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Author: gurdison Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121217  
Subject: Re: Tax shelters redux Date: 6/22/2003 6:07 PM
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<Republicans claim that lower-income workers don't pay any taxes, so they don't deserve a tax cut. I don't know if they (we!) pay income taxes or not (perhaps we get back in refunds what we pay in taxes?), but I know for a fact that we pay payroll taxes. In my case, quite a bit of my income goes to Social Security and Medicare, which bothers me because I may not even get to take advantage of those two programs. As such, to me, that's wasted money, money that I could use to buy things (as would other lower-income workers>


You said a lot of things that cover all parts of the map. First of all we are talking about NET taxes. If you have 1K of federal income taxes taken out during the year but get various credits and refunds that bring your final net bill to zero, you can't be "refunded" anything more. If it was decided to give such a person more, it would have to be a specific policy decision. IOW, is the potential stimulative benefit of doing this worth the perception of giving away something for nothing? Like everything else in Washington it usually comes down to the price of doing something vs the price of not doing something.

The tax code already has plenty of policies refected within it. It is one reason why some things do not always make sense from a logic POV. IE: mortgage interest is deductable. That is a specific policy designed to encourage home ownership. The recent change in making the MFJ standard deduction double that of a single is another policy decision. So is the setting of qualifications for exemptions (kids, seniors, yourself).

You say that quite a bit of your income goes to pay SS & medicare taxes. IIRC, the current limit is around 7.65%. The SS portion is capped on the first 80k or so of income. The possibility of not ever getting to use either program is part of the policy that has been in effect for decades. Your contributions are not saved for you. They are spent right away (probably the same day they come in). What does not go out to pay current recipients gets spent by the government on everything else (it never finds its way into those "lock boxes" we heard so much about in 2000). Those surplusses we had were not really surplusses if all excess SS was sent to a separate account. By the same token, our current deficits are really larger than they appear.

There is an awful lot of deceptive accounting that would make the folks at Enron look good, but that too has been going on for decades. There were several proposals to stimulate the economy by giving workers a "holiday" on SS payments for a brief period of time. Those proposals did not get very far as evidenced by the final tax bill that was passed. Eventually there will most definately be a day of reckoning. Unfortunately, both parties are loath to face up to that fact. Those unfunded liabilities will add up to substantial real dollars as more and more retirees need to be supported by the payroll taxes of fewer and fewer workers. Ignoring that now will only make the medicine that much tougher to take later on. But hey, that will be the problem of some other president and congress. If it makes you feel any better some of our European counterparts will likely be facing their bigger bill sooner than us because of their demographics and tax structures.

This is always a good topic for discussion. Maybe some of our resident pros will want to weigh in too.


BRG
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