A question about the "rich paying their fair share" charge...

[alkemyst]

Yep, welcome to reality. Big business, he big business-owned media, and the politicians love to the average wage ($39k) because it sounds much better than telling us we're dirt poor. If we think a decent wage is "average" and therefore "normal", then we're much likely to think "I only make $26k so there must be something wrong with me. Tax cuts for the rich wooo!!"

The average isn't much better than the median. However, in dual breadwinning families that $39k x 2 is much better than $26k x 2.

Meanwhile most actively running the political train on this are making about 3x+ more than that higher number.

In the end, this class battle will never be won. The uber wealthy (measured in tens of millions+++) will always be the least affected.

IMHO, this is very fair. I am no where near that level. I have the 'jealousy' starting wages of the six figure range. My freaking neighbors want to hate me after I have called police for them to help them. Sadly two of them watched my own home be burglarized for 4 hours and still never got a license plate despite their claims of trying to be valiant.

 

[alkemyst]

We know for a fact sales tax is regressive. That's why local taxes are regressive... they're mostly sales tax.

You know much like your K&N filter debate what people you qualify as important to you will tell you. You have no real experience, but just follow DOGMA.

When you think in terms of those working illegally then the sales tax arguement is not so regressive. You also have to think in a Capitalistic mind frame. If you are brainwashed into the current Socialist (cough cough Communist) movement people above are laying out for you to follow, you will surely be fucked.

 

[Craig234]

http://www.wweek.com/portland/article-17350-9_things_the_rich_dont_want_you_to_know_about_taxes.html

That's a very good article people should read, by David Cay Johnston.

 

[Fern]

We know for a fact sales tax is regressive. That's why local taxes are regressive... they're mostly sales tax.

I pay far more in real estate taxes than I do sales tax. And I do not see how real estate taxes are regressive.

Fern

 

[Throckmorton]

You know much like your K&N filter debate what people you qualify as important to you will tell you. You have no real experience, but just follow DOGMA.

When you think in terms of those working illegally then the sales tax arguement is not so regressive. You also have to think in a Capitalistic mind frame. If you are brainwashed into the current Socialist (cough cough Communist) movement people above are laying out for you to follow, you will surely be fucked.

I don't know or care what illegal immigrants pay in taxes. I care about us citizens and legal residents paying a disproportionate percentage of local taxes, while being told by the rich that we're lazy bums who don't pay our fair share.

 

[Throckmorton]

I pay far more in real estate taxes than I do sales tax. And I do not see how real estate taxes are regressive.

Fern

Are you poor? If not, that would explain why you (visibly) pay more in real estate tax than sales tax.

Real estate tax is by necessity regressive because it's based on property value... The poor and middle put a much bigger percentage of their income into housing than the rich. And yes, renters pay property tax because it gets passed on to them from their landlords.

 

[Fern]

I'd like to find ways to prevent that. It's not easy.

Of course it's easy to prevent/detect it. Money leaves a trail any accountant can follow.

And if they're using cash payment to in an effort to avoid that, they have absolutely no documentation meaning exactly they exactly zero deduction.

People who make above $100K are 10 times as likely to be audited as the average person.

Fern

 

[Throckmorton]

 

[Fern]

Ooops. You forgot local and state taxes, which are very regressive!

http://www.itepnet.org/whopays.htm

Similar to the federal income tax system, state income taxes also have higher brackets meaning it's NOT regressive.

Fern

 

[Throckmorton]

Similar to the federal income tax system, state income taxes also have higher brackets meaning it's NOT regressive.

Fern

Progressive state income tax is offset by regressive local taxes in all but one state. I think it was Maine or Delaware or something.

Look at that chart I just posted

 

[Fern]

If you own a business it's easy to cheat. I've seen people claim hundreds of thousands of dollars a year of personal expenses as business expenses.

Sure, it's easy to write down what you want as a deduction, it's also easy as heck to find those bogus personal expenses too.

Fern

 

[Craig234]

Of course it's easy to prevent/detect it. Money leaves a trail any accountant can follow.

No, it's not. An audit could do good, but that's difficult to happen - the Republicans have slashed the resources for auditing the returns of the wealthy.

And even in an audit, there are all kinds of things people can do that an audit can't catch, that lack evidence of proving the taxpayer is lying.

And then there is an entire industry of designing 'tax strategies' for the rich that are a gray to black area legally, but 'game the system' - for a cut of the 'savings'.

People who make above $100K are 10 times as likely to be audited as the average person.

I don't have that statistic handy, but like I said they've been slashed - but at the same time, major investments were made in increasing the automated systems for detecting any problems with wage earners. If your statistic were accurate, it doesn't tell us much - what are the rates at which taxpayers cheat, for how much?

The enforcement of the tax laws is far simpler for wage earners, who have w-2's to check and typically at most a small number of modest deductions.

Problems are largely caught without an audit; a letter from the IRS might result in fixing whatever problem.

The bottom line is that there is significant tax avoidance by the wealth and relatively little enforcement, which has been slashed under Bush.

Read David Cay Johnston on the topic for specifics.

 

[Fern]

Business owners cheating isn't even really a loophole. There is just enough gray area in the tax laws and enforcement is lax enough that they take the chance. Like Craig said it is a tough problem to solve. Auditing a business is much more complex then auditing an individual. If I have 5 million in revenue and 4 million in real business expenses, it's pretty easy to include another 200,000 in personal expenses without arousing too much suspicion.

If you have that kind of tax return, you're extremely unlikely to be preparing your tax return.

Any tax accountant can easily see those $200K of personal expenses in your books and records, and 99.999999% of them are not going to allow you to deduct them. For many years now, tax law has contained severe rules/penalties for tax preparers as well as taxpayers for those kinds of things.

Fern

 

[Craig234]

I pay far more in real estate taxes than I do sales tax. And I do not see how real estate taxes are regressive.

Fern

Real Estate taxes tend to be at best a 'flat tax' - not progressive - insofar as people house houses proportional to their income.

But at very high levels of wealth, they don't. Bill Gates and Warren Buffet spend a tiny fraction of their income on housing.

Gates despite his expensive house; Buffet even lives in an old modest home.

Anyone who makes a billion dollars spends a tiny percent on housing.

 

[Fern]

-snip-

And even in an audit, there are all kinds of things people can do that an audit can't catch, that lack evidence of proving the taxpayer is lying.

No Craig, there are not. To take a deduction you have to prove it. The IRS doesn't have to prove it's not deductible. Tax law works that you are guilty until proven otherwise.

And then there is an entire industry of designing 'tax strategies' for the rich that are a gray to black area legally, but 'game the system' - for a cut of the 'savings'.

Again, I strongly disagree. There are not nearly as many 'gray' areas as people make out. That's why are tax law is huge with thousands of pages and many more thousands of rulings and court cases.

As I have said before, many lawyers, who often think they know more than do in tax, craft things which are guaranteed to lose in court, but the whole thing hinges on 'invisibility'. The IRS has made this a huge focus of compliance.

Fern

 

[Craig234]

If you have that kind of tax return, you're extremely unlikely to be preparing your tax return.

Any tax accountant can easily see those $200K of personal expenses in your books and records, and 99.999999% of them are not going to allow you to deduct them. For many years now, tax law has contained severe rules/penalties for tax preparers as well as taxpayers for those kinds of things.

Fern

There's a large industry of accounting firms who design very aggressive tax avoidance schemes, knowing just where to play games. They understand how to fight with the IRS for years - and often win at some point as ideological politicians are favorable to wealthy taxpayers.

Why? It's very profitable for firms to design these programs, and take a cut. Many have been illegal. Many have been arguably illegal but they've won the legal battle.

 

[nonlnear]

No Craig, there are not. To take a deduction you have to prove it. The IRS doesn't have to prove it's not deductible. Tax law works that you are guilty until proven otherwise.



Again, I strongly disagree. There are not nearly as many 'gray' areas as people make out. That's why are tax law is huge with thousands of pages and many more thousands of rulings and court cases.

As I have said before, many lawyers, who often think they know more than do in tax, craft things which are guaranteed to lose in court, but the whole thing hinges on 'invisibility'. The IRS has made this a huge focus of compliance.

Fern

I have a coworker who worked for one of the Big Four in a consulting wing that was informally called the "chop shop". He was happy to get out, but if he had fewer scruples the earning potential for anyone with credentials and a willingness to take on massive risks was pretty darn big.

 

[Craig234]

No Craig, there are not. To take a deduction you have to prove it. The IRS doesn't have to prove it's not deductible. Tax law works that you are guilty until proven otherwise.

You're arguing against something I didn't say. A lot of lies can't be disproven.

Again, I strongly disagree. There are not nearly as many 'gray' areas as people make out. That's why are tax law is huge with thousands of pages and many more thousands of rulings and court cases.

As I have said before, many lawyers, who often think they know more than do in tax, craft things which are guaranteed to lose in court, but the whole thing hinges on 'invisibility'. The IRS has made this a huge focus of compliance.

Fern

I agree on that about many tax schemes 'knowing they are or probably are illegal'.

Also, after my last post, I did a quick check. My information comes from the mid-Bush administration; I hadn't heard of Democrats increasing audits on the rich, and said they should have. Well, it looks like they did. You're right they've increased under Obama - but your numbers are out of date too. They're up nearly double from the rate you list, which is from a year ago.

But as I said - they were about 90% lower a decade ago, early under Bush.

 

[Fern]

-snip-
Also, after my last post, I did a quick check. My information comes from the mid-Bush administration; I hadn't heard of Democrats increasing audits on the rich, and said they should have. Well, it looks like they did. You're right they've increased under Obama - but your numbers are out of date too. They're up nearly double from the rate you list, which is from a year ago.

The IRS undergoes significant changes far more than people realize. It typically has absolutely nothing to do with the President. It's really a huge organization, with officers who have a great of power and influence within it, or over it, who are career personnel (i.e., not governmental appointees).

You may find this surprising given my occupation and/or political view, but I'm highly complimentary of their efforts/changes over the past 5 or 6 years. Changes most people aren't aware of and won't ever see.

Fern

 

[alkemyst]

There's a large industry of accounting firms who design very aggressive tax avoidance schemes, knowing just where to play games. They understand how to fight with the IRS for years - and often win at some point as ideological politicians are favorable to wealthy taxpayers.

Why? It's very profitable for firms to design these programs, and take a cut. Many have been illegal. Many have been arguably illegal but they've won the legal battle.

There is some rumor that these larger firms (the ones that the common dude can't afford to hire nor would they take a simple 1040 filing from him anyway) are coluding with our leaders in a quid pro quo relationship.

Many loopholes were done out of political favors more or less at the heart of them.

 

[the DRIZZLE]

If you have that kind of tax return, you're extremely unlikely to be preparing your tax return.

Any tax accountant can easily see those $200K of personal expenses in your books and records, and 99.999999% of them are not going to allow you to deduct them. For many years now, tax law has contained severe rules/penalties for tax preparers as well as taxpayers for those kinds of things.

Fern

When I see these situations it's after the fact so I don't know how they get the accountants to sign off on it. I would guess that the taxes are prepared in house in the company so they owner can basically have them say anything they want.

 

[Craig234]

There is some rumor that these larger firms (the ones that the common dude can't afford to hire nor would they take a simple 1040 filing from him anyway) are coluding with our leaders in a quid pro quo relationship.

Many loopholes were done out of political favors more or less at the heart of them.

Yup, there's not really much question about your last point.

 

[Craig234]

The IRS undergoes significant changes far more than people realize. It typically has absolutely nothing to do with the President. It's really a huge organization, with officers who have a great of power and influence within it, or over it, who are career personnel (i.e., not governmental appointees).

You may find this surprising given my occupation and/or political view, but I'm highly complimentary of their efforts/changes over the past 5 or 6 years. Changes most people aren't aware of and won't ever see.

Fern

Some is agency-driven and some is politically driven. The Republicans when Bush took power seemed to make a very political choice to shift enforcement priorities.

I'm not surprised by that. I have no reason to think you wouldn't support efficiency at the IRS; I don't view you as one of the anti-tax ideologue nuts.

As I said, I haven't kept up with that issue but the bits I've heard are good.

 

[alkemyst]

When I see these situations it's after the fact so I don't know how they get the accountants to sign off on it. I would guess that the taxes are prepared in house in the company so they owner can basically have them say anything they want.

Doesn't really work that way like the other said unless you want to see prison time. Screwing with the IRS is more likely to get you jail time than killing a gas station attendant.

Also the bounty the IRS hands over for whistle blowers is pretty sweet.

 

[Atreus21]

Ooops. You forgot local and state taxes, which are very regressive!

http://www.itepnet.org/whopays.htm

I know I did. I was trying to identify in what areas the rich did pay their "fair share". With reference to federal income taxes, they do. With reference to state and local taxes, that does not appear to be the case.

Correction: Sales tax rates tend to be regressive. Is there any way to get data on a total tax burden across all income categories?