American Tax Inequities and Complexities

[Azem.Ocram]

The tax system of the USA is so complicated, that everyone with taxable income without the wealth to hire professionals to find deductions and loopholes are overtaxed.

The US government spends more money on corporate subsidies to fossil fuel companies than on literally the biggest, most expensive military on the planet. Pollution is a negative externality which charges the environment and health of impacted areas more than consumers pay. Subsidizing fossil fuel companies, which operate as monopolies just means that consumers pay slightly less than they should and the owners of the fossil fuel companies earn much more money than they should while they kill the (mostly local besides greenhouse effect) environments and those living in them.

The payroll tax impacts all workers, from the poorest to the wealthiest and is proportional for a while (which is fine) but becomes regressive once it hits the cap (which is bad).

It is entirely possible to simplify the tax code, generate more revenue for the government (eliminating the deficit and chipping away at the debt), and reduce inequities all at once. The money saved from removing the fossil fuel subsidies could fund single-payer healthcare, which would further reduce government spending and improve overall health, and the savings could be used however seen fit (education, welfare, or debt repayment).

 

[Estebonrober]

The tax system of the USA is so complicated, that everyone with taxable income without the wealth to hire professionals to find deductions and loopholes are overtaxed.

The US government spends more money on corporate subsidies to fossil fuel companies than on literally the biggest, most expensive military on the planet. Pollution is a negative externality which charges the environment and health of impacted areas more than consumers pay. Subsidizing fossil fuel companies, which operate as monopolies just means that consumers pay slightly less than they should and the owners of the fossil fuel companies earn much more money than they should while they kill the (mostly local besides greenhouse effect) environments and those living in them.

The payroll tax impacts all workers, from the poorest to the wealthiest and is proportional for a while (which is fine) but becomes regressive once it hits the cap (which is bad).

It is entirely possible to simplify the tax code, generate more revenue for the government (eliminating the deficit and chipping away at the debt), and reduce inequities all at once. The money saved from removing the fossil fuel subsidies could fund single-payer healthcare, which would further reduce government spending and improve overall health, and the savings could be used however seen fit (education, welfare, or debt repayment).

At this point it seems unlikely any of this will happen until it is well too late.

Edit fixed entirely to unlikely.

 

[Lexicus]

I think the payroll tax should be abolished.

 

[Azem.Ocram]

Source for the fossil fuel subsidy https://www.rollingstone.com/politi...ubsidies-pentagon-spending-imf-report-833035/

$649 billion in 2015 in fossil fuel subsidies. It has only increased under The D'ump. I was wrong about the military budget, $599 was merely the Pentagon's budget in 2015. That means that the combined spending of all branches of the US armed forces added up to more than the $649 billion spent on fossil fuel subsidies but $649 is still a lot of money when pollution should be taxed, not subsidized.

Personally, I think the payroll tax should be abolished. The only reason Social Security is underfunded is that the money raised from the payroll tax is being "borrowed" by other departments (mostly corporate subsidies and the military). Second-best would be for the payroll tax percentage to be halved but the cap removed, that would make the poor pay less and the ultrawealthy pay their fair share (the same percentage of income as the poor, which means that those making twice the current cap would see their payroll tax increased while everyone else would see their payroll tax decrease).

If Bernie or AOC [Warren] is elected president of the US in 2020, these changes will be likely. If The D'ump is reelected, this is the least of our concerns because the reputation of the USA will be permanently and irreparably marred further than it already has been from electing The D'ump after reelecting W.

 

[Estebonrober]

Source for the fossil fuel subsidy https://www.rollingstone.com/politi...ubsidies-pentagon-spending-imf-report-833035/

$649 billion in 2015 in fossil fuel subsidies. It has only increased under The D'ump. I was wrong about the military budget, $599 was merely the Pentagon's budget in 2015. That means that the combined spending of all branches of the US armed forces added up to more than the $649 billion spent on fossil fuel subsidies but $649 is still a lot of money when pollution should be taxed, not subsidized.

Personally, I think the payroll tax should be abolished. The only reason Social Security is underfunded is that the money raised from the payroll tax is being "borrowed" by other departments (mostly corporate subsidies and the military). Second-best would be for the payroll tax percentage to be halved but the cap removed, that would make the poor pay less and the ultrawealthy pay their fair share (the same percentage of income as the poor, which means that those making twice the current cap would see their payroll tax increased while everyone else would see their payroll tax decrease).

If Bernie or AOC is elected president of the US in 2020, these changes will be likely. If The D'ump is reelected, this is the least of our concerns because the reputation of the USA will be permanently and irreparably marred further than it already has been from electing The D'ump after reelecting W.

They really don’t like that 650 billion dollar figure being used.


If Bernie or Warren I think you mean, but even if they are it is unlikely that the GOP will be rendered inert and even if the dems get 60 votes in the senate I think it likely they will mess it up.

Here’s to your optimism though!

 

[Lexicus]

AOC can't be President in 2020, not old enough and she's not running.

 

[Zkribbler]

The only reason Social Security is underfunded is that the money raised from the payroll tax is being "borrowed" by other departments (mostly corporate subsidies and the military).

Since Day 1 of Social Security, all trust funds have been required to be invested in treasury bonds.

W's comment that when he looked in the fund and found nothing but IOU's is a misleading reference to this. Gore's proposal to put all funds into a lock box was just jibber jabber.

 

[PPQ_Purple]

The one thing that I remember shocked me when I found it out was that americans have to file taxes on their own. And that it's done at the end of the year. Especially income tax. Over here in Europe the general practice is that unless you are a business owner or self employed you don't pay your own taxes. Rather you negotiate on your net wage and income tax is automatically paid by your employer. As an employee I don't even know what my gross income is. And what ever other taxes I receive like property tax come as a nice invoice in an envelope that I just have to sign and take to the bank.

So I am not sure if the problem with your tax system is that the system it self is broken rather than the fact that you are exposed to it far more than the rest of the world is. For all I know the tax system over here might be 10 times worse but we just don't see it and therefore it does not effect us.

Just something to think about.

 

[Samson]

The one thing that I remember shocked me when I found it out was that americans have to file taxes on their own. And that it's done at the end of the year. Especially income tax. Over here in Europe the general practice is that unless you are a business owner or self employed you don't pay your own taxes. Rather you negotiate on your net wage and income tax is automatically paid by your employer. As an employee I don't even know what my gross income is. And what ever other taxes I receive like property tax come as a nice invoice in an envelope that I just have to sign and take to the bank.

So I am not sure if the problem with your tax system is that the system it self is broken rather than the fact that you are exposed to it far more than the rest of the world is. For all I know the tax system over here might be 10 times worse but we just don't see it and therefore it does not effect us.

Just something to think about.

It is that way because the tax filling software makers pay for it to be that way. I am not sure there is a more overt example of failure of democracy.

Inside TurboTax’s 20-Year Fight to Stop Americans From Filing Their Taxes for Free​

​

Using lobbying, the revolving door and “dark pattern” customer tricks, Intuit fended off the government’s attempts to make tax filing free and easy, and created its multi-billion-dollar franchise.​

 

[Lexicus]

effective in generating the revenue needed to fund government programs and services.

Not really though.

 

[Bamspeedy]

The one thing that I remember shocked me when I found it out was that americans have to file taxes on their own. And that it's done at the end of the year. Especially income tax. Over here in Europe the general practice is that unless you are a business owner or self employed you don't pay your own taxes. Rather you negotiate on your net wage and income tax is automatically paid by your employer. As an employee I don't even know what my gross income is. And what ever other taxes I receive like property tax come as a nice invoice in an envelope that I just have to sign and take to the bank.

So I am not sure if the problem with your tax system is that the system it self is broken rather than the fact that you are exposed to it far more than the rest of the world is. For all I know the tax system over here might be 10 times worse but we just don't see it and therefore it does not effect us.

Just something to think about.

Employer withholds income taxes and sends it to IRS for you, so at least part of the process is similar.

People may have other income than just their main job (return on investments, interest, profit from sales, etc), and tax credits that should be of no concern to the employer (so the employer would not adjust tax withholding because of those situations). Having multiple jobs, one employer isn't going to consider your other sources of income that should push you onto a higher tax bracket, its easiest if he only has to look at your income from his business to figure your tax withholding.

'Filing taxes' just adds all these numbers up to find if the tax withholding was correct, if you need to pay more, or over paid. Not knowing what credits are available and all the exact rules (IRS can be very picky!) are why many hire professional.

Edit: property taxes sent in mail, I barely pay attention to it. most mortgages have property taxes and insurance included in your payment (escrow), so dont have to worry about big property tax and/or insurance bill at end of year.

It is that way because the tax filling software makers pay for it to be that way. I am not sure there is a more overt example of failure of democracy.

Inside TurboTax’s 20-Year Fight to Stop Americans From Filing Their Taxes for Free​

​

Using lobbying, the revolving door and “dark pattern” customer tricks, Intuit fended off the government’s attempts to make tax filing free and easy, and created its multi-billion-dollar franchise.​

US tax system has been over complicated since well before electronic filing.

 

[Birdjaguar]

The US income tax system only gets complicated if a person's or household income goes beyond employer wages seen on a W-2 form. As one adds layers, the complexity goes up: itemizing deductions; interest and dividend income; small business income; rental properties; more complex investments; foreign income; etc. High income folks also can make things more complicated on purpose to hide income. Trump has over 500 business entities that he funnels money through to create deductions and hide income.

The old paper forms and tax tables were terrible and complicated to fill out and use. Software has made things very easy for most people. I gladly pay $60 for TurboTax Deluxe every year. Once I have all my inputs arranged, it takes me about half a day to complete the forms and check my results. Federal filing is free. State filing is not, so I usually just print and mail my NM taxes. I refuse to pay quarterly and that costs me a small penalty that is made up easily.

 

[GoodEnoughForMe]

Land value tax would solve this

 

[Birdjaguar]

Land value or land plus improvements?

 

[GoodEnoughForMe]

Land value, we don’t want to penalize improvements, that already exists for property taxes and it’s one of many reasons (psychopathy being another) landlords and owners are loathe to improve anything.

 

[Farm Boy]

It's a frakking headache. Spent an hour with a professional this morning. Made enough on paper through self employment that I now need to pay back cash-in-hand temporary social security benefits for surviving parents. Now to pay the employee and employer's share(because self employment) of the paper for the paper. Still no cash flow. I'm not sure how much more I can afford to bleed on value, the school is already really expensive, and that's super frustrating because everytime you guys toss numbers I see the range you say is low, and then you want to pick up larger sticks.

 

[amadeus]

I have to file despite not living in the USA continuously now for over a decade.

What about the rich Americans that…

Hey I ain’t rich. Not by a long shot. A really long shot.

 

[Bamspeedy]

Yes, you have to file, but you probably won't have to actually pay anything as the first 120,000 of foreign income is excluded from being taxed, taxes paid in other country offsets taxes owed to US, among other expenses to reduce any liability.

You can always give up your citizenship and you won't have to file again.

Foreign Earned Income Exclusion | Internal Revenue Service

You may qualify for the foreign earned income, foreign housing exclusions and the foreign housing deduction if you meet certain requirements. Learn more.

www.irs.gov

 

[Birdjaguar]

@Bamspeedy If your wife works in the US as a Chinese citizen, does she pay income tax at a rate different than you do?

 

[Bamspeedy]

Green card holders (legal resident) have to file and pay taxes, just like citizens. Since money is earned in US and she lives here, it's taxed the same as anyone else.