Socialism in the US and US income taxes

We already have Socialism in the US.

In order for business to succeed in this country:

• Roads so the work force and customers can get to locations
• Police to reduce theft at those locations
• Firemen to put out the fires at locations
• Schools to provide an educated work force
• etc.

All of these are provided by the government and paid for by taxes. Taxes have been around forever. Federal income tax was adopted by Congress in 1861 and 1862 to pay for the Civil War. Even in 1862 the income tax was progressive (higher percentage on higher income).

So, here's the reason most everyday Americans don't understand taxes:

As of 2007, there are about 138 million taxpayers in the United States.^[8] The Treasury Department in 2006 reported, based on Internal Revenue Service (IRS) data, the share of federal income taxes paid by taxpayers of various income levels. The data shows the progressive tax structure of the U.S. federal income tax system on individuals that reduces the tax incidence of people with smaller incomes, as they shift the incidence disproportionately to those with higher incomes - the top 0.1% of taxpayers by income pay 17.4% of federal income taxes (earning 9.1% of the income), the top 1% with gross income of $328,049 or more pay 36.9% (earning 19%), the top 5% with gross income of $137,056 or more pay 57.1% (earning 33.4%), and the bottom 50% with gross income of $30,122 or less pay 3.3% (earning 13.4%).^[9][10] If the federal taxation rate is compared with the wealth distribution rate, the net wealth (not only income but also including real estate, cars, house, stocks, etc) distribution of the United States does almost coincide with the share of income tax - the top 1% pay 36.9% of federal tax (wealth 32.7%), the top 5% pay 57.1% (wealth 57.2%), top 10% pay 68% (wealth 69.8%), and the bottom 50% pay 3.3% (wealth 2.8%).^[11]
Other taxes in the United States with a less progressive structure or a regressive structure, and legal tax avoidance loopholes change the overall tax burden distribution. For example, the payroll tax system (FICA), a 12.4% Social Security tax on wages up to $97,500 and a 2.9% Medicare tax (a 15.3% total tax that is often split between employee and employer) is a regressive tax on income with no standard deduction or personal exemptions. The Center on Budget and Policy Priorities states that three-fourths of U.S. taxpayers pay more in payroll taxes than they do in income taxes.^[12] The Tax Foundation has stated that the burden of the corporate income tax (a 15-39% tax) falls on customers and workers of the corporations, who are often not rich.^[13] (Source Wikipeida - really it is less dry than the other sources)

Did you understand it all? I certainly didn't fully understand it, but whatever way you look at it Socialism is already here.

Here's the thing ~ when they talk about raising (or lowering) you taxes, you need to keep in mind that our taxes are progressive.

Progressivity in the income tax is accomplished mainly by establishing tax "brackets" - branches of income that are taxed at progressively higher rates. For example, for tax year 2006 an unmarried person with no dependents will pay 10% tax on the first $7,550 of taxable income. The next $23,100 (i.e. taxable income over $7,550, up to $30,650) is taxed at 15%. The next $43,550 of income is taxed at 25%. Additional brackets of 28%, 33%, and 35% apply to higher levels of income. So, if a person has $50,000 of taxable income, his next dollar of income earned will be taxed at 25% - this is referred to as "being in the 25% tax bracket," or more formally as having a marginal rate of 25%. However, the tax on $50,000 of taxable income figures to $9,058. This being 18% of $50,000, the taxpayer is referred to as having an effective tax rate of 18%.

Essentially, if person A makes $10,000 a year, and person B makes $50,000 a year, and person C makes $100,000 a year, all three of them pay the same amount of taxes on the first $10,000. Person B will be taxed on his remaining $40,000 at the next appropriate bracket. Person C will be taxed on his next $40,000 at the same rate as person B was, and now will be taxed on the remaining $50,000 at the next appropriate tax bracket.

With that being said, when the candidates talk about raising or lowering your taxes, you need to look at what tax brackets are being affected. It may impact you differently than you had first thought.

Here's an interesting article on both McCain's and Obama's tax cutting plans:
http://www.walletpop.com/blog/2008/09/11/tax-calculator-for-how-your-taxes-would-change-under-obama-or-mc/

"In the simplest terms, McCain is going to cut everybody's taxes, but cut the very richest people's taxes most. Obama is going to cut everybody's taxes except the really rich. As the Tax Policy Center points out, both plans are lousy for the federal debt: Obama's would raise the debt by $2.9 trillion, McCain's by $4.2 trillion."

Shouldn't we consider how to get out of the National Debt before we talk about lowering taxes?

Corporate taxes are another thing entirely. The majority of corporations PAY NO INCOME TAX in the US.

In the United States, the federal corporate income rate for the year 2006 varies between 15 and 39% depending on taxable income. But since 1999, when Treasury announced the "check the box" system many corporations can elect to be treated as a pass-through entity, thereby skipping the entity level 35% tax and having all income pass through to the shareholders. This is the tax treatment that the much discussed "S" corporations receive; but now many more types of state-law corporations may avoid double taxation by "checking the box". Dividends are also subject to a lower rate of income tax in the United States. The U.S. corporate tax rate is ranked as the second highest statutory rate among the OECD countries (the U.S. average rate of 39.3 ranks just behind Japan's 39.5 and well above the OECD average of 28.7).^[27] However, the U.S also has the greatest number of corporate tax loopholes of any OECD member,^[28] allowing many corporations to achieve a lower effective tax rate than the published rates.

So, that doesn't prove the statement I made necessarily that corporations don't pay income taxes, does it? Guess who pays those taxes - YOU do! That's right Companies charge you, the consumer/customer/client, higher prices for the goods and services to pay those costs. So then would it be fair to say you are, essentially, being double taxed? And is this also Socialism?

Anyways, there is far too much about taxes to get too in depth. We'll leave that one to the economists. My main points are:

• Socialism is already here, like it or not.
• We should not be increasing the deficit even more to cut taxes - anyone's taxes
  
• If taxes are cut on the Federal level, that burden gets shifted down to your state, county, and local levels anyways.
• It is our responsibility as law abiding Americans to pay taxes - it is also our responsibility to keep our elected officials honest about how our taxes are being spent. You do this by paying attention, voting, and writing and calling your officials.
  

More on taxes

Obama: Tax cuts for 95% of working families
McCain: NO tax cut for 100 million Americans
Most would get a larger tax cut from Obama

The numbers in the graph are from the highly respected, non-partisan Tax Policy Center (see their full report or executive summary (PDF) ). For details of the Obama tax proposals, see this article by his advisers or Obama's site. Here is some of our commentary on McCain's tax plan.

Top Economists Overwhelmingly Favor Obama Plan: 80% Say He Has Better Grasp of Economics

From the tax foundation.org:

US tax rates going back to 1913. Notice how the lower rates for the wealthy led us into the depression, and how raising taxes on the wealthy owning class took us out of the depression.

http://www.taxfoundation.org/publications/show/151.html

Trickle down economics DO NOT WORK. When the rich get richer, they do not share the wealth. Strong economies are built from the bottom up, by the working and spending class.

This election is the most important in US history as our economy teeters on a perilous edge.

Top Economists Overwhelmingly Favor Obama Plan: 80% Say He Has Better Grasp of Economics

The Economist magazine surveyed members of the prestigious National Bureau of Economic Research (NBER) and responders overwhelmingly think Obama far surpasses McCain in his grasp of economics and think Obama's plan is superior. (h/t to Freakonomics). These numbers are truly staggering! Sorry Marty! (former head of NBER and McCain supporter)

As with the Scott Adams poll, economists overwhelmingly choose to self-identify as Democrats and support Obama. This is no fluke and NBER is the cream of the crop.

(By the way, apparently the Economist is one of Palin's faves!)

UPDATE: (Don Pedro) Thanks to Lerxst for posting this while I was out canvassing in Virginia! I've taken the liberty of changing the title. I also want to highlight key excerpts from the Economist writeup:

Even among Republicans Mr Obama has the edge: 46% versus 23% say Mr Obama has the better grasp of the subject. “I take McCain’s word on this one,” comments James Harrigan at the University of Virginia ..

“John McCain has professed disdain for ‘so-called economists’, and for some the feeling has become mutual,” says Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology Sloan School of Management. “Obama’s team is mainstream and non-ideological but extremely talented.”

Mr Obama, says Jonathan Parker, a non-aligned professor at Northwestern’s Kellogg School of Management, “is a pragmatist not an ideologue. I expect Clintonian economic policies.”

Twice as many economists think Mr McCain’s plan would be bad or very bad for long-run growth as Mr Obama’s. Given how much focus Mr McCain has put on his plan’s benefits for growth, this last is quite a repudiation.

VOTE OBAMA/BIDEN NOV 4th
YOUR FUTURE DEPENDS ON THE NEXT 4 YEARS!

Obama's tax calculator

Enter your information to see your tax savings under Senator Obama's tax plan. Don't worry, it will show you McCain's as well.

Cindy McCain Tax Returns: Reports $4.2 Million In 2007

She reported $4.2 million, paid $1.1 million in taxes and was taxed at 26%???? Why am I making waaaaaay less than that and paying 33%. . . .this, 'my friends', is Socialism.

WASHINGTON — Republican presidential candidate John McCain's wife, Cindy, reported $4.2 million in income for 2007, nearly $2 million less than she reported the previous year, according to tax returns released by the McCain campaign Friday. Mrs. McCain, who files her taxes separately from her husband, paid $1.1 million in taxes, a tax rate of about 26 percent. She reported nearly $530,000 in itemized deductions.

The McCain campaign said her losses were in investment income directly related to her family business, Hensley & Co., an Arizona beer distributorship of which she is chairwoman.

"The reduction is a combination of capital investments in the business and, like many companies, Hensley has felt the impact of a weakened economy," McCain spokesman Brian Jones said.

The Arizona senator's campaign had released her 2006 return in May but said Mrs. McCain had requested an extension on her 2007 return.

McCain himself released his own tax return last April, reporting a total income of $405,409 in 2007 and $84,460 in federal income taxes.

Democratic rival Barack Obama and his wife, Michelle, made their returns public earlier this year, reporting $4.2 million in 2007 income, most of it profits from his books, "Dreams From My Father" and "The Audacity of Hope."

The McCain campaign only released the summary pages of Mrs. McCain's returns, thus offering limited information on her finances. She listed nearly $2.9 million in income from rental real estate, royalties, partnerships and trusts _ a category that would include her investment income from Hensley & Co. She had reported $4.5 million in that category in 2006.

She also reported $297,000 in salary income, more than $118,000 in dividends and more than $746,000 in capital gains. Her dividend income dropped by about $165,000 from 2006.

Perhaps anticipating higher income, she overpaid her taxes over the year by more than $950,000. She applied that amount to her 2008 estimated tax.

As an heiress to the Hensley fortune, Cindy McCain's worth has been estimated at more than $100 million.

http://www.huffingtonpost.com/2008/10/17/cindy-mccain-2007-income_n_135748.html

Most corporations pay no U.S. income taxes

If "72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes", then why have 1) they already sent so many of American jobs overseas, and 2) why do the corporations need more tax cuts????

SAY NO to John McCain and his corporate welfare ideology.

Oligarchy, socialism, fascism, whatever name you chose to give, one thing is clear, the redistribution of the wealth TO the top 1% is PRECISELY what America has been doing for 8 long years. And it is what McCain is proposing in his new tax plan. Stealing from the poor to further pad the pockets of the rich.

Study says most corporations pay NO U.S. income taxes
Tue Aug 12, 2008 12:54pm EDT http://www.reuters.com/article/newsOne/idUSN1249465620080812?sp=true
WASHINGTON (Reuters) - Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.

More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.

During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.

The report did not name any companies. The GAO said corporations escaped paying federal income taxes for a variety of reasons including operating losses, tax credits and an ability to use transactions within the company to shift income to low tax countries.

With the U.S. budget deficit this year running close to the record $413 billion that was set in 2004 and projected to hit a record $486 billion next year, lawmakers are looking to plug holes in the U.S. tax code and generate more revenues.

Dorgan in a statement called the report "a shocking indictment of the current tax system." Levin said it made clear that "too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States."

The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said.

(Reporting by Donna Smith, Editing by David Wiessler)

Who is really going to cut your taxes?

Obama’s plan

While McCain is still yelling drill, baby, drill and mustering up the lynch mobs, Obama has come up with a strong, common sense, road map OUT of these perilous financial times.

On Monday Senator Obama unveiled his economic plan:
· A temporary tax credit for firms that create jobs in the United States.
· Penalty-free 401(k) and IRA withdrawals through 2009, to allow struggling families to withdraw up to 15 percent of their savings, up to $10,000. (Obama acknowledged that McCain had earlier proposed a similar but more limited plan.)
· A 90-day foreclosure moratorium for homeowners making "good-faith efforts" to keep up with their mortgage payments.
· A new entity created to lend to state and local governments, allowing for an effort similar to the liquidity assistance that the Federal Reserve recently extended to commercial banks.
· The temporary elimination of taxes on unemployment insurance benefits.

http://www.barackobama.com/issues/economy/jumpstart

http://thehill.com/campaign-2008/obama-offers-new-economic-plans
-2008-10-13.html

Today in Virginia, John McCain said he would lower taxes on retirement accounts, reduce capital gains taxes, and eliminate taxes on unemployment benefits.

"If I am elected president, I will help to create jobs for Americans in the most effective way a president can do this -- with tax cuts that are directed specifically to create jobs, and protect your life savings," McCain said. "Retirees have suffered enough and need relief, and the surest relief is to let them keep more of their own savings."

But McCain does not believe people should be allowed to make early withdrawals from their IRAs and 401k plans, and instead proposed cutting the capital gains tax in half.

The problem with this plan is there is no help for working people like you and I. If you are paying capital gains taxes, you do NOT need financial help. People who have to choose between a loaf of bread and a gallon of milk for their kids over a gallon of gas to get to work need the help. McCain is out of touch with reality. Remember, this is the man with 9 houses and 13 cars. He doesn't understand sacrifices like holding two jobs to pay the mortgage.
And then deciding which to pay this month - the electricity or the gas. Unless you are making over $250,000 a year, McCain's plan will NOT help you.

Mr McCain's proposals shows he is out-of-touch. "Senator McCain also shows how little he understands the economy by offering lower capital gains rates in a year in which people don't have an awful lot of capital gains," Obama campaign spokesperson Bill Burton said. "His trickle-down, ideological recipes won't strengthen our economy and grow our middle-class."

He added that the McCain plan provided "no tax relief at all to 101 million hardworking families, including 97% of senior citizens, and it does nothing to cut taxes for small businesses or give them access to credit".

JOBS, baby, JOBS!

What they are claiming to do with taxes.

Both of the 2008 presidential candidates are talking about lowering your taxes (aren't they always?)

Lets take a look at what actually would be happening here:

McCain: The average taxpayer in every income group would see a lower tax bill, but high-income taxpayers would benefit more than everyone else.

Obama: High-income taxpayers would pay more in taxes, while everyone else's tax bill would be reduced. Those who benefit the most are in the lowest income groups.

Under John McCain's plan, he would further cut takes on the top of the income levels - those who make over $2.9M would see a further reduction of $269,364, and those who make over $603,000 would see an additional reduction of $45,361.

Those of us who fall into the $38,000-$66,000 bracket (myself included) would see a cut under McCain's plan of $319. Under Obama's plan, that cut nearly triples to $1,042. So McCain isn't lying when he says his plan is to cut taxes, but the tax cuts he is planning on the middle class are nothing compared to the taxes he plans for the richest in the nation. Senator McCain is lying, however, when he says that Barack Obama is going to raise your taxes. Senator Obama will raise taxes on McCain's elitist friends, but I think they can afford it, don't you?

Why did W cut taxes of those who are richest, oh yeah - he wanted their votes. America, it is time for the middle class to take back their lives, and to re-distribute some of the wealth of this once great nation.