Quote:
Originally Posted by hannukah harry
i hear this used a lot... but how many rich people do you know who are actually doing their own taxes? i doubt many. if you're paying someone to do your taxes, you want them to squeeze every last cent they can, make it so you pay as little as possible.
|
There is the cost of tax planning and then there is the cost of tax avoidance execution. Again, what would you do? If your tax burden is projected to be $100 how much effort do you put into your tax situation? If your tax burden is projected to be $1,000,000 how much effort do you put into your tax situation? In the first situation, you would not even go to your local H&R Block office. In the second, you hire an "A" team of tax and financial professionals, there is a cost to that and therefore a break even point. Then they recommend you do certain things, I.e. set up trusts, corporations, re-title assets, invest in tax efficient instruments, etc, etc., there is a cost to that, setting another break even point. Then there are the opportunity costs. If you invest in tax free municipals, that means you are not investing in corporate bonds, are you giving up some potential ROI for tax free income efficiency? So, you have to constantly look at the trade-offs and the points where it is cost effective to do something and when it is not.
Even look at the current housing crisis. If a person earned enough income to be in, let's say a 30% marginal tax bracket, and they could buy a home, no money down, with a payment of 1,000 per month (assume it was all deductible for simplicity), but it cost $850 to rent the same home, what did most people do? They bought the home and after taxes the cost was $700 all other things being equal. The tax code modified behavior. The tax code caused people to take risks or do things in home ownership that they may have ordinarily avoided. Is this the purpose of our tax code?
Minimizing current taxes paid may not always be the way people will go, but the point is that "rich" people have options, others do not have. However, if taxation was based on consumption, then everyone would have options, the playing field would be even, the tax code would be "fair" in my opinion.
Quote:
|
so what you're saying is we should get rid of loopholes allowing investments and capital gains to avoid taxation?
|
I say it is unfair to tax investments and capital gains. First you earn money, it is taxed ( the gov takes their share first). Then you save or invest, after your personal expenses. Then you earn interest or dividend income, it is taxed. If you have a capital gain it is taxed. You die, and you may face more taxes. However, if you spend all your money, go into debt you have no further tax obligation. People wonder why the national savings rate is negative??? But, on the other hand people with asset based wealth, will earn income, then deduct expenses and pay tax on what is left over. The "loop holes" are really a "loop hole". Taxation based on income (income earners carry the burden), versus people with asset based wealth, or "rich" people who manage their tax burden, paying what they want.
Fairness to me says if you spend like a millionaire get taxed like one, regardless of how you get the money to spend.
Quote:
|
if we don't fix the loopholes that the wealth holders use, then lowering the tax rate for lower income earners doesn't really do much to change the problem. get rid of loopholes that favor the rich, then drop the taxes for the poor and middle class. but you'd be acting foolishly to cut your income without knowing it's replaced (when you're already spending more than you actually make).
|
The only way to close the "loop holes", as you perhaps see them, is to simplify the tax code. The reason the tax code is so complicated is because Washington wants to serve special interests and modify behavior. The real goal simply should be to make sure everyone pays their "fair" share.