Ask HN: Do you feel like you're paying too much taxes?

16 points by montbonnot 10 years ago | 43 comments

Sorry for the people who live outside of the US (even though it might be the same issue), but I'm looking at the republican candidates tax reforms... One candidate is talking about 15% for small businesses/corporates and the other talks about 16%. And something like 10% income tax for every employee. Meanwhile, democrats are talking about "no tax increase" or something like "millionaires should pay %30 instead of 0-%10". By the way, if I make a million dollars today as a business owner I have to give away about 50% of my income to the government here in California. How do millionaires pay only %10 taxes?? Billionaires maybe..

Anyway, I'll be honest with you, I am not a fan of republicans at all... but I came to the point where I have to listen to them a bit more carefully. Beyond all the conservative BS etc... tax is my main concern at the moment. I'm worried... It's what impacts my life everyday. I feel like half of the money I earn is taken away and given back to the government. W2's or business owner's it's the same problem. So my question is, what do you guys think about paying too much taxes? Do you care? Is this one of your main problems?

adam419 10 years ago |

I take no ethical issues with the concept of taxes and funding things that are in the common interest of the country.

What I do take issue with is the fact that I don't think my tax dollars are being used as effectively as they should be, not just because I don't feel like I get proportionate value from what they're supposedly funding, but more importantly I dont think anyone is.

I think by and large the world runs on incentives, and I don't think that the people whose job it is to allocate the resources obtained through taxes have the kind of skin in the game that's necessary to make decisions in the long term best interest of all parties involved. Anytime you have a scenario where a organization of people in society unbounded by naturally selective forces, waste and misallocation of resources will take place. It would make me feel a lot better if my taxes were going towards a system characterized by bottom up trial and errors rather than grand design, and unfortunately I think the latter best describes how our country appropriates tax dollars to our collective benefit.

As for your other question, I think there is something fundamentally fair about the concept of proportionality. I don't think its the job or role of taxation to act as punishment, because it's not as "fair" for someone making 50k a year to pay 20% in taxes to pay the same 20% as someone making 500k. I find great injustice in this idea, as I want to live in a society that seeks to empower people to become the best that they can, in a spiritual and economic sense. Not send the message that those who've achieved economic success somehow have engaged in a misdeed they have to pay or make up for.

dllthomas 10 years ago | |

"As for your other question, I think there is something fundamentally fair about the concept of proportionality."

Proportionality of what, is much of the question. Progressive taxation is often justified by pointing at the fact that money (like most things) has diminishing marginal utility. Taking $10k from someone making $50k is far more of a burden than taking $100k from someone making $500k.

adam419 10 years ago | | |

But whose job is that to decide? The arbiters of fairness and marginal utility?

The issue with fairness is that it's impossible to arrive at a definition of fairness without it inevitably just serving the interest of whomever defined it.

montbonnot 10 years ago | | |

I'd push the logic even further. How about taking away $100k from someone who's making $250k per year? If you reach $250k/y you're supposed to make a statement. Someone who studied hard (for example), got into student debt, etc. A doctor, a lawyer, an engineer, etc. You have to give away 2 times the salary of that person making $50K/y. I think it's not far. Progressive taxation should start way higher. If you make 1 million dollars a year you'll never become a millionaire because you'd have to give away %50 of it. You have to make 2 million dollars to earn one million dollars. I think it's unfair at any level. Unless you're a billionaire. Billionaires should get taxed %50. You still have half a billi left in your bank account to live your life like a king... you'll be fine trust me.

ereckers 10 years ago | |

Some people may call it punishment, others call it progressive taxation: https://en.wikipedia.org/wiki/Progressive_tax

adam419 10 years ago | | |

And others can call it whatever they like as long as they end their sense of entitlement in being able to lay a claim on my earnings.

I'm aware of the definition, instead of replying with semantics you could try to outline the specifics of your defense of it.

From how I see it, in no morally relativistic sense do I see how making more money means I should have to forfeit more of my income because that's what's decided to be right and just by people who make less money.

I think if someone claims they have a bigger claim on my money because I earn more, you must PROVE why that is.

joshuanomed 10 years ago |

Politically I vote Democratic at the Federal level and a mix between Democrats and Republicans at State/local level. That's shifted in recent years as the GOP has purged moderates out of the NY State party.

I think we should either pay enough taxes to cover our routine government expenses, or cut the expenses to meet the revenues from taxes.

Generally the GOP talks about cutting taxes and spending, but shifts the burden to debt and various user fees. Democrats get blamed for raising taxes, but generally raise taxes to meet existing obligations (as well as use taxes as punitive means to change social or business policy).

For 2014 my household had an AGI of approximately $900k, of which we paid around $250k in US Federal taxes, roughly $70k in NY State taxes, and another $32k in NYC taxes. So, roughly 42% tax rate when you combine all three (I'm ignoring sales taxes).

I don't think I pay too much in tax.

Would I like it to be less? Sure. But I like having roads that are paved, bridges that don't fall down, police and firemen who are paid a decent wage. None of these services are free. Many of these services (at least in NYC) started out as commercial services in the 1800s and shifted to being government produced and funded.

You know why? Because humans suck at forecasting their own needs. I don't have kids, but I pay for schools in my taxes. I don't plan to have a fire, or be the victim of a crime, yet I continue to subsidize the people who are victims of crimes, even (indirectly) the people who commit those crimes.

Americans seem to be uniquely blind to the benefits of the social system we’ve created over the past 230+ years. All we see are the system, its bugs and inefficiencies, the corruption, the costs. We fail to recognize the benefits.

The US economy is an extremely imperfect capitalist system, but until someone explains to me clearly, without waving hands, or relying on the Laffer curve, how to fund socially shared obligations without paying taxes, then I'll pay them and use other forms of influence to try to change how my taxes are used.

Because the alternative is to resort to building a castle and a moat, and hiring a bunch of flunkies to guard me and my moat and my money, and effectively create my own little government.

stegosaurus 10 years ago |

Do I think I pay too much tax? Yes and no. I'd like to pay more, but I have basics to take care of first.

I think that taxes should be reserved for those with some level of financial stability/independence. I don't know how to come up with a benchmark for that, though.

If I earned what I do now in a low cost of living environment, then I could pay 80% and still get by just fine.

Put simply, as a UK citizen, to a very good approximation, a worker earning 50K pa pays the same amount of tax whether they own a 5 bedroom home outright or whether they live in a tent. (Council tax / property tax exists but is generally small).

I don't think that's an efficient policy. It makes bootstrapping much more difficult than it should be.

laughfactory 10 years ago |

I hate taxes, plain and simple. This is in part for the same reasons I hated cable TV (and cancelled it): I don't like paying a lot of money for things I don't want, need, or support. But then there's the issue of fairness. We live in Southern California and pay every form of tax there is. And does the IRS do a cost of living adjustment? Of course not. So my $73k here gets taxed at a higher level... Even though we pay a lot more for everything here. So I think I'd be less pissy about it if they'd adjust the tax owed by the local cost of living. But yeah, it does chafe that we spend trillions of dollars on the albatross we call our modern government.

exolymph 10 years ago |

"By the way, if I make a million dollars today as a business owner I have to give away about 50% of my income to the government here in California."

This is if you make a million dollars in salary or in profit. If you reinvest that money into the business, you aren't taxed to nearly the same extent, while still retaining the value. If you have a million bucks floating around, you're also in a position to invest your money outside the business and take advantage of capital gains rates: https://www.irs.gov/taxtopics/tc409.html

Obvious disclaimer: I am not a lawyer.

montbonnot 10 years ago | |

Sure.. what if you're an LLC making apps (single owner). How do you re-invest your million dollars into your business? Your business consists on a laptop and yourself. That's all you need to make apps and to sale them on the app store... You would most likely be working from home. So you have to file a regular income tax since you'd be a sole proprietorship. The business money is your income money because you have to "withdraw" that million dollars from your LLC to your personal bank account. If you leave it in your business it would be taxed anyway. So at the end it becomes regular income tax and you fall into the seventh bracket (federal: %39) + state tax + self employed tax (%15). It's more than %50... Sucks you made a million dollars and you have to give away half. That's why I don't get it when democrats think that millionaires avoid taxes. There's no way around for most of the small business owners.

Avshalom 10 years ago | | |

Well then you didn't make a million dollars, you made 500k. Gross is an admittingly galling fiction but is for day to day purposes pretty much that, a fiction.

tmaly 10 years ago |

It does not really matter at this point which person you vote for. The giant Gov Credit Card has been used to buy a bunch of stuff. The taxes will not go down as the monthly payments have to be made to pay for all these purchases.

Yes it is a little crazy that most people pay an effective 50%+ tax rate and there is little to show in return.

Singapore is probably one of the better models for how taxes should be, but everyone likes to promote this myth that a country as large as the US could not do the same thing.

I say why not.

twoquestions 10 years ago | |

Care to elaborate on what makes Singapore's tax scheme so good? A quick glance looks like they have a progressive system like ours, just with lower rates.

EDIT: That sounded hella confrontational, and I don't mean that at all. I'm really interested if Singapore has found a better way to fund their government that we don't use for some reason.

tmaly 10 years ago | | |

Most of what I discovered came from this post that was on HN a while back https://gyrovague.com/2013/10/30/half-the-donut-why-an-entre...

sharemywin 10 years ago |

Rich people as a class invest and save more as a percentage of income. what are you going to do with that dollar you saved on taxes anyway put it in the stock market, real estate, etc? it's just an illusion collectively all that does is raise prices on assets. So, as a whole the rich will still own the same stock, bond, real estate they just paid more for it. then someone comes along and raises taxes the all the sudden asset prices fall. but you still only own 1 share of xyz.

besides I'd be much more worried about the trade war they all want to start more than anything.

Next, would be all the federal workers they want to layoff to get those taxes cuts. lay off a couple million people and see what happens to the economy.

tima101 10 years ago |

I think that the question about how efficiently gov uses tax money is an order of magnitude more important than the question of how much to pay in taxes.

Another related question is how efficient gov in allocating the help. I wish there is a separate gov body that quantifies the efficiency of all allocations.

Who knows, perhaps, when inefficiencies are removed, taxes we pay now is enough to build a just society with big middle class. I personally consider Wall Street's bailouts and international military interventions are among the biggest gov inefficiencies.

aminorex 10 years ago |

It is absolutely insane that anyone, person or corporation alike, should pay taxes in the modern era. The government should just be honest and do in the open what they do by obfuscation anyhow: Print the money. It's the only way to avoid pervasive corruption.

myroon5 10 years ago | |

I think this is simplifying it a little too much and not considering the cons of the inflation that comes with this system. It's an interesting thought though.