How tax breaks work

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As a CPA I'm finally starting to see daylight as individual taxes are due either on Monday or Tuesday (depending on where you live). I just wanted to post one of my favorite explanations of how taxes work

 

When the Rich stop paying, then that's where everything falls apart. How can the breaks be spread out so that the rich still pay, but the lower end guys still get some breaks...

 

Somebody will always complain about the system, no matter how it fairly it might work.

 

Disclaimer: I live in Canada, and know very little about U.S. tax laws.

While I agree with Snook's post in general, the problem comes when tax breaks only benefit (or are likely to only benefit) high-income earners. For example, reductions in the top marginal tax rates or capital gains taxes.

 

Yeah that article is one of my favourites too.

As far as Splunge's comments go - I think that the high income earners (in Canada as well as the U.S.) are taxed so much disproportionatly higher than their fair share that they would deserve some more tax breaks.

You have to love the last Canadian federal election's promises. The Conservative party managed to campaign promising a tax cut that mostly benefits the higher income earners and yet sold it to the masses as mostly benefiting the poor. P.T. Barnum would be giving them the big .

 

Generally I agree with you, JSBB. But I’m used to paying my share taxes (I’m in the upper range). So I wouldn’t mind a bit more to going to those more in need of it, as long as it doesn’t cost me more to do so.

 

Its funny because its true... the problem is that people don't understand the tax system. They see the rich getting tax cuts, and they get angry. They fail to see that the rich also pay twice (or whatever the real ratio is... the rich pay more)as much as them anyways

 

Our national experience shows that sometimes the richer portion makes tricks to pay less, and that the rest of the population seems to find out like 15 years later that they had to pay for what they hadn't consumed (when they nationalized their debts, using the state). So that means our tax system scks.
Still, don't forget that it's part of a bigger system, and that this simplification probably leads to a share of mistakes in the reasoning.

 

Lord, that makes me sick everytime I read that tired old, worn out steaming pile of ...., with its patronizing, arrogant display of self-rightousness. Yeah, let me get out the world's smallest violin and play it for the "poor" rich. Another piece of capitalistic propaganda, which is utter So, they have to give back to a country and a population that they have been exploiting for years, and profiting from as well? Give me a break! They won't show up at the table anymore? We should be so lucky.

 

*cheers Chandos* Go Go Chandos you da man!

 

Why such hate towards the rich CtR? The article is just telling people to stop complaining about someone getting a numerically larger tax break if they pay more. The system isn't fair and people are happy with it being that way, yet when it isn't fair in their favor they start to complain.

This is what happens when you play with percentages. Seems completely fair to me that those who pay the most benefit most in a reduction. They still pay more than anyone else and proportionately still pay the same amount more.

 

I think SOMEONE woke up on the wrong side of the tax bracket....

 

"Years of exploitation" to hit the top 10% of income earners?

I am sorry but I think you are breaking out the tiny violins for the wrong group of people.

I hit the the top 10% of income earners as soon as I started my first job after graduating University. I worked hard in school and that is pretty much all it took. The job and pay rate were quite typical for someone graduating in my field. I paid my own way through University with a combination of scholarship money earned via my good grades and from working while I was going to school.

 

I have no hatred for the rich. Yet, I fail to see why we should have any special sympathy for them. Tax relief should be for those who need it the most, not for those who benefit the most. But that's just my opinion. What we really need is a smaller government that spends less on wars, contracts and other "incentives" that benefit the rich and hurt the working classes. America doesn't need the rich, the rich need America.

That's not the rich. Anyone who has to work for a living is not rich, but upper middle class. If you can quit your job now, and live well until your last day, then you are "rich." That's not the top 10 percent. I'm speaking of the top 1 percent. That's the true "rich."

 

This article wasn't telling us to have special sympathy (as you put it) for the rich... it is telling people to stop complaining when the rich get more money off of their taxes - they pay more, they should get more back. It is the same percentage, it just turns out that the more money you put it, the more you get back.

 

No, what the article was telling us was that some people (including some on this board, it seems ) can't do percentages. The fifth man got 100% cut, the sixth man got 33% cut, the seventh man got 28% cut, the eighth man got 25% cut, the ninth man got 33% cut, and the tenth man got 12% cut. That's not "the same percentage". The fifth man, out of all of them, ought to have been the one sticking up for the tenth man, as he went from paying for the meal to getting it for free (even if it was only one dollar). They also apparently cannot do basic math, as it seems they didn't mind one person (the ninth man) getting $6 off, but $7 was over the line.

It also tells us that the person who wrote the article has a grasp on neither general math nor the current tax situation (as it again seems some of us don't). People like JSBB are the ones who get screwed by the system: making enough money to be in the uppermost tax brackets, but not enough to hire a team of lawyers and accountants to find every little loophole in the system so that they end up paying significantly less. It may be nominally a progressive tax (not proportional, Saber ), but I guarantee you that if you did the numbers you'd get a significant dip on the percentages at the far end.

 

So be it. Perhaps his math is wrong... but still, they person who pays more deserves to get more back, right?

 

Yes, and that's not the rich. It's people like JSBB in the buffer zone.

 

Hmm, I thought the rich would have to pay even more? In any case, I do want to let you know that I'm not defending my family or anything, we aren't rich (actually, we're kind of in a predicament right now ).