. I actually started writing a rant yesterday but decided I didn't even want to get into it. The post above was about as much ranting as I care to do on this subject. Gilbo probably already said a lot of the stuff I would have said. The system is broke because of both parties. The sooner we get rid of both neoconservatism AND 1960s liberalism the sooner we might actually fix things.

 

[Stereodude]

How about those Dem plans to tax oil companies,

Just like every other business they'll just pass the cost increases on to the customers. But, somehow this action is going supposed lower the price at the pump.

 

[Stereodude]

You're missing Buffett's main point though. The tax system is broke when billionaires can find loopholes which result in their paying less percent of their income in taxes than a maid.

Apparently everything is broken then. I pay more as a percentage of my income for a 52" LCD TV than someone like Buffet. It's not fair!!!

 

[jtr1962]

You're missing the point again. Someone making $30K nowadays can't afford to live at today's prices even if they pay zero taxes. The taxes they do pay are not coming from disposable income. It's not like the money they send to the government each week simply means they have to give up buying a few CDs or other fluff. Rather, this shortfall due to taxes means they have to make up the difference somehow by either working overtime, or working another job. Even then, a good portion of this "replacement money" goes for taxes also. Anybody making a subsistence wage or less shouldn't pay any taxes at all, FICA or otherwise. A subsistence wage in most parts of the country is probably at least $30K for a single person, $40K or so for a couple with no children. In high cost of living places like New York it's probably closer to $75K. Any fair tax system would take local cost of living into account as well. And before you mumble "move to somewhere cheaper" as the answer, who then will be left to perform the basic services in a city like New York? They're certainly not going to be able to live 100 miles away and commute for a $10 an hour job.

 

[ddrueding]

Move somewhere cheaper. Really, I mean it. If you can't afford to live where you are, it is your problem not the governments.

Where I live is very expensive, and there is no cheap place to live nearby. Therefore even the illegal mexican maid or gardener charges $15/hr. Fine. If they are good enough, it's worth it.

 

[Stereodude]

Someone making $30K nowadays can't afford to live at today's prices even if they pay zero taxes.

Maybe they should stop buying lotto tickets, going to Atlantic City to gamble, and buying cigarettes and alcohol.

Seriously though. Go to nearly any casino (outside of the really fancy ones in Vegas on the "Strip") and you'll see that the people in there gambling are the ones who can least afford to do so. And while I'm on a roll, the lottery is just a tax on people who are bad at math.

 

[jtr1962]

Maybe they should stop buying lotto tickets, going to Atlantic City to gamble, and buying cigarettes and alcohol.

You're right that a lot of uneducated, low-income people spend money they really don't have on stupid things, and otherwise have pretty warped priorities (i.e. big screen TV but no food in the house). But the fact remains that in certain parts of the country even the most basic housing runs $2000 a month and up. To make it worse, employers in these areas don't pay anything close to a living wage. Taking taxes out of their already meager salary is just adding insult to injury.

Where I live is very expensive, and there is no cheap place to live nearby. Therefore even the illegal mexican maid or gardener charges $15/hr. Fine. If they are good enough, it's worth it.

$15 an hour won't even get you an apartment in NYC, especially considering that a third of that would be taxes. Let's see, take-home would be about $1600 a month. Cheapest carfare is the $81 a month Metrocard. Food is at least $5 a day even eating crap. That leaves about $1370 a month to cover housing, clothes, toiletries, electricity, etc. Given that the cheapest rents you're likely to find anywhere run $1500 and up, you're already well into the hole just after paying your housing. In this part of the country you need $75K a year just to live on your own halfway decently. You need well over $100K to live well. Problem is employers aren't paying it. That's why housing subsidies and so forth are such a cottage industry in NYC. Only problem is the waiting lists for subsidized housing are years long, and for the most part they don't take single people. The free market in regards to housing doesn't work here at all. The only glimmer of hope is that the speculators are starting to get out of the housing market. Hopefully that will cause housing prices to fall more in line with what they should be going by inflation (i.e. ~$200K for a single family house, not $500K-$600K).

 

[Striker]

. And before you mumble "move to somewhere cheaper" as the answer, who then will be left to perform the basic services in a city like New York? They're certainly not going to be able to live 100 miles away and commute for a $10 an hour job.

That's not even taking into account the enormous risk and cost of trying to find a new job if they move out of the region.

 

[Striker]

Move somewhere cheaper. Really, I mean it. If you can't afford to live where you are, it is your problem not the governments.

Where I live is very expensive, and there is no cheap place to live nearby. Therefore even the illegal mexican maid or gardener charges $15/hr. Fine. If they are good enough, it's worth it.

If you're barely making enough to survive, how do you think people are going to be able to afford the cost of moving, finding a new home then having enough money to survive while you try and find another job?

Just move somewhere cheaper is not a realistic option for many people.

 

[Stereodude]

Just move somewhere cheaper is not a realistic option for many people.

Yeah, instead they should just rely on the gov't to and take from those who do make more than $15 an hour and give it to them.

 

[Fushigi]

I've known a number of people who have use a couple of forms of rental assistance called "family" & "roommates". For the most part it seemed to work out OK for them. A few others have been "dual income"; that seems to add to the table as well. Sure, these non-government subsidies won't work in all cases but they are surprisingly popular for an unregulated industry.

Did you ever stop to think that the housing subsidies in NYC are part of the reason the prices are so out of line? Owners can charge more because they know the gov't will pitch in to make it 'affordable'.

As to the poor not being able to move to somewhere less expensive, it seems to work for the illegal aliens; why would it not work for citizens?

 

[ddrueding]

There are plenty of places where you can live if you are poor. It is not your gov't guaranteed right to live in NYC or SF, or around Silicon Valley. I personally consider it a privilege and am working hard to maintain it. I felt the same when I was living in NYC and in SF.

There are many places that are cheap enough to live on a low income. A quick peek shows the average house in Florida sells for $70k. Indiana is $140k. California and NY are $532k and $358k respectively.

Moving is very much an option, even on a low budget. That many are too lazy or closed-minded to consider it is their problem not mine.

 

[jtr1962]

There are many places that are cheap enough to live on a low income. A quick peek shows the average house in Florida sells for $70k. Indiana is $140k. California and NY are $532k and $358k respectively.

Those places are cheap because the few jobs there are low-paying. Proportionately housing is just as expensive relative to the available jobs. You can't afford a $140K house on that $5 an hour job in the local greasy spoon, which is about all you're likely to get in a place like that. In FL the added cost of electricity for the AC you'll need practically year-round tends to even things out also. I'll also add that the need to own a car makes both places a lot more expensive than they appear at first. Cars are black holes for money. Besides, quite a few people are physically unable to drive.

Moving is very much an option, even on a low budget. That many are too lazy or closed-minded to consider it is their problem not mine.

How about not wanting to leave the only support system of family and friends they may have? And if you've lived in a large city your entire life, adjusting to someplace much slower is difficult to impossible. Besides, if you're barely getting by, where do you get the money to move in the first place? And to buy the car you'll likely need when you get there? And what happens if you can't get a job there?

All this is academic anyway. Fact is places like NYC need workers for a lot of menial and nonmenial functions. They're unwilling to pay these workers anything close to a living wage. So the only alternative is subsidized housing. If everybody who couldn't afford to pay market housing moved out of NYC, it would cease to function. Fact is most of the people here in these $600K houses couldn't afford them if they had to buy them now. Speculators have skewed both the rental and private housing markets by using housing and mortgages as "investments". Funny, but I always thought they were just places to live in. Or at least that was the case until this stupidity started about 15 years ago. If it was a true free market housing prices would be more in line with what people make, and subsidies wouldn't be needed. It's anything but a free market now. Excessive housing demand by speculators who might buy 10 houses and rent them is what caused the spike in housing prices.

 

[Striker]

Yeah, instead they should just rely on the gov't to and take from those who do make more than $15 an hour and give it to them.

Of course I'm not at all shocked by this typical response.

 

[Stereodude]

Of course I'm not at all shocked by this typical response.

Why should you be? Those of us who go out and bust our asses every day to better ourselves, and climb the pay scale ladder resent the fact that we're supporting a bunch of leeches with their hands out. If you really feel so strongly about supporting those who make less than $15 go out and help them yourself instead of trying to pass laws to make me support them.

The same people who pass all these laws that enable the Robin Hood branch of the federal gov't walk by the very people they claim to care so much about and they do nothing to actually help them. A liberal will see someone rummaging through a dumpster looking for food, and think to themselves that the someone needs to do something to help that person, or wonders how the gov't might be able to help them. A conservative sees that same person and buys them a meal. It's quite the stark contrast.

 

[Striker]

A liberal will see someone rummaging through a dumpster looking for food, and think to themselves that the someone needs to do something to help that person, or wonders how the gov't might be able to help them. A conservative sees that same person and buys them a meal. It's quite the stark contrast.

Nice generalization founded in no way by fact.

Again, not at all surprised.
Your insinuation that people with less money work less hard than you or others is not only wrong in general it also doesn't surprise me.

In my experience people making more money, at least up to a certain point do less work than those below them. Maybe I'm wrong, but at least I'm not making assumptions about either side.

If you really feel so strongly about supporting those who make less than $15 go out and help them yourself instead of trying to pass laws to make me support them.

I must have missed the part where I said I felt this way...

 

[Stereodude]

I must have missed the part where I said I felt this way...

Of course... You're just arguing with me because you agree with me! Why didn't I think of that.

 

[Striker]

Of course... You're just arguing with me because you agree with me! Why didn't I think of that.

You're not paying attention to the points I was arguing. You just assumed that was what my problem was.

 

[sechs]

Moving is very much an option, even on a low budget. That many are too lazy or closed-minded to consider it is their problem not mine.

Ah, the illusion of workforce mobility.

If you can barely afford where you are now, how do you get the money to move? You have to have savings and/or credit; these folks don't have that!

And if you do move, how are you going to make money there? You can't move to someplace cheaper with no job waiting there for you.

 

[ddrueding]

The first time I moved, I was just out of high school and had less than $1k total. I had no job and no apartment waiting for me. I had no help from family, and a friend could only put me up for a week.

When I moved to Eugene, Oregon I had no job waiting for me and minimal cash. I had a lead on an apartment ($250 a month!) and everything worked out.

No, you won't be able to hire a moving company. Yes, you might end up living in a hole. You are not guaranteed comfort.

 

[sechs]

With $1k, you had a lot more saved than many of the people you are expecting to move....

 

[jtr1962]

The first time I moved, I was just out of high school and had less than $1k total. I had no job and no apartment waiting for me. I had no help from family, and a friend could only put me up for a week.

When I moved to Eugene, Oregon I had no job waiting for me and minimal cash. I had a lead on an apartment ($250 a month!) and everything worked out.

No, you won't be able to hire a moving company. Yes, you might end up living in a hole. You are not guaranteed comfort.

You also had a few things going in your favor. For one thing, you were young, and as far as I know had/have no major health issues. If need be, a young, fairly healthy person can live out of a box for a long time. It's not the best, healthiest thing long term, but many have done it and survived. Don't think your typical American 30 or 40 year old who might be priced out of where they currently live could do this. Half the people I see my age, or even 10 years younger, have trouble walking six blocks, and have a nice list of meds they have to take fairly often. I don't even want to think what adverse living conditions will do to their already not so great health. Granted, for many it was 100% their fault they ended up this way, although in a lot of cases just working their butts off to pay the bills for the last 20 years took its toll.

You're also a good deal smarter and more resourceful than the typical person who might "need" to move. You'll find work easier, be more likely to make some sort of living arrangement, perhaps even get "creative" and live off the land to some extent (i.e. dumpster diving). I don't see Joe Sixpack who worked in a blue collar job and has the IQ of a tomato being able to do any of this.

Fact is you're not typical. Neither is Stereodude. Just because you or him may have done something doesn't mean every person who can't is lazy or unmotivated or whatever. Some people just can't do much beyond work a menial job. Others maybe could have at one time but now have disabilities preventing full-time work. Best thing long term might be to selectively breed them out of existence but that's neither here nor there. So long as such people constitute the majority (trust me, they sadly do), the work force won't be very mobile, and they will vote for people who will give them "help". Not saying I agree with it. It's just a numbers game. There's more of them than you or SD or me or Merc. And sadly, judging by how we're breeding, or rather not breeding, on this site, the situation is only going to get worse. I don't have any easy answers. If any major candidate for office even mentioned something like permission to breed based on IQ, they would probably be spending the rest of their lives in a padded cell, assuming someone didn't put a bullet in their head first. Once the many put too much drag on the few able who are pulling most of the weight those few will get up and go to another country and the mindless masses will starve. That's nature's way of evening out things. At one time the US was that country of choice where the ambitious flocked to. More and more China is seeming like the place to go if you're smart, young, ambitious, and want to get rich. I give a 50-50 chance the USA as we know won't exist by the time you're my age.

 

[ddrueding]

More and more China is seeming like the place to go if you're smart, young, ambitious, and want to get rich. I give a 50-50 chance the USA as we know won't exist by the time you're my age.

Agreed. Though I don't think China is the answer. They still have a long, long way to go. They have too many people to do anything quickly. I was actually thinking of Singapore for a while, but now that I'm learning Russian, perhaps the *stans are a decent place to "get ahead".

 

[Striker]

The first time I moved, I was just out of high school and had less than $1k total. I had no job and no apartment waiting for me. I had no help from family, and a friend could only put me up for a week.

When I moved to Eugene, Oregon I had no job waiting for me and minimal cash. I had a lead on an apartment ($250 a month!) and everything worked out.

No, you won't be able to hire a moving company. Yes, you might end up living in a hole. You are not guaranteed comfort.

Did you have a car?

 

[ddrueding]

Not the first time. I took the Coast Starlight (train) and only took what I could carry in one trip. The second time I had my hatchback and only took what would fit.