“Furthermore, since the wealthy folks can spend so much to lobby, they can have the sorts of earnings they get from their place of business declared by law as not payroll. ”

Imagine that. You can work at a company and get laws passed that make it possible to avoid paying income tax on your compensation from that company. No company I ever worked for would compensate me with stock. Though there were employees who did recieve stock. Hmmm, I wonder what the difference between them and me is? I know, it is an extension of the divine right of kings. God favors the highest officers of the company or He would not have put them in that position. Therefore they are deserving of this humongous tax dodge where I am not.

OF FREAKING COURSE Buffet and most everyone else deliberately minimizes the taxes they pay. And in fact it makes perfect sense (though one might worry a bit about the ethics) that the wealthy have spent a great deal to get passed favorable tax laws to make that possible. We citizens need to protect ourselves from this power that wealth gives you over your fellows. I don’t want to be a peon.

So is Romney’s.

Capital gains are typically less because they’ve already been taxed once as corporate profits. Buffett’s corporation, Berkshire Hathaway, is paying about 29 percent, a piece of information that was in my post on what the top ten corporations are paying.

Buffett has worked hard to arrange that his personal income is taxed at a low rate. Meanwhile, he makes noises on how he should pay more, and the gormless idiots look at the sky and drink it up like domestic turkeys drowning in a rainstorm.

If Buffett wants to pay more, he can take his income as a normal salary. Problem solved.

If his secretary is paying over 35 percent, the first thing she needs to do is throttle her accountant. Someone paying 35 percent is either making a hell of a lot more money than we think, or is screwing up very badly.

The second thing she can do is ask her boss to pay her partially with stock so she can partake of the capital gains deal. Will he?

Buffett’s setup is deliberate. It took effort to do it that way. He’s paying low taxes because he badly wants to pay low taxes.

People need to wake up and smell the bullshit.

As for Romney, the boob put a lot of his money into an IRA, which is currently worth about $100 million. In a few years, when the mandated withdrawals start, the tax man is going to take him to the cleaners.

I think you illustrated how Tom’s “proportionality” can translate into a “regressive” tax rate, and along the way, by mentioning simplifying assumptions you had to make, you also illustrate how complicated it gets when you don’t take into account all income and all taxes. That’s the grey area where lobbyists try to rig the tax code to favor their clients, by exempting income and setting up a confusing tangle of different taxes computed on different bases.

Those definitions are simplified ideal cases, and you don’t find those in the real world. Economics is really a dismal science.

I didn’t remember that term before, but I do now.

It’s a tax where the tax paid is proportional to income, i.e. 10 percent of $10,000, or 10 percent of a million.

Theoretically, payroll taxes are also proportional, but beyond a certain income limit, there is no additional Social Security tax. This is because benefits are limited too (a millionaire does not get 10 times the Social Security payments as someone who makes $100,000 a year). This makes a lot of people think SS taxes are regressive, and they certainly take a bigger bite out of lower income brackets, but the top 20 percent still pays 43 percent of our social insurance taxes. Which means even there, they carry a lot of the load for the lower brackets.

There is no upper income limit on Medicare taxes.

A sales tax with no exemptions would be regressive, in that necessities will always take a higher percentage of income from less wealthy people.

But all existing sales taxes have provisions that don’t include necessities like food. In the case of flat taxes, proposals have included exemptions or some other provision to ease the hit on lower incomes. “Progressive” flat taxes. Go figure.

One plus of a consumption (sales) tax is that it requires no forms, no calculations, no hassle. I have to bare my soul to the IRS every year. God knows what would happen if their computers ever got hacked.

The real reason politicians don’t like flat taxes, sales taxes, or other simple tax proposals instead of the current system is that the tax code is a major way politicians grant favors to friends and hand out punishment to their enemies. A good reason to enact such taxes, but the best reason it’ll never happen.

Again, it’s important not to get bogged down in the revenue end. As I pointed out, our problem is not insufficient revenue, it’s too much spending.

I objected (mildly) to the underlined:

“Tom’s talking about a regressive tax rate “where the relative tax rate or burden increases as an individual’s ability to pay it decreases” (by wikipedia, of course). That’s the mathematical consequence of a flat tax rate”

I don’t understand the concept of a regressive “mathematical consequence” of a flat tax based on all income.

Did anyone else have to read the wiki definition twice? I think an example might be a good idea.

Consider a state which only has a sales tax. The tax applies to food. To make it easier imagine the citizens only buy food and nothing else.

A poor family could easily spend 25% of their income on food.

A family with a $100,000 income probably spends more on food because they can. They go out to dinner a few times a week, like to entertain, buy choice cuts of meat etc. But percentagewise they spend 18% of their income on food.

The “wealthy” family is taxed only on 18% of their income while the poor family pays tax on 25% of theirs.

Since they are both taxed at the same rate, they pay 18% and 25% in state taxes respectively. If the wealthy family ate the same food that the poor family did, their effective tax rate would drop to 6%.

The sales tax is even more regressive because the poor family probably spends their entire annual income. If there were no exemptions like there are in the real world, they would pay taxes on 100% of their earnings.
The wealthy family likely puts money in savings and investment accounts. The more they save the less they pay in taxes.

There are plenty of examples of regressive taxes; car tabs, taxes on utilities, cigarette taxes, and gasoline taxes.

The reason why people call a flat income tax ‘regressive’ is the fact that most flat tax proposals exclude capital gains, interest and dividends from taxation.

That’s insane in my opinion. Doubt Romney would think so.

.
(I’ve never heard of a proportional tax. As far as I can tell it’s that same thing as a flat tax.)

I had a lot of questions. Any answers?

Next we can work on whether “liberal” is a perjorative.

It might be I’m just not understanding your objection. I thought that all income was already considered, by the definitions and in data tables like the CBO data Tom linked to below (here). According to the footnotes, those data tables include all income and all taxes, so I have a feeling that somewhere there’s somebody who’s dealt with your objection.

Not me, I’m afraid. I’m no economist. Thank god, cause that would make me a dismal scientist.