Thread: Pawlenty tax plan.

Originally Posted by Red_Lizard2

I highly doubt the poor have a tax burden of 0% of less, they still have to pay the medicare/SSI taxes (when employed) and still have to pay sales taxes in states that use it.

The tax the middle class has to pay is about the same as the rich (as of 07 I think, and not a lot has changed between then) when everything is added up right now, at 45%. Under the plan above, I'd fathom it'd likely still sit around the same number for those who do pay taxes, maybe a lower number by a bit, but still the middle class and rich would probably have the same rate in the end.

I am pretty sure that if your income is low enough and you have enough dependents you can actually get back more money than you put in. Enough to cancel out medicare and SSi. Then we have some that are living of the gov 100%, I would say that their tax liability is less than 0%.

Originally Posted by flame

Yep, guy at work got back nearly $10K and he only paid in $1000. Good ROI...

I am worried that there will be a point in our lifetime where it will be better to be poor than to be middle class.

Originally Posted by CivilWars

I think his income tax plan would be more effective than what we have now. I disagree with zero taxation on investments because that is basically another form of income, but I do feel it should be at a lower tax rate than income tax, maybe at the 10% rate he suggested. I am opposed to inheritance taxation all together. I realize it helps with the tax burden, but it is not "new" money, so I don't feel it should be taxed.

I disagree that it would be more effective, and I'll leave it at that. As for returns on investments, I don't think is should be that low. Most of the wealthiest people make their money from investments, so you're effectively removing their tax burden. And on the inheritance tax, I honestly haven't looked too much into that one, but I do see the arguments for both sides, so I'm not sure about that one.

Originally Posted by SpecOpsScott

Moving the tax burden onto the poor? How so? The poor have a tax burden of 0% or even less now. (Depending on how you define poor)

I'm talking about the tax burden on the group, not the tax liability for an individual. And I also said poorer, not just poor. As in poorer than the wealthiest people. Not the best wording on my part, I'll give you that. The bottom 40% of the people in this country own less that 1% of the wealth. So their tax burden, as in the percentage of the total tax revenue, should be very low.

Originally Posted by SpecOpsScott

The only time you place the tax burden on the poor is when you raise taxes on companies that provide necessary goods and services to the poor.
The feel it when they buy things like food, clothes and gas. Business interests are not going to take a severe hit in profits to accommodate a raise in taxes, they will raise their price accordingly. When the poor are forced to pay more for the necessities in life then there is no disposable income for vacations, eating out, a movie or new car.

Not entirely true. The only time that might be true is if their is a monopoly, otherwise it is difficult to pass on a tax to the customer. Remember, only profits are taxed. If prices are raised too high, people won't buy it or they'll buy the competitors product at a lower price, further reducing the profits for the company. Raising taxes on corporations does not invalidate the laws of supply and demand, so this requires a lot of speculation if they want to raise prices. They might, at best, be able to pass on a fraction of the taxes, but not all of them.

Originally Posted by CivilWars

If you make investment taxes the same as employment taxes what incentives do the wealthy have investing in new or growing business? It is easy to say from this side that they will do it any way, and many of them probably will, but if the rich stop investing their money into businesses the middle class no longer has jobs. 10% may be too low, but in my opinion it should be less than the 25% rate. If you have a doctor making $1M/year for doing plastic surgery, and a business man making $1M/year by investing in 10 businesses that make him $100K each in returns, if I were in charge I would think the doctor should pay a higher tax rate on his $1M.

I would support having different tax brackets for investment returns, too, and allowing each investment to be taxed individually. That may be a situation that is rife for abuse, but it would essentially solve the dilemma you posed and not punish middle-class or small-time investors who invest small amounts and get small returns. If I invested, say $10,000, and saw a return of only $1,000, I shouldn't have the same tax rate as the guy who can invest millions and pulls millions in returns.

Originally Posted by SpecOpsScott

This is what i read, this is what i responded to. No biggie, i think we are on the same page there anyway.

When you say poor, im thinking a family of four making the average individual income for any given area/state and less. In my area that would be about 39k gross. As jobs have become more scarce over the last three years, this demographic has increased in population. So there is a sizable chunk of the population that is in the 0% range, including all taxes.

Like I said, my bad. I didn't word it as best I could have, so that was my fault. And yes, a large segment of the population will have zero tax liability. They also own less than 1% of all the wealth in the country.

Originally Posted by SpecOpsScott

I work in an industry that is easily affected by supply and demand and can agree with much of what you say. Raw material costs and shipping are the number one and number two causes of cost increases that i see. When they hit most manufacturers that supply us will hold off as long as possible for the sake of not rocking the boat, but eventually, the collective will raise prices, many times drastically. One item in particular (a highly competitive item in the home building industry from a major manufacturer) that i sell rose by 30% in January and then another 3% in April, the competition was soon to follow. The same can be said for Taxes, and in my industry it might not be felt as much since nearly 100% of what i deal with are durable goods with a looooong lifespan. But perishables and goods that need frequent replacement like heating oil, gas and food are all subject to taxes, and they are felt quicker and harder especially by the poorer. I hope that makes sense.... it was a long day today.

I understand what you are saying, and I mostly agree. However, for something like gas, that's closer to the "monopoly" situation than the other things. There are really only 6 major oil companies. Food prices are more dictated by demand and harvest than taxes, and any tax increase felt on things like clothes would be negligible at best.

Originally Posted by SpecOpsScott

Something like a graduated tax based on the percentage of return?

Example: You invest 10K and make a 1K return your rate would be X%
You invest 1K and make a 10K return your rate would be Y%

Would you be for carrying the same rate over to the guy that invests 1M and makes 100K and so on? Or would you raise the rate of taxation based on both the percentage of return and the dollar volume of the initial investment?

Eh, it wasn't a well-thought out plan. Just something that popped in my head at the time I was writing the last post. Didn't really think it all the way through. You pose good questions, though. I was thinking we do it purely on the gains made on the investment. So if it is under 10k, it's taxed at 10%, under 50k at 20%, under 100k at 30%, and anything over at 40%. (Just as example numbers) If we do based on ROI percentages, it would be too tricky because the smaller investors ROI would fluctuate a lot more than bigger investors. So, in short, I think a graduated capital gains tax would benefit everyone.