Rich getting richer, hard to get ahead, etc...

[Carol in Cal.]

Not sure how this relates to my musings about SS (it's not like I said to get rid of it??)

 

And most wealthy people pass on their money to their children. Sure they donate some, but the children of the well off tend to do ok.

 

I'm guessing that it refers to your suggestion of means testing, which raised my hackles as well.

 

[SKL]

Not sure how this relates to my musings about SS (it's not like I said to get rid of it??)

 

And most wealthy people pass on their money to their children. Sure they donate some, but the children of the well off tend to do ok.

 

What do children have to do with it?  We're talking about older people, most of whose children (if they had any) are grown up and independent, maybe independently successful, maybe estranged, maybe dead, maybe living with their parents to help out.  I'm not saving money to give to my children when I die.  They can have my house if it's still standing.

 

Then again, my kids will be 27 when I'm 67, so maybe they will still need my help, who knows?

 

Do you want the government to meddle in inheritances now?  I guess so....

[hepatica]

 

 

Do you want the government to meddle in inheritances now?  I guess so....

 

Yep, I'm ok with that. Nothing new.

[SKL]

I noticed a difference rather quickly when Johns Hopkins told me we had to pay up front for my type of radiation because even though it was considered the best for my tumor, many insurances wouldn't cover it and they weren't about to get burned.  They didn't trust health share would cover it.  We had to come up with mid five digits of cash for me to have what was deemed best (then we did get reimbursed 100% because health share did cover it).  What if we'd had no insurance or what if we'd had insurance that wouldn't cover it?  Then we might have qualified for a lesser type that did more brain/head damage, but absolutely no to what was considered best at keeping the most intact with fewest side effects and still being effective.  If no insurance, then we were SOL without cash unless we had a low enough income for charity - and that bar seemed to be pretty low TBH.

 

I have a distinct feeling that most can't come up with mid five digits in cash.  We wouldn't have been able to lose that amount either if health share wouldn't have reimbursed us.

 

There is no place on earth where you get to decide what will be covered under whatever health insurance is available.  Every "universal insurance" system says "no" to many options.  I am thankful that you got your radiation type covered ultimately.

 

To respond to the comments of several others (not the here-quoted comment), mental health is an example of a health issue that tends to be handled badly in most if not all countries, including the USA.

 

PS I didn't say none of the bad stories are true, but I don't believe they are ALL true, and I don't agree with using those horror stories as the basic description of healthcare accessibility in the USA.  I have seen far, far more examples of low-income people getting excellent care and not going broke.  A little balance in reporting would be nice.

[frogger]

Well certainly not investment income tax breaks. And plenty of people I would consider well off are taking a mortgage interest deduction. 

 

Wealthy is probably not a good term because we seem to disagree on what it means. How about not poor? My point is many people are receiving government benefits that seem to come with no stigma and they don't even admit or realize that they are.

 

 

I agree that many have disdain for those who accept certain types of welfare while getting public education for their kids, claiming social security, etc.  So they can accept help from the government but no one less well off can. 

 

Also, the poor do pay payroll taxes even if they don't pay income taxes. They are also more likely to end up having to pay fines because they can't afford to keep up with regulations. All the little fines and fees and late payments. 

 

 

I do think that arguing how much someone should be allowed to have is ridiculous especially considering who ends up with a lot of tax money. If you were scrapping by would you want to know your taxes were going to bank bail outs and contractual bonuses of millionaires?  

 

The big three are housing, health, and education. It is strange to me that we can pay over $20,000 per student in our district but teachers are not well paid and still have to buy supplies for their own class.

 

It doesn't matter how much money you give people for housing if you don't solve the problem that there isn't enough housing. So you give everyone a subsidy, they are all competing for the same number of apartments because people don't want more housing built so the rent goes higher. How does that help anyone? You can argue that some can't even afford the cost it would take to build anything and that is where housing help should come into play but having cities restrict housing while the Fed's subsidize it doesn't get us anywhere other than the middle class can no longer afford housing. 

 

It doesn't matter who pays the health bill if that bill is 5x's the amount it could be because doctor's have a monopoly or two little hospitals have to spend a bunch of money to get the state to ALLOW them to build another room in their hospital. And they have to compete for this ability and run ads and lobby. I'm sorry but no one seems to care that no matter how much we spend it doesn't matter if it is not getting to where it actually helps people. I mean yes, there will always be people who need help paying for health care and most would agree with that but it would be easier to make sure more people were covered if the costs weren't so astronomical. 

 

You can tax the small business man with employees to pay  and the young couple both working trying to get into a home all you want but I hope you are happy when some fat cat bureaucrat ends up with it anyway. 

[SKL]

 

State tax rates are completely different than what we're talking about... did he leave the country over our federal tax rate in his day?

 

People (and companies) do tax planning considering all their taxes.

 

Maybe it's easier to take your stuff and leave the US nowadays, I dunno.

 

But obviously tax rates impact how much a person can do with his after-tax income.  How could it be otherwise?

There are modern-day rich philanthropists whose work would be curtailed by higher tax rates.  Surely you can think of some off the top of your head.

[SereneHome]

Also interesting to note that he did this with a 79% tax rate for his highest income, no?   ;)  It's rather amazing that he didn't need a lower rate to be wealthy and donate all his millions...

 

ETA:  Googling I found out I was incorrect.  Taxes in his era for his highest income were around 90% - and he still donated a fortune and left a bit to his family.

 

It does make one wonder just why it could happen then, but not now.

 

 

But we can't discount health care.  It's a MAJOR thing that needs to be fixed in this first world country.  We can't bury our heads in the sand and pretend that problem isn't there.  How to fix it?  Higher taxes (along with much fewer deductions) and distribute that cost out among as many as we can - along with dropping the "for profit" part of it all.

 

 

State tax rates are completely different than what we're talking about... did he leave the country over our federal tax rate in his day?

 

 

You know, if you're so envious, you can change places with them.  That IS an option.

 

You might find yourself giving up a bit, but think of how much you get for free.  That should be incentive enough.

 

 

So easily said until you've BTDT either yourself or with someone you know.  Obviously, those other stories can't be true.

 

I noticed a difference rather quickly when Johns Hopkins told me we had to pay up front for my type of radiation because even though it was considered the best for my tumor, many insurances wouldn't cover it and they weren't about to get burned.  They didn't trust health share would cover it.  We had to come up with mid five digits of cash for me to have what was deemed best (then we did get reimbursed 100% because health share did cover it).  What if we'd had no insurance or what if we'd had insurance that wouldn't cover it?  Then we might have qualified for a lesser type that did more brain/head damage, but absolutely no to what was considered best at keeping the most intact with fewest side effects and still being effective.  If no insurance, then we were SOL without cash unless we had a low enough income for charity - and that bar seemed to be pretty low TBH.

 

I have a distinct feeling that most can't come up with mid five digits in cash.  We wouldn't have been able to lose that amount either if health share wouldn't have reimbursed us.

 

OK, you want to go into the land of silly - I'll play along.

 

Guess what?  I wouldn't have to give up anything.  All I would have to do is divorce my husband and BOOM - I am a single mother with 3 children and a PT job and all of a sudden I am eligible for EIC and Child tax credit, not even counting food stamps and housing assistance and all other good stuff.   All while still living with my now ex-husband.  And if you think that's horrible and dishonest - well, I guess you will be proposing policy changes that significantly crack down on this type of things bc it happens all.the.time.    I've done more tax returns that I can count like that.  And I've worked with many many women who were doing that.

 

But in the meantime - I am sure you are getting your check book as we speak to write checks to IRS for all the excess income that you are so willing to share, correct?

 

[Guest]

OK, you want to go into the land of silly - I'll play along.

 

Guess what? I wouldn't have to give up anything. All I would have to do is divorce my husband and BOOM - I am a single mother with 3 children and a PT job and all of a sudden I am eligible for EIC and Child tax credit, not even counting food stamps and housing assistance and all other good stuff. All while still living with my now ex-husband. And if you think that's horrible and dishonest - well, I guess you will be proposing policy changes that significantly crack down on this type of things bc it happens all.the.time. I've done more tax returns that I can count like that. And I've worked with many many women who were doing that.

 

But in the meantime - I am sure you are getting your check book as we speak to write checks to IRS for all the excess income that you are so willing to share, correct?

 

Are you really saying there are hoards of divorced couples happily living together for the amazing food stamp benefits? I call shenanigans.

[historically accurate]

OK, you want to go into the land of silly - I'll play along.

 

Guess what?  I wouldn't have to give up anything.  All I would have to do is divorce my husband and BOOM - I am a single mother with 3 children and a PT job and all of a sudden I am eligible for EIC and Child tax credit, not even counting food stamps and housing assistance and all other good stuff.   All while still living with my now ex-husband.  And if you think that's horrible and dishonest - well, I guess you will be proposing policy changes that significantly crack down on this type of things bc it happens all.the.time.    I've done more tax returns that I can count like that.  And I've worked with many many women who were doing that.

 

But in the meantime - I am sure you are getting your check book as we speak to write checks to IRS for all the excess income that you are so willing to share, correct?

 

 

A quick google says that NY welfare would not accept that - I assume most states welfare programs wouldn't accept that. http://www.lawny.org/node/30/can-my-boyfriend-or-husband-live-me-if-i-get-public-assistance

 

I have no idea on EIC or Child Tax Credit (my tax class was 20+ years ago), but I do not know of ANY divorced couples living in the same house in order to cut taxes. Apparently, it's rampant and I'm oblivious according to you, but every divorced couple I know never wants to see each other again, most especially not at 6:30 in the morning over the bathroom sink. 

Edited July 18, 2017 by beckyjo

[SKL]

Are you really saying there are hoards of divorced couples happily living together for the amazing food stamp benefits? I call shenanigans.

 

I don't know the numbers, but yes some low-income people enter into marriages or divorces of financial convenience.

 

My mom used to tell me that they used to have a law against "living together" if you were on welfare.  She said the welfare workers would come and do surprise inspections, even looking under the bed to find out if there was a man living there.  At some point there was enough outrage that they changed that rule.  You could cohabit without losing your benefits.  :P  But I'm sure marrying would impact household income / poverty line calculation.

 

[Caroline]

You are wrong. Does it happen? Sure. But not at the rates you are implying or you just cannot count very high.

 

OK, you want to go into the land of silly - I'll play along.

 

Guess what? I wouldn't have to give up anything. All I would have to do is divorce my husband and BOOM - I am a single mother with 3 children and a PT job and all of a sudden I am eligible for EIC and Child tax credit, not even counting food stamps and housing assistance and all other good stuff. All while still living with my now ex-husband. And if you think that's horrible and dishonest - well, I guess you will be proposing policy changes that significantly crack down on this type of things bc it happens all.the.time. I've done more tax returns that I can count like that. And I've worked with many many women who were doing that.

 

But in the meantime - I am sure you are getting your check book as we speak to write checks to IRS for all the excess income that you are so willing to share, correct?

 

[Caroline]

I don't know the numbers, but yes some low-income people enter into marriages or divorces of financial convenience.

 

My mom used to tell me that they used to have a law against "living together" if you were on welfare. She said the welfare workers would come and do surprise inspections, even looking under the bed to find out if there was a man living there. At some point there was enough outrage that they changed that rule. You could cohabit without losing your benefits. :P But I'm sure marrying would impact household income / poverty line calculation.

 

Probably they don't do that any more because it cost more to employ people doing the checking than they ever saved by catching any fraud.

[Bootsie]

Also interesting to note that he did this with a 79% tax rate for his highest income, no?   ;)  It's rather amazing that he didn't need a lower rate to be wealthy and donate all his millions...

 

ETA:  Googling I found out I was incorrect.  Taxes in his era for his highest income were around 90% - and he still donated a fortune and left a bit to his family.

 

It does make one wonder just why it could happen then, but not now.

 

 

But we can't discount health care.  It's a MAJOR thing that needs to be fixed in this first world country.  We can't bury our heads in the sand and pretend that problem isn't there.  How to fix it?  Higher taxes (along with much fewer deductions) and distribute that cost out among as many as we can - along with dropping the "for profit" part of it all.

 

 

State tax rates are completely different than what we're talking about... did he leave the country over our federal tax rate in his day?

 

 

You know, if you're so envious, you can change places with them.  That IS an option.

 

You might find yourself giving up a bit, but think of how much you get for free.  That should be incentive enough.

 

 

So easily said until you've BTDT either yourself or with someone you know.  Obviously, those other stories can't be true.

 

I noticed a difference rather quickly when Johns Hopkins told me we had to pay up front for my type of radiation because even though it was considered the best for my tumor, many insurances wouldn't cover it and they weren't about to get burned.  They didn't trust health share would cover it.  We had to come up with mid five digits of cash for me to have what was deemed best (then we did get reimbursed 100% because health share did cover it).  What if we'd had no insurance or what if we'd had insurance that wouldn't cover it?  Then we might have qualified for a lesser type that did more brain/head damage, but absolutely no to what was considered best at keeping the most intact with fewest side effects and still being effective.  If no insurance, then we were SOL without cash unless we had a low enough income for charity - and that bar seemed to be pretty low TBH.

 

I have a distinct feeling that most can't come up with mid five digits in cash.  We wouldn't have been able to lose that amount either if health share wouldn't have reimbursed us.

Just because there was wealth and taxes collected when the tax rate was 79% or 90% does not mean that there would not have been MORE tax revenue collected at a lower tax rate.  It is not simply the tax rate, but the tax rate multiplied by the tax rate, that determines the amount of tax revenue collected.  

 

If Mr. W earns $1 million when the tax rate is 90%, the tax revenue is $900,000.

 

If Mr. W earns $3 million when the tax rate is 50% (because he gets to keep $50 for every $100 he earns rather than only 10), then the tax revenue is $1.5 million.  

 

Yes, taxing him at 90% lowers the income disparity, but it does not provide more $ for social programs.  

[Guest]

In my backwards hometown, there is a group of immigrants that are referred to as Muslims (I have no idea if they are Muslim). The women are covered head to toe. Some of the women appear to be very tall and have a manly walk. Clearly, ISIS is hiding in the woods of BFE Missouri.

 

Bias will cloud your vision.

[Bootsie]

Are you really saying there are hoards of divorced couples happily living together for the amazing food stamp benefits? I call shenanigans.

Just off of the top of my head I can think of a number of people I know who have intentionally not married in order to receive benefits.  This is a failure of the structure of the social programs.  One significant factor in opportunities children have is having a stable family/home life.  This is not something that government programs can mandate, but some of our programs discourage this instead of encourage it, which seems counterproductive.

[SKL]

Just off of the top of my head I can think of a number of people I know who have intentionally not married in order to receive benefits.  This is a failure of the structure of the social programs.  One significant factor in opportunities children have is having a stable family/home life.  This is not something that government programs can mandate, but some of our programs discourage this instead of encourage it, which seems counterproductive.

 

I also know people who didn't/don't marry in order to keep benefits.  However, I'm not sure how much that actually affects stability for the children.  I think that's a little more complex. 

 

I do know someone who finally married when her welfare benefits ran out - stayed married about a year and then got divorced to go live with another guy ... with whom she had another baby for more benefits ....  So her being married to the 1st guy probably didn't do much for her kids ....  Her reason for divorcing him was that he spent too much time working.  :P  OK that is totally irrelevant but, true story.  :P

[Guest]

I don't know the numbers, but yes some low-income people enter into marriages or divorces of financial convenience.

 

My mom used to tell me that they used to have a law against "living together" if you were on welfare. She said the welfare workers would come and do surprise inspections, even looking under the bed to find out if there was a man living there. At some point there was enough outrage that they changed that rule. You could cohabit without losing your benefits. :P But I'm sure marrying would impact household income / poverty line calculation.

 

Yes, it does. It is rampant in some areas. One of our employees talked about how this kind of "scamming" was happening a lot in his extended family. (Working class poor white folks.) They sold their SNAP cards to other people as well. Black market food stamps.

[hepatica]

So the basic argument here is that the people receiving government benefits, in the main, don't deserve them? Just making sure I understand.

[SereneHome]

Are you really saying there are hoards of divorced couples happily living together for the amazing food stamp benefits? I call shenanigans.

 

Does it really matter what *I* am saying if you are just going to read into it whatever you want anyway?

[Guest]

So the basic argument here is that the people receiving government benefits, in the main, don't deserve them? Just making sure I understand.

And they are probably evil scammers.

[SereneHome]

A quick google says that NY welfare would not accept that - I assume most states welfare programs wouldn't accept that. http://www.lawny.org/node/30/can-my-boyfriend-or-husband-live-me-if-i-get-public-assistance

 

I have no idea on EIC or Child Tax Credit (my tax class was 20+ years ago), but I do not know of ANY divorced couples living in the same house in order to cut taxes. Apparently, it's rampant and I'm oblivious according to you, but every divorced couple I know never wants to see each other again, most especially not at 6:30 in the morning over the bathroom sink. 

 

You are taking "divorced" out of context.

 

Believe me, there are plenty of never married couples who do this kind of thing. 

 

 

[SKL]

So the basic argument here is that the people receiving government benefits, in the main, don't deserve them? Just making sure I understand.

 

Depends which bias you are looking through.  What I'm hearing is that well-off taxpayers don't deserve taxpayer-funded benefits.  :P

 

[hepatica]

 

Typed while drinking a cup of tea before going to job 1 of 3 today, at 6.39am.

 

 

Hope you didn't buy that tea at Starbucks or whatever your equivalent coffee shop is. That would be scandalous.

[SereneHome]

You are wrong. Does it happen? Sure. But not at the rates you are implying or you just cannot count very high.

 

 

You can be as rude as you want, I don't get offended easily. 

 

Why even bother where I get my information - insulting people is so easy and fun.

[hepatica]

Depends which bias you are looking through.  What I'm hearing is that well-off taxpayers don't deserve taxpayer-funded benefits.  :p

 

 

Well off tax payers don't like to admit that they are receiving government benefits.

[Carol in Cal.]

Well off tax payers don't like to admit that they are receiving government benefits.

 

I think that people can reasonably take issue with the suggestion that being allowed to keep some more of their earnings is qualitatively equivalent to getting a handout.  I don't personally see any shame in getting a handout, but the two things are still different despite attempts to call them the same.

[Bootsie]

Also interesting to note that he did this with a 79% tax rate for his highest income, no?   ;)  It's rather amazing that he didn't need a lower rate to be wealthy and donate all his millions...

 

ETA:  Googling I found out I was incorrect.  Taxes in his era for his highest income were around 90% - and he still donated a fortune and left a bit to his family.

 

It does make one wonder just why it could happen then, but not now.

 

 

Marginal income tax rates were high in that era, but capital gains taxes were much lower as were corporate tax rates.  

[SereneHome]

Yes, it does. It is rampant in some areas. One of our employees talked about how this kind of "scamming" was happening a lot in his extended family. (Working class poor white folks.) They sold their SNAP cards to other people as well. Black market food stamps.

 

A friend of mine is a manager of a large grocery store.  People would come in, buy water by the case, go outside, pour the water out and return the bottles for cash. 

 

 

There were women in one of my homeschooling groups who would get baby formula through WIC and sell it bc they were breastfeeding and didn't need the formula.

[Guest]

A friend of mine is a manager of a large grocery store. People would come in, buy water by the case, go outside, pour the water out and return the bottles for cash.

 

 

There were women in one of my homeschooling groups who would get baby formula through WIC and sell it bc they were breastfeeding and didn't need the formula.

That breaks my heart so much, I cannot even "like" your post.

[hepatica]

Does anyone deserve help? You could certainly make the argument that intelligence, work ethic, good health, not being poisoned by a toxic environment, not being born into a war zone etc... are all random accidents of birth. At what point do people become worthy of a "handout."Mental deficiency, mental health issues, paraplegic... these are ok, but just not quite so smart or not very lucky, these are not?? Seriously, I have a really hard time with these questions. I don't have to understand what motivates people or why they are in the circumstances they are in to believe that everyone should be able to eat decent food, have safe housing and access to education, to get healthcare. I just want to live in a society where everyone has that. I don't think this in unaffordable, and I do think government can be used to achieve these aims.

[SereneHome]

OK, bc I am obviously gluten for punishment....

 

To whoever compared mortgage deduction with Sect 8 housing assistance.  Let's throw some numbers into this:

 

Let's say I am that wealthy SOB who is making $100K/yr and I buy a fancy $200K house.  Let's say (since I can't count very high I'll make numbers very simple) my mortgage payment is $1000/mo.  Le's say my  interest is probably $500/mo or $6K /yr.

 

Tax return time comes and I am jumping for joy bc I can deduct that $6K.  But wait!  It's not a credit, it's just a deduction, which all it means that my taxable income will simply be decreased by $6K.  Yay me, right?  Well....but I PAID that $6K, no one gave it to me.  But wait, there is more!  I don't get the whole $6K benefit, I only get a % of it, depending on what my tax rate is. 

 

So, I paid taxes on  my earnings.  I am paying interest on my loan.  And at the end of the day I am getting a benefit of returning MY $2K that I paid with my AFTER TAX money.

 

The way Sect 8 works:   Govt provides me with someone else's money to live in a house. 

 

I am not even getting into logistics of standard vs itemized deduction bc if I don't have enough to itemize, that mortgage deduction doesn't even matter to me. 

 

OK, I really need to get off this thread and get a life. 

[Bootsie]

I think that people can reasonably take issue with the suggestion that being allowed to keep some more of their earnings is qualitatively equivalent to getting a handout.  I don't personally see any shame in getting a handout, but the two things are still different despite attempts to call them the same.

 

 

Well off tax payers don't like to admit that they are receiving government benefits.

There is a difference in saying that a person is benefitting (paying lower taxes than they otherwise would) from a tax law and that a person is receiving a government benefit. 

 

 Also, someone can be in a situation where they benefit that a portion of the tax law is there compared to it not being there and still say they are in favor of a different tax law (e.g. a low marginal tax rate on all without any deductions) without denying they benefit from the current situation. 

[Artichoke]

. 

 

Edited July 19, 2017 by Artichoke

[hepatica]

There is a difference in saying that a person is benefitting (paying lower taxes than they otherwise would) from a tax law and that a person is receiving a government benefit. 

 

 Also, someone can be in a situation where they benefit that a portion of the tax law is there compared to it not being there and still say they are in favor of a different tax law (e.g. a low marginal tax rate on all without any deductions) without denying they benefit from the current situation. 

 

I disagree. They are government benefits just distributed through the tax system.

 

Tax expenditures have a huge impact on the federal budget. If a person's entire tax bill was offset by tax expenditures would we still say they are not government benefits? At what point do they become a government benefit? They make the tax code more opaque and allow better off citizens to pretend they are not the recipients of a government benefit. These tax expenditures make it very difficult for citizens to ascertain just how progressive or regressive the tax system really is.

[Pam in CT]

re tax "deductions" vs tax "subsidies" vs tax "credits" vs "transfer payments" 

I disagree. They are government benefits just distributed through the tax system.

 

Tax expenditures have a huge impact on the federal budget. If a person's entire tax bill was offset by tax expenditures would we still say they are not government benefits? At what point do they become a government benefit? They make the tax code more opaque and allow better off citizens to pretend they are not the recipients of a government benefit. These tax expenditures make it very difficult for citizens to ascertain just how progressive or regressive the tax system really is.

 

 

Yes -- businesses and economists and government budget planners all consider them similarly.  An corporate tax "credit" for (say) building headquarters in a particular state, vs a direct "subsidy" for (say) employing a certain number of adults with disabilities, vs a "deduction" for (say) offering premo health plans to senior management... it all goes to the corporate bottom line; it all comes from taxes otherwise due.

 

It's easier to hide the ball, though.  And the idea of "taxes otherwise due" rankles to some households.

 

Mortgage deductions are great for those who can afford to own the housing they live in, but they're hard to justify in terms of public policy when data set after data set demonstrate that the benefits overwhelmingly accrue to higher income / higher wealth households, both because they're more likely to own and also because lower income households are less likely to itemize.  

 

Even if you accept the premise that encouraging home ownership over renting is a proper role for the government to be playing (and... I dunno that I do accept that premise) mortgage deductibility isn't actually encouraging first-time "starter home" ownership of on-the-financial-cusp households when you actually look at the data.  It's effectively just a transfer from renters to owners... but it's much harder to see the ball, than with direct subsidy payments like SNAP.

[regentrude]

I think the entire debate about what "government benefits" are and what "tax deductions" are is not helpful and also kind of pointless. 

I prefer to look at it differently: as a society, we have certain values and priorities and decide on a system so that contributions are raised according to people's abilities, to fund projects that are in the best interest of society. We don't all agree on how the contributions are raised and what they are spent on, but this is the basic premise of any civilized country.

 

It is in the best interest of society to have an educated populace, hence we finance public schools. As a homeschooler, I do not begrudge the portion of my money that goes towards those schools, because  I do not think it is good for all of us if children are uneducated.

It is in the best interest of society to have a working infrastructure, so some funds go towards roads and bridges.

It is also in the best interest of society to have a healthy population, thus some funds are spent towards this goal by financing Medicare, Medicaid, CHIP, and giving tax breaks on Health Savings Accounts.

Society has decided to promote homeownership and does so by reducing the tax burden on people with mortgages.

Society has decided that it is vaulable if poor people are housed, and does so by spending funds on subsidized section 8 housing.

Society has decided that there is some value in a college education and is spending funds on public colleges, Pell grants, and tax credits and deductions (I personally would like to see more spent here, but this is not about the details, just about the principle).

 

There is no "government money". We, the people, pay money into a big pot to keep the society running and stable. 

And we, the people, may take advantage of services paid by the community, reductions in our tax burden, or assistance if we cannot manage on our own. This is the basis of civilization.

 

ETA: please note that I do not say the system works perfectly. In the ideal world, elected officials would make decisions with their constituents best interests at heart, programs would be administered efficiently without waste and fraud, people would not cheat on their taxes. But that's not the point here. 

Edited July 18, 2017 by regentrude

[Frances]

OK, I have to take this on a bit. Social security benefits are capped commensurate with the cap in the income that is taxed for them. Last year the maximum social security benefit someone could get who had 'pegged' the income limit every year was around $3500/month if he didn't start collecting it until age 70. If the income limit for social security taxation was raised, so would be the maximum benefit. It's designed to be a zero sum system, although it's running a surplus now because we are trying to collect more for a while to make up for not being likely to collect enough to fully self-fund down the road.

 

I know people who live on social security almost entirely in their later years. That and Medicare have kept the elderly alive for decades now. These are very good programs.

 

But people paying in at the maximum get a significantly smaller benefit percentage wise than those paying in less. As someone who doesn't pay SS on all my income, I would be fine doing so, ditto for my husband. Actuarial studies done several years ago showed that this would basically solve the funding problem. But every year that Congress fails to act makes the problem worse.

[DawnM]

OK, bc I am obviously gluten for punishment....

 

To whoever compared mortgage deduction with Sect 8 housing assistance.  Let's throw some numbers into this:

 

Let's say I am that wealthy SOB who is making $100K/yr and I buy a fancy $200K house.  Let's say (since I can't count very high I'll make numbers very simple) my mortgage payment is $1000/mo.  Le's say my  interest is probably $500/mo or $6K /yr.

 

Tax return time comes and I am jumping for joy bc I can deduct that $6K.  But wait!  It's not a credit, it's just a deduction, which all it means that my taxable income will simply be decreased by $6K.  Yay me, right?  Well....but I PAID that $6K, no one gave it to me.  But wait, there is more!  I don't get the whole $6K benefit, I only get a % of it, depending on what my tax rate is. 

 

So, I paid taxes on  my earnings.  I am paying interest on my loan.  And at the end of the day I am getting a benefit of returning MY $2K that I paid with my AFTER TAX money.

 

The way Sect 8 works:   Govt provides me with someone else's money to live in a house. 

 

I am not even getting into logistics of standard vs itemized deduction bc if I don't have enough to itemize, that mortgage deduction doesn't even matter to me. 

 

OK, I really need to get off this thread and get a life. 

 

 

Yup.  And standard deduction is now $14K for a couple.  So, guess what?  You only get any tax break AFTER the $14K you spent gets calculated.

 

Paid $6K in interest but your other deductions only come to $8K.....bummer for you, you get no benefit.  $0

[regentrude]

Yup.  And standard deduction is now $14K for a couple.  So, guess what?  You only get any tax break AFTER the $14K you spent gets calculated.

Paid $6K in interest but your other deductions only come to $8K.....bummer for you, you get no benefit.  $0

 

Yes. But then the mortgage interest deduction is a very strange thing that raises all kinds of questions:

Why do we reward people for going into debt at all?

Why do we reward them more if their debt is even bigger?

Why does the person who saved and waited to acquire a modest home and now has only a small mortgage does not receive any benefit ?

Why do we reward debt that is incurred for mansions, but not debt that is incurred for education?

Edited July 18, 2017 by regentrude

[Frances]

I think the entire debate about what "government benefits" are and what "tax deductions" are is not helpful and also kind of pointless.

I prefer to look at it differently: as a society, we have certain values and priorities and decide on a system so that contributions are raised according to people's abilities, to fund projects that are in the best interest of society. We don't all agree on how the contributions are raised and what they are spent on, but this is the basic premise of any civilized country.

 

It is in the best interest of society to have an educated populace, hence we finance public schools. As a homeschooler, I do not begrudge the portion of my money that goes towards those schools, because I do not think it is good for all of us if children are uneducated.

It is in the best interest of society to have a working infrastructure, so some funds go towards roads and bridges.

It is also in the best interest of society to have a healthy population, thus some funds are spent towards this goal by financing Medicare, Medicaid, CHIP, and giving tax breaks on Health Savings Accounts.

Society has decided to promote homeownership and does so by reducing the tax burden on people with mortgages.

Society has decided that it is vaulable if poor people are housed, and does so by spending funds on subsidized section 8 housing.

Society has decided that there is some value in a college education and is spending funds on public colleges, Pell grants, and tax credits and deductions (I personally would like to see more spent here, but this is not about the details, just about the principle).

 

There is no "government money". We, the people, pay money into a big pot to keep the society running and stable.

And we, the people, may take advantage of services paid by the community, reductions in our tax burden, or assistance if we cannot manage on our own. This is the basis of civilization.

 

ETA: please note that I do not say the system works perfectly. In the ideal world, elected officials would make decisions with their constituents best interests at heart, programs would be administered efficiently without waste and fraud, people would not cheat on their taxes. But that's not the point here.

As someone who works intimately with tax deductions on a daily basis, I have to disagree. Whether the money is spent directly through outlays for infrastructure or benefit programs or indirectly through tax expenditures, it is still being spent. So how we divide up a finite resource and fund our priorities is reflected in both spending and tax breaks.

 

For my family, over $50k of our income doesn't even show up on our return due to tax expenditures. Then another chunk is excluded through itemized deductions. If higher income people only focus on how much they are paying rather than how much of their income is being excluded from taxation due to tax expenditures, they can end up with a very skewed picture of who is benefitting from government policies and priorities.

[regentrude]

As someone who works intimately with tax deductions on a daily basis, I have to disagree. Whether the money is spent directly through outlays for infrastructure or benefit programs or indirectly through tax expenditures, it is still being spent. So how we divide up a finite resource and fund our priorities is reflected in both spending and tax breaks.

 

For my family, over $50k of our income doesn't even show up on our return due to tax expenditures. Then another chunk is excluded through itemized deductions. If higher income people only focus on how much they are paying rather than how much of their income is being excluded from taxation due to tax expenditures, they can end up with a very skewed picture of who is benefitting from government policies and priorities.

 

So where exactly are we disagreeing??? I think the bolded above is exactly what I was trying to say.

Edited July 18, 2017 by regentrude

[DawnM]

Yes. But then the mortgage interest deduction is a very strange thing that raises all kinds of questions:

Why do we reward people for going into debt at all?

Why do we reward them more if their debt is even bigger?

Why does the person who saved and waited to acquire a modest home and now has only a small mortgage does not receive any benefit ?

Why do we reward debt that is incurred for mansions, but not debt that is incurred for education?

 

But you CAN get a $3,000 credit PER college student straight off your taxes, UNLESS you make over a certain amount.  Then you get nothing.  

[regentrude]

But you CAN get a $3,000 credit PER college student straight off your taxes, UNLESS you make over a certain amount.  Then you get nothing.

 

Yes, $2,500 for the American Opportunity Credit - unless you are over the income threshold. 

 

Meanwhile, mortgage interest on up to 1 million debt is deductible, and the income cutoff for that is roughly twice what it is for the American Opportunity Credit. Why?

Edited July 18, 2017 by regentrude

[Pam in CT]

re mysteries of the mortgage interest deduction

Yes. But then the mortgage interest deduction is a very strange thing that raises all kinds of questions:

Why do we reward people for going into debt at all?

Why do we reward them more if their debt is even bigger?

Why does the person who saved and waited to acquire a modest home and now has only a small mortgage does not receive any benefit ?

Why do we reward debt that is incurred for mansions, but not debt that is incurred for education?

 

 

That's it, isn't it.  Why indeed.

 

And the take-a-step-back bigger picture question: is choosing to favor homeowners over housing renters an appropriate role for government to take on in the first place.

[Frances]

That's what is so hard about these discussions. There is poor with problems that can be solved with money (my dad grew up like that - it got a little better each generation) and then there is poor with a dysfunctional culture. I think the problems and solutions are different for each group, which is why these discussions often feel like people talking past each other.

 

I think this is absolutely key and one reason why some people don't want to pay any more in taxes to help those less fortunate and why they feel that many government programs have failed. Even as someone who would happily pay more to have a more robust safety net and would even be fine with paying significantly more to have a social welfare systems like many European countries, my heart absolutely breaks for the innocent children born into dysfunction, addiction, etc. Through local volunteer work and charitable contributions, I try to do my part, but I have a difficult time not being very angry at parents who choose not to wait to become parents until they are stable themselves. We know from research the devastating effects these children face everyday, and often even before they are born. And the problem only seems to be getting worse.

 

And yes, I know that for many of these people their own decision making skills are impacted by their own childhoods. But I sometimes worry that some of our programs and policies are just making the problem worse.

[DawnM]

N/M:  Honestly not worth it.  

 

Edited July 18, 2017 by DawnM

[Frances]

As far as tax breaks - well......that is my money that I earned first. I am simply not sharing that part of my earnings with the world. So, how is that the same thing as someone getting govt assistance?

 

And no, not all income of less affluent gets taxed. As a matter of fact, thanks to various refundable credits families can get money from the govt without paying any federal tax at all. I'll say it again - they are not paying ANY federal tax. At all!

But the progressive income tax system at the federal level helps to balance the very regressive tax systems of most states. When all taxes are taken together, and the focus is not just on federal INCOME taxes, the picture changes pretty significantly.

 

And the biggest refundable tax credit, the earned income tax credit, has been shown to be very effective and efficient at helping people out of poverty. Most use it for only a limited number of years and move into tax paying status. It actually has strong bipartisan support.

 

Plus,many of those others not paying federal income taxes are the elderly, young part-time workers, students, etc. But they are certainly paying plenty of other taxes.

[Frances]

So where exactly are we disagreeing??? I think the bolded above is exactly what I was trying to say.

I'm sorry if I misunderstood your post. It was really only the first sentence I was disagreeing with because I think wealthy people who benefit the most from tax expenditures sometimes only want to focus on the spending side. And literally some people are not even aware of the concept of tax expenditures. But I absolutely agree that ideally we would set our big picture priorities and then decide the best ways to achieve them.

[Frances]

This bears repeating.

 

Many of the middle class tax breaks that people assume are for the 'wealthy' are not available to the wealthy or even to the high income, because the eligibility for them phases out before you get to the high income levels that some call 'wealthy'.

 

One of the confounding problems is also the extreme differences in COL around the country. Income that could make someone "wealthy" in small town Oklahoma might barely be enough for a family of five to be solidly middle class in Silicon Valley.

[EMS83]

:grouphug: :grouphug:  :grouphug: