How is the current federal income tax fair?

[awhite088]

SO the argument for the current progressive taxation system is that "everyone pays what their fair share." Someone who makes $350,000 can afford to pay 35% of their income and someone who makes $25,000 pays 18% of their income to the federal government. But I do not see how this is fair at all. Actually, I cant even make myself rationalize it. If someone makes 350,000 and has to pay 35% of their income, they would be paying $122,500 in federal income tax. The federal income tax on someone who makes $25,000 is $4,500. Not only is the person paying 27 times more money, he is getting charged a higher % rate. And these people both have equal say in the government whether it be from voting or participation. This is the first problem. (1) People are getting taxed differently with the same amount of government representation. Lets get real. There are classes in the United States that will always be there as long as we have a capitalistic economy. There is the labor class, the management class, the governing class, etc.... the list goes on and on. And in my opinion, the theme in this country is equality and freedom. The freedom to make your own decisions in you life, to pursue happiness, and to have an opportunity to do so without fear or hindrance. This tax system hinders small business growth and is a redistribution technique. It stunts the growth of the economy because it is targeting the people who can make it grow. Here is an example, a small business sells wood furniture. There is an owner, three sales men, and 15 craftsmen who make the furniture. This would qualify as a small business. You pay all 18 of your employees 40,000.The business makes a gross income of $3,000,000. First you take the federal business tax est at 20%(-600,000). Then you pay your employees (-$600,000). Then you pay payroll taxes, the employer must match FICA taxes for each employee (social security- 6.2% (-$446,400), medicare-1.45%(-$10,440), unemployment- 6% of the first $7,000 paid(-$63,500), total business taxes = $520,340.(2) This is another major problem with this tax system. WHY would a company want to hire more people when they have to match the taxes of the people they hire? This literally MAKES companies use the least amount of employees as possible. Now we are done with business taxes. The furniture business now has 1,279,660. Now because we are smart, we invest half of that back into the business for supplies, transportation, communication, marketing, etc. This leaves the owner with 639,830. You would think he is doing pretty well. But now lets move on to personal taxes.Because he made so much he is in the top tax bracket at 39.9% (-$255,292.17). State income tax at 7.8% (in MN) (-$49,906.74). The FICA tax (social security -$39,669.46, medicare -$9,227.53, unemployment -$3,500, total -$52,396). The business entity must match his FICA(-$52,396). This is double taxation. So the business owner is left with $282,234. That is 55.89% of the business owners income that is taken from taxes. Does anyone else think that is ridiculous? Why would a small business owner want to expand or invest any money when over half of it will be taken away. This is not a top executive in a corporate office who does not have to pay any taxes to worry about anything but himself. This is the average business owner trying to run a successful business and improve the lives of his employees and his community. The argument is well he's making 280,000 while his employees are making 35,000. This is a fair argument but a business owner has much more responsibility, investment, and risk associated with the business than the employees do. If the business fails, the employees can find another job without loosing anything but the time not working. If a business fails, the owner has lost everything he has invested. Like I said before, as long as there is a capitalistic society there will always be economic classes.
(3)The last problem I want to point out is that this tax system goes against our fundamental constitutional right of equality. Making someone pay 55% of their income compared to 15% is fundamentally unequal treatment of humans. There is no representative benefit in the government for the person that is paying a higher percentage. Every person has an equal input in the governmental process, unless elected. So why should the financial input be different.This current system has been voted in by the representatives of the majority of people. Statistically, this unequal taxation will never be voted out of Law because the Majority ( the people benefiting from this tax system) are suppressing the Minority (the people who are hurting from this system). 90% of people are taxed under 25%. Just because 90% think its right doesn't make it equal.
Did I do the math wrong? I thought I included the basic federal business and personal income taxes? Am i missing more? I would like to know where I went wrong. Wouldnt the business's profits be disposable income for owner?

And im not an accountant and have only taken basic accounting. Only a person who has spent 7 years to get their NBA in accounting could possibly understand the complexity of the system, and even then, they only understand a part of the tax code.

Why do you think I asked the question on here. To get some snide answer. Why even post if you dont want to correct me or make the argument against?

[taxreff]

Income taxes reduce ones disposable income. If a person makes $350K, income taxes paid may well affect where he goes on vacation, how expensive a car he buys, and similar high ticket purchases. If a person makes $25K, income taxes will cut into his food, shelter, and clothing budget. That is where the fairness of progressive tax rates comes in.

On a different point, the numbers and "facts" you quote show that you have extremely little understanding of both accounting, and the tax system in the US. Almost everything you say is incorrect. I would recommend that, if you are going to crusade on this. you learn more about these subjects. Its hard to take anyone seriously who presents such obviously flawed statements.

[maricciuto]

That is why a flat tax across the board would be fair. No deductibles nothing but a flat tax on gross earnings. That means a one page IRS form to file, anyone with Grammar school education could fill out. Wouldn't need much of an IRS bureau. Saves a ton of money, makes government much smaller at the same time. Same with Social Security. Flat tax across the board with no cap on earnings. So simple.

[Bobbie]

To waste a lot of your time and every body else time for nothing at this time in your life.
Hope that you find the above enclosed information useful. 01/05/2014

[CarVolunteer]

What you regard as fair is based on what , if anything, you regard as right. Still, I will make a point.

A flat tax without exemptions or deductions, as some propose, would literally take money from some people that they need to live. I cannot regard that as fair.

The argument for representation is one for which I have some sympathy, but ultimately I cannot agree with. Government is about far more than money, let alone how much is raised from whom and how by taxes. At the extreme, it is about people getting killed.

There is no perfection in this world. A progressive tax structure does have the problem that people can vote for policies that that they don't have to pay for, so they don't consider the cost. Still, you have to tax people who have the money.

[BCinvest]

Your understanding of the tax code is not correct. The tax code is progressive, the more you make the higher the percentage of tax. The highest marginal tax rate is only applied to the income above a particular limit. Not all of a taxpayers income. The average tax rate is lower.

Everyone has equal representation. Having more money does not entitle one to more of a vote. Are you implying that those who make more money should have greater representation? They pay the same taxes on the income that someone who makes $50,000 per year makes. It as at the higher income levels that they pay a higher tax rate at. That is what has been decided is in the best interest of society and the economy as a whole. Those who make more generally place a higher demand on societies resources. They use more natural resources, use more highway miles, etc. The products that the business makes (the furniture in your example above) needs to be shipped and uses up our highways. Use more and you should pay more.

If he organized his business as a LLC his business pays no tax. He can avoid the expense of the employees if he does all of the work himself. If you have employees it is likely that they generate more in revenue than the cost of their salaries. Otherwise it the sign that the company has a huge management problem.

A company paying social security tax is not double taxation. The employee pays the other half. The reason a company hires more people is because the marginal revenue they generate allows a company to generate higher income. If I offered you $500k and told you half would have to be paid in taxes would you take the $500k? The answer is obviously yes. That is the same reason a business owner a business owner wants to expand. So he can make more money. If he can make more by leveraging the services of more workers generating additional revenue then the smart owner will expand.

Your argument that "that this tax system goes against our fundamental constitutional right of equality" How is that if two people make the same income and all other facts are the same they pay the same tax. If a business owner feels that they pay too much tax they can pay their employees more thereby lowering their income so they lower the amount of tax they pay. If some one who currently makes $50k gets hired at a higher paying job they will pay more in taxes. It does not make sense to turn down the job just to avoid paying more in taxes, you would forgo all of the additional income that came with it.

The taxpayers with higher incomes are better able to pay and as a society that is what we have decided is fair. Nobody has to make a lot of money or even stay in the U.S. The rich have seen their taxes slashed to generational lows over the past 40 year. The deficit has exploded and income inequality has increased. When the masses have too little to spend the economy suffers. We need a strong middle class to keep our economy strong. The wealthy will benefit the most when the economy is strong. Reducing taxes on the rich has not helped the economy.

Capitalism is not perfect. Concessions like a minimum wage need to be in place to counteract some of the negatives that come along with capitalism. It is the best system we have, but it is far from perfect.