Thread: Taxing Money More Than Once

Originally Posted by Nickelking

But the federal tax charged for that year is on pre-tax dollars, your withholding has no bearing on your gross taxable income. (it's the same in California btw)

I know it's pretty arcane, but I believe that the rationale is that the tax rates apply only to that portion of the income that is net, post-tax. Otherwise, they'd be in the position of taxing your taxes. I suppose they base the tax tables on the adjusted gross income, rather than the post tax income, because that would require a sliding mathematical scale and they realize that most of us don't know calculus. So they do it for us and embed it in the tax tables and rates. That's my understanding, at any rate.

In other words, it's not comprehensible by mortal man, like most of the tax structure.

I don't work for the IRS, but know people who do, and can ask next week, if that would help.

j

By the way, the people at IRS didn't design this. They're just required to manage the whole ridiculous process, with decreasing budgets and staffing.

j

Well on my forms I'm supposed to put in my gross income, then my deductions. that results in the agi... there's no deduction for state and local taxes that has been withheld as it's still part of my my gross income.

It'd be asinine to only tax post-tax income as it would result in a never ending loop of lower and lower income, it's not a possible equation. They take your gross and let you have the minimum deduction or your standard deductions, that's the amount taxed by the federal, state and local tax boards.A return is part of your gross income that you're taxed on, and your deductions from that gross result in your AGI. the withholding amount only factors into the return not your AGI. Sadly some states see it otherwise, and that's patently absurd.

Simplified math model... you made 100k, you get a standard deduction of 10k, you get taxed on 90kand have to pay 9k for that year. that's how taxes are figured. No matter whether you had 30k or 1k withheld you owe 9k.

(obviously this isn't a true tax estimate, and only a simplification of the tax code, please don't assume that if you have 90k AGI you only owe 9k)

I would of course appreciate you asking your tax officer friends about the legality about taxing refunds. I'm rather curious as to how some states get away with it.

to illustrate the not taxing the tax part of your argument I'd like to persent a formula.In this example the tax rate = 10% ( I-T=I-T*10%) I=income, T=taxes. I hope this helps you realise the absurdity that only post tax income is taxed.

Originally Posted by Nickelking

to illustrate the not taxing the tax part of your argument I'd like to persent a formula.In this example the tax rate = 10% ( I-T=I-T*10%) I=income, T=taxes. I hope this helps you realise the absurdity that only post tax income is taxed.

I didn't say 'post tax." What I postulated was a sliding scale in which an equilibrium is achieved between the amount of income taxed versus supposedly non-taxed federal taxes. The object is to find the point at which the amount of tax owed is in balance with the amount of net income post-tax.

Besides, I'm not arguing. I think the whole thing is pretty crazy.

I know it's pretty stupid. For example, they do tax your sales taxes and other taxes.

The middle class continues to lose ground.

j

To respond to the original premise of this thread:

The argument of taxing money twice obviously doesn't hold up. Money in the U.S. (and most other countries) is taxed when it changes hands. Corporations pay taxes on profits; individuals pay taxes on their income and on things they buy.

The issue, if we'll remember, is that some people oppose estate taxes because they regard that as double taxation. That assumes, however, that you can tax a dead person, which is absurd. But some people nevertheless oppose taxing the heirs to estates in excess of (next year) $3.5 million.

Many of these same people also oppose taxing capital gains, which constitute a substantial portion of the income of the wealthiest Americans. Again, this is based on the fallacious premise that it represents double taxation, as the corporations that generated the profit are taxed on their income.

So my question is this: When is it permissible to tax rich people?

Just a thought.

j

Originally Posted by Nord Jim

To respond to the original premise of this thread:

The argument of taxing money twice obviously doesn't hold up. Money in the U.S. (and most other countries) is taxed when it changes hands. Corporations pay taxes on profits; individuals pay taxes on their income and on things they buy.

The issue, if we'll remember, is that some people oppose estate taxes because they regard that as double taxation. That assumes, however, that you can tax a dead person, which is absurd. But some people nevertheless oppose taxing the heirs to estates in excess of (next year) $3.5 million.

Many of these same people also oppose taxing capital gains, which constitute a substantial portion of the income of the wealthiest Americans. Again, this is based on the fallacious premise that it represents double taxation, as the corporations that generated the profit are taxed on their income.

So my question is this: When is it permissible to tax rich people?

Just a thought.

j

The thing you have to remmeber with capital gains is that is a tax on top of the income tax, in other words you pay tax on the money you made as income, and then you have to pay capital gains too.

If we went with a flat tax system everything would make sense.

Heres a proposed tax code:

1. Tax all individuals at the same percentage for every penny they make from any source.

2. Corporations are legal individuals and pay the same tax on income as the price of the liability protection incorporation provides.

3. thats it. There are no exceptions, or exemptions for anything.

In Canada they charge sales tax on postage stamps. I believe that is taxing a tax.

Originally Posted by hoglahoo

Oklahoma does it

That's odd- I've not had my returns taxed. Time to run

Originally Posted by Nord Jim

So my question is this: When is it permissible to tax rich people?

You don't have to be rich ... in this country (the UK) you can be in the absurd position of having lived in a house all your life, when your parents die and you inherit the house you have to sell the house in order to pay for the inheritance tax. Fair enough you may say but in the UK the IT threshold is £312k and the average house prices are :

Average Cost: £218,112
Detached: £342,794
Semi-detached: £197,416
Terraced: £173,858
Flat: £200,344

Having family property doesn't make you rich, house prices in the UK have skyrocketed, my house has doubled in value in the last 8 years.

Barney

Apologies Nord Jim, I apparently misread your post prior to my previous one.