Income tax: Ever calculated how wealthy you'd be without it?

[cubical]

I don't see why if your personal income taxes went down you would use that money to hire more people at the company you work for or run- very few people would. Obviously I can't speak for what you personally would do of course but what would occur?

Now if the people who did get tax reductions spend that extra money they got at your business then you may hire more people due to the increased sales. Let's say you had your own business and not some big corporation and you made $100k a year and then get a tax reduction of $20k (using your 20% figure). Would you use that money yourself- vacation? Buy something? Put it into an investment or retirement? or would you hire a person to work for you at $20k a year? Most would use the money themselves.

You don't see talent as an essential part to business? If you have more free resources to grow your business, you will pay for the best employees or you will get passed by your competition. Why do you believe everyone would take that 20% and consume it?

 

[Danke]

Didn't say it would be a bad thing.

O.K. Would it not then be a good thing?

 

[brushfire]

My house would have been paid off while I was still in my 20's

 

[Zippyjuan]

You don't see talent as an essential part to business? If you have more free resources to grow your business, you will pay for the best employees or you will get passed by your competition. Why do you believe everyone would take that 20% and consume it?

No-they won't all go out and spend the entire 20% (assuming they would be getting 20%- as mentioned earlier, 46% of people would be getting zero extra dollars since they end up owing no net taxes)- as I pointed out they could save it or invest it in addition to spending it. Those at higher income levels would be less likely to spend it (and more likely to receive a reduction in taxes) since they already have more of what they could want or need.

And so, you would be willing to take your own personal tax refund and use it to hire somebody else? Or would you use it for yourself as well? Do you do that when you get a raise? (same net effect). The question here was if you had your personal income taxes reduced or eliminated would you use that money on yourself or would you hire more people to work for you. (Unless you really paid a lot in taxes, in most cases we are probably not talking about enough money to hire more than one or two people- if you are making over $200,000 a year that would put you in the top five percent of incomes in the US). http://en.wikipedia.org/wiki/File:United_States_Income_Distribution_1947-2007.svg

This is a completely separate question from "do you have to pay a premium to attract qualified workers" which is the second question. That depends on the labor market. If the demand for qualified workers is higher than the supply then you probably do have to pay more to attract the best workers. If there are plenty of qualified workers looking for work in the field then you can pick and choose without offering a higher salary.

 

[Zippyjuan]

Some figures for actual tax rates (not marginal tax rates) for some income groups:
http://economix.blogs.nytimes.com/2010/11/24/the-other-taxes-who-pays-them/

For example, the Congressional Budget Office found that, in 2005, the highest 10 percent of households in terms of income paid 16 percent of their income in federal income tax. The next 10 percent of households in terms of income paid 12 percent of their income.

At the same time, the bottom 40 percent of households in terms of income owed, on average, no tax, in the sense that those households received more in refundable income tax credits than they paid in tax.

So if you were in the top 10% and the income tax was eliminated, you would have on average 16% more money. Since $200,000 would get you into the Top 10%, if you made less than that you would get $20,000 or less (ten percent) more a year. If you were in the next ten percent bracket, your income would increase by twelve percent (this ignores other taxation- real disposable (after all taxes) income would increase by a higher percentage). If you made $40,000 or less, you would be the same income wise with or without it.

If you were a business man and making $100k a year (our example earlier) you would then have $12,000 to spend (if you wanted) on your business to hire somebody or invest in equipment or spend on yourself or save or invest it (your paycheck would be $833 bigger each month- going from $8,333 to $9,166 a month- not counting things like Social Security taxes or other withholdings).

 

[Danke]

O.K. Would it not then be a good thing?

Those at higher income levels would be less likely to spend it (and more likely to receive a reduction in taxes) since they already have more of what they could want or need.

I figured as much.

 

[cubical]

No-they won't all go out and spend the entire 20% (assuming they would be getting 20%- as mentioned earlier, 46% of people would be getting zero extra dollars since they end up owing no net taxes)- as I pointed out they could save it or invest it in addition to spending it. Those at higher income levels would be less likely to spend it (and more likely to receive a reduction in taxes) since they already have more of what they could want or need.

And so, you would be willing to take your own personal tax refund and use it to hire somebody else? Or would you use it for yourself as well? Do you do that when you get a raise? (same net effect). The question here was if you had your personal income taxes reduced or eliminated would you use that money on yourself or would you hire more people to work for you. (Unless you really paid a lot in taxes, in most cases we are probably not talking about enough money to hire more than one or two people- if you are making over $200,000 a year that would put you in the top five percent of incomes in the US). http://en.wikipedia.org/wiki/File:United_States_Income_Distribution_1947-2007.svg

This is a completely separate question from "do you have to pay a premium to attract qualified workers" which is the second question. That depends on the labor market. If the demand for qualified workers is higher than the supply then you probably do have to pay more to attract the best workers. If there are plenty of qualified workers looking for work in the field then you can pick and choose without offering a higher salary.

Some would be used on consumption, some on investment. The fact that some would be used on investment would mean that more people would get productive jobs and those who are already working(I assume they have some sort of higher skillset) will get paid more. It is simple supply and demand. There would be a demand for labor, due to more savings and potential production, thus labor prices would rise. So of course I would use my money to hire someone else and keep my best workers. It means more more consumption in the future for me.

 

[evilfunnystuff]

I don't see why if your personal income taxes went down you would use that money to hire more people at the company you work for or run- very few people would. Obviously I can't speak for what you personally would do of course but what would occur?

Now if the people who did get tax reductions spend that extra money they got at your business then you may hire more people due to the increased sales. Let's say you had your own business and not some big corporation and you made $100k a year and then get a tax reduction of $20k (using your 20% figure). Would you use that money yourself- vacation? Buy something? Put it into an investment or retirement? or would you hire a person to work for you at $20k a year? Most would use the money themselves.

But you are not seeing the forest see the forest for the trees, outside of burying it in a secret spot for retirement, everything you could possibly do with it is creating more demand for workers.

This would create a more lucrative job market for everybody.

 

[blustreeak]

This is directed to Zippyjuan

"Why would an employer be giving you (lower income workers) more money? Employers don't pay your income taxes (they do pay half of the Social Security taxes). They may withhold the taxes but don't pay them. Getting rid of income taxes doesn't give them any more money to pass along to workers (and this assumes that they won't keep any extra money if there was some in the first place for themselves or share holders)."

A family member of mine makes around 500k net a year and runs a small business. He ends up paying around 120k in Income taxes every year. I asked him if he had to pay no income tax would he hire more workers. He said yes, he would also add an intern or two because he gets a lot of requests for that, but takes on only a few because of the costs. He also said he would give his employee's better holiday bonuses and likely hirer another young young worker and maybe a part time marketer to expand a little bit. Small businesses employ most of America. To say that those owners who run them would not pass along income they saved to their workers if income tax is eliminated is not true in my opinion. Without the income tax America grew to be the envy of the world with immigrants coming here non-stop to be a part of our way of life. Our economy is imploding for lots of reasons, but one of them is we are punishing the productive and discouraging hiring by taxing them out the wazoo.

I strongly disagree that reducing the income tax would have no effect on low income workers income's. I think they would see a rise in their wealth with more opportunities for employment and businesses being able to be more liberal with their resources because they would be getting to keep more of their fruits of their labor.

 

[EcoWarrier]

I strongly disagree that reducing the income tax would have no effect on low income workers income's. I think they would see a rise in their wealth with more opportunities for employment and businesses being able to be more liberal with their resources because they would be getting to keep more of their fruits of their labor.

100% correct. Do not tax production by abolishing income, sales and property taxes. Use commonly created wealth to fund common services. Geonomics does that.

 

[Zippyjuan]

"Why would an employer be giving you (lower income workers) more money? Employers don't pay your income taxes (they do pay half of the Social Security taxes). They may withhold the taxes but don't pay them. Getting rid of income taxes doesn't give them any more money to pass along to workers (and this assumes that they won't keep any extra money if there was some in the first place for themselves or share holders)."

A family member of mine makes around 500k net a year and runs a small business. He ends up paying around 120k in Income taxes every year. I asked him if he had to pay no income tax would he hire more workers. He said yes, he would also add an intern or two because he gets a lot of requests for that, but takes on only a few because of the costs. He also said he would give his employee's better holiday bonuses and likely hirer another young young worker and maybe a part time marketer to expand a little bit. Small businesses employ most of America. To say that those owners who run them would not pass along income they saved to their workers if income tax is eliminated is not true in my opinion. Without the income tax America grew to be the envy of the world with immigrants coming here non-stop to be a part of our way of life. Our economy is imploding for lots of reasons, but one of them is we are punishing the productive and discouraging hiring by taxing them out the wazoo.

I strongly disagree that reducing the income tax would have no effect on low income workers income's. I think they would see a rise in their wealth with more opportunities for employment and businesses being able to be more liberal with their resources because they would be getting to keep more of their fruits of their labor.

Good for him. That is not typical though. If he is making $500k a year, he is in the top one percent of all wage earners.

 

[Nickels]

You'd be nominally wealthier by 30-40%, but not necessarily materially wealthier.

What happens to price of gas, food, housing, utilities and entertainment when your paycheck gets a 30% raise?

Some people want to say "if I didn't have to pay income tax, I could use that to buy this, which would mean I didn't have to borrow money, and that saves me interest, and I can even get an insurance plan which would cover whatever accidents I run into...." all speculative. If you had more cash in hand, would you just hoard it? Or would you likely spend it? How is not paying income tax different than giving everybody a fat stimulus check (oh, we call that "tax return")?

 

[Kluge]

You'd be nominally wealthier by 30-40%, but not necessarily materially wealthier.

What happens to price of gas, food, housing, utilities and entertainment when your paycheck gets a 30% raise?

Some people want to say "if I didn't have to pay income tax, I could use that to buy this, which would mean I didn't have to borrow money, and that saves me interest, and I can even get an insurance plan which would cover whatever accidents I run into...." all speculative. If you had more cash in hand, would you just hoard it? Or would you likely spend it? How is not paying income tax different than giving everybody a fat stimulus check (oh, we call that "tax return")?

Not sure if you noticed, but we're pushing for smaller gov't, not a more indebted government that has to tax everything else higher so they can continue their bloated ways.

What's wrong with speculating, just out of curiosity?

 

[Nickels]

I strongly disagree that reducing the income tax would have no effect on low income workers income's. I think they would see a rise in their wealth with more opportunities for employment and businesses being able to be more liberal with their resources because they would be getting to keep more of their fruits of their labor.

and I strongly disagree that income is everything. if it were, then having high minimum wage would make sense. if cash equals wealth, then printing money would always make sense. If higher wages always meant better living, then we'd be stupid to let the market decide on it. Income taxes, just like the rate of interest or rate of money printing (credit extension) affect prices of goods and services, so eliminating it altogether WOULD nominally change the prices, but not necessarily mean people would be wealthier, the only thing I can think of that's guaranteed, is leaving enforcers jobless.

 

[Nickels]

Not sure if you noticed, but we're pushing for smaller gov't, not a more indebted government that has to tax everything else higher so they can continue their bloated ways.

What's wrong with speculating, just out of curiosity?

Oh, I am aware of reducing government. But I was asking, what difference would it be to you, whether you were giving a complete tax refund, or taxed, and then giving the same amount in a stimulus check on the government's credit loaned by the same people (taxpayers, yourself)? My answer is, the only difference is how efficient the government was at giving you the money you got. For you, you have the same amount to spend, and thus the result for consumer prices, your personal wealth, is the same, isn't it?

Nothing wrong with speculating as long as you know you are.

 

[Kluge]

Oh, I am aware of reducing government. But I was asking, what difference would it be to you, whether you were giving a complete tax refund, or taxed, and then giving the same amount in a stimulus check on the government's credit loaned by the same people (taxpayers, yourself)? My answer is, the only difference is how efficient the government was at giving you the money you got. For you, you have the same amount to spend, and thus the result for consumer prices, your personal wealth, is the same, isn't it?

Nothing wrong with speculating as long as you know you are.

So what you're saying is that there's no difference between there not being an income tax, and me being forced to pay the gov't, then have that money circulate through the gov't and eventually come back to me? Really? IRS agents aren't volunteers.

Are you arguing that all people who file income taxes get all of their money back?

 

[TheTexan]

I wouldn't be just nominally wealthier, I would be actually wealthier. Out of the income taxes I pay, I see very very little of that. Roads/infrastructure makes up 3% of income taxes, and that's basically the only thing I use. The other 97% is sent down a drain as far as I know.

 

[Nickels]

So what you're saying is that there's no difference between there not being an income tax, and me being forced to pay the gov't, then have that money circulate through the gov't and eventually come back to me? Really? IRS agents aren't volunteers.

Are you arguing that all people who file income taxes get all of their money back?

I am not arguing all people who file income taxes get anything back, but when they do, we call it a tax return, tax refund, tax credit. Yes, I am aware IRS isn't working for free, and I acknowledged that that would be one difference in the grand scheme, but for YOUR purposes, what difference does it make if you make $100K gross, paid $30K in taxes, and then $30K showed up in your bank account? What difference does it make to you, as long as you never pay it back and was fully legal, where it came from?

 

[Nickels]

I wouldn't be just nominally wealthier, I would be actually wealthier. Out of the income taxes I pay, I see very very little of that. Roads/infrastructure makes up 3% of income taxes, and that's basically the only thing I use. The other 97% is sent down a drain as far as I know.

if that was in your hands, where would it be spent and why wouldn't the prices of it go up due to more money from you and other consumers?

 

[Kluge]

I am not arguing all people who file income taxes get anything back, but when they do, we call it a tax return, tax refund, tax credit. Yes, I am aware IRS isn't working for free, and I acknowledged that that would be one difference in the grand scheme, but for YOUR purposes, what difference does it make if you make $100K gross, paid $30K in taxes, and then $30K showed up in your bank account? What difference does it make to you, as long as you never pay it back and was fully legal, where it came from?

Because that's not the way it works, and it's never been the way it worked. People who make that kind of money don't get that 30k back. Not to mention that the 30k can be used in investments and earn returns in the time period that it's tied up by the bureaucracy.

I'm really not sure what you're arguing here, except that you're defending the existence of the IRS and like paperwork and paying people to do bullshit "work."