Some basic math

Nov 2017
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What's up with some (on the Left, to be specific) talking about wanting the wealthy - the top 1% (or 0.1% etc.) - to pay their fair share in taxes, then calling for their tax bracket rate to be something that's as absurdly high as 70%, maybe more?

When it involves brackets, it's dishonest to speak of some higher bracket as being a fair share; it makes no sense. A fair share tax rate is simply one that's the same for everyone; when it's a percentage, fairness is already built into it.

For example, let's take a 10% tax rate for everyone; if you compare what someone who makes $40k/yr were to pay in taxes to what someone who makes $500k/yr were to pay in taxes (and you have some basic math skills), you would discover (if you don't already know) that someone who makes $500k/yr is paying more in taxes than what someone who makes $40k/yr earns in a year.

If, for whatever reason, you don't know how to calculate this, I'll do it here for you; it's actually easy to calculate with the use of a 10% tax rate as an example, because all you have to do is move the decimal point and you don't even need a calculator:

10% of $500k/yr for 1 year is (10%) x ($500k/yr) x (1 year) = 0.1 x ($500k) = $50k

Is it fair that an individual who makes $500k/yr is paying more in taxes than someone who earns $40k/yr earns in an entire year? The individual who makes $500k/yr is paying $10k more than what someone who earns $40k/yr earned in an entire year, yet it's fair given that both pay the same tax rate, by a tremendously large factor of 12.5 to 1 ($500k/$40k = 12.5).

The fact that there are brackets means it already unfair in favor of the individual who makes $40k/yr. Suppose the tax bracket for the individual who earned $40k/yr is 4% instead of 10%; that makes the ratio a whopping 31.25 to 1 (that's (500 x 0.1) / (40 x 0.04) = 50/1.6 = 31.25).

This means that with a bracket rate of 4% for someone earning $40k/yr and 10% for someone earning $500k/yr (BTW, the end result isn't that much different when taking into account the marginal difference, especially for those who make far above $500k/yr), for every dollar that the $40k/yr individual pays, the $500k/yr individual is paying around $30.

If the individual making $40k/yr doesn't think it's fair that they're only paying $4k in taxes (for a 10% rate) while the individual who makes $500k/yr is paying $50k in taxes, would they consider it fair if instead of that, the individual who makes $500k/yr were to only pay the same amount, $4k? Logically speaking, that can be considered fair.
 
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Mar 2013
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Before Reagan, the top tax rates were in the 70% plus range. However EVERYTHING was a write off. The interest on all almost all loans, not just mortgages but car loans, even credit card interest was deductible. This is where the old "three martini lunch" came from. It was all a write off. Hell even the hookers er evening entertainment was written off. Few people paid any where near the top rates. And frankly the ones I heard complaining the loudest were driving the nicest cars and had the biggest houses. What it did do was encourage people to spend that money, plow it back into the economy. Today ?? They just pay the tax and slap it in the bank or fatten up their investment fund.
 
Dec 2013
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What's up with some (on the Left, to be specific) talking about wanting the wealthy - the top 1% (or 0.1% etc.) - to pay their fair share in taxes, then calling for their tax bracket rate to be something that's as absurdly high as 70%, maybe more?

When it involves brackets, it's dishonest to speak of some higher bracket as being a fair share; it makes no sense. A fair share tax rate is simply one that's the same for everyone; when it's a percentage, fairness is already built into it.

For example, let's take a 10% tax rate for everyone; if you compare what someone who makes $40k/yr were to pay in taxes to what someone who makes $500k/yr were to pay in taxes (and you have some basic math skills), you would discover (if you don't already know) that someone who makes $500k/yr is paying more in taxes than what someone who makes $40k/yr earns in a year.

If, for whatever reason, you don't know how to calculate this, I'll do it here for you; it's actually easy to calculate with the use of a 10% tax rate as an example, because all you have to do is move the decimal point and you don't even need a calculator:

10% of $500k/yr for 1 year is (10%) x ($500k/yr) x (1 year) = 0.1 x ($500k) = $50k

Is it fair that an individual who makes $500k/yr is paying more in taxes than someone who earns $40k/yr earns in an entire year? The individual who makes $500k/yr is paying $10k more than what someone who earns $40k/yr earned in an entire year, yet it's fair given that both pay the same tax rate, by a tremendously large factor of 12.5 to 1 ($500k/$40k = 12.5).

The fact that there are brackets means it already unfair in favor of the individual who makes $40k/yr. Suppose the tax bracket for the individual who earned $40k/yr is 4% instead of 10%; that makes the ratio a whopping 31.25 to 1 (that's (500 x 0.1) / (40 x 0.04) = 50/1.6 = 31.25).

This means that with a bracket rate of 4% for someone earning $40k/yr and 10% for someone earning $500k/yr (BTW, the end result isn't that much different when taking into account the marginal difference, especially for those who make far above $500k/yr), for every dollar that the $40k/yr individual pays, the $500k/yr individual is paying around $30.

If the individual making $40k/yr doesn't think it's fair that they're only paying $4k in taxes (for a 10% rate) while the individual who makes $500k/yr is paying $50k in taxes, would they consider it fair if instead of that, the individual who makes $500k/yr were to only pay the same amount, $4k? Logically speaking, that can be considered fair.

For those who also like visuals



 
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Mar 2019
2,574
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Flat rate tax 17%
No tax on labor. 100$ day no tax
Corporate and individual rates same.
Charity is the only deduction.
 
Jul 2008
19,013
12,864
Virginia Beach, VA
What's up with some (on the Left, to be specific) talking about wanting the wealthy - the top 1% (or 0.1% etc.) - to pay their fair share in taxes, then calling for their tax bracket rate to be something that's as absurdly high as 70%, maybe more?

When it involves brackets, it's dishonest to speak of some higher bracket as being a fair share; it makes no sense. A fair share tax rate is simply one that's the same for everyone; when it's a percentage, fairness is already built into it.

For example, let's take a 10% tax rate for everyone; if you compare what someone who makes $40k/yr were to pay in taxes to what someone who makes $500k/yr were to pay in taxes (and you have some basic math skills), you would discover (if you don't already know) that someone who makes $500k/yr is paying more in taxes than what someone who makes $40k/yr earns in a year.

If, for whatever reason, you don't know how to calculate this, I'll do it here for you; it's actually easy to calculate with the use of a 10% tax rate as an example, because all you have to do is move the decimal point and you don't even need a calculator:

10% of $500k/yr for 1 year is (10%) x ($500k/yr) x (1 year) = 0.1 x ($500k) = $50k

Is it fair that an individual who makes $500k/yr is paying more in taxes than someone who earns $40k/yr earns in an entire year? The individual who makes $500k/yr is paying $10k more than what someone who earns $40k/yr earned in an entire year, yet it's fair given that both pay the same tax rate, by a tremendously large factor of 12.5 to 1 ($500k/$40k = 12.5).

The fact that there are brackets means it already unfair in favor of the individual who makes $40k/yr. Suppose the tax bracket for the individual who earned $40k/yr is 4% instead of 10%; that makes the ratio a whopping 31.25 to 1 (that's (500 x 0.1) / (40 x 0.04) = 50/1.6 = 31.25).

This means that with a bracket rate of 4% for someone earning $40k/yr and 10% for someone earning $500k/yr (BTW, the end result isn't that much different when taking into account the marginal difference, especially for those who make far above $500k/yr), for every dollar that the $40k/yr individual pays, the $500k/yr individual is paying around $30.

If the individual making $40k/yr doesn't think it's fair that they're only paying $4k in taxes (for a 10% rate) while the individual who makes $500k/yr is paying $50k in taxes, would they consider it fair if instead of that, the individual who makes $500k/yr were to only pay the same amount, $4k? Logically speaking, that can be considered fair.
Except you are calculating how much is paid in taxes incorrectly.

We use a progressive tax rate. Lets just use your examples. If you make 40,000 per year you are taxed at 4%. If you make 500,000 per year your income UP TO 40,000 is taxed at 4% (just like the guy that only makes 40,000) and the remainder is taxed at the higher rate.

This means the guy making 40,000 pays 1,600 and the guy making 500,000 pays (40,000 x .04) + (460,000 x .1) or 47,600. Now the rates are not that dramatic and there are far more brackets.
 
Nov 2017
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(I suppose I'll rarely be making an exception of not investing the effort to post replies on this forum.)

Except you are calculating how much is paid in taxes incorrectly.

We use a progressive tax rate. Lets just use your examples. If you make 40,000 per year you are taxed at 4%. If you make 500,000 per year your income UP TO 40,000 is taxed at 4% (just like the guy that only makes 40,000) and the remainder is taxed at the higher rate.

This means the guy making 40,000 pays 1,600 and the guy making 500,000 pays (40,000 x .04) + (460,000 x .1) or 47,600.
Evidently you didn't pick up on the fact that this sort of detail's beside the point & that my objective here is to avoid getting sidetracked by these kinds of details, for those who don't like math or aren't good at it; I'm pretty sure that it's already a miserable headache for them as it is now. Why do you feel compelled to nitpick (LOL is that what the "N" in your name stands for, "nitpick"?) about this, especially given that in the OP, I included the parts that I have highlighted (with bold & underlined) below?

What's up with some (on the Left, to be specific) talking about wanting the wealthy - the top 1% (or 0.1% etc.) - to pay their fair share in taxes, then calling for their tax bracket rate to be something that's as absurdly high as 70%, maybe more?

When it involves brackets, it's dishonest to speak of some higher bracket as being a fair share; it makes no sense. A fair share tax rate is simply one that's the same for everyone; when it's a percentage, fairness is already built into it.

For example, let's take a 10% tax rate for everyone; if you compare what someone who makes $40k/yr were to pay in taxes to what someone who makes $500k/yr were to pay in taxes (and you have some basic math skills), you would discover (if you don't already know) that someone who makes $500k/yr is paying more in taxes than what someone who makes $40k/yr earns in a year.

If, for whatever reason, you don't know how to calculate this, I'll do it here for you; it's actually easy to calculate with the use of a 10% tax rate as an example, because all you have to do is move the decimal point and you don't even need a calculator:

10% of $500k/yr for 1 year is (10%) x ($500k/yr) x (1 year) = 0.1 x ($500k) = $50k

Is it fair that an individual who makes $500k/yr is paying more in taxes than someone who earns $40k/yr earns in an entire year? The individual who makes $500k/yr is paying $10k more than what someone who earns $40k/yr earned in an entire year, yet it's fair given that both pay the same tax rate, by a tremendously large factor of 12.5 to 1 ($500k/$40k = 12.5).

The fact that there are brackets means it already unfair in favor of the individual who makes $40k/yr. Suppose the tax bracket for the individual who earned $40k/yr is 4% instead of 10%; that makes the ratio a whopping 31.25 to 1 (that's (500 x 0.1) / (40 x 0.04) = 50/1.6 = 31.25).

This means that with a bracket rate of 4% for someone earning $40k/yr and 10% for someone earning $500k/yr (BTW, the end result isn't that much different when taking into account the marginal difference, especially for those who make far above $500k/yr), for every dollar that the $40k/yr individual pays, the $500k/yr individual is paying around $30.

If the individual making $40k/yr doesn't think it's fair that they're only paying $4k in taxes (for a 10% rate) while the individual who makes $500k/yr is paying $50k in taxes, would they consider it fair if instead of that, the individual who makes $500k/yr were to only pay the same amount, $4k? Logically speaking, that can be considered fair.
I would expect someone like you, as someone who evidently knows their way around & is comfortable with math calculations to be aware of what the following example illustrates, but I'll cover it for those who aren't aware.

Let's take the hypothetical example of 40% as the highest tax bracket of $500k in a certain year; without getting into the details on what the lower brackets are and what the rates for each one is, let's suppose someone who made $500k (in that year) had to pay $60k in taxes for it. That's not too bad, right? It in effect comes out to 12%. Now, let's look at what the tax rate effectively comes out to for someone who made $20 million in that year; it's going to be:

$60,000 + 0.4 x ($20,000,000 - $500,000) = $60,000 + 0.4x($19,500,000) = $60,000 + $7,800,000 = $7,860,000 that they have to pay in taxes. That comes out to an effective tax rate of 39.3%.

For the individual who makes $500k, the ratio between 40% and 12% is about 1:3.333, but for the individual who makes $20 million, the ration between 40% and 39.3% is only about 1:1.018. What this means is that the more someone makes, the less significant, or the less it matters, that it's a progressive tax rate. The individual who made $500k only has to effectively pay a mere 30% of that 40% tax rate, but the individual making $20 million has to pay over 98% of that 40% tax rate.

Let's repeat the example, except with someone making $150 million, instead of $20 million; now things look like this:

$60,000 + 0.4 x ($150,000,000 - $500,000) = $60,000 + 0.4x($149,500,000) = $60,000 + $59,800,000 = $59,860,000 that they have to pay in taxes. That comes out to an effective tax rate of 39.9%.

For this individual who makes $150 million, the ratio between 40% and 39.9% is only about 1:1.0025. This individual has to effectively pay 99.75% of that 40% tax rate. The higher the income, the closer it gets to 100% of 40%.

Now the rates are not that dramatic and there are far more brackets.
Sure it's dramatic! Let's take a look at what the rates are based on this source (for unmarried individuals): 2018 Tax Brackets, Rates & Credits | Standard Deduction

It's simply a mere 10% for anyone who made $9,525 or less; on the other hand, the bracket's at 37% for anything over $500k.
 
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Mar 2013
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Here's the reality of the situation. Currently you make $40K, but are married with a kid and a small mortgage. You're wife makes $25K part time. You aren't paying any taxes. By the time you take your deductions you'll only pay about 6% according to an online tax calculator, or $4500. Under a flat tax with no deductions they pay the full 10% or $6500. For family trying to make ends meet that's a substantial increase. When you consider that HALF of ALL working adults in this country make less than $30K a year, all of them would see significant increases in their taxes, while the guy making $500K would see his tax bill drop from $185K down to just $50K.

In other words the vast majority of working Americans would actually see their taxes increase while the top 10% would see 6 digit decreases.

You can talk about a fair tax all you want. But implementing one would be a huge burden on our poorest working families.
 
Nov 2017
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Here's the reality of the situation. Currently you make $40K, but are married with a kid and a small mortgage. You're wife makes $25K part time. You aren't paying any taxes. By the time you take your deductions you'll only pay about 6% according to an online tax calculator, or $4500. Under a flat tax with no deductions they pay the full 10% or $6500. For family trying to make ends meet that's a substantial increase. When you consider that HALF of ALL working adults in this country make less than $30K a year, all of them would see significant increases in their taxes, while the guy making $500K would see his tax bill drop from $185K down to just $50K.

In other words the vast majority of working Americans would actually see their taxes increase while the top 10% would see 6 digit decreases.

You can talk about a fair tax all you want. But implementing one would be a huge burden on our poorest working families.
Don't misconstrue what I've posted as an attempt to imply that I don't support the progressive tax bracket structure that we have. I'm not saying I'm exactly a big supporter of it (I'm probably not a very big supporter of it), but at least when it comes to those on the lower income spectrum, I basically do support having lower brackets for them. In fact, I'm willing to go as far as saying that I may be in support of actually eliminating any income tax on anyone earning less than what's considered a living wage.

I'm fine with the ramp up pattern of progressive tax rate brackets, but I do have some reservations about the actual percentages; my inclination is that they ought to progressively ramp up from maybe less than 1% to up to 10%, and no more than that (and that's being a bit generous, too), rather than starting at 10% and going up to 37%. The reason it ramps up to 37% is because that's around the optimal rate for the government to maximize revenue it collects from tax payers. My position is that the state doesn't need to maximize revenue it collects from tax payers; the state should only be getting enough revenue to operate the government, and anything in excess of that should be reimbursed to tax payers.

One thing I consider to be a premise behind taxation is that it's there to help society, both collectively and for individuals. For someone who's prospering, such as someone making $500k/yr or more, I think they ought to be paying a fair tax rate for their tax bracket; on the other hand, someone who's barely making ends meet, or maybe worse, unable to make ends meet, shouldn't have the extra burden of being taxed imposed on them. In fact, in practice, we sort of do, and have, with welfare, food stamps, section 8 housing, or whatever other programs are in place, which you could say effectively (in a sort of round-about manner) and more or less does do away with taxation for them.

Furthermore, I actually do support having something that's similar to UBI, but it has to be implemented and run properly; and I think it can be implemented and run properly. What I'm concerned with is the possibility that voters & politicians may decide to implement and run it in an improper way. I've been planning on creating a thread that gets more into depth about this & I'll go over more details about it when I'm ready.

Anyways - what I am taking issue with, and it's the reason I created this thread, is because some on the Left (I guess fairly far Left) want to change our current progressive tax rate brackets, which I think aren't too bad, and change it so the highest tax bracket is some ridiculously high rate like 70%. I'm not talking about loopholes or ways people, who make hundreds of thousands of dollars a year or more, use to get around having to pay their fair share of taxes (in the 30's percentage vicinity, not way up in the 70's).
 
Jul 2018
2,433
624
Earth
Everyone should pay taxes as the cost of being working members of society. The more you make the more you should have to pay because you get more benefit from society. If you work for a public company as a CEO your tax should be a minimum of 370 times the tax on your average worker or if you make 200 times what your average worker makes then you should have to pay 200 times the amount the average worker pays in tax.
 
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May 2018
4,643
3,638
USA
I'll add that the USA didn't have a major budgetary problem, despite the massive costs of the Vietnam War, until Ronald Raygun, I mean Reagan, slashed the top tax rate in half and tripled government spending. ALL of the USA government's fiscal issues can be ultimately dated to Reagan's incompetence.

For the record Reagan only cut taxes on the richest, least needy Americans. The rest of us got a series of tax increases...oh wait, Reagan called them "wage based premiums".