Aren't taxes just too high?

EDIT: This is in response to Grey's graph post.

1) He said he is fiscally Republican. He never mentioned that he subscribed to Bush's fiscal policies.

2) As a percentage of the gross domestic product (GDP), within the context of the national economy as a whole, the highest deficit was run during fiscal year 1943 at over 30% of GDP, whereas deficits during the 1980s reached 5-6% of GDP and the present projected deficit for 2005 is 2.9% of GDP, close to the post-World War II average. http://en.wikipedia.org/wiki/Deficit

3) Avoiding the deficit would have been nearly impossible for Bush. The economy retracted immediately when he entered office which made tax revenue drop.

[Matty]

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He said he is fiscally Republican. He never mentioned that he subscribed to Bush's fiscal policies.

[/ QUOTE ]All spending must originate in the House of Representatives- so that's over 200 Republicans. It's hardly a problem confined to one man.

I'm not saying Republicans spend more than Democrats, but it also can't be said that Democrats spend more than Republicans. All that changes (slightly) between the two is what the money gets spent on.

The most important factor in cutting government spending is having the different branches controlled by different political parties. A Republican Congress with a Democratic President wouldn't spend that much. Same with a Democratic Congress and a Republican President. But when the same party has both... watch out.

[XxGodJrxX]

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1) He said he is fiscally Republican. He never mentioned that he subscribed to Bush's fiscal policies.



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Look at the graph again. The deficit increases significantly during the Ford, Reagan and both Bush terms. The deficit decreases during Carter's and Clinton's. Fiscally Republican seems to mean that you like to run up a huge deficit, then a Democrat comes along and fixes the mess. Maybe Republicans are not as conservative as they advertise.

[JonPKibble]

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[bobman0330]

Is that 38% state + federal?

Anyways, I think the problem isn't so much that the tax rates are too high, but that there are too many stupid deductions. For example, the mortage interest deduction, in addition to costing the Treasury a ton of revenue, also lead to an economically disastrous misallocation of funds. I'm not extremely well versed in the tax law, but I bet there are also some deductions that should be erased for the top bracket, because they make less sense when applied to the rich.

[adios]

So everyone in the top bracket is rich? Also what is income really? We've been over this many times on the forum but the problem with an income tax is that the income earner base is very diverse and thus defining income for all income earners is an impossible task and IMO is the breeding ground for special interest groups. If income is just money earned on a W-2 then isn't the standard deduction costing the government tons of money as well? Why have the standard deduction?

[bobman0330]

Defining income is hard, but I don't think you can just write it off as an impossible task. Just takes some effort.

My understanding of the standard deduction was that it was just there to save people the time (and cost) of itemizing.

In any case, my main point was that people in the top bracket should have fewer deductions. Not because they're all "rich" by whatever definition, but because the utility of the behavior encouraged by a lot of deductions is less for the wealthy. (obviously, some deductions, like the charitable giving one, are MORE effective for high-income taxpayers. keep those.) For example, the mortgage interest payment deduction for people making 200,000/year. Do we really feel the need to subsidize home ownership for these people? Healthcare costs? Maybe it's a good thing that we'd like to do, but the cost is the same as or higher than the same tax subsidy to a poorer person who needs it more. At some level of wealth, the cost is going to outweight the benefit.

[lehighguy]

In general we should have lower overall rates and fewer deductions. The government shouldn't prode people into engaging in certain activities at any economic level.

[adios]

Ok fair enough your points are well taken and I appreciate your thoughtful reply. However, I don't think that the standard deduction exists for the reason you say it does. From the following link:

16th Amendment and Income Tax

Modern interpretation

In Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955), the Supreme Court laid out what has become the modern understanding of what constitutes 'income' to which the Sixteenth Amendment applies, declaring that income taxes could be levied on "accessions to wealth, clearly realized, and over which the taxpayers have complete dominion." Under this definition, any increase in wealth - whether through wages, benefits, bonuses, sale of stock or other property at a profit, bets won, lucky finds, awards of punitive damages in a lawsuit, qui tam actions - are all within the definition of income, unless Congress makes a specific exemption (as it has for things like gifts, bequests, scholarships, and alimony).

Some lower courts have ruled that the Amendment authorized unapportioned direct taxes on income. However, the Supreme Court has always said that all income taxes are indirect.

Let's take a hypothetical but a fairly common situation. A person gets paid by an employer and receives a W-2 at the end of the year. That person commutes each day to his/her place of employment and incurs expenses for maintaining their employment. Clearly there are expenses that would not be incurred if that person was not working. The standard deduction is intended to in part cover those expenses. If we expand other necessary expenses to shelter, food and clothing (is there any argument that all people need these things?) then I think that a clear argument can be made that a certain level of income is needed just to purchase the necessities of life and that this income is not an "accession to wealth." Does the standard deduction cover all of these expenses? Of course not and this has been recognized by more than a few people. My understanding of this is the foundation of the Steve Forbes tax plan. Clearly there should be deductions for the basic necessities of life. Where to draw the line is debatable but it isn't at the level of the standard deduction for a family of 4 lets say.

[Meech]

Yes, they are way too high. Add up all the little fees and taxes I'd be surprised if it doesn't exceed 50%.

We've dumped tea in the harbor for less.