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A different kind of high end tax

Thoughts on such a tax setup

  • In general, yes I'd prefer this style

    Votes: 2 66.7%

  • In general, no I'd not prefer this style

    Votes: 0 0.0%

  • If a compromise was required, I could accept this style

    Votes: 1 33.3%

  • If a compromise was required, I could still not accept this style

    Votes: 0 0.0%

  • I think we should do this style but not raise the top tax rate

    Votes: 0 0.0%

  • I think we should do this style but raise all/mot of the other tax rates also

    Votes: 0 0.0%

  • Shut up you fake conservative

    Votes: 0 0.0%

  • I can't stand an income tax and refuse to vote

    Votes: 0 0.0%

  • Other (explain)

    Votes: 1 33.3%
  • Total voters
    3
Zyphlin

Zyphlin

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A random thought here, and not something I'd necessarily support. However, while typing up another thread this thought came to me.

Currently the Tax Brackets work that whatever your total income is, that's the bracket you're put in. One of the reasons some conservatives argue against having an exceptionally high "top" tax bracket is that you get to a point (if the other brackets stay lower) where it may be more beneficial to make LESS money because the top bracket tax is so high it ends up losing them money. Take for example our current tax brackets.

1. 0 - 8.5k = 10%
2. 8.5k - 34.5k = 15%
3. 34.5k - 83.6k = 25%
4. 83.6k - 174.4k = 28%
5. 174.4k - 379.2k = 33%
6. > 379.2k = 35%

Currently, if we doubled the top tax rate from 35% to 70% we'd have a situation where someone making $400k a year would actually make less take home money than someone making $200k a year.

However, what if instead we said that your bracket isn't determined by your total income but rather each bracket is taxed at its amount. IE someone making 40K would have the first 8.5 taxed at 10%, the 26k taxed at 15%, and the last 5.5k taxed at 25%.

And what if we changed the tax brackets then so that Bracket 4 had a rate of 30%, bracket 5 had a rate of 40%, and bracket 6 had a rate of 70%.

Lets compare some numbers under the new and old system.

40k a year ..... Old System $10k ..... New System $6,125
120k a year ... Old System $33.6k ... New System $27,945
250k a year ... Old System $82.5k ... New System $74,505
500k a year ... Old System $175k .... New System $210,745
1 Mil a year ... Old system $350k ..... New System $560,745

So this method would decrease the tax burden on those making under the top tax rate while increasing the burden on those over the top tax rate while at the same time assuring that those who make the most pre-tax will always be making more than someone who makes less than them.

What would peoples thoughts be in regards to that type of system where each bracket of income is taxed at a specific level rather than your entire income being taxed at a single bracket? If we were to raise the top tax bracket, would moving to this type of system be a reasonable compromise between full out raising of the top tax rates or lowering of it?
 
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I think we need a flat percentage across the board. The current brackets aren't even a legitimate representation of actual tax obligation. When I file taxes I fit into bracket 2, yet I usually get almost all of my tax withholdings back as a refund. When I also submit my tuition information for the year I usually get back MORE than I had withheld. I think the best solution is to eliminate deductions and create a flat percentage for all income levels above poverty. Cut the poverty level to 5 or 10% and put everybody else at 15-20%. Without the luxury of deductions, there should be more revenue over all.
 
I understand there are umpteen billion various tax philosophies around from the flat tax to a fair tax and onwards. There are a lot of threads for those. Saying which tax one prefers is one thing, but please lets not turn this thread into a general discussion of various taxes and more the thoughts specifically between our current system, this system, and a system where the top 1 or 2 brackets are raised but all other methods stay the same.
 
It doesn't look horrible, but who in their right mind would want to tax anybody 70% of their income in the first place? I say use this "tiered" system to a certain point where it is beneficial, and then a flat 35% on earners above that level. There is no need to take much more than 1/3 of anybody's income IMO.
 
Zyphlin said:
I understand there are umpteen billion various tax philosophies around from the flat tax to a fair tax and onwards. There are a lot of threads for those. Saying which tax one prefers is one thing, but please lets not turn this thread into a general discussion of various taxes and more the thoughts specifically between our current system, this system, and a system where the top 1 or 2 brackets are raised but all other methods stay the same.
Click to expand...

If we're sticking to the OP then I don't think raising the percentages on the top brackets is a good idea. I fully believe it would lead to these earners disguising earnings to avoid tax obligations and we may actually lose revenue in the long run. Punishing somebody for success won't encourage success.
 
Zyphlin said:
A random thought here, and not something I'd necessarily support. However, while typing up another thread this thought came to me.

Currently the Tax Brackets work that whatever your total income is, that's the bracket you're put in. One of the reasons some conservatives argue against having an exceptionally high "top" tax bracket is that you get to a point (if the other brackets stay lower) where it may be more beneficial to make LESS money because the top bracket tax is so high it ends up losing them money. Take for example our current tax brackets.

1. 0 - 8.5k = 10%
2. 8.5k - 34.5k = 15%
3. 34.5k - 83.6k = 25%
4. 83.6k - 174.4k = 28%
5. 174.4k - 379.2k = 33%
6. > 379.2k = 35%

Currently, if we doubled the top tax rate from 35% to 70% we'd have a situation where someone making $400k a year would actually make less take home money than someone making $200k a year.

However, what if instead we said that your bracket isn't determined by your total income but rather each bracket is taxed at its amount. IE someone making 40K would have the first 8.5 taxed at 10%, the 26k taxed at 15%, and the last 5.5k taxed at 25%.

And what if we changed the tax brackets then so that Bracket 4 had a rate of 30%, bracket 5 had a rate of 40%, and bracket 6 had a rate of 70%.

Lets compare some numbers under the new and old system.

40k a year ..... Old System $10k ..... New System $6,125
120k a year ... Old System $33.6k ... New System $27,945
250k a year ... Old System $82.5k ... New System $74,505
500k a year ... Old System $175k .... New System $210,745
1 Mil a year ... Old system $350k ..... New System $560,745

So this method would decrease the tax burden on those making under the top tax rate while increasing the burden on those over the top tax rate while at the same time assuring that those who make the most pre-tax will always be making more than someone who makes less than them.

What would peoples thoughts be in regards to that type of system where each bracket of income is taxed at a specific level rather than your entire income being taxed at a single bracket? If we were to raise the top tax bracket, would moving to this type of system be a reasonable compromise between full out raising of the top tax rates or lowering of it?
Click to expand...

What you are describing is the way that the system currently works. Your entire income is not taxed based on your tax bracket. Bill Gates pays 10% on his first $8,500 in income just as someone working at Wal-Mart does (ignoring various deductions and credits).
 
Kandahar said:
What you are describing is the way that the system currently works. Your entire income is not taxed based on your tax bracket. Bill Gates pays 10% on his first $8,500 in income just as someone working at Wal-Mart does (ignoring various deductions and credits).
Click to expand...

See, learn something new every day. I didn't realize our current system works that way. Guess this threads useless then, heh
 
tessaesque said:
If we're sticking to the OP then I don't think raising the percentages on the top brackets is a good idea. I fully believe it would lead to these earners disguising earnings to avoid tax obligations and we may actually lose revenue in the long run. Punishing somebody for success won't encourage success.
Click to expand...

So sorta what happens now? They define as much as possible as capital gains to get lower tax rates. Some pay themselves very little but give huge bonus packages which aren't taxed the same. And I've always wondered what a surprise invasion of the Cayman islands would yield.
 
Zyphlin said:
See, learn something new every day. I didn't realize our current system works that way. Guess this threads useless then, heh
Click to expand...

I'm not so sure.

Didn't your math prevent the "making more, taking home less" issue?

How does the current method cause this phenomenon and your idea not do so?

Inquiring minds want to know!

I'm intrigued.
 
"Currently the Tax Brackets work that whatever your total income is, that's the bracket you're put in. One of the reasons some conservatives argue against having an exceptionally high "top" tax bracket is that you get to a point (if the other brackets stay lower) where it may be more beneficial to make LESS money because the top bracket tax is so high it ends up losing them money..."
Then, the existing system is good, but not effective enough.
Increase the tax and force those who are over-compensated to reduce their profits and cause consumer prices to drop....
It was a mistake to reduce the tax rates in the first place, so lets correct things and restore the tax rates to those of the pre-Reagan era.
 
I think the top tax bracket should be higher, but that should be as a result of creating more top-end tax brackets rather than raising the rates on the existing brackets.

My main objection to tax law is that capital gains should be taxed at the same rate as earned income.
 
What if...? said:
Didn't your math prevent the "making more, taking home less" issue?

How does the current method cause this phenomenon and your idea not do so?
Click to expand...

His proposal is the current method; he just didn't know that when he posted the thread.
 
Zyphlin said:
See, learn something new every day. I didn't realize our current system works that way. Guess this threads useless then, heh
Click to expand...

That's why they are called MARGINAL tax rates, which refer to rate of taxation on the LAST however many dollars you're referring to.
 
Viktyr Korimir said:
His proposal is the current method; he just didn't know that when he posted the thread.
Click to expand...

I get that, I was wondering why his math doesn't cause the earning more, taking home less thing that is used as one of the reasons to go to some kind of flat tax.

Where does Z's idea depart from the current method? Is it just the rates or what?
 
What if...? said:
I get that, I was wondering why his math doesn't cause the earning more, taking home less thing that is used as one of the reasons to go to some kind of flat tax.
Click to expand...

It doesn't. What often does, is various types of credits and deductions which are a symptom of legislators trying to micromanage (and thus distort) the tax code.

Where does Z's idea depart from the current method? Is it just the rates or what?
Click to expand...

It doesn't, really (I think).
 
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