Maybe this is why I have been feeling yucky. Tax changes that will effect me and mine.

Discussion in 'Controversial' started by Scooby_Snax, Nov 17, 2017.

  1. Scooby_Snax

    Scooby_Snax Rut-Roh

  2. RabbiKnife

    RabbiKnife Open the pod bay door, please HAL.

    As a general rule, if it is in the Washington Post, it is written from the most liberal/socialist frameworks. And it shows only one tiny corner or one possible outcome.

    Moving from 7 to 4 is meaningless. Each family is different, and the tax plan is not finalized. Most of the "increases" the JCT found arises from decreases from Obamacare health subsidies, i/e/, tax credits, if Congress doesn't fix it. Those increases were built into the plan by Obama and Harry Reid, not the Republicans. They are going to happen no matter what happens in terms of overall tax policy otherwise.

    The biggest benefit to lower income families is that the standard deduction is increased to $24,000, which means you would pay no taxes on the first 24K of income. That's huge for lower income families.

    A huge benefit the lower income bracket receives is from upward wage pressure, more hiring, more investment for small businesses.
     
    DaniH likes this.
  3. tango

    tango ... and you shall live ... Staff Member

    ... and of course one issue with the tax credits for the (un)affordable care act is that they effectively mean that for the self-employed the net result is similar to if government takes anything up to about a 75% share in your business.

    When tax credits of anything up to $18,000pa are phased out as income increases from about $35-40k to about $80k, that means the loss of premium tax credits is equivalent to a 40% tax. Add in 10-20% federal tax and 15% self-employment tax and you've got a lot of tax on that extra income. Needless to say state and local income taxes don't help matters.

    I'm curious to see how many more years people are going to see heavy double-digit increases (as in 40-50% or more) before they realise the whole system is fundamentally broken. I'm also curious to see how long it takes before the general consensus is that $15,000pa for "insurance" that caps your healthcare costs at a mere $15,000pa per couple isn't "affordable" in anyone's language except the very wealthy's. Or indeed just how high the tax credits are going to go, chasing relentlessly rising premiums, before the whole thing collapses. The way things are going it can't be long before tax credits end up being worth more than someone's total income, for those at the lower end of the scale.
     
  4. teddyv

    teddyv The horse is in the barn. Staff Member

    Boo hoo.
     
  5. Kierkegaard

    Kierkegaard Life is not a problem to be solved Staff Member

    Let me tell you about self-employment and taxes in the UK. It'll make you feel much better.
     
  6. teddyv

    teddyv The horse is in the barn. Staff Member

    Complaining about taxes would probably stop completely if we forced everyone to live in a third world country for a year, probably less for most of us. It took me 3 months.
     
  7. Scooby_Snax

    Scooby_Snax Rut-Roh

    I do not feel like I am complaining about taxes. I do have complaint with the balance of taxes V.S. wage, and always will.
    I do not see corporations as people, but people as people. I do not see corporations as being FOR the people. The more technical we get, the less corporations need people.
    Corporations are always going to be about profit.

    I understand that many disagree with me-- I doubt I will ever earn much more than what I do today (which is less than I earned in the early 80's working for a company with a union) And yes, having an increase over time to hit high for this proposal 10 years from now when I am getting ready to retire, concerns me.
     
    teddyv likes this.
  8. tango

    tango ... and you shall live ... Staff Member

    Been there, done that. It doesn't make me feel any better than facing a marginal tax rate of over 70%.
     
  9. tango

    tango ... and you shall live ... Staff Member

    I don't actually have a problem with paying some tax. I just don't think that an effective tax rate of 70% or more is a good way to encourage people at the lower end of the economic spectrum to actually go out and work. A good friend of mine is currently making less than that and, economically speaking, the best thing he could do is cut back on his working and go on welfare. What's the point of him busting his backside to try and make extra money if he's only going to get to keep $20-25 out of every $100 he makes?

    Good job making a strawman of my point though.
     
  10. devilslayer365

    devilslayer365 Wazzup?!

    I don't understand your point. You actually believe paying HALF (or more!) of your income in taxes is "fine?" Maybe even “fair?” Why are you ok with working hard (I assume you work?) and then having the government taking such a BIG chunk of your money? Just because others have a harder time making a living than you, as in third world countries, doesn't mean it's "fine" to be financially raped by your own government. I find it sad that others have gotten to a point where "well, I'm getting screwed, but you're getting screwed worse in life than me, so I'll just take my screwing with a smile" is now something to be content with. :rolleyes:
     
    Last edited: Nov 19, 2017
  11. teddyv

    teddyv The horse is in the barn. Staff Member

    I don't understand how tango calculated a tax grab of 70%. He may have to explain that better.

    Between my wife and I, we are not paying 50% in income tax. My wife will be in the 20% range. I will be less, about 15%. That's federal. Provincial is about 11% for my wife and about 5% for me. I'm not sure what my business tax rate is, but it's probably in the 15% range. Of course there are other consumptiion taxes of goods, services and fuel. Then there are property taxes. But at the end of it all, there is no way we are paying 50% of income to the government. So no, I don't consider myself being 'screwed'. If someone else thinks they are getting screwed, that's their issue, not mine. We also don't get certain benefits that Americans get in being able to write off mortgage interest or property taxes.

    Anyway, my point was that if one lives in some countries with extremely low income tax rates (or none because they are cash societies and gather tax revenue through value-added taxes), there is precious little for infrastructure, healthcare options, education, and public works initiatives that we really take for granted here in North America and Europe. I've spent about a two years total in third world countries and after that time, I was just so thankful to come home, be able to get in my car and drive on a smooth, safe road. I could drink water out of my tap without a filtration system attached. I don't have to worry about crooked police officers and outright corruption. And on, and on. As I said, after three months I got a better sense of what my taxes pay for and how they benefit not just me, but our entire society.
     
  12. tango

    tango ... and you shall live ... Staff Member

    The effective tax figure is a combination of lost premium tax credits under the "affordable" care act, plus federal income tax, plus self employment tax, plus state and local income taxes.

    For 2018 initial figures suggest that increasing the income for a self-employed couple from circa $35k to $80 results in a loss of approximately $18,000 in premium tax credits to put towards health insurance (the fact that the government is potentially giving out $18,000 per year to help with the cost of health insurance shows just how badly broken that system is). That alone works out as an effective 40% tax, but in the form of withdrawn tax credits rather than tax actually taken directly. Then add the federal tax on an income of $35k (which I have assumed is still the lowest rate of 10%), to make 50%. Then add 15% self-employment tax which makes 65%. State and local taxes then nudge it up to more like 70%, depending on exactly where you live. As income rises closer to $80k I presume the tax rate rises, resulting in an effective tax rate of potentially more like 75-80%.

    If my figures are wrong I'd really like to know what I miscalculated (when I looked at the figures for a recently divorced friend who was struggling to work it all out because he had previously been covered by his former wife's insurance my initial thoughts were that I couldn't believe what I was seeing). If they aren't wrong they represent a horrendous assault on lower paid workers, in a way that is sufficiently non-transparent that many will be working hard trying to get ahead without even realising the government effectively took a 70% stake in their business without telling them, such that they are potentially only getting to keep $30 out of every $100 they make.
     
  13. tango

    tango ... and you shall live ... Staff Member

    For the record I'm not disputing that some tax is necessary. My problem here isn't the existence of taxes - as you say somebody has to pay for roads and infrastructure and things (it could be a topic of another discussion whether that should be government or some other entity, but the fact remains that one way or another somebody has to pay). My problem is when tapering tax credits paired with rising taxes render it all but pointless for people to try and lift themselves out of poverty.
     
  14. teddyv

    teddyv The horse is in the barn. Staff Member

    That could be an interesting topic, but I don't think it would go far.

    I think I'd just to need to see some actual case studies because the numbers you calculate just seem off to me - not that they are and I know that your financial background is superior to mine, plus I'm too lazy to get in that right now.
     
  15. tango

    tango ... and you shall live ... Staff Member

    You're probably right, passions tend to run pretty high on both sides and it's unlikely anything will change anyway .

    I'm still wondering whether I've missed something fundamental but when I saw a figure of $18,000 in tax credits to put towards health insurance (which is another issue in itself, given that five years ago comparable policies cost under $4,000pa) I had to look twice to make sure I hadn't misread. From there I started to wonder just what kind of effective tax burden that created, given it tapers away as earnings rise and found the results truly depressing.

    Some day when I'm feeling less lazy I'm going to dig out the template for a 1040 tax return and the form to reconcile health insurance tax credits, run the relevant parts through Excel and look at the effective tax rate as income rises incrementally from about $20,000 to about $80,000 to get some actual hard figures. Most of the 1040 would be irrelevant, it would just be a simple case of assuming $20k in self-employment earnings and feeding everything else through the mangle.
     
  16. devilslayer365

    devilslayer365 Wazzup?!

    One of the biggest tax changes I’m rooting for is Congress POSSIBLY getting rid of the individual mandate for Obamacare that imposes a tax penalty for those without health insurance. Of course, some people don’t want to see that go away because they fear that if that penalty goes away people will not be motivated to get health insurance and insurance companies will then raise premiums and other costs for those who do have health insurance. The problem with that logic is many people already, even with the penalty currently in place, aren’t motivated to get health insurance and they simply pay the penalty as it’s often cheaper than getting health insurance. Having a penalty does NOT motivate many people to get health insurance that they can’t afford. Also, health insurance companies have always been jacking up rates with the penalty still in place. What makes people think taking away the penalty will suddenly change anything for the worse? Having the penalty from the start didn’t stop the insurance companies from raising their rates. They’ve been charging more and more the whole time Obamacare has been in effect. The way to get more people to buy health insurance is to make it more affordable, not hang a tax penalty over peoples’ heads...
     
    Last edited: Dec 11, 2017
  17. RabbiKnife

    RabbiKnife Open the pod bay door, please HAL.

    And how would you make it more affordable?
     
  18. devilslayer365

    devilslayer365 Wazzup?!

    I don’t know, but imposing a tax penalty sure DIDN’T accomplish it. Let’s put it this way. At my job, I get most of my health insurance premium paid for by my employer as an employee benefit. I pay a very small part of it. I’m thankful for that. I also do have certain deductibles and copays I’m responsible for, of course. If I wanted to add my wife to the coverage, I’d be paying $700 or $800 a month for her premium. I don’t know what kind of income YOU bring home, but, for me, that’s RIDICULOUS...
     
    Last edited: Dec 11, 2017
  19. tango

    tango ... and you shall live ... Staff Member

    I can't help thinking that requiring people to buy insurance removes incentives for insurance companies to keep prices down because the option to say "never mind, I'll do something else" is no longer there. Then if the prices rise tax credits bring them back down again, removing another incentive to keep them down. Throw in a succession of requirements under the title of "insurance" that are actually nothing to do with insurance at all and the price pushes higher again.

    The ACA seems to be little more than a way to make insurance more expensive while frightening people into voting Democrat because the nasty Republicans might take away the tax credits. Although it is seriously lame that the Republicans talked of repealing and replacing Obamacare for so long but when they took control of government they didn't seem to have come up with much of a plan to actually replace it.

    Part of the issue is that for however many years now people have been used to the idea that insurance pays for health stuff. So if you want to go and see the doctor for a checkup, insurance pays the bill. But routine stuff isn't an insurable event - insurance is about the transfer of risk from one party to another. My car insurance is there in case I crash my car, or it gets stolen, or a tree falls on it. It isn't there to pick up the tab if I need new tires or a routine service or I need to put gas in the tank. If I expected my car insurance to pay for new tires and a service every six months I could be sure that the premium would rise considerably, and continue to rise as there would be little to no forces keeping prices down because the average consumer would never see the raw ticket price.

    There is a certain irony in the "affordable" care act creating a situation in which health insurance premiums can show premium increases well into double digits for multiple years. The policy my wife and I have for this year came with a price tag of $1,098/month. The same policy for next year (which is more or less the same, albeit with slightly reduced coverage) has a price tag in the region of $1,700/month. I'm not sure how a circa 60% annual premium increase is "affordable", or how paying in the region of $20,000 in annual health insurance premiums is "affordable", or indeed how throwing ever-more taxpayer money at tax credits is "affordable", or just what purpose there is in essentially giving untold millions of taxpayer dollars to insurance companies unless it is merely an attempt to use public money to buy votes. I'm coming to the conclusion that the "affordable care act" would be more accurately named the "unaffordable votes act".

    As for ways of making it more affordable, I think the bigger issue is that the whole structure of healthcare needs to be overhauled. Partly because so much of what people expect insurance to cover isn't actually an insurance issue, and partly because the costs are driven higher because of the overuse of insurance. Maybe what we need is some form of system that is actually insurance, that covers the cost of actual risk events (life threatening issues, or the kind of treatments that the vast majority could never expect to be able to fund themselves) with associated products that are more about maintenance, with the individual picking up the slack. In that regard it would be more like running a car or a home - you have insurance to cover major issues, you may take out a specific warranty or service contract (maybe to cover the cost of the freezer breaking down, or spread the cost of annual services, or the cost of heating oil or pest extermination or some such) and the day to day costs you cover as and when they arise (e.g. putting gas in the car or buying new furniture when the old stuff is worn out).

    Along the way the treatment of those who cannot afford to take relatively minor conditions to the doctor needs to be considered because it really makes no sense at all to essentially deny treatment to poor people until a minor condition has developed into a major condition and they show up in the ER. At the same time a balance needs to be struck between providing services to those who may struggle to afford it and creating yet another disincentive to work for fear of losing access to medical services.
     
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  20. teddyv

    teddyv The horse is in the barn. Staff Member

    So, basically universal coverage then? With scaled monthly premiums based on an income test?
     

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