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Do you think the U.S. Personal tax exemption should be raised? (it's capped at just over $3k now) - Zer Netmouse
April 22nd, 2012
04:37 pm

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Do you think the U.S. Personal tax exemption should be raised? (it's capped at just over $3k now)
Poll #1835541 Increase personal tax exemptions?

I believe, if your household income is below $110,000/yr, the personal tax exemption for you and members of your household should be raised to $5,000 /person. Who's with me?

That's just a random number. I can't support that
2(9.5%)
That would bring us back to exempting a poverty level of income. Good idea!
5(23.8%)
Humans cost more than that to feed and house! But it's a start.
11(52.4%)
I strongly oppose this idea
0(0.0%)
I strongly support the idea.
1(4.8%)
I eat strong cheese, drink strong beer and - wait, what was the question?
0(0.0%)
Clicky!
2(9.5%)

(21 comments | Leave a comment)

Comments
 
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From:ceemage
Date:April 22nd, 2012 08:54 pm (UTC)
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Different systems, I know, so not strictly comparable. But the Personal Allowance in the UK for Income Tax is £8,105 ($13,050) for 2012-13, and will be increasing to £10,000 ($16,100) over the next few years.
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From:netmouse
Date:April 22nd, 2012 10:04 pm (UTC)
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That's per person?
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From:ceemage
Date:April 23rd, 2012 05:13 am (UTC)
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*Nods* All income tax is done per person, so husbands and wives have a separate allowance. (As, in theory, do the children, but they are unlikely in practice to have any meaningful income to able to use it.)
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From:drplokta
Date:April 22nd, 2012 08:58 pm (UTC)
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Sharp cutoffs are nearly always a bad idea. You don't want people earning $109,990 per year to have to beg their boss not to give them a $200 raise. Increase the threshold for everyone, and reclaim it from the rich with a slightly higher top rate.
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From:eleri
Date:April 22nd, 2012 09:25 pm (UTC)
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*nod* I remember Blade having to turn down a raise at work, because it would have put us over income for Mousie's SSI.
(Deleted comment)
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From:netmouse
Date:April 22nd, 2012 10:02 pm (UTC)
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Nod, you guys are right. I was just using the current tier, but there's no need for a cutoff, and it can have deleterious effects..

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From:ckd
Date:April 22nd, 2012 11:17 pm (UTC)
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Either have a gradual phase-out, or just let it be part of the scheme.

Personally, I'd raise the exemption and get rid of the FICA cap. (I suspect doing so would cost me some money, but I'm okay with that.)
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From:purplecthulhu
Date:April 23rd, 2012 06:44 am (UTC)
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The correct solution to that is to not have sharp changes in the system. Instead of delta function gradients smoother functions like polynomials etc. should be used. That way 'poverty gaps' etc. can be engineered out of the system.

I would love to see the BBC economics correspondent discussing how a change in the coefficients of the taxation equation will affect things, but I suspect that he, the Treasury and the general populace are just too mathematically ignorant to be able to cope.
From:nicegeek
Date:April 23rd, 2012 12:48 am (UTC)
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I would rather provide progressivity through an expanded Earned Income Credit, and have the rest of the tax code be flat.
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From:amanda_lodden
Date:April 23rd, 2012 02:00 pm (UTC)
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I think this is probably the best and most practical one-sentence tax idea I've heard. There are far too many loopholes available at higher income levels.

I don't have a problem with the concept of a lower tax rate for investment income (because I do like to encourage investment), but I'd like to see more restrictions on what can be considered "investment income", and I'd like to see more progression between "short term capital gains" and "long term capital gains"-- specifically, I'd like to see short-term rates raised considerably and a gradual decline over time as it heads towards multi-year long-term, in order to discourage the massive bubbles that have decimated our economy several times in just my own lifetime.
From:nicegeek
Date:April 23rd, 2012 03:01 pm (UTC)
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I think this is probably the best and most practical one-sentence tax idea I've heard.

Thanks. For those not familiar with the EIC, the idea is that instead of giving exemptions or reduced rates for the first $X of income, the government multiplies the first $X of income by some factor, and cuts everyone a check. You can make the system as progressive as you want by picking the cutoff point and the multiplier.

The problem with an exemption-based/graduated bracket approach is that it encourages people to try to hide their income, to stay in lower tax brackets. This leads to the ever more complicated shenanigans by tax lawyers and accountants. With an EIC/flat approach, this is reversed; people just want to prove their incomes up to the maximum EIC match, and beyond that, there's no need to track anything.

Another benefit is that the tax can be collected by simply charging every corporation X% of its payroll. It would be pretty easy to structure it in a way that eliminated the need for individual tax returns altogether.

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From:coraline73
Date:April 23rd, 2012 06:59 pm (UTC)
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In the uk, most people on salary (as opposed to self-employed)don't have to do individual tax returns. Income tax is deducted at source by the employer, and tax relief on things like pension contributions are reclamed by the pension company. You only need to do a tax return if you have other sources of income or if you are self-employed.

One advantage is that for people who are employed and don't have other sources of income, the responsibility for paying the tax is the employers, not the employee's.
From:nicegeek
Date:April 24th, 2012 01:17 am (UTC)
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The US also has income tax deducted by the employer. However, most people have some other form of income, be it bank interests, investment dividends, or a second job, and there are also countless potential deductions and credits buried in our insanely complex tax code. Also, since the tax rate is graduated, the correct tax rate can only be fully calculated after a person's total income for the year is known. Consequently, the pre-paycheck deduction is only ever a rough approximation, which everyone needs to rebalance every April.

Hence the appeal of the EIC/flat approach.
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From:rmeidaking
Date:April 23rd, 2012 02:08 pm (UTC)
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I think households should be treated as corporations, and their documented expenses deducted from their documented income. This would put individuals and households on the same footing as corporations, and shift the burden to those households which manage to have something left over at the end of the year. Since the poorer households do tend to spend all of their income, this would inherently shift the tax burden to the wealthy.

Yes, it becomes a game of spending all that income, but that spending is what drives the economy. Increasing savings generates money for banks, and gives the government something to borrow, but causes the economy itself to stagnate.

I have even more radical ideas on how to fund a government.... :-)
From:nicegeek
Date:April 23rd, 2012 02:38 pm (UTC)
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It seems like this would discourage saving for important things like retirement and education. It would also encourage everyone to buy lots of assets that they didn't need (yachts, etc), thereby pulling their money out of the banking system and driving interest rates up for everyone.
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From:rmeidaking
Date:April 23rd, 2012 02:57 pm (UTC)
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You think saving is good. Why?
From:nicegeek
Date:April 23rd, 2012 03:05 pm (UTC)
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Because saving allows a person to invest in self-improvement, withstand hardship, or allow retirement, without having to impose on anyone else to pay for it.
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From:rmeidaking
Date:April 23rd, 2012 03:52 pm (UTC)
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That's certainly what the banks and stock exchanges want you to think. That's what keeps them in business.

Might it not be better to buy a solid item, such as gold or land, and then sell it again when you need the money? That's what the truly wealthy do. That's what you're doing when you invest in stocks, unless you pick them solely on the basis of expected dividend payment.

Best of all: Start or buy a business which you will eventually turn over to other people to manage. You get a chunk of the profit; they get jobs and the economy is enlarged instead of shrunken.
From:nicegeek
Date:April 24th, 2012 01:09 am (UTC)
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Putting your savings in real estate was all the rage five years ago or so. It didn't work out so well...

As for using it to start a business, most people have neither the time, the skill, nor the inclination to become entrepreneurs. Even among those who do, the majority of startups still fail and go broke. This would seem not to be the sort of thing for most people's retirement nest egg.

Money and securities are liquid, and dollars, at least, are reasonably stable in value (at least compared to the alternatives). You can move in and out of them with much lower transaction overhead than most other assets. That seems a more likely explanation for their popularity than a banking industry conspiracy.
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From:apostle_of_eris
Date:April 24th, 2012 03:39 am (UTC)
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So, what brings all this to mind?
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