4aapl
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Post by 4aapl on Jul 14, 2024 6:58:37 GMT -8
One of the things that bugs me about the current tax system is that it is so complex and variable that people at all levels try to game the system or help others game the system, while feeling that others are doing the same and doing it even more. It would take a huge overhaul, but massive simplification while also getting nearly everyone to pay at least a little could help bring everyone together, especially if part of an overall goal that included relooking at all spending and fixing known issues. That sounds like a lot, and it is. At the same time it is good to remember that most spending is part of the money flow, going to multiple citizens in short order, along with the whole monetary theory that it all doesn't matter too much if kept in check, though personally I think a lot of these things (worries about fed spending, debt, social security, etc) weigh at least some on a lot of the population and not having the near constant wall of worry items would be good for the country (productivity and psychologically). But in seeing on average more than half of my son's pay as tips, hearing of trades people getting plenty of pay but trouble with getting a home loan or rental since a lot of their pay is in cash, and occasionally paying people in cash while also seeing others encourage it (beat the system!), I wonder a bit about it. Of course with the complex tax system you could justify not paying taxes on tips by staying that tips are really gifts, and there's no tax there below a certain level. And that might make sense or not matter much if tips were 10 or even 20% of the take-home. But when cash payments that are kept under the table make up around 50% of income, does it still make sense. Not only is this not being taxed and sending money into the IRS like other jobs do, but they aren't getting the benefit of proven income for loans/credit/rentals, and they aren't paying into social security, part of the three legged stool for retirement that is even more important when you likely don't have a work based 401k or other retirement plan. Anyways. looks like some politicians here in NV are proposing to have no income taxes on tips, which really only matters by making it legal (you're supposed to report those tips), and equalizing it for jobs that pay the tips on the paycheck instead of in cash (some restaurants in town do that). The story says 2.5% of workers in NV are servers. 5% of workers is likely a good guess on the high side for workers that make any tips at all. Nevada's Democratic Sens. Rosen, Cortez Masto join Ted Cruz's 'No Tax on Tips' billI don't have a magically complete solution though I have some ideas to get there, but this seems like a step in the wrong direction if we want simplification and a way to bring everyone together for a common goal. OTOH "helping middle class families out by lowering their tax bill" always gets attention.
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Dave
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"It's tough to make predictions, especially about the future." Yogi Berra
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Post by Dave on Jul 15, 2024 12:05:41 GMT -8
I agree with you that tips should not be taxed. But that is just one small item on a long list of items that should not be taxable. It goes along with the list of regulations that are basically an indirect tax. What is now called the underground economy was once called everyday commerce and was legal and encouraged. That dollar in your pocket belonged to you, it was your private property, it belonged to you. It did not belong to anyone else or group. But that is an outdated concept now and the idea of private property is quickly changing. Digital currency is on the horizon and no one will need to worry about what is fair or right.
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4aapl
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Post by 4aapl on Jul 19, 2024 7:32:05 GMT -8
I agree with you that tips should not be taxed. But that is just one small item on a long list of items that should not be taxable. It goes along with the list of regulations that are basically an indirect tax. What is now called the underground economy was once called everyday commerce and was legal and encouraged. That dollar in your pocket belonged to you, it was your private property, it belonged to you. It did not belong to anyone else or group. But that is an outdated concept now and the idea of private property is quickly changing. Digital currency is on the horizon and no one will need to worry about what is fair or right. Actually I think tips should be taxed. To me, the only way to bring things back together is to try to fairly tax everyone. It's easy to demonize the billionaire who somehow has a $1M gain untaxed (let's say selling a piece of art through a Bermuda company), but it seems unfair to have someone making $60k taxed as if they only made $30k (if half of your income was in cash payments that you didn't put on your tax forms) vs someone in a job also making $60k but all of it was on paystubs/W2's and so was taxed on the full $60k. So really the first step is taxing all income, not letting anyone, no matter their income level, cheat the system. If you did that, you'd have more tax money coming in at current rates. And from there you could then lower rates, pay off debt, or a combination of the two. There'd still be the decision of what rates to lower, and then resulting complaints. How do you go about doing that? It partially happens on its own through people using cash less and less, along with no new bills higher than $100 coming out. There's checks/paypal/venmo/AppleCash/etc, but cash is still king, though in larger amounts some people get worried about counterfeits. Counterintuitively, one huge dent would be to give tax deductions for listing big cash payments, thus listing these transactions and forcing the hand of receivers to also list these transactions. I'm thinking here about houses and contractors, where we paid the painters $2k with cash or check. If it was similar to donations, where I need to give some info and then give more info about the nonprofit if the donation is over $500 or so, then to get my $2k deduction on my house on the eventual profit I could have to list it that year on my taxes. Right now, even if renting it out where you list costs that year (as opposed to your home where costs come in when you sell it), you don't have to put that info in. So you'd only need that info if you were audited. Tips would mostly be with the business. It wouldn't catch everything, like someone passing a $20 bill to a ski instructor/dive master/hike leader at the end of the day. But if there was some liability to the business, and some audits on the scale of the tips, you could get maybe 80% compliance even if that meant some data collection at restaurants and even an occasional strip joint or golf course. I guess it goes back to separation of powers, and how we hear of many of the gangs/cartels/mafia going to jail over tax evasion. We might not want big brother to watch and know every transaction, but unless we are the ones benefiting we want the system to be fair and even. And that still leaves lots of opinion and interpretation, but it seems like in general that one person making $60k and another making $60k should be taxed the same. That's not the case when a big portion of some people's income is untaxed, due to unreported cash income of tips or other income.
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Post by Luckychoices on Jul 20, 2024 13:32:14 GMT -8
I agree with you that tips should not be taxed. But that is just one small item on a long list of items that should not be taxable. It goes along with the list of regulations that are basically an indirect tax. What is now called the underground economy was once called everyday commerce and was legal and encouraged. That dollar in your pocket belonged to you, it was your private property, it belonged to you. It did not belong to anyone else or group. But that is an outdated concept now and the idea of private property is quickly changing. Digital currency is on the horizon and no one will need to worry about what is fair or right. Actually I think tips should be taxed. To me, the only way to bring things back together is to try to fairly tax everyone. It's easy to demonize the billionaire who somehow has a $1M gain untaxed (let's say selling a piece of art through a Bermuda company), but it seems unfair to have someone making $60k taxed as if they only made $30k (if half of your income was in cash payments that you didn't put on your tax forms) vs someone in a job also making $60k but all of it was on paystubs/W2's and so was taxed on the full $60k. So really the first step is taxing all income, not letting anyone, no matter their income level, cheat the system. If you did that, you'd have more tax money coming in at current rates. And from there you could then lower rates, pay off debt, or a combination of the two. There'd still be the decision of what rates to lower, and then resulting complaints. How do you go about doing that? It partially happens on its own through people using cash less and less, along with no new bills higher than $100 coming out. There's checks/paypal/venmo/AppleCash/etc, but cash is still king, though in larger amounts some people get worried about counterfeits. Counterintuitively, one huge dent would be to give tax deductions for listing big cash payments, thus listing these transactions and forcing the hand of receivers to also list these transactions. I'm thinking here about houses and contractors, where we paid the painters $2k with cash or check. If it was similar to donations, where I need to give some info and then give more info about the nonprofit if the donation is over $500 or so, then to get my $2k deduction on my house on the eventual profit I could have to list it that year on my taxes. Right now, even if renting it out where you list costs that year (as opposed to your home where costs come in when you sell it), you don't have to put that info in. So you'd only need that info if you were audited. Tips would mostly be with the business. It wouldn't catch everything, like someone passing a $20 bill to a ski instructor/dive master/hike leader at the end of the day. But if there was some liability to the business, and some audits on the scale of the tips, you could get maybe 80% compliance even if that meant some data collection at restaurants and even an occasional strip joint or golf course. I guess it goes back to separation of powers, and how we hear of many of the gangs/cartels/mafia going to jail over tax evasion. We might not want big brother to watch and know every transaction, but unless we are the ones benefiting we want the system to be fair and even. And that still leaves lots of opinion and interpretation, but it seems like in general that one person making $60k and another making $60k should be taxed the same. That's not the case when a big portion of some people's income is untaxed, due to unreported cash income of tips or other income. How would you guys feel about a flat tax? A curtain specific percentage for *everyone*, regardless of income…with 0 deductions.
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4aapl
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Post by 4aapl on Jul 20, 2024 14:34:17 GMT -8
How would you guys feel about a flat tax? A curtain specific percentage for *everyone*, regardless of income…with 0 deductions. I like the simplicity of a flat tax with no deductions. And I think having everyone pay at least some income tax is a good thing, or at least a much higher percent of people (80%?) than currently. But I also understand that for a decent portion of the population, just saying 20-30% for starters, it's much more of a struggle financially, and each dollar helps a lot more. Basically if they don't have it, they'll really need to be given support in another way. And I also understand that this level varies a lot based on where you live. The current system doesn't really account for that AFAIK, except for being able to make some deductions including for state income tax (though SALT is more limited now). One way might be to give a standard deduction equal to the poverty rate, give a low alternate minimum tax for a swath up to 3x or even 5x the poverty rate, and then a higher alternate minimum tax above that. A starting point might be half of the current tax rates in the various brackets. It's not entirely simple, but it could be a lot simpler than the current system if it deleted many of the various overlapping layers that currently exist. Because we've added all these different things over the decades that have made it more and more complex. I know I've had different things to learn each couple of years. But with it being so complex, I think the only real way would be to make huge drastic changes all at once, so that everyone lost their favorite deduction, but also could understand the overall picture, not feel that others had unfair advantages, and hopefully that rates could correspondently go down. A really tough part is the difference between personal income taxes and business income taxes, since businesses can take so many more deductions, to help make it all work out, especially for low profit margin businesses that have lots of expenses.
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Dave
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Post by Dave on Jul 21, 2024 2:11:50 GMT -8
If you want to talk about something being fair, the flat tax would be the best option. No deductions, no loopholes. But it will never happen as the complexity of the present system provides too much power and control over the population. If you want more of something, you lower the tax. Less of something, you raise the tax. And the same can be said about regulations on business, which translate into higher prices for the consumer. Indirect taxation. The connection between the government’s budget, or lack of one, no longer has a connection to the amount of tax revenue that is collected or even can be collected.The present system also keeps the classes divided by claiming that the other guy is not paying his fair share and “if you vote for me I’ll correct this inequality”. This is why a flat tax can never happen. But it’s fun to dream.
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4aapl
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Post by 4aapl on Jul 21, 2024 7:57:01 GMT -8
If you want to talk about something being fair, the flat tax would be the best option. No deductions, no loopholes. But it will never happen as the complexity of the present system provides too much power and control over the population. If you want more of something, you lower the tax. Less of something, you raise the tax. And the same can be said about regulations on business, which translate into higher prices for the consumer. Indirect taxation. The connection between the government’s budget, or lack of one, no longer has a connection to the amount of tax revenue that is collected or even can be collected.The present system also keeps the classes divided by claiming that the other guy is not paying his fair share and “if you vote for me I’ll correct this inequality”. This is why a flat tax can never happen. But it’s fun to dream. Nothing is ever going to be "fair" in everyone's eyes. One of the books on taxes labeling the system unfair put the burden of both sides of Social Security onto the worker, not caring that they should get an overall positive return on it and feeling that the company would raise pay by 6.3% if that business side wasn't there. But then it also put the burden of general business taxes onto the employee. The thing that a flat tax, or something pretty close to that, has going for it is simplifying the rules dramatically. Even when thinking of a board or card game, it's when rules aren't followed or there is some strange little known rule that people think things are unfair. "House rules". From that sense I could see deleting or minimizing all or nearly all deductions, along with lowering all rates. Flattening it entirely doesn't seem right, but but tranches of under 3x the poverty rate, there to 2x the median, and then above 2x the median could work. More dear to people on this board, I do sometimes wonder about the longer term viability of special dividend and long term capital gains rates. If trying to flatten everything else and make things simple for things to seem more fair, is there room or reasoning for this sort of thing? If going big to change the whole system, it might be a hard sell on its own. I think this would have to be coupled with another big change. Personally I'd like to see the health system and health insurance changed. It's amazing how huge the drain of that is on our economy (lots of layers of middle management, added costs for potential liability, and then the whole billing side of things for doctors and insurance), whereas all things that way are then also a big part of our economy. In the long term thinking, and heading things off before they become big problems, even just giving free immunization, a 1 year physical, and a few office visits would be huge. But that's a whole different kettle of fish. If pushed right I could see it helping bring people together or bring someone into office, since there is so much frustration around both of these things (taxes and health care). There's many other areas too, where frustration with the system could help bring opposing sides together for change, but these two seem important. (I've been told for nearly 30 years that there might not be SS money at my traditional retirement age. I now realize that it should mostly be fine, but that's another frustration point that could bring people together with a shared goal. With Pensions nearly disappearing, and 401ks taking over but not helping all levels of jobs, plus the extra worry over added complexity (some people just want things done, not worrying about how much to put in one place and how much in another, hence the targeted retirement date funds), I could see a big change here coupled with increased future payouts if the 3 legged stool analogy is no longer valid or has major issues with a large part of the population. And while I like the theory of private accounts or investing that SS money, that makes things more complex and could also make things more divided. Either way, this is a frustration point that could use change.) (I do wonder about taking deductions to zero. That would be a very hard push from where things are, even though there are some limits in place of how much deductions you can take (lots of complexity that I don't remember fully). Maybe there is a simple way to make it work, like limiting deductions to no more than 25% of your income, carrying forward excess. Or maybe it is 50%. The problem is the outliers, such as those rare people that are really in retirement but still work, and donate all that they make. But likewise, it would have to be decided if there should be a limit on deductions for businesses. That's the complaint by some for even some big businesses like Amazon, that they are announcing a profit, but with taxes (additions like depreciation, or different amortization schedules) they are flat or at a loss and so not paying taxes. But you'd have to look at a variety of places and make sure we don't squash our companies, whether new upstarts or grocery stores)
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Dave
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Post by Dave on Jul 21, 2024 9:21:42 GMT -8
Social Security is a prime example of government mismanagement and corruption. It was too easy for generations of politicians to dip into the SS funds and borrow money for other projects knowing that they would be out of office or dead by time the consequences of their actions became apparent. They looked at the new generation of babies being born (the baby boomers)and the rapid expansion of the American economy and saw the revenue that was going to be generated and wanted to spend that money. Now that same generation is retiring and demanding their money. And now the population is in decline, so you have fewer people paying into the system, and the rate of inflation is promising a poverty level of existence for those depending on SS as their only income source and it doesn’t paint a bright future. One of the generators of our inflation is our limited labor force because of the decline in our population. Again because of the baby boomers retiring. So what does our government do, they penalize those on SS for working. And whenever you pull money from your IRA it is counted as income.
I think that the fairest thing to do is to force the politicians to live by their own rules. And only then they may come up problem solving ideas.
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4aapl
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Post by 4aapl on Jul 21, 2024 11:03:51 GMT -8
Social Security is a prime example of government mismanagement and corruption. It was too easy for generations of politicians to dip into the SS funds and borrow money for other projects knowing that they would be out of office or dead by time the consequences of their actions became apparent. They looked at the new generation of babies being born (the baby boomers)and the rapid expansion of the American economy and saw the revenue that was going to be generated and wanted to spend that money. Now that same generation is retiring and demanding their money. And now the population is in decline, so you have fewer people paying into the system, and the rate of inflation is promising a poverty level of existence for those depending on SS as their only income source and it doesn’t paint a bright future. One of the generators of our inflation is our limited labor force because of the decline in our population. Again because of the baby boomers retiring. So what does our government do, they penalize those on SS for working. And whenever you pull money from your IRA it is counted as income. I think that the fairest thing to do is to force the politicians to live by their own rules. And only then they may come up problem solving ideas. My understanding is that age distribution is changing, but the US population has yet to decline. Likewise, the mismatch between future SS payouts and payouts it could likely sustain alone is small, while there is no reason for it to be considered alone. One huge problem is the lack of an automatic way to adjust SS based on lifespan averages. If it was automatic, it would just happen, similar to inflation based adjustments that are already there. But while the average lifespan after 65 increased, corresponding changes did not happen and instead it had to be decided to raise some of the ages manually. It is disappointing that small changes have not already been made, since small changes over long times would take care of it. But I guess I don't understand your qualm on taxing money taken from an IRA. It wasn't taxed going in. Why wouldn't it be taxed coming out, likely an average of 30 years later?
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mark
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Post by mark on Jul 21, 2024 14:01:44 GMT -8
Social Security is a prime example of government mismanagement and corruption. It was too easy for generations of politicians to dip into the SS funds and borrow money for other projects knowing that they would be out of office or dead by time the consequences of their actions became apparent. First of all, that's what politicians do ... they spend as much as possible to make themselves look good so they will be reelected. Second of all, it is quite possible that the alternative would have been worse. Let's say they never spent any of the social security money, and let's say there was currently $50 or 60 trillion in a fund somewhere. It would have to be invested in equities, because investing in treasury bonds is literally the same as spending it (what they do today), and over the years it would grow. That would essentially mean that the government owns a big chunk of all public companies, heck, maybe ALL the public companies depending how big the fund ever got. And the people who own public companies are the ones who choose the Board of Directors, and they choose/approve all the big steps taken by companies that they direct. Can you imagine 5 out of 7 board seats held by a bureaucrat?? I shudder to even think about it!
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Dave
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Post by Dave on Jul 21, 2024 15:34:57 GMT -8
Thanks Mark, that really would be a frightening scenario.
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