Friday, January 04, 2008

Marriage, Progressive Tax Codes and State Rights

Figured I would answer Joe's comments to the 'I Am Progressive' post in a new post since it would be more fun that way.

Regarding marriage, he brings up a good point. Basically he is saying (if I understand correctly) that marriage, being conducted by churchs and the like, is a religious institution and as such, the special benefits married couples received is a violation of church and state. I actually agree with this arguement. Ideally the government should be in the business of civil unions and the churches the marriage bit. That way, you take the entire 'marriage is the union of a man and a woman' out of the equation of whether or not you receive government tax breaks and the like and just leave it to the churchs to work that out. When people get hitched, they go down to the City Hall, get it notorized or whatever as a civil union, then do whatever religious or pagan or whatever ceremony they want to do as far as marriage goes and yer all done. To me that makes a lot more sense then what you have now.

Regarding the progressive tax code question. A progressive tax code is what we have now in which you are taxed at a higher rate the more you make. This is different than a regressive or flat tax where everyone is taxed at the same rate or you levy a heavier sales tax to make-up the short fall. The theory is 10% of someone's income for someone making $20,000 is a lot more to them than 10% of someone making $200,000 in terms of standard of living, etc. This is something I agree with.

Finally, state's rights. I believe Joe's question boils down to stronger state's rights equals more division between the states and within the country as a whole. While there is a certain amount of truth to this, I believe states are in a better position to identify the needs of their population and to react to those needs faster and more effeciently than the federal government. Additionally, the needs of your California's and New York's are very different thatn the needs of your Kansas's and Texas's, so the 'one size fits all' of the Feds doesn't always make sense. With that said, I also believe the Federal government has a strong role to play. I'm just not sure where the line is. What I do know is that it is too far on the fed side now.

23 comments:

Jamie said...

The theory is 10% of someone's income for someone making $20,000 is a lot more to them than 10% of someone making $200,000 in terms of standard of living, etc.

I disagree Ryan... I have to say that I think a progressive tax encourages fraudlent reporting of income. If I make just above or just below a tax break line, I'm more likely to fudge so I can be lower. Also a dollar is a dollar no matter who you are. I think a flat tax like Illinois and other states have encourages accurate reporting, simplifies taxes and makes more money for the state overall. As to smaller contributors feeling a bigger punch with a flat tax, on some level this is true. However the consumer who makes 13000 with a 1% flat tax pays 130.00 in comparison to the household with 130000 income paying 13000 in taxes. Should we punish those who make more for doing so, or just ask them to pay their share based on income?

Ryan said...

I'll be the first to admit that I don't know all the in's and out's regarding taxes and the arguement for or against, so I'm going to wing it for now.

First of all, those in the higher tax brackets often have more means for tax shelters than those in middle and lower tax brackets. So just because their base income tax level is a higher percentage, the effective tax level often ends up lower than the tax level middle and lower class peeps pay under the current code. Additionally, don't forget that SS taxes are capped at $95k so anything earned above that is less. Therefore, a progressive tax code is hardly punishing the rich. If anything, when you compare effective tax rates they are making off like bandits, it is hardly punishing them. This is something I have confirmed with several accountants.

Something else I just learned talking with some people regarding the flat tax is that investments and other sorts of capital gains wouldn't be subject to a flat tax in the same way, although I'm not sure on the details there. In any case, the idea that a flat tax would have no loop holes or tax shelters seems to me to be a bit naive.

All of that is to say this, when you talk about taxes you have to talk about effective tax rates and not tax brackets. Richer people have more means to lower their tax bracket while poor people do not. As a result, the poor often end up paying a higher tax rate than the rich do. Who is it then that is being punished?

Bunny said...

Gah. I just erased a huge paragraph about the taxes bit only to realize I don't know what the hell I'm talking about and I think you'd see right through me.

Anyway, making marriage a question of separating church and state I think is a bit asinine. Our culture (being of Judeo-Christian background) has always regulated marriage. The first amendment says, "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof..." So, while it would be nice and sterile to consider all "marriages" as civil unions, and thus do away with the argument that it just be between a man and a woman, it is culturally impossible to expect that this is the ideal our fore-fathers envisioned. Just because the state regulates marriage and many people get married in religious ceremonies does not mean the state (or country) is "respecting an establishment of religion" or that they are "prohibiting the free exercise thereof." My marriage license signed in a Lutheran church is the same Maryland license signed in a courthouse or a synagogue. So, no one is trying to mesh church and state here.

And just for kicks, before you go and think I'm all this-government-is-Christian-and-I-think it-should-be-this-way I pretty much think that marriage should be legal between two people. Even if they are of the same sex.

So there.

Ryan said...

:)

I don't think you are "this-government-is-Christian-and-I-think it-should-be-this-way" at all and I think you made a good point regarding culture and the regulation of marriage.

I wonder what the true history of marriage in the country is and how it became codified in the law of the land. I would be willing to bet that in the begining of the country marriage was mainly a religious institution. What I would be real curious to know is exactly when a marriage had to be ratified by the state and, more importantly, why? The answers to those questions could be very interesting.

Jamie said...

I'm confused Ryan... what flat tax are you referring to? Is this some imaginary one... or proposed one??

The one I've always paid is based on my aggregated gross income. So the only things that come off of that are so minimal its child's play. Any income I receive on a 1099 or W2 is on there less the first line agreggates. We don't care how many of you there are... just pay.

I'm all for minimal government and small tax burdens. Why create a complicated system? Tell me what you've earned... I'll tell you what percent you owe and do the math. Then you can pay it in.

As to the SS cutting off at 95K. I agree it should, maybe even lower. Why should I pay in more than everyone else? Am I getting a cookie that you forgot to tell me about? I'll be lucky to get anything.

Ryan said...

I was actually talking about the progressive tax that is currently in place in response to your punishment line. Maybe I mistook what that was aimed at? I'm used to it being an arguement for the flat tax because the progressive tax we have now punishes people that make more.

There are several flat tax proposals running around. I believe Ron Paul's is a flat income tax and I believe Huck's is a 23% sales tax. Huck's, to me, is the more regressive of the two but I think they both punish the poor more so than anyone else.

The system is so complicated because of a lot of special interests that want tax loopholes and the like. That is why I said believing you could ever get a straight flat tax like you described it is somewhat naive. There will always be special interestes banging out loopholes to lower their rate. Is there any reason to believe a flat tax would prevent that?

Why do you say you won't get anything back? Do you buy into SS being bankrupt in 10 years? That is an ENTIRELY different topic there. All I was saying is if everyone else has to pay into it why shouldn't everyone have to pay all the way into it. Why the favoritism?

Jamie said...

Why is it naive to think that a system that works for the states would work for federal? I admit lobbyists are powerful, but that's the joy of the flat tax on aggregate income.

I disagree with sales taxes overall by principle. I want my economy to grow and my people to spend money. I should tax them NOT to spend. I should encourage spending especially in my own state. If I illegally go to Delaware (no tax and I don't claim fair use tax) and buy my expensive items and bring them to Virginia, I've helped Delaware's economy but not Virginia's. If I buy gas in one state but drive in another... where did my tax go?

Taxing income is the easiest most efficient equalateral tax.

Ryan said...

I agree with you on the sales tax. I was just showing the difference between the two fair tax plans.

I am unfamiliar with any states having a straight flat tax with no excemptions, deductions, loopholes, etc. I would also say that corporations probably don't get involved in individual state tax codes as much as they do in federal codes, particularly worldwide or nationwide corps. So you wouldn't have as much pressure for these sorts of loopholes in the state code that you would in the fed code. So I'm not sure that "it works for the state, why wouldn't it work nationally" really flies.

James said...

I agree with the other Jamie's point on sales tax. People should not have a disincentive to spending since more spending = stronger economy. On the other hand, if you look at Delaware's road maintenance vs. Maryland's, there's quite a difference! :-)

Silent Joe said...

The whole point of percentages is that everyone pays relative to what they make. Having them do otherwise is bad.

Example. Lets use the sales tax. Someone who makes $500000 still only pays a small percentage of sales tax and the same percentage that someone making $5000 will. Yeah the item is priced the same but having special tax brackets is the problem. What if you made over $100,000 and your sales tax was dropped 1% etc. It would be a tiered tax so why not?

I know I can sit here and say "they can afford it" but that is a weak argument. Why should some guy who makes $12000/year working on trucks have to pay a larger relative amount (using the flat tax system) than someone sitting in a cozy office making $120000? A flat PERCENTAGE is definately the way to go and get rid of the tiers. The tiered system is flawed and needs corrected. If we move to a flat tax system, we may as well give the USA to the European Union cause we will bankrupt USA.

Now onto Marriages.
The biggest point of church and state in regards to marriages is that the government should have absolutely no say in who marries who. If there religion allowed it, so should the government. By the government making laws against same sex, they are stepping on the toes of religion.

Silent Joe said...

I totally forgot about state rights. The current system is bullox. I think the problem we are currently having in Washington is that we are trying to please everyone.

We have always been a Majority rules nation, why divide it further into states?

Ryan said...

The 'they can afford it' arguement is not BS and is very real. An example:

You make $20,000 a year and, under a progressive tax code, are taxed 3%. That's $600. Under a 'fair' tax or flat tax, you would be taxed say 10%, or $2000. For someone only making $20,000 that $1400 is HUGE! That's probably 4 months of rent in Section 8, or the cost to feed your family for several months. You are talking about basic necessaties here.

On the other side, someone making $200,000 apparently gets whacked by a 30% tax under a progressive tax code. That's $60,000 which is definately a good chunk of change. However, their effective tax rate is probably much lower because of tax holes and shelters, etc. The chances of them actually paying $60,000 is slim to none or they just have a bad accountant. But lets ignore that and just say they are paying $60,000. Now under the flat tax they would only pay 10%, or $20,000. That is a $40,000 different which is a lot of money. However, that extra money isn't going to necessitaties. They other $140,000 takes care of that (compared to a $20,000 earner who only has $14,000 after a flat tax). Who is really suffering or being punished here? It sure as hell isn't someone that still pockets $140,000 in the year.

I don't have much more to add with marriage and state rights.

Silent Joe said...

they need to get rid of tax shelters, discounts, "credits" etc as well. Should be a flat percentage. No loop holes either. Straight up and screw everyone.

- Joe

Ryan said...

A flat rate would still screw the poor more than the rich for the reasons stated above.

Silent Joe said...

Someone who makes 140,000 deserves that amount since they secured the job. Same with the person making 20,000. To get into unfair pay scales is a whole different discussion. To be the most fair, someone who makes $1 should pay the same percentage as someone making $100. Yeah the actual dollar amount is bigger etc but its still the same percentage, therefore fair to everyone.

$1 tax at 10% is only 0.10 and $10 at $100 but its equal percentages across the board. No credits, discounts, nothing.

Straight up "flat percentages". You are not paying more at 150,000 a year, you are paying the exact same percentage. One of the drawbacks of making so much but its all equally relative. No more bell curves. An 85% grade should be 85% not 100% if the rest of the class got 50%. Its unfair to the person who actually studied and did well on the test. Yes they are getting 100% but those other slackers should get the F for screwing around while the other guy actually did work to get his passing grade.

- Joe

Ryan said...

I understand how percentages work, I'm not differing with you there. I am contending that the meaning of money is relative based on how much you make. If we had a liveable minimum wage then I might agree with you, but we don't. Those that aren't able to make $200,000 for whatever reason are just not in a position to have the same flexibility as those that are. $1 means more to the poor on a SURVIVAL level than it does to the rich.

Silent Joe said...

I agree with your survival term. The real problem here is with the current economy and the minimum liveable wage. Our economy is so screwed up right now thanks to the "please everyone" mentality we currently have in Washington.

The percentage tax is one of the first steps to solving this. Maybe it will squeeze the lazy people out to actually vote and be involved in there own life instead of bitching that things suck and just take the punches.

I think the biggest problem we have is the "poor" people just dont feel like being invloved.

Maybe make it mandatory to vote or you are fined or something. Actually you know that would be a good idea on the tax system. If you are involved like voting, donating time etc, you should get a tax credit. That would be the only one I would agree with. Not donating money, thats a cop out. Donate time. Make the social security cards like credit cards and you clock in with them at the polls and community service locations. The time you spend doing community service can be credited towards your taxes.


- Joe

James said...

So you know me, I'm all about finding the right balance between two sides. As for this, I'm all for making life a little easier for those less fortunate. BUT, and this is a big BUT for me, I don't want to make things TOO easy. That is to say, I don't want to disincentivise people from going out, working hard, and making a living on their own. A little pressure is a good thing. People need the push.

Ryan said...

I'm not sure a tax is really a push? I've never really understood that idea. Could you expand on it a bit perhaps?

James said...

Well, I suppose what I was getting at is more of a welfare issue than a tax issue. And, again, I'm not saying completely do away with these programs, but rather finding the right BALANCE.

So, one of my least favorite programs, and this is just my own opinion based on my own observations, is Section 8 housing. I had a friend who lived in an apartment complex that had this program. I lived in an apartment complex across the street that did not offer this program. Vastly different worlds a few hundred yards apart. Why? In its current state (admittedly, I don't know all the details, so I may be making some assumptions here), the program offers a disincentive to work. Let's say my buddy was making $40K/year at the time and his rent was $1000/month. Let's assume a 15% effective tax rate (just a wild guess), leaving him $34,000 take home - $12,000 for rent. That leaves him $22,000 take home per year. A good chunk of that is going to go toward utilities and food, things that, again I am guessing, are subsidized for the Section 8 folks. So, in the end, he's only making out a few thousand dollars a year than his Section 8 counterpart. But, he's going out and working 8 hours a day, putting gas in his car, paying to ride the Metro, buying work clothes, etc. Why wouldn't he just not work then, and sit in his apartment all day playing Nintendo? Then he might get bored and get into trouble, which is why I believe his complex seemed a lot more shadier than mine. Again, let me throw out my disclaimer that I don't think everyone on welfare is a criminal or is lazy or whatever. And I'll admit that some people (disabled, mentally handicapped, whatever) do belong on these programs. My point is that as they are currently implemented, these programs are broken and provide a disincentive in some cases for people to go out and work.

Ryan said...

Ah, ok. That makes more sense. I'm with you on the need to find a balance in welfare programs. I also agree their are abuses.

However, as to Section 8 housing, I'll tell you a counter story. My brother lived in Section 8 for a while. He was living with his then girlfriend (and might as well be wife at the time) and there is no way they could have afforded better even with both of them working because the minimum wage is so out-of-touch with the cost of living.

So here is where I'm at I guess. Welfare is necessary. It would be less necessary if someone working a fulltime job and earning the minimum wage could actually afford to live on it. Since they cannot, you have welfare programs kicking in to make-up the difference where if you could make a living on the minimum wage they wouldn't have to and they could scaled back.

James said...

Yeah, I agree with your point. To me it almost seems like a better idea, then, to use a lot of the money that goes to welfare and Section 8 to instead somehow subsidize the minimum wage to bring it up to a "livable wage" or whatever you want to call it. That'd be much more of incentive for people to work, knowing that that is their best opportunity to be able to afford the necessities of life, rather than relying on them to be provided by welfare programs, etc.

Ryan said...

Agreed.

Now we just have to get the corporate loyalists to stuff it and we may actually get it done.