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Letters to the Editor

Letter to the Editor: Tax fairness

September 26, 2012

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To the editor:

Those pontificating about tax fairness should read a Wall Street Journal article and historical records on tax revenue vs. tax cuts (cuts increased revenue by 40 percent in some cases). The “rich” pay income taxes at an average rate of 35 percent, or around 20 percent of their adjusted gross income to the government. By contrast, the bottom 40 percent in AGI pay an average of 5.9 percent, with 46 percent of all households paying zero, expanding from 40 percent in 2005.

What’s fair?  How about everyone paying in something, since everyone gets something in return? When the Congressional Budget Office projects that proposed tax increases on the “rich” will fund the government for eight days, it shouldn’t be about who pays more but about a simple code that everyone can understand and affects everyone equally. Instead of creating a false class conflict (2 percent of wage earners are above $250,000/year), candidates should focus on clear, prudent tax reform and our enormous national debt. Maybe the “rich” should forgo all the exemptions their accountants use when they file.

Do you trust bureaucrats to fix things? The IRS sends out billions to identity thieves. The USPS isn’t suspicious when delivering 2000 returns to the same address. The SSA sends up 18 percent of its checks to dead people.  The GSA spends on lavish “conventions” like drunken sailors, and the DOE gives loans to companies that go bankrupt or are bought by the Chinese. This election, demand better.

Comments

George Lippencott 1 year, 6 months ago

It is interesting to note that many of the things with significant increases are not in the "basket" commerce uses to calculate inflation.

So we get reported low inflation when we really have significant inflation.

Is this an accident or is their complicity

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Steven Gaudreau 1 year, 6 months ago

Anyone else feel like they are spending almost twice as much for gas and groceries? I only bring this up because it hits home for me rather then talking about tax rates. Why is everyone under the impression we are out of a recession and have no inflation? My cost of living has skyrocketed since the banks raped our country. I don't blame Obama for causing our economy but I do blame our Pres and congress for not stopping these vultures on Wall St and big banks from manipulating markets and the continued raping of our future.

How to fix our country? In my opinion, raise tariffs on China (does Wal Mart really need to keep making billions a year) and raise taxes on everyone across the board. We all need to pay the price to fix this financial mess.

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Biker 1 year, 6 months ago

It is pugnacious and self-indulgent for someone who pays 0 % into federal income taxes to accuse anyone else who is paying something into federal income tax, regardless of income tax bracket or amount, of being unfair. It is only after everyone has skin in the game that we can begin to address tax fairness and reforms amongst equals.

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George Lippencott 1 year, 6 months ago

Your not going to get an argument from me. he whole trust fund concept is flawed because the money was spent. At the end of the day w e have the same outcome - we owe ourselves billions of dollars we do not have.

Worse we taxed a bunch of people under what amounts to false premisses if we do not honor the bonds.

Better to have never become use to the SS trust fund revenue so we would not have expanded spending without raising taxes somewhere else (or not expanding at all).

The game has been played and the bill is due. No wonder morale in this country is so poor. There have been too many instances of politicians playing this kind of game.

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jafs 1 year, 6 months ago

I know I said I was done, but...

It's not "smart" to use money collected for one purpose for others, and then figure you'll get the other money somewhere else - it's "stupid" and "irresponsible".

If I know I'll have some expenses a little bit down the line, and save some money for them, but then use that money for other things, that's ridiculous. Especially without a clear plan of how I'll get the money in the future.

Keeping the money in a bank account is the most conservative plan - that way I'm sure the money will be there when I need it. Investing it is an option, but it's riskier, and involves the possibility of loss of principal. One could invest in government bonds with low returns - that's pretty safe.

But the government investing in government bonds makes no sense at all, on any level. And, other options are riskier - high quality corporate bonds, for example. But, at least that way, it's not lending the money to oneself, which makes a little more sense.

If the government uses payroll taxes (excess) to fund other operations of the government, then those payroll taxes are being used to fund general operations of the government. And, then, later on, they'll have to figure out where to get the money to pay back the bonds.

And, since payroll taxes are spent on current benefits, they're not "buying" anybody anything.

So, those who pay current payroll taxes are paying for current retirement benefits (thank you), and excess amounts are being used to fund general operations of the government.

It's not a matter of fault or blame, it's just the reality of it.

If the government kept the money separate, and didn't do that, then payroll taxes would only go towards current and future SS/Medicare benefits.

Why has this not been fixed? I'd say it's political - seniors don't want reduced benefits, nobody wants to pay higher payroll taxes, or any other taxes. So, if instead of using the trust fund money, we had to raise that money elsewhere, or cut spending, people would complain.

So, politicians keep kicking the can down the road a bit, which works for a while, but eventually will stop working.

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George Lippencott 1 year, 6 months ago

Mr Romney wants to jump start the economy by reducing taxes to free resources fo0r investment and consumption.- primarily for the wealthy (half don't pay any).

Mr Obama wants to jump start the economy by giving money we don't have to democratic constituents (not the poor) who will presumable invest it and spend.

To me that sound suspiciously like neither one of them have a clue how to make things happen??

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atiopatioo 1 year, 6 months ago

Obama inherited a terrible economy that Bill Clinton said that even he couldn't turn around. If Obama wins, he will inherit an even worse economy than the economy he inherited the first time around. If Clinton says that he couldn't turn the first economy around, where does that leave Obama for the next 4 years? Another 4 years of increasing food stamps? More cell phones for the mostly college educated that vote for him?

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George Lippencott 1 year, 6 months ago

I tried but no matter how I explain it some people feel a need to justify why half of us pay no federal income taxes by arguing that payroll taxes are equivalent.

They support that notion because the government is smart enough to use excess payroll taxes to avoid having to borrow money with the clear intent of repaying the loan.

These must be the kind of people who would send you to jail because the bank loaned your deposits to a criminal enterprise. Since your money went there you are somehow responsible . I would watch such logic.

Payroll taxes buy a personal retirement annuity and a partial health care program and nothing else.

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jafs 1 year, 6 months ago

I'm going to stop now.

The difference between a bank that lends money to different customers and the government lending money to itself should be obvious.

Lending the money in the trust fund to other parts of government is like lending your left hand money with your right - it makes little sense.

By the way, courts have ruled that people have no "ownership" of monies paid into SS, so once it gets to the government it's not "your" money any more.

If the trust fund is lent to other government agencies to spend, then payroll taxes that went into it are being used for other purposes, plain and simple.

And, where exactly do you think the money to pay the interest on the bonds, and the money to pay the bonds back will come from? It won't be payroll taxes - it'll be other taxes or other revenue (borrowing, printing, fines, etc.).

They're not keeping the funds separate, as they should, in my mind, if they're going to collect separately.

And, to my mind, if they have a surplus in the fund, they should keep it there, rather than lending it to themselves with interest, which makes no sense at all to me. If they did that, then the system would function as a separate system, except of course for the problem of overly generous benefits.

The whole thing is out of whack, and unsustainable for a number of reasons. Simply repeating a simplistic version of how it works isn't helpful.

My preferred solution would be to stop collecting separately (since they're not actually keeping the money separate), and means test benefits. I think this would help make the system simpler, and more sustainable.

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headdoctor 1 year, 6 months ago

Well, I guess this thread has been beat to death by trolls, ignorant posts and lack of understanding how threading works.

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George Lippencott 1 year, 6 months ago

I invest money in the bank for future return (trust fund). The bank loans that money to buy a car in return for Bills promise to repay with interest (bonds in trust fund). At some point I demand my money back with interest (I draw SS). The bank pays me with current deposits from others and from the profit it made loaning to Bill (costs avoided by the government in not having to borrow).

No where in there did my money become anybody else’s money. It is still owed to me unless of course Bill decides to walk off with the car and not repay the loan because he feels he is more deserving of the money than I who provided it.

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George Lippencott 1 year, 6 months ago

Well, let us clarify.

  1. Right now all funding for old age and survivors under SS is paid from payroll taxes. There are no general funds in it. The excess from the payroll taxes goes to the general fund in exchange for bonds. When they redid SS circa 1990s they deliberately increased the payroll tax to build a trust fun to pay the boomers. Since that time we have all been paying more than that needed for current benefits in order to build the trust fund. Some smart Senators saw most of this coming and set it up to forward fund the boomers. We all pay this for ourselves and for the boomers.

2 Part A of Medicare is paid from the trust fund resulting from payroll taxes. We all pay for this through payroll taxes.

  1. Payroll taxes have nothing to do with Parts B, C and D of Medicare. There is no trust fund. The costs are paid from premiums assessed against participants and because these are not sufficient from general revenue. The 47% pays nothing here.

Now I think I see your drift that payroll taxes are paying current recipients and the boomers while buying the payee a right to future benefits specifically determined in law. So it is a ponzi scheme but it is still dedicated for a specific function and does not go to the general fund to buy government operations. Your argument that by borrowing excess trust fund benefits for general revenue we can claim that payroll taxes are the same as income taxes is a gross distortion of the law and the facts.

It would be stupid to pile up the excess payroll taxes while borrowing money to run the government. The bonds are the basis for the difference – they are as real as cash unless the government goes down or the liberals steal them for social services and walk away from the intergenerational basis of the program. Could somebody on here be planning that??

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justfornow 1 year, 6 months ago

If you don't want someone replying to a comment don't comment, it's that simple.

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jafs 1 year, 6 months ago

The fact is that contributions don't pay for benefits for many people.

So, the money isn't paid into a fund that then generates one's benefits. What actually happens is that current payroll collections pay for current benefits. The payroll taxes we've paid over the last 30-40 years are gone, and have paid for others' benefits. When we retire, our benefits will be paid by others, both through their payroll taxes, and through other means.

Any surpluses go into the "trust fund", which has been lent to other parts of the government, and thus is used for other purposes.

So, some of us are certainly paying payroll taxes that wind up in that fund - it's probably impossible to know who and how much - and therefore their payroll taxes are being used for general purposes (or the purposes of whoever borrowed it in whatever department).

Since benefits outpace contributions (for many), SS/Medicare are being run at least partly as "social programs", not ones that we've bought for ourselves.

When the "trust fund" bonds are paid back, that money will undoubtedly not come from payroll taxes in whole, and so benefits paid out of that will come from other sources than payroll taxes.

The whole system is very flawed, in a number of ways.

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George Lippencott 1 year, 6 months ago

To whom it may concern

I believe CMS, they are the experts, the responsible government agency and they should know.

The issue was payroll taxes as a substitute for income taxes and not whether there are general revenue payments to people on Medicare (there are) or to people on normal SS (there are not)

SS (old age and survivors) is paid by payroll taxes. Even the payment to spouses is funded that way.

Medicare is for the most part general revenue funded with the recipient paying premiums

Any revenue shortfall will be paid from general revenue which is a supplement to payroll taxes (not yet happening). We will have to buy back the bonds in the trust funds any year now – but that was the plan.

So the argument that payroll taxes are the same as income taxes IS BOGUS On its face and a horrible disinformation campaign to avoid the fact that about half of the 47% paying no income taxes have substantial income.

Now those who have limited income actually do get more SS then they paid. The formula for benefits is structured that way. For now the money to fund that comes from the higher income folks who get back less then they paid despite the cap at $1ooK and change. I calculated it for higher income people and in my calculation it was a wash.

As I said above and despite the resort to fire and brimstone the payroll taxes buy the individual a retirement annuity and a partial health insurance program (hospitalization). The do not contribute to the common good.

Federal income taxes pay for all of the social safety net, the operation of the federal government and the income transfer programs. People making more than $25K per year should be asked to contribute (albeit not much) to that pot.

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jafs 1 year, 6 months ago

I can only guess that the motivation of those who want to fuzz up the SS/Medicare issue is that they want to justify their benefits. That's ok, I guess, but I find it unpleasant that they want to cut others' benefits on the grounds that they deserve theirs, while others don't.

If the programs were working as they were intended to work, then payroll taxes and premiums would cover the full amounts of benefits, as in private insurance programs and annuities - you can count on that, as the companies make sure to take in more than they pay out.

But they're just not working that way.

Benefits far and away are much more than amounts paid in, for many people. Especially spouses who have paid in nothing to those systems but receive benefits from them.

There may be some at the top who don't get back what they pay in, but I'd have to see some numbers, since there's a limit on payroll taxes at somewhere near $100K, and benefits are based on income as well.

Our calculations are based on real numbers, from a middle class perspective - if we live longer than 8 years after retirement, we will outlive our contributions. Medicare recipients take about 3X in benefits what they pay into Medicare (average recipient).

Putting the trust fund into government bonds is insane - it turns a surplus and asset into a liability, one which will be paid back by other taxes, not payroll taxes.

The simple, although uncomfortable, truth about these programs is that they are generously subsidized by taxes other than payroll taxes, and that money paid in doesn't pay for one's benefits by any means.

Which is fine, if that's what we want as a society. But, it means that SS/Medicare benefits aren't ones that people have paid for by payroll taxes, and somehow deserve, while other social programs are different from that.

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George Lippencott 1 year, 6 months ago

And to address your math problem. If the payroll tax is inadequate to pay the benefits then the general fund must be tapped. That means that payroll taxes are still buying you a retirement annuity and health insurance but that the 53% paying taxes are subsidizing your benefit.

By the by Medicare Parts, B, C, D are not paid from payroll taxes. The premiums are paid by the participants (Part B $100 /month and up). All are not fully supported and the premiums need to be raised. Both parties are trying to deal with this so as not to hurt people. IMHO the dems want to tax the upper middle more so that the lower income folks do not see a perineum increase. The Republicans want to turn the whole program over to the market with subsidies to the lower income folk (shades of Obama care)

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headdoctor 1 year, 6 months ago

Romney is a very wealthy idiot. Your point being?

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rtwngr 1 year, 6 months ago

Oh yeah, and President Obama is an idiot.

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rtwngr 1 year, 6 months ago

Everyone go to www.fairtax.org and watch the video. This is a system that would work and fix the tax code for good.

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jafs 1 year, 6 months ago

This notion that SS/Medicare payments buy you a personal annuity and health insurance is a bit off.

In fact, the payments into those systems isn't anywhere near enough to pay for the benefits. So the benefits will be paid, in large part, by other taxes from other people once one retires. I just looked at an annual SS statement. After 40 years of so of contributing into the system, if we choose to retire early, at 62, the amounts paid into SS will cover about 8 years of SS benefits (that includes both employee and employer contributions). After that, it's all coming from somewhere else. And, I'm hoping to live quite a bit longer than age 70.

Also, spouses are granted benefits, whether or not they've paid into SS/Medicare.

And, of course, the federal government has seen fit to use the "trust fund" for other government expenses, so it's not there at all for those benefits. All of that money will have to be paid back into the system, and almost certainly from other tax sources.

The same is true with Medicare, perhaps even more so. We've paid a lot less into Medicare than SS, and even with low/moderate premiums, it seems to me that most people will be getting much more in health care benefits than they pay in. I've seen studies showing that most people take about 3x as much in benefits as they've paid into the system.

So, payroll taxes are in fact being used for the "common good", and SS/Medicare benefits are in large part paid for by other taxes.

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George Lippencott 1 year, 6 months ago

Alyosha

I don’t know about your intent but your comments seem to be aimed at driving any comment you disagree with to the extreme. I don’t think any rational person wants to tax people with no income. .

About half of the people paying no federal income tax have incomes that are between $25K and $50K. Why can they not contribute a mite to the common good?

Payroll taxes are for you. They buy you a specific service. They do not contribute to the common good.

Whether the quote from Mr. de Tocqueville is completely accurate he did observe the possibility that a challenge facing a democracy is the pressure to vote more for the comm0n good without raising the revenue to pay for it.

The Democratic Party increased annual expenditures by close to 30%. They did not raise taxes to pay for that increase. They had four months in 2009 with complete control of the government to raise taxes.

Do you honestly consider it anyway near fair to tax the upper half of the middle class (60 to 120K) at close to 30% (not counting payroll taxes) while taxing Romney at the same level?
You know that Mr. Obama’s proposed tax on the rich would likely not have increased Mr. Romney’s taxes a wit.

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tange 1 year, 6 months ago

Lately, this sort of talk has me thinking of little Mitt Romney having to stem the evil tide which is the 47%. I don't know the particulars, but rumor has it that Mitt has a little black box. He can't really see into it, but it belches some 13 million dollars annually. Well, not 13 million dollars, 13 million dollars less 14%; his little black box belches only about 11 million dollars annually, but the 2-ish million dollars nevertheless is noted, to attest to Mitt's role as taxpayer, unlike the "victim-mentality, mooching" 47%. Mitt doesn't know how it works precisely; he doesn't even have to turn a crank to get the weasel to pop, it just happens, like magic. In fact, the little black box's magic doesn't even depend on Mitt; it would belch 13 million dollars, less some similar percentage, even in his absence. So, what is it exactly that Mitt does do? Oh, now I recall, he disparages all the hard-working people who don't have little black boxes but nevertheless must crank relentlessly just to survive.

Poor little Mitt Romney.

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Constitutional_Malfeasance 1 year, 6 months ago

Fair share has a meaning for Ken and another for Obama. We know what it is. Obama's is redistribution and Ken's is everyone pay the same percentage of income. The last paragraph is excellent. This government needs overhauling from the bottom to the top.

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Trumbull 1 year, 6 months ago

Again and again the whole notion of Federal Payroll taxes is left out. I would agree with the letter writer to some extent if he were to include this in his anlaysis.

Regarding Income taxes, the only way to get everyone to pay a little would be by eliminating the following things: standard deductions, itemized deduction, home mortgage interest deduction, child and dependent exemptions, IRA and 401k deductions. In other words a flat tax.

I on the other hand, believe in a graduated tax system. And because payroll taxes are regressive by nature, I believe the working poor thru the middle class are paying their fair share.

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Eybea Opiner 1 year, 6 months ago

"BTW, since O'Bama became president, investors have doubled their net wealth. No other president in the past 40 years can claim that."

I call Bullxxxx on that statement. Can you back it up with some sort of link or study?

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JohnBrown 1 year, 6 months ago

Liberty, you should get a horse and start avoiding all those roads and bridges bought with taxpayer dollars, then.

So if not paying any taxes is "fair", then why are the RINO's all over the 47 that are already there?

It was a Democrat that said "Ask not what your country can do for, ask what you can do for your country". That question needs to be asked again, to those with the most to lose if the country falters.

BTW, since O'Bama became president, investors have doubled their net wealth. No other president in the past 40 years can claim that.

Sheesh.

JohnBrown

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Liberty_One 1 year, 6 months ago

The only fair tax is no tax at all.

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nativeson 1 year, 6 months ago

Federal taxes are clearly progressive. However, analysis of the tax burden on households should be done by reviewing the average tax burden across federal, state and local taxes including contributions to Social Security and Medicare.

Property taxes can be argued to be progressive since it is reasonable to assume that higher household incomes have more valuable residences. However, sales tax is flat.

The result will show that taxes on the whole are still progressive, but not to the extent found by looking only at federal income tax. This discussion is somewhat moot. Everyone is going to pay more in the future given current deficits and the growing population of retirement aged Americans accessing Social Secuity and Medicare in the future.

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Jackie Jackasserson 1 year, 6 months ago

I don't quite make a quarter of 250K and I pay 30% in taxes. So this letter's stats are off. I certainly don't have an accountant to make up exemptions for me.

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Armstrong 1 year, 6 months ago

I would agree with the majority of your letter. My question is if then entitled crowd already has a free ride what's the motivation to do better and actually contribute. Free health care, food stamps, unemployment..... Does this sound like were on the right track ?

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