It's not secular stagnation; it's financialization.
April 18, 2016 1:49 AM   Subscribe

Elizabeth Warren has a great idea for making Tax Day less painful - "She's taking on TurboTax and other predatory companies."
On Wednesday, Sen. Elizabeth Warren (D-MA) introduced a bill that would make doing taxes vastly easier for Americans — and would strongly push back against the tax prep industry's attempts to keep taxes difficult.

The Tax Filing Simplification Act of 2016 would order the IRS to create a free online tax preparation and filing service comparable to TurboTax or other commercial programs. Moreover, it bans the agency from working with the tax prep companies, as it's been doing for years.
A weird coalition wants to keep tax preparation painful and difficult - "In Sweden, the four-page tax form comes in the mail already filled out. In 15 minutes we are done." (via)

But it's not just tax preparers who're fleecing America: What to do? (vs. what's being done...)
  • The White House: How More Competition Gets You a Better Deal - "President [Obama] is launching a new initiative to stoke competition across our economy, so that no corporation can unfairly squeeze their competitors, their workers, or their customers at everyone's expense." (via)
  • Robert H. Frank: Why Libertarians Should Support Many Forms of Government Intervention - "If both the employer and the worker find the terms of a proposed labor contract attractive, and both are well informed, how does the government make either party better off by requiring greater safety than they want? My response is that the case for regulation doesn't rest on any claim that parties to the contract are incompetent or ill-informed. Rather, the problem is that their contract imposes harm on third parties that is virtually impossible for them to avoid on their own... the most comprehensive measure of a person's autonomy is ultimately the extent to which she is able to do the things she wants to do. If others act in ways that cause her substantial harm, they reduce her autonomy."
  • Economists Are Warming to Government Intervention - "Virtually all economists agree with the principle that externalities should be taxed and tend to see externality taxes (or 'Pigovian' taxes after the economist Arthur Pigou) as quite natural."
  • Soaking the Rich Is a Perfectly Reasonable Idea - "Researchers Dirk Krueger and Fabian Kindermann, for instance, have suggested that the government could maximize its revenue if it slapped a 98 percent top marginal rate on the highest 1 percent of earners (right now, we're at a measly 39.6 percent). Thomas Piketty, Emmanuel Saez, and Stefanie Stantcheva argue the golden number is probably between 57 and 83 percent. Sanders, by comparison, envisions a top income tax rate of a mere 54.2 percent. Clinton? Just 46.1 percent. The nonpartisan Tax Policy Center, which uses pretty mainstream assumptions about how workers and investors change their behavior when taxes rise, thinks both will raise plenty of money."
  • The Global Architecture of Wealth Extraction - "If we were to tax a mere 10% of the money hoarded away in tax havens, we would have at least $2,000,000,000,000 that could be used to fund (1) universal basic income; (2) universal healthcare for more than 7 billion people; (3) free public and university education for everyone on Earth; (4) fund basic scientific research for all major problems humanity must confront; and (5) make the transition to ecologically-based energy systems and urban design that staves off the potential for collapse of our highly unsustainable civilization."
posted by kliuless (233 comments total) 130 users marked this as a favorite
 
Remind me again why Elizabeth Warren isn't running for President this year?
posted by chavenet at 3:45 AM on April 18, 2016 [24 favorites]


So, in the US do you all, regardless of job have to do taxes? I've never quite grasped this.
In the UK most people are taxed automatically from out of their paycheck every month (or whatever pay period)
So if you have a basic officey job, you still have to do taxes?
posted by Just this guy, y'know at 3:54 AM on April 18, 2016 [4 favorites]


It's basically impossible to get away from these tax prep goons, too, unless you literally print out your return, fill it in by hand, and mail a paper copy, which is horribly inefficient and error-prone both for you and the government. To get around the outrageous state e-filing fees this year, I copied everything from my (software-prepared) state return into Virginia's free fillable forms. Guess who hosts, develops and gets paid for the free fillable forms site? Intuit.

I really like how they touch on the Right's interest in keeping this awful paper shuffling nightmare going, too. You can see part of this con on display this year with Ted Cruz dusting off the old "let's have a flat tax 'cause taxes are too complicated!" ruse.
posted by indubitable at 3:58 AM on April 18, 2016 [20 favorites]


Just This Guy, yeah, EVERY American who makes more than $way below the poverty line per year has to file a full tax return themselves. This includes Americans living abroad.

This is almost exclusively because of the few million dollars Intuit and H&R Block spend each year buying politicians to prevent them from allowing tax reform, which would harm their many-millions-of-dollars-a-year businesses. Make no mistake, it is a problem that exists exclusively because of government corruption in the form of "campaign contributions" and the like.
posted by DoctorFedora at 4:17 AM on April 18, 2016 [22 favorites]


Remind me again why Elizabeth Warren isn't running for President this year?

Because she can actually accomplish much more of her long-term goals in the US Senate (i.e. Ted Kennedy), and possibly in the Supreme Court one day.
posted by C.A.S. at 4:32 AM on April 18, 2016 [109 favorites]


indubitable: "It's basically impossible to get away from these tax prep goons, too, unless you literally print out your return, fill it in by hand, and mail a paper copy, which is horribly inefficient and error-prone both for you and the government."

You don't need to print it out and enter it by hand, it's all PDF forms that you can fill out on the computer, but yeah, you have to do all the calculations manually, and reading (and understanding) the instructions takes forever. That said, if your income situation (i.e. employer, number of kids, number of bank accounts, etc.) doesn't change every year it gets faster and faster because while the numbers change, the questions and positions stay the same. I think this last year I managed to finish the whole thing in around 2 hours. I don't know how much those tax prep services cost, but my impression is that it costs more than I'd make in two hours, so doing it by hand is cheaper than hiring them to do it.

That said, the first year I did it it took like 6 hours, as compared to Japanese taxes, which the first year took maybe 1 hour, despite the fact that English is my native language. So don't mistake me saying "you can manage it by hand, it's not impossible" as me saying "and therefore it's just fine and not at all insane."
posted by Bugbread at 4:33 AM on April 18, 2016 [4 favorites]


In the UK most people are taxed automatically from out of their paycheck every month (or whatever pay period)
So if you have a basic officey job, you still have to do taxes?


Yep. We all have taxes taken out of our paycheck every month too, but the point of filing taxes is to calculate whether the amount taken out of our paychecks was too much or too little. If the government took too much, they send us it back; if they took too little, we have to pay the difference.

So it's an annual renegotiation of what our tax obligation for the previous year should have been, versus what it was.
posted by EmpressCallipygos at 4:33 AM on April 18, 2016 [26 favorites]


So if you have a basic officey job, you still have to do taxes?

In the U.S., we get the best (worst) of both worlds: income taxes are automatically taken out of employees' paychecks, modified by employee-claimed exemptions based on certain factors (single/married, number of dependents, etc.).

Then at the end of the year we file a tax return and learn if we claimed too many or too few exemptions, or if we got it right. If we still owe money, we pay it then. If we already paid too much in taxes over the year, we get a refund.
posted by AndrewInDC at 4:34 AM on April 18, 2016 [4 favorites]


Just This Guy, yeah, EVERY American who makes more than $way below the poverty line per year has to file a full tax return themselves. This includes Americans living abroad.

This is true but not quite the full set. Every American plus every single other person who earns money in America - from resident aliens to people like musicians and athletes. Further once you live and/or earn money in America the United States government claims the right to access your financial information in other countries in perpetuity.
posted by srboisvert at 4:36 AM on April 18, 2016 [3 favorites]


If we already paid too much in taxes over the year, we get a refund.

aka "an interest-free loan to the government with a 3-12 month repayment period".
posted by Mogur at 4:36 AM on April 18, 2016 [33 favorites]


we have something like this in chile. it's great. i just log on to the website, click "ok" a couple of times, and fill in my bank details for the refund (which, iirc, does include some interest).
posted by andrewcooke at 4:40 AM on April 18, 2016 [1 favorite]


This is the first year I've purchased a tax prep software, and it was nice having the program pull in info from various sources. But the only reason I broke down and bought software is because it's so complicated: I'm partly self employeed, partly employeed by a big box retail and have obamacare for the first time. I still had to print out and mail State taxes or be hit with another "convenience" fee. I hate having to use the big goons.

I don't really trust the software but have an irrational fear of the irs and hope the software keeps me from making big mistakes. It's a more stressful time of the year than xmas!

If only single-payer medical and sane taxes were a reality, life would be so much better, but I bet the entrenched pocket -lining of congress is going to maintain the status quo.
posted by mightshould at 4:44 AM on April 18, 2016 [1 favorite]


In the UK the tax office generally reassesses this stuff automatically and then will send you a cheque (with interest) if they asked for too much. (it doesn't happen often, but is nice when it does).
If you underpaid they just raise your tax code for the next year by whatever is needed to make it up.

I always assumed that the right wanted tax confusing not because of accountant lobbyists but just to make sure everyone was aware at all times of how much the government was taking from you.
posted by Just this guy, y'know at 4:49 AM on April 18, 2016 [3 favorites]


Tax preparation is unduly difficult for most people. But to lay the blame for that solely at the feet of H&R Block et al. is a bit disingenuous. What about placing the blame on our tax code itself?

For non-USians reading here, our country does a lot of backdoor legislating and policy crafting through the tax code. It incentivizes behavior X (good, good, let the debt slavery flow through you), it penalizes activity Y (don't sell that asset now--or ever!), and that makes accounting for our tax liabilities harder than it should be. It's not a simple question of (1) look up your salary on this table and pay the corresponding amount.

Make fun of the various tax reform policies (and I agree, flat tax is regressive) all you want. But they're tapping into something real. Our current system and chickenshit legislators who won't do publicly what they'll do in the arcane tax code are to blame for its complexity--not an overnight industry that preys on that complexity.
posted by resurrexit at 4:50 AM on April 18, 2016 [7 favorites]


So it's an annual renegotiation of what our tax obligation for the previous year should have been, versus what it was.

I live in the UK but am from the US so I am familiar with both systems. Yes, in both cases money is taken out of your paycheck but in the UK case I have provided enough information beforehand that the amount taken out is exactly right. Filing a tax return (or a self-assesment actually) in the UK is thus an exceptional process rather than the norm.

I haven't filed a single UK tax return since I moved here in 2008.

But I do continue to file US tax returns, despite the fact that I don't earn any money in the US. And the pervasive tax preparer people have caught onto this market for sure. Their spider-like web stretches out across the Atlantic ocean. They now help expats file their tax return to the US government in which no money is owed - except to the tax preparation software of course.
posted by vacapinta at 4:52 AM on April 18, 2016 [7 favorites]


And to lay the blame for the tax code's complexity at the feet of the political right or left (at least in the US) is also disingenuous. On death (in the form of global warmongering) and taxes, they're sadly aligned.
posted by resurrexit at 4:53 AM on April 18, 2016 [3 favorites]


I gladly pay the $60 for TurboTax because it saves me endless hours of headaches, especially because I work in a different state from the one in which I live. I'm paying for convenience and ease.

Having said that, it's ridiculous that there is not a free way to do it via the government, or some nominal fee of like $10 to use the software and file. Or, as Warren has said, the govt already has all of the information. They can do the calculations and inform me, and then I can choose to accept it or appeal the figure.
posted by archimago at 4:56 AM on April 18, 2016 [17 favorites]


What about placing the blame on our tax code itself?

Read the article, the IRS already has all the information necessary in many cases to compute someone's return for them. W-2s and 1099s from employment, 1099s for interest, capital gains and dividends, form-whatevers for HSA and IRA contributions, etc., etc.
posted by indubitable at 4:59 AM on April 18, 2016 [8 favorites]


Having said that, it's ridiculous that there is not a free way to do it via the government, or some nominal fee of like $10 to use the software and file.

I file with FreeTaxUSA and pay a very nominal fee.
posted by roomthreeseventeen at 5:01 AM on April 18, 2016 [5 favorites]


Also, a lot of these tax prep outfits are basically operating like payday lenders. They will lend you an advance on your tax refund at some absurdly high interest rate, and they will also prepare your return for you. Now, a lot of poor and working class Americans are eligible for the Earned Income Tax Credit, which is refundable*. Refundable credits like the EITC exist because the federal government has decided as a matter of policy to administer as much welfare as possible through the tax code. And poor and working class people are more likely to seek out tax preparers than someone with more education, money and free time. So now we have effectively handed over administration of welfare programs to private entities who are given free reign to rip people off.

*"Refundable" here means that the government will send you the balance calculated even if you paid no taxes that year. This is not true of all tax credits.
posted by indubitable at 5:15 AM on April 18, 2016 [25 favorites]


Yeah, the point is that the tax code is how it is specifically BECAUSE the tax prep companies are paying congresspeople to vote against reform. I don't even know if it reaches "open secret" levels of trying to hide it.
posted by DoctorFedora at 5:26 AM on April 18, 2016 [5 favorites]


I used turbotax this year because between the two of us, we had three "normal" jobs and one self-employment form that needed a schedule C, and... yeah, it's a bit beyond me. It cost about a hundred bucks to do both state and federal, but the tax guy MrWebb's parents use wanted $325, so I guess it's still a bargain? Also I could have paid the turbotax fee out of my refund itself (plus a $35 convenience fee). Yuck.

By comparison, our local taxes were available to e-file this year. Completely free.
posted by specialagentwebb at 5:30 AM on April 18, 2016 [2 favorites]


I always assumed that the right wanted tax confusing not because of accountant lobbyists but just to make sure everyone was aware at all times of how much the government was taking from you.

The right wants the tax code to be complex, with loopholes of various kinds, so as to make it easier for wealthy people to pay fewer taxes.
posted by a lungful of dragon at 5:30 AM on April 18, 2016 [26 favorites]


Anyone asking why Warren isn't running for president or vice president doesn't understand what she's doing, what she's accomplished nor what she may do in the future.
posted by humboldt32 at 5:32 AM on April 18, 2016 [22 favorites]


Or you could just put it in the mail.

1040
and 1040EZ are a bore, but pretty straight forward for the average taxpayer. Do it once and the procedure becomes fairly smooth in subsequent years, the more so if your finances are simple. Less and less the case of course for households that need multiple income streams. Real complexity comes at the corporate level, where complexity is bought and paid for by those who can afford to corrupt congress (remarkably cheap, as it happens).

the IRS already has all the information necessary in many cases to compute someone's return for them.

It's been proposed.

I've read (cannot find the cite) that the IRS will do the tax prep for members of congress. That they, mostly one percenters, are not forced to do the slog themselves and with the ever present threat of audit is another pitchfork moment.

But that's a small crew of people and the IRS probably does not the computing power for the rest of us. Not that I would want them to do so. They have a conflict of interest, and are not privy to the various deductions, you state and local taxes, and other bits and bobs that I am.

(Turbo-Tax used to default to AMT, historically intended to snare the rich but which over time has come to plunder the middle class who, did they but know, can usually avoid it. Assuming they were aware of AMT in the first place and didn't use Turbo-Tax. Don't know if they fixed that.)
posted by IndigoJones at 5:33 AM on April 18, 2016 [1 favorite]


Read the article, the IRS already has all the information necessary in many cases to compute someone's return for them. W-2s and 1099s from employment, 1099s for interest, capital gains and dividends, form-whatevers for HSA and IRA contributions, etc., etc.

They definitely have the information to figure out when you missed something, as I learned this year when they let me know about a W-2 I didn't enter last year (it hadn't been sent by the employer I forgot about the work). They also helpfully let me know about an additional $1,600 I owed them.
posted by Bulgaroktonos at 5:34 AM on April 18, 2016 [5 favorites]


That new scam of high interest loans based on your tax return should be illegal. It targets the less affluent and less educated. Further, if the tax preparer makes a mistake, the borrower pays for the error both in principal and interest.

Still, personal taxes for a wage earner are simple. Try running a business, with multiple employees and a retirement plan or two, or be involved in a partnership or two. Now, you fallen in among sharks - attorneys (different ones for taxes, retirement plans, and business), accountants, and external auditors - and 5-6 figure yearly bills for all these services are commonplace, even in relatively small companies. It's an entire industry based on the complexity of the law and tax code. It's like the police/justice/prison system, which makes money off the victims (and government as well) for the benefit of the practitioners and private concerns (like for-profit prisons). There is also the developing parasitic industry around medical practice (licensure/CME/HR/QC/various levels of audits and reporting) which profits will soon, I predict, eclipse the income of the actual practitioners, if the haven't already with the decreasing numbers of independent practitioners.

In this way, all are like the financial industry. These entities are rent-seeking in a broad sense, setting themselves up at the interface where money changes hands and securing their positions with influence on law and regulation, draining money from the system.
posted by sudogeek at 5:36 AM on April 18, 2016 [16 favorites]


Then at the end of the year we file a tax return and learn if we claimed too many or too few exemptions, or if we got it right. If we still owe money, we pay it then. If we already paid too much in taxes over the year, we get a refund.

Also worth mentioning to non-USians: the amount of tax withheld from our paychecks is never actually right, due to the complexities of the thing, so it's really not a "correcting possible mistakes" phase. It's more like, "it's probably within about 5-10% of being right, now it's time to settle up."

Also, some but not all states also have income tax, and their laws and forms are different (usually simpler) from the federal ones, and it's another thing that tax prep services overcharge for.
posted by Foosnark at 5:46 AM on April 18, 2016 [3 favorites]


lol Vox:

What you can do to fight the tax preparation industry: [boycott tax preparers]

The powers of market forces will surely save us from this mess which we arrived at through, uh, some totally inexplicable process! Never change, neoliberals :-)
posted by indubitable at 5:46 AM on April 18, 2016 [15 favorites]


The fact that anyone can seriously argue for a 98% tax on any portion of income is just gross.
posted by corb at 5:47 AM on April 18, 2016 [4 favorites]


Random fun fact: not only do Americans have to deal with taxes like this, American living abroad do, too. There's evidently one other country in the world where citizens living and working overseas have to file taxes. Possibly Bolivia? I can never remember.

There is an exemption, currently at about $93000. If you make less than that, you don't have to pay, but you do, still, have to file taxes. There is either talk of connecting filing taxes to passport renewal or its already happened. And yeah, every once in a while, there's talk of taking away the exemption, which would require Americans abroad to pay taxes twice.

It's absurd, and they keep adding new rules (woohoo, FBARS!) all the time. Guh.
posted by Ghidorah at 5:49 AM on April 18, 2016 [4 favorites]


It might be counterproductive but its hard to see how 98% is gross.

Global taxation is good. Unless you like tax havens.
posted by JPD at 5:51 AM on April 18, 2016 [9 favorites]


"pay taxes twice" is not really accurate, since IIRC you are credited for foreign tax paid.
posted by indubitable at 5:52 AM on April 18, 2016 [6 favorites]


Now, you fallen in among sharks - attorneys (different ones for taxes, retirement plans, and business), accountants, and external auditors - and 5-6 figure yearly bills for all these services are commonplace, even in relatively small companies.

What the hell are you doing? Unless you're doing lots of M&A or something you're severely overpaying for legal services.

Nobody uses attorneys for retirement plans anymore. Pick a model plan document. Talk to your TPA and your plan provider and they'll give you one for free.

Why do you need a separate tax attorney from your business attorney? If you were a big corporation or doing lots of overseas business and dealing with tax treaties maybe, but for a small business? That's insane. S corps and LLCs aren't that complicated. Use your accountant.
posted by leotrotsky at 5:52 AM on April 18, 2016 [3 favorites]


In Chile, you log in, they show you a form already filled in and calculated, and tell you 'you must pay this much' or 'we will pay you this much'. If that's OK, you press 'submit' and you're done.
It took me about 60 seconds this year, and I was on the phone with my wife and reading emails at the same time.
posted by signal at 5:54 AM on April 18, 2016 [5 favorites]


We have to do a similar thing in Canada. It's inane. But this year, Revenue Canada are pre-filling all the information they have from your employers into your online tax account, so it's supposed to save a bunch of time.

Of course, I'd never know this. ms scruss is from the US, so we have to prepare US and Canadian taxes in sync, which to get right needs professional help. What with the FBARS filing, our joint tax prep cost well over $1000.
posted by scruss at 5:55 AM on April 18, 2016 [2 favorites]


one other country in the world where citizens living and working overseas have to file taxes.

Eritrea, in east Africa is the other one: the United States and Eritrea are the only countries which impose taxation and reporting requirements on the income which citizens living abroad permanently earn in their countries of residence.

Not even taxable after the foreign earned income credit, which makes it seem even more pointless.
posted by p3t3 at 5:56 AM on April 18, 2016 [3 favorites]


The fact that anyone can seriously argue for a 98% tax on any portion of income is just gross.

Fun word problem! The median income in America is $51,939. If your income were taxed at 98%, and your after-tax income was $75,000, what was your before-tax income?
posted by odinsdream at 5:57 AM on April 18, 2016 [18 favorites]


(Bonus question, worth 2 extra points: Don't count your SuperPAC contributions in your before-tax income amount.)
posted by odinsdream at 5:58 AM on April 18, 2016 [10 favorites]


BTW, there is a free online service in the US that anyone can use that does calculations for you. It's called Free File Fillable Forms, and is provided by a consortium of tax prep companies. Needless to say, it's wildly user-hostile: all errors are returned to you as raw XSLT error codes, so you have to know and understand XPath to have a chance of getting it right.

In the past we used to keep resubmitting until there was only one error that wouldn't go away, then print out and sign the PDF the website produces and mail it in.
posted by scruss at 6:00 AM on April 18, 2016 [6 favorites]


So, there are free tax assistance programs, if you make under a certain amount of money. Check to see if there's one near you! I worked for one this year and I was amazed at the number of people who made under $10,000, even under $1000 annually, and were still paying H&R Block to get their refund.

That said, the whole system is absolutely ridiculous and no one should have to pay to file, regardless of their income. It's only due to people's (totally misplaced) fear of the (underfunded, understaffed) IRS that ANYONE who owes is filing at all.
posted by chaiminda at 6:00 AM on April 18, 2016 [7 favorites]


(Bonus bonus question, worth 4 extra points: How many individual Americans are there with a gross income above your answer for Question #1?)
posted by odinsdream at 6:00 AM on April 18, 2016 [8 favorites]


the problem with a 98% income tax rate is everyone does what ever they can to convert income into capital gains or if they have the option hand back their US passport.

It creates a massive inefficiency in exchange for less revenue than you think. Hence the idea that the most revenue comes from a tax rate of 57-83%
posted by JPD at 6:01 AM on April 18, 2016 [3 favorites]


If we still owe money, we pay it then

You left out the best part! If our inability to predict the future (how much we will owe come April 15th) exceeds a certain threshold and we end up owing too much, then we pay the difference and a penalty for our general lack of complex financial forecasting skill.
posted by Seymour Zamboni at 6:03 AM on April 18, 2016 [5 favorites]


ooh ooh also let's all pretend we don't understand how taxes work, and pretend that "99% tax bracket" means "99% of total income is taxed" instead of what it actually means here in the real world
posted by DoctorFedora at 6:06 AM on April 18, 2016 [76 favorites]


Oh...and if you *think* that might happen to you then you are supposed to send the government random quarterly payments (guestimates) that will hopefully mean you end up giving them more than you should have. And then you will get the overage back, without interest. Yes, it is this stupid.
posted by Seymour Zamboni at 6:06 AM on April 18, 2016 [2 favorites]


The fact that anyone can seriously argue for a 98% tax on any portion of income is just gross.

90+% marginal tax rates on millionaires helped pay for the war against Nazi Germany and solidified the US as an economic and military superpower, which are serious arguments for taxation. I wouldn't call defeating Nazis "gross", at least.
posted by a lungful of dragon at 6:06 AM on April 18, 2016 [62 favorites]


("Marginal tax rate" means "each dollar you earn beyond a certain point is taxed at a higher rate." Hypothetical example: let's pretend up to $20K is 0%, then up to $30K is 10%. If you make $30,000, you pay $0 on your first $20,000 of income, then pay 10% of the next $10,000, or $1,000 total on $30,000, rather than most people's misunderstood $3,000 on that $30,000 with a top marginal tax rate of 10%)
posted by DoctorFedora at 6:10 AM on April 18, 2016 [17 favorites]


Remind me again why Elizabeth Warren isn't running for President this year?

Because a transporter malfunction separated her into Hillary Clinton and Bernie Sanders. Clinton got her political savvy, while Sanders got her progressive values. Unfortunately, neither has what it takes to command the Enterprise run the country alone. We really need to figure out some way to jam them back together into one person.
posted by Naberius at 6:14 AM on April 18, 2016 [37 favorites]


90+% marginal tax rates on millionaires helped pay for the war against Nazi Germany and solidified the US as an economic and military superpower, which are serious arguments for taxation. I wouldn't call defeating Nazis "gross", at least.

All right... all right... but apart from better sanitation and medicine and education and irrigation and public health and roads and a freshwater system and baths and public order... what have taxes done for us?
posted by entropicamericana at 6:14 AM on April 18, 2016 [74 favorites]


The fact that anyone can seriously argue for a 98% tax on any portion of income is just gross.

You're right, letting the wealthy keep 2% of what they stole instead of confiscating it all and returning it to those it rightly belongs to really incentivizes theft, exploitation, and plundering.
posted by Pope Guilty at 6:17 AM on April 18, 2016 [36 favorites]


I'm willing to guess the fact that you were paying something like a 49% marginal tax at 200k(current dollars) in 1942 raised a whole lot more revenue than the 80% at 1.12m.

Just based on the numbers of people who earn those amounts. You are hitting 5% of the total population with the 200k vs <.01% with the later.

Or the 34% at 112k as opposed to 25% today.

That's kind of the reality is that yes, it is more fair to create higher progressive tax brackets, but from a numbers and cents perspective increasing taxes on the upper middle class will raise a lot more revenue. And if your ultimate goal is a better welfare state, that is what you need to do.

Note: Not an argument against higher tax brackets and rates, just noting that it doesn't actually solve much.
posted by JPD at 6:18 AM on April 18, 2016 [2 favorites]


The deliberate confusion raised over marginal taxation is one of the bigger scams that conservatives pull. Not the biggest, by far — see voter fraud — but it is an old, reliable go-to at tax time.

All right... all right... but apart from better sanitation and medicine and education and irrigation and public health and roads and a freshwater system and baths and public order... what have taxes done for us?

The left just needs better marketing — higher tax rates worked well when America was at its economic peak. If a social compact that is fairer for all, which includes working infrastructure like bridges and roads, etc. was good enough for a staunchly Republican president like Eisenhower, I don't see why it can't be reintroduced today under similar terms with similar goals.
posted by a lungful of dragon at 6:22 AM on April 18, 2016 [17 favorites]


That's kind of the reality is that yes, it is more fair to create higher progressive tax brackets, but from a numbers and cents perspective increasing taxes on the upper middle class will raise a lot more revenue. And if your ultimate goal is a better welfare state, that is what you need to do.

It's also a much harder argument politically, I suspect.
posted by leotrotsky at 6:25 AM on April 18, 2016


The left just needs better marketing — higher tax rates worked well when America was at its economic peak. If a social compact that is fairer for all, which includes working infrastructure like bridges and roads, etc. was good enough for a staunchly Republican president like Eisenhower, I don't see why it can't be reintroduced today under similar terms with similar goals.

Republicans: The party that says government doesn't work, and then, once elected, does everything in their power to make sure it doesn't.
posted by entropicamericana at 6:25 AM on April 18, 2016 [16 favorites]


The idea that just because I didn't say the words "marginal tax rate" that I don't understand how it works is also gross. To be clear, I find the idea of declaring that people above a certain income should essentially be virtually stopped from making any more money just because some people think it meets an arbitrary level of "too much" morally repugnant. Yes, even if it helped defeat Nazis. We did a lot of other morally repugnant shit in order to defeat Nazis, it's not an argument for shooting and torturing prisoners now to get back to the good old days, nor should it be for this.
posted by corb at 6:32 AM on April 18, 2016 [5 favorites]


Some of us even have to file municipal income tax forms every year. Our PGH-1040 was due this week too and while it's a pretty simple flat 3%, it's still an extra hassle to remember.
posted by octothorpe at 6:32 AM on April 18, 2016 [6 favorites]


Even simpler than raising the marginal tax rates would be to stop treating capital gains (i.e., money you did nothing to deserve, money that you get just for already having money) differently from regular income (i.e., money that you worked for). That's surely one of the greatest tricks that those in power have played on the rest of us. We're arguing about 20% versus 30% tax brackets, meanwhile the people with the most money are paying 15% because they don't actually work for a living.
posted by hydropsyche at 6:37 AM on April 18, 2016 [42 favorites]


Having come from New Zealand (no personal tax form required at all unless you have income outside of salary/interest/wages etc), and having lived in the Cayman Islands (no tax) the US system is mind-warpingly complex. It cost my wife and I over $500 and the better part of a Saturday to get our current taxes done this year - on a scenario which should have been automatic pay as you go tax but for $reasons wasn't. Since I've lived back in the US for the last few years I've never been able to use the online tools successfully....there's always been an issue (needing to get an ITIN for one child or having worked in too many states etc)......which is why I always try and remember to kick in a few $ to the California Sea Otter Fund at the end of my state form when they ask. One day the Sea Otters will rise up and save us all from this mess.
posted by inflatablekiwi at 6:39 AM on April 18, 2016 [3 favorites]


Just wanted to take a moment to thank kliuless once again for creating yet another fantastic FPP. My reading list is already filled to bursting point but every time I see that name at the bottom of an FPP or a comment I always take the time to look at it in depth.

Thank you for your efforts once more. You're fully awesome.
posted by longbaugh at 6:39 AM on April 18, 2016 [20 favorites]


I've had to deal with the IRS regarding incorrect payments twice. Once they wrote me a letter out of the blue to tell me that I owed them money. Once they wrote me a letter out of the blue to tell me that they owed me money, because they had found an exemption that I could take that I hadn't realized I could take. That was not something I expected the IRS to do, based on conventional wisdom that says the IRS are evil bastards. My experience has been that the people writing the tax code are assholes, but the people actually administering the tax code are pretty fair.
posted by Bugbread at 6:41 AM on April 18, 2016 [24 favorites]


The left just needs better marketing — higher tax rates worked well when America was at its economic peak. If a social compact that is fairer for all, which includes working infrastructure like bridges and roads, etc. was good enough for a staunchly Republican president like Eisenhower, I don't see why it can't be reintroduced today under similar terms with similar goals.

Eisenhower was president back before the Republicans declared themselves the Death To Society Party.
posted by Pope Guilty at 6:45 AM on April 18, 2016 [8 favorites]


To be clear, I find the idea of declaring that people above a certain income should essentially be virtually stopped from making any more money just because some people think it meets an arbitrary level of "too much" morally repugnant.

That's an especially odd moral position. I think it probably comes from a lack of understanding of the power of money exponentially increasing in our society, and how that relates to well-being. It is absolutely moral to consider that there is a maximum amount of income above which it becomes not only obscene but damaging to everyone else. Not recognizing this I think is due to a poor understanding of the scales involved. When 4,000 people are making as much per individual as hundreds of people's combined poverty-level incomes, it's a pretty tortured moral position to say those 4,000 people "deserve" to keep all that income for themselves, just so they can stuff it in their ears.
posted by odinsdream at 6:45 AM on April 18, 2016 [57 favorites]


there are a bunch of good reasons why we tax capital gains at a lower rate - the most important being that it promotes investment and saving.
posted by JPD at 6:56 AM on April 18, 2016 [2 favorites]


Saving is absolutely the worst thing the wealthy (i.e. those who get most of their wealth from capital gains) can do for society.
posted by Pope Guilty at 6:57 AM on April 18, 2016 [27 favorites]


the most important being that it promotes investment and saving.

Do you... do you even... know real people?
posted by odinsdream at 6:59 AM on April 18, 2016 [17 favorites]


Remarkably I do.
posted by JPD at 7:03 AM on April 18, 2016


Bugbread: Not to mention, if you have the time to read and try to understand them, the IRS documentation is pretty clear and has good examples, too. So the people who are tasked with explaining the tax code are also great. The issue is in the "if" clause in my first sentence — and the more complex your tax situation is, the more stuff you need to find time to read and understand.

(The language TurboTax uses is almost malicious in its infantilization, too. "It turns out you don't need to report your foreign bank account," it tells me about the tiny account my mom opened jointly with me. So it just happens that I don't need to report it. Ain't I lucky. Instead of, you know, not being responsible to report because the value of the account is way below the reporting threshold. But saying that would be actually explaining something to me, which, we can't have the taxpayer understanding things, are you kidding me.)
posted by seyirci at 7:04 AM on April 18, 2016 [5 favorites]


the most important being that it promotes investment and saving.

yeah, if it were taxed like regular income, capitalists would be all, "whoa, no way do i want to earn money from investing my capital now, i'd rather just stuff it under a mattress and lose it all to inflation!"
posted by indubitable at 7:05 AM on April 18, 2016 [24 favorites]


I agree with corb a bit -- it was silly how the Beatles, the Stones, and ABBA had to evade the confiscatory taxes as they did.

Exceptionally talented entertainers, artists, and sports people actively employ their skills to create new wealth -- works of art, sporting spectacles -- and are rewarded for having such large fanbases.

They're not the problem. This is:

Saving is absolutely the worst thing the wealthy

specifically the "saving" that is going into rent-seeking investments like

Large-Scale Buy-to-Rent Investors in the Single-Family Housing Market: The Emergence of a New Asset Class?

housing rents are an immense flow out of the working economy to the rent-seeking one, and the operators within here have hidden inside the "capitalist" umbrella for a very long time, but they are not true capitalists that create new wealth like a Musk, Bezos, or Jobs, they are parasitical investors merely capturing existing wealth.
posted by Heywood Mogroot III at 7:05 AM on April 18, 2016 [9 favorites]


to be serious more than any other tax you see people behaving the most rationally around the cap gains taxes. That doesn't mean 15% is the right rate, just that it makes sense to tax it differently from income.

yeah, if it were taxed like regular income, capitalists would be all, "whoa, no way do i want to earn money from investing my capital now, i'd rather just stuff it under a mattress and lose it all to inflation!"

More like "why should I get myself locked into an illiquid investment or care about short-term vs long-term gains"
posted by JPD at 7:07 AM on April 18, 2016




there are a bunch of good reasons why we tax capital gains at a lower rate - the most important being that it promotes investment and saving.

Managers of hedge funds and private equity do not do what they do to promote saving. Their investments are engineered to recoup the greatest profits in the shortest time span. Loopholes enable them to earn profits at much lower tax rates.

A number of hedge funds are privately owned and managed, so this is in effect not a savings account but an end run around income taxation. This, of course, is an adjunct to the off-shore tax havens of the sort making the rounds in the papers.

If some people rig the system so that they don't pay their share, what's the incentive for the rest of us to make it all keep going? I don't see how a democracy can succeed in that kind of environment over the long term.
posted by a lungful of dragon at 7:09 AM on April 18, 2016 [15 favorites]


why should I get myself locked into an illiquid investment

everything can be bought and sold these days. If it's illiquid, it's just for 'the greater fool', that's all.
posted by Heywood Mogroot III at 7:10 AM on April 18, 2016


I will never stop resenting the fact that I make less than $15K a year but I still have to file taxes back home in the US, where I don't live, where I don't intend to live, and where I have to find an accountant who will consent to doing a US tax return and not charge me more than I can afford for doing it. I make nothing, I never have, I probably never will, but having to do it when I am no longer a resident of my home country under threat is a bitter pill to swallow.
posted by Kitteh at 7:10 AM on April 18, 2016 [14 favorites]


renting apartments isn't rent seeking. Also pretty much all of the big players that tried to do that large scale renting thing are exiting the market because the returns aren't there - mostly because its a leverage game and their leverage costs are cheaper than the mortgage you can get if you have a downpayment.

Dude - stop playing with Fred- you don't even know WTF you are posting. None of those things have anything to do with savings rates.
posted by JPD at 7:10 AM on April 18, 2016


I have simple tax processes (two W-2s, nothing else) so I actually appreciate TurboTax -- free software for people like me and I'm done in half an hour. Their "are you SURE you don't want our $29.99 package?" nagging is a small price to pay.
posted by delfin at 7:12 AM on April 18, 2016 [3 favorites]


More like "why should I get myself locked into an illiquid investment or care about short-term vs long-term gains"

If you want to provide a disincentive to churning investments, you could just as easily raise transaction costs via a transaction tax. Also, "why should I get myself locked into an illiquid investment?" is a very important question to be asking yourself regardless of tax situation.
posted by indubitable at 7:13 AM on April 18, 2016 [2 favorites]


I would also point out that a lower capital gains tax is pretty much the definition of a regressive tax, since it's essentially a tax break for getting your income from being rich rather than from working. If anything, we should be taxing capital gains brutally since if high taxes on your capital gains would be meaningful, you're already rich enough to afford it.
posted by Pope Guilty at 7:13 AM on April 18, 2016 [32 favorites]


At what income bracket does is become better to reduce the amount you pay in tax every paycheck, invest it, and then pay taxes in a lump sum at the end of the year?
posted by rebent at 7:13 AM on April 18, 2016


To be clear, I find the idea of declaring that people above a certain income should essentially be virtually stopped from making any more money just because some people think it meets an arbitrary level of "too much" morally repugnant.

That's a novel use of that word.
posted by octothorpe at 7:14 AM on April 18, 2016 [16 favorites]


Managers of hedge funds and private equity do not do what they do to promote saving. Their investments are engineered to recoup the greatest profits in the shortest time span. Loopholes enable them to earn profits at much lower tax rates.

A number of hedge funds are privately owned and managed, so this is in effect not a savings account but an end run around income taxation. This, of course, is an adjunct to the off-shore tax havens of the sort making the rounds in the papers.


The entire carried interest scam is about making what by any normal definition is income into a capital gain so that it gets taxed at a lower percent. The problem isn't the cap gains rate, its that the income is taxed like a cap gain. It is an indefensible practice, but not related to the issue at hand.

Also the tax they earn on their investments is paid by their investors, no the managers.

The other tax scam has to do with when they liquidate fees earned from their non-taxable clients. There they benefit from a time value of money thing.
posted by JPD at 7:16 AM on April 18, 2016


renting apartments isn't rent seeking.

sure it is -- existing housing has a very small labor component compared to the rental income it produces.

economic rent is defined as profit above costs required to bring the good/service to market, and housing rents are locked to wages, so as wages rise economic rents rise.

More than half the population of our major cities rents now. This is an immense -- perhaps a trillion-dollar -- wealth flow for working america to parasitical investing class, both SFH and apartment blocks.

It is the primary reason why things are kinda fucked now.
posted by Heywood Mogroot III at 7:16 AM on April 18, 2016 [17 favorites]


At what income bracket does is become better to reduce the amount you pay in tax every paycheck, invest it, and then pay taxes in a lump sum at the end of the year?

as long as you don't hit the penalty - any tax bracket.
posted by JPD at 7:17 AM on April 18, 2016 [1 favorite]


Work is actually kind of slow today because I'm not actually the person pushing the button on the last extensions, and I'm mostly here to deal with questions about returns my boss is just getting around to signing when I finished them weeks ago. So, I don't work with the super-wealthy. I work with the sort of people who make up the wealthy people in a given small town.

People always say that capital gain rates will "encourage investment", but I don't know if people understand that it isn't like it means that these wealthy people are going out and investing in your local small businesses. They could, but they don't. What they do instead is, for example, organizing their businesses as S-corps now instead of partnerships. The s-corp requires that they pay themselves a paycheck, so you'll see successful professional upper-income people who make a paycheck of $30k a year, which is less than I make. Then the entire rest of the income from that S-corp is capital gains. They did absolutely zero different about running the business. The IRS is supposed to check to make sure the wages they're paying themselves are reasonable, but I have yet to see anybody audited for this. The dirty secret of all of this is that the IRS hardly ever audits anybody for stuff they can't easily check. That means that regular taxpayers get letters about errors on their W-2s, but nobody ever looks at most business returns' expenses.

So, yes, they make financial decisions in order to try to convert ordinary income to capital gains, but none of the things this encourages actually turn out to be stuff that makes society better. "Encouraging investment" is not inherently pro-social when the things the rich invest in exclusively benefit the rich. There is no reason to "encourage investment" if it is not actually going to benefit the country as a whole.
posted by Sequence at 7:19 AM on April 18, 2016 [61 favorites]


1040 and 1040EZ are a bore, but pretty straight forward for the average taxpayer.

Disagree - tax literacy is low, and whether that's a product of education or the tax code, it's true. I work with some well-paid [young] people - and do you know how many times I've explained the difference between witholding and paying taxes, or why a single young person isn't a "head of household"? So many people can't even figure out how to calculate their number of allowances on their W-4, no way they can do their own 1040.

I know a decent amount about the tax code and even I struggled to figure out what to do about the medical study payments that I received in 2015 (I couldn't quite recall the amount I'd been paid) or how to handle state residency during the part of the year I'd been extremely nomadic.
posted by R a c h e l at 7:20 AM on April 18, 2016 [2 favorites]


economic rent is defined as profit above costs required to bring the good/service to market, and housing rents are locked to wages, so as wages rise economic rents rise.

yeah and the cost of owning those apartments is interest rate + opportunity cost and nominal interest rates are tied to wages. any return those guys get is from piling on heaps of leverage, which isn't economic profit to generate a rent you need economic profit.
posted by JPD at 7:20 AM on April 18, 2016


there are a bunch of good reasons why we tax capital gains at a lower rate - the most important being that it promotes investment and saving.

The main reason we tax capital gains at a lower rate is that we live in an oligarchy.

Half of income from capital gains in the US go to the top 0.1%. "Saving" and/or "investing" for them means increasing inequality, as opposed to paying for schools and roads and so forth.
posted by Foosnark at 7:22 AM on April 18, 2016 [24 favorites]


Tax preparation is unduly difficult for most people. But to lay the blame for that solely at the feet of H&R Block et al. is a bit disingenuous. What about placing the blame on our tax code itself?

And yet if you make a typo on your tax return, the IRS will pretty quickly send you a note with what they've calculated your taxes to be. There's no reason they couldn't just send you that information to begin with and let you either just approve or revise it.
posted by straight at 7:26 AM on April 18, 2016 [14 favorites]


I think the tax system should be more progressive and that investment income should be taxed. But it seems strange that people who think this often seem to fall into this weird argument that increasing taxation on those things has no effect on savings and investment. the tax rate affects the return on those activities. The claim that the tax rate on those things doesn't affect investors' behavior seems to imply their activities are pretty return-inelastic, which seems like a strong claim. If nothing else, hedge funds and investment banks spend a lot of effort evading those taxes and lobbying to lower those rates, which suggests to me that they would strongly prefer to not pay them.

Like I said, I'm not convinced the revenue maximizing or socially optimal rate of taxation on capital gains is 0 or as low as 15%, and to the extent there is widespread evasion or loopholes of taxes on investment, there should be rigorous enforcement; so what Sequence is talking about is a real problem, but it doesn't mean that investment is tax-inelastic. It might just mean that the social costs of raising capital gains taxes are lower than what some people claim. Lower is not necessarily the same as zero.

I guess this is just a plea for not using bad claims in favor of good policy. There are tradeoffs in tax policy. They may not be as stark as politicians claim, and they may be tradeoffs we're all willing to deal with (less investment overall but also less inequality is one that it seems like foosnark is okay with, for instance). But I think it's a bad idea to pretend those tradeoffs aren't there.

heywood, one again, posting FRED charts is not an argument, and that's not the definition of rent seeking.
posted by dismas at 7:27 AM on April 18, 2016 [2 favorites]


Here in New York, they had volunteer tax preparers working at free clinic-type places where you could make an appointment and have them help you with your taxes for free. And Turbo tax can be free too, IF you have a simple return and you don't want any bells and whistles like them automatically downloading your name and address from your last return. I refused that this year - I don't want to spend 29 bucks just to avoid typing my name.

However, the more complicated your tax situation, the less likely you can get this for free. I was claiming exemptions for my writing for a couple years, and that set of calculations took me out of the easy-level tax prep software world. It was worth it, but it still cost me. And my roommate had an unusually complicated tax situation herself (she is a Belgian citizen here on a research grant which is her only income, and had to file a return based on that), and when she went to the free tax clinic, they looked everything over and admitted they couldn't help. And so did the H&R Block guy. It took another guy from that grant office to sort things out for her (her grant was wholly exempt and she didn't owe anything).
posted by EmpressCallipygos at 7:27 AM on April 18, 2016 [2 favorites]


Their investments are engineered to recoup the greatest profits in the shortest time span. Loopholes enable them to earn profits at much lower tax rates

Those two things are, as a general matter, mutually exclusive. It's commonly stated that carried interest is "taxed at capital gains rates," but that's a misleading oversimplification. Carried interest means that the character of the fund's income is passed through to the fund manager. So if we have a hedge fund generating a lot of short term capital gains, which are taxed as ordinary income and also subject to the Medicare surtax, the carried interest means that the fund manager is taxed at a marginal rate of 43.4% (39.6% short term cap gain + 3.8% Medicare surtax).
posted by jpe at 7:29 AM on April 18, 2016


The main reason we tax capital gains at a lower rate is that we live in an oligarchy.


Since virtually every country provides some sort of tax break for capital gains, that means virtually every country is an oligarchy.
posted by jpe at 7:31 AM on April 18, 2016 [1 favorite]


Since virtually every country provides some sort of tax break for capital gains, that means virtually every country is an oligarchy.

This is one of the basic realizations required to have any shot at understanding politics, yes.
posted by Pope Guilty at 7:38 AM on April 18, 2016 [42 favorites]


(Turbo-Tax used to default to AMT, historically intended to snare the rich but which over time has come to plunder the middle class who, did they but know, can usually avoid it.

Not to derail, but could someone please share this One Trick for avoiding AMT that I apparently don't know about? It's not like it's just a checkbox on the form...
posted by primethyme at 7:39 AM on April 18, 2016


Ugh, last year I used TurboTax, and after almost filling out my return, they said, "Your taxes are too complicated. You need to upgrade to the Deluxe$$$ version."

My taxes aren't that complicated. I'm a graduate student and have fellowships and grants--but their free forms already had everything I need.

And then to my shame I used TurboTax again this year, because I was pressed for time. At the end they tried to upsell me with loans and prepaid cards and whatnot and they used obfuscatory language to make it difficult to tell which option was the simple "give me my tax refund, no loans, no prepaid card, no extra processing fee" one.

Next year I will start early. Screw them.
posted by Kutsuwamushi at 7:40 AM on April 18, 2016 [9 favorites]


Since virtually every country provides some sort of tax break for capital gains, that means virtually every country is an oligarchy.

To be more accurate, virtually every country is some combination of oligarchy, plutocracy (government by the wealthy), kleptocracy (government by thieves), and/or proctocracy (a neologism meaning "government by assholes").
posted by Faint of Butt at 7:44 AM on April 18, 2016 [19 favorites]


I've pirated TurboTax every year I've done my taxes as an adult, and the more I learn about screwed up the lobbying is around tax prep, the less guilt I have about doing so.
posted by SansPoint at 7:44 AM on April 18, 2016 [4 favorites]


fact that anyone can seriously argue for a 98% tax on any portion of income is just gross

Life is full of pain and difficulty. Some people lose their jobs and get evicted from their homes. Some people die of cancer and go bankrupt with medical bills. Some people pay high marginal rates on their upper incomes. So things happen.
posted by deanc at 7:46 AM on April 18, 2016 [39 favorites]


I've been reasonably happy with turbo tax. I held out for years still filling out my forms by hand until I wasn't allowed anymore.

At this point, however, the time value of money has made it worthwhile to pay $80 for turbo tax. However, turbo tax does nothing that the IRS couldn't do for me.
posted by deanc at 7:48 AM on April 18, 2016


I'm sorry... how is TurboTax predatory? I've never felt "pressured" to use TurboTax to do my taxes. I've gone back and forth between using TurboTax (for when my taxes are relatively simple - same job all year, itemized deductions, etc.) and a CPA when they're complicated (consulting jobs and all the shit that goes with basically being your own employer). Tax prep companies aren't the reason your taxes are complicated. They just figured out how to monetize your taxes being complicated.
posted by prepmonkey at 7:48 AM on April 18, 2016 [2 favorites]


Tax prep companies aren't the reason your taxes are complicated.

Wrong.
posted by Pope Guilty at 7:49 AM on April 18, 2016 [21 favorites]


Also, a lot of these tax prep outfits are basically operating like payday lenders. They will lend you an advance on your tax refund at some absurdly high interest rate,

Refund anticipation loans have been largely shut down by the IRS and state attorney generals. Not a moment too freaking soon.

So if we have a hedge fund generating a lot of short term capital gains, which are taxed as ordinary income and also subject to the Medicare surtax, the carried interest means that the fund manager is taxed at a marginal rate of 43.4% (39.6% short term cap gain + 3.8% Medicare surtax).

Funny how that never seems to happen, isn't it? It's almost as if, when you can structure your investments virtually however you like with almost no oversight, you can game the way returns come back to you!
posted by praemunire at 7:50 AM on April 18, 2016 [4 favorites]


Since virtually every country provides some sort of tax break for capital gains, that means virtually every country is an oligarchy.

We didn't used to. George W Bush changed our laws to provide a tax break for capital gains and dividends: a reduction in the dividend tax from 39.6% to 15% and a reduction in the capital gains tax from 20 % to 15 %. So yes, we have become more of an oligarchy even than we once were, and yes, we can point to who is responsible for that: an oligarch was elected (or placed in power by the oligarchs on the Supreme Court), and he used that power to do a favor for his oligarch buddies.
posted by hydropsyche at 7:51 AM on April 18, 2016 [11 favorites]


From my perch down here in the lower branches, I'm not seeing a tremendous difference in how a person with 10 million lives as opposed to how a person with 100 million lives.

The difference between ten thousand and 100 thousand seems to be the difference between suffering and relative happiness, however.

Tax away, say I.
posted by Mooski at 7:52 AM on April 18, 2016 [50 favorites]


I find the idea of declaring that people above a certain income should essentially be virtually stopped from making any more money just because some people think it meets an arbitrary level of "too much" morally repugnant.

People with excess capital are a demonstrable drag on an economy. I don't agree with every aspect of how economics is done, but there are very simple explanations for why it ends up costing everyone in a society when some participants in the economy have so much surplus capital they can't invest it fast enough to beat or match inflation. It leads directly to the kinds of speculative market bubbles that keep the boom and bust economic cycles going. There's a whole niche specialization in economics that studies the effects of capital surpluses. I'm not an expert in it, but I'm familiar with some of the arguments. And they're hard to refute once you really understand them.

For the sake of argument, if someone could prove to you mathematically and with solid empirical evidence that letting people continue to earn above a certain level of income in proportion to overall economic growth was harmful to the overall health of an economy, would you still feel it was wrong to tax income higher above a certain threshold?
posted by saulgoodman at 7:53 AM on April 18, 2016 [23 favorites]


Tax prep companies aren't the reason your taxes are complicated. They just figured out how to monetize your taxes being complicated.

They are, actually, at least in part. They've lobbied extremely heavily for years to block any effort to simplify the process of filing.

The New York Times:
Intuit’s opposition to return-free filing has been ferocious. In the last five years, according to disclosure documents, Intuit spent nearly $13 million on federal lobbying. That is about the same amount that companies many times its size have spent on lobbying. Apple, which has an annual income about 40 times that of Intuit, also spent about $13 million on lobbying in the same period. While documents show that Intuit lobbies on several issues, including immigration, cybersecurity and intellectual property law, the company’s largest lobbying contracts all involve the issue of tax administration.
Mother Jones:
In late July, the Senate Appropriations Committee approved a 2016 federal agency funding bill that came with instructions to the Internal Revenue Service to vastly expand the paperwork for the Earned Income Tax Credit.

This buried provision adds a layer of red tape for which the tax-preparation company H&R Block has lobbied heavily for more than a year, in letters and hearings. H&R Block and other tax-prep companies stand to benefit handsomely, while taxpayers who are unable to navigate the complicated new forms will face two costly alternatives: Pay a tax preparer to parse the forms, or give up the EITC, a crucial tax break for low-income families.
posted by cjelli at 7:55 AM on April 18, 2016 [10 favorites]


For the sake of argument, if someone could prove to you mathematically and with solid empirical evidence that letting people continue to earn above a certain level of income in proportion to overall economic growth was harmful to the overall health of an economy, would you still feel it was wrong to tax income higher above a certain threshold?

He's making a "moral" argument, so of course he would.
posted by tobascodagama at 8:01 AM on April 18, 2016 [1 favorite]


proctocracy (a neologism meaning "government by assholes").

stealin dis
posted by entropicamericana at 8:04 AM on April 18, 2016 [13 favorites]


(corb = she, tabascodagama.)

resurrexit: “Tax preparation is unduly difficult for most people. But to lay the blame for that solely at the feet of H&R Block et al. is a bit disingenuous. What about placing the blame on our tax code itself?”

This comment doesn't make sense at all. Did you read the article? Do you know how tax codes get written? H&R Block alone has one of the largest and most powerful lobbying operations in American politics. To a very substantial degree, they wrote the tax code itself.

“For non-USians reading here, our country does a lot of backdoor legislating and policy crafting through the tax code. It incentivizes behavior X (good, good, let the debt slavery flow through you), it penalizes activity Y (don't sell that asset now--or ever!), and that makes accounting for our tax liabilities harder than it should be. It's not a simple question of (1) look up your salary on this table and pay the corresponding amount.”

Sincerely, I don't think you understand the problem here. Every nation in the world does these things. Backdoor legislation, complex tax requirements, etc, have absolutely nothing to do with how difficult it is for the average taxpayer to pay their taxes. You might as well try to argue that people find Microsoft Windows hard to use because the design of the microprocessors inside PCs is too complex – no, these things have almost nothing to do with each other.

Almost all of the complexities of tax preparation are artificial complexities constructed by the system in order to make it more difficult. Case in point: the deduction / refund system. Why does the government fail to deduct the proper amount of taxes from our paychecks? Here's a hint: it's not because calculating that proper amount is difficult. We live in an era when running a very complication computation a billion times only takes a day or two for someone with even modest computing power. No: they do this because it adds complexity to the system, because it induces taxpayers to fill out forms and hire tax prep companies.

And, yes: the right has historically been in favor of increasing such complexity. I've even heard the argument put this way by some libertarians: taxes are bad, they stymie growth, but people are complacent, and unless you make taxes a huge hassle, they'll never fight to lower taxes. The right has been making this argument for decades at least. And you can bet that politicians on the right understand the corollary: they campaign on the issue of lowering taxes, so the more they can piss people off about the whole process the better they'll be in the ballot box. So, yes: this is very much something that's happened because politicians on the right saw that it was in their interest.
posted by koeselitz at 8:09 AM on April 18, 2016 [12 favorites]


He's making a "moral" argument, so of course he would.

Ugh, how is it moral to let some people's ambitions and desire for unlimited wealth screw everybody else out of a fair share of wealth and opportunity!? (Also, I think you misgendered corb there...)
posted by saulgoodman at 8:09 AM on April 18, 2016 [1 favorite]


(corb = she, tabascodagama.)

Too late to edit, but thanks for the correction.

Ugh, how is it moral to let some people's ambitions and desire for unlimited wealth screw everybody else out of a fair share of wealth and opportunity!?

There's no such thing as universal morality, so corb could be operating in a system which defines the extraction and retention of personal wealth as the sole or highest moral good. Which isn't even that strange, since that's clearly the dominant moral system in the United States.
posted by tobascodagama at 8:13 AM on April 18, 2016 [3 favorites]


Damn, that Mother Jones article: "In several letters to Congress over the past year, H&R Block has pushed to expand the Schedule EIC—the form required to claim the credit—as a backstop against tax fraud and improper payments."

If that isn't a nakedly corrupt giveaway to industry on the backs of those who can least afford it, I don't know what is.
posted by mubba at 8:15 AM on April 18, 2016 [6 favorites]


This has been blessedly well covered upthread, but it's worth reiterating how MIND-BOGGLING it is that public discourse re: taxes includes the twin lies that a) wealthy people work hard to earn their wealth and b) a $10 million lifestyle is significantly rougher than a $20 million lifestyle.

I remember some devil's advocate-ish pieces around the 2008 crisis explaining how a salary of "only" $300K can present real hardships to people who are used to getting $1M+, and I get that. If you've overextended yourself with mortgages and private school tuitions and yacht club memberships and your bratty spawn are used to having certain things to keep up with their peers, and/or you never bothered to cultivate yourself as a decent person and rely on wealth/power to keep friends around? I get that. But yeah, let's talk about repugnant morals.
posted by witchen at 8:25 AM on April 18, 2016 [20 favorites]


Ugh, how is it moral to let some people's ambitions and desire for unlimited wealth screw everybody else out of a fair share of wealth and opportunity!?

The premise of the argument is a moral one, is what tobascodagama was saying.
posted by Etrigan at 8:27 AM on April 18, 2016 [1 favorite]


Remind me again why Elizabeth Warren isn't running for President this year?

Because she realizes that Americans' over-reliance on individual saviours is a big reason they're in this mess to begin with.
posted by klanawa at 8:28 AM on April 18, 2016 [37 favorites]


there are a lot of problems with the moral theory of "just desert" but the funniest thing about conservatives talking about morality and income is the idea that owners of capital "deserve" to make income from that capital, regardless of whether they do any work ie. confiscatory taxes are immoral because they deprive people of the fruits of their honest labor.

it's pretty hard to make an honest six figures, much less seven figures or more, from your "labor". the best thing about high marginal tax rates is precisely that they discourage firms from paying certain classes of workers high wages. which is a real mind-fuck, i mean, what if your pay actually doesn't correspond to the marginal value of your labor? the idea here is that, for reasons obscure to conventional economics, firms may fail to continue to invest in their own business or even keep up with amortization costs in order to pay out to various stake-holders. another word for this is looting.

yeah and the cost of owning those apartments is interest rate + opportunity cost and nominal interest rates are tied to wages. any return those guys get is from piling on heaps of leverage, which isn't economic profit to generate a rent you need economic profit.

the way most real estate owners in the US, even well-intentioned ones, make net-income and/or capital gains ahead of amortization from their property is from "deferred maintenance," otherwise known as stealing from themselves or "looting." single-family home owners are probably the worst.
posted by ennui.bz at 8:39 AM on April 18, 2016 [4 favorites]


Warren's office also published this report about how much of a mess filing taxes are: The Tax Maze. Lots of pullquotes in there, but:

On average, taxpayers spend 13 hours and
$200 to file their tax return—a burden that return-free
filing could significantly diminish. Nearly two-thirds
of taxpayers have relatively simple individual income
tax situations—they do not itemize and only take the
standard deduction



It's so frustrating that the IRS has renewed this agreement to 'not compete' with the Free File Alliance til 2020. I have always done mine by hand and refuse to give my data to a third party. But the sheer amount of busywork in filing is so stupid:

1. Copy this number from a form the IRS received electronically into one line.
2. Do trivial math on that number.
3. Repeat 20 times.

Most of filing is just playing a game of "guess the number I'm thinking of" anyway. Why can't they just tell me the number and let me decide if I agree with it?

Yes, implementing some of the weirder corners of the tax code could be hard or complicated, but even Schedule A is straightforward enough that it could be done online.

The worst part is that until all states have a similar system (or ideally, use the fed system), this is all a losing battle. As long as people don't have an easy system for state, it will be easiest to use tax prep for both. Which just gives the industry more money to lobby for blocking a commonsense system and propping up a disgusting, predatory business.
posted by stobor at 8:45 AM on April 18, 2016 [5 favorites]


A policy proposal for warren to copy: in Canada they switched the rules for Turbo Tax et al so that if they want access to Revenue Canada forms and automatic filing, they must offer the software free for those on low income. Thus most students use the software for free. You prep your file for free, and are charged when filing if your inconecus above the threshold.

There are still scammers, of course. Some offices offer to orp your disability claim for a percent of your return, for example. But my audition (who us awesome) was on the news advising it should not cost more than $40 because it is an easy one or two page form for an accountant to fill out, but could be worth 1000s on a percentafw vasus. He volunteers to do them free though a local charity to ensure people get their benefits.
posted by chapps at 8:45 AM on April 18, 2016 [1 favorite]


Because she realizes that Americans' over-reliance on individual saviours is a big reason they're in this mess to begin with.

“I would not be a Moses to lead you into the Promised Land, because if I could lead you into it, someone else could lead you out of it.” -Eugene Debs


it's pretty hard to make an honest six figures, much less seven figures or more, from your "labor".

Awhile back I was on a family trip to visit other family in Florida, and we took a ferry cruise along the coast a bit, seeing all the homes and scenery. There's some fucking amazing houses down there on the coast, very droolworthy, and I had a moment where I thought to myself, "What kind of work generates the kind of the income necessary to own these homes?" Then I remembered- other people's.
posted by Pope Guilty at 8:46 AM on April 18, 2016 [32 favorites]


Intuit free filing site for Canada.
If I were intuit I'd offer this on my own, without government intervention, because if your income ever changes you stick with them to keep your file transferring forward. That is what I did post-free filing. Have paid them ever since.
This is especially true if you get students to do it free first, I'd bet.
posted by chapps at 8:49 AM on April 18, 2016 [1 favorite]


On average, taxpayers spend 13 hours and $200 to file their tax return

Most of filing is just playing a game of "guess the number I'm thinking of" anyway. Why can't they just tell me the number and let me decide if I agree with it?


The craziest thing about this to me is that, because so many people pay so much money to file their taxes, if the IRS gave you your expected numbers and was off consistently by more than a hundred dollars it would still be a net gain for filers.
posted by cjelli at 8:49 AM on April 18, 2016 [5 favorites]


Funny how that never seems to happen, isn't it?

Funny that people that don't do tax have all sorts of weird ideas about the tax system, isn't it? Because I've seen it happen quite a bit in my practice.
posted by jpe at 8:50 AM on April 18, 2016


There's some fucking amazing houses down there on the coast, very droolworthy, and I had a moment where I thought to myself, "What kind of work generates the kind of the income necessary to own these homes?" Then I remembered- other people's.

well, not to mention hiding the liabilities of your business until you have liquidated your investment and passing those costs onto someone else, ie. dumping CO2 into the atmosphere. while we all go under it's going to be satisfying watching those home-owners demand technofixes to keep those fucking amazing houses from drowning.
posted by ennui.bz at 8:50 AM on April 18, 2016 [3 favorites]


We didn't used to. George W Bush changed our laws

There were a grand total of two or three years in which long-term cap gains were taxed at the same rate as other income. Before Reagan and the '86 act, between 40% and 50% of income from long-term capital gains was excluded, meaning the rate on LTCGs was half of the ordinary rate.
posted by jpe at 8:53 AM on April 18, 2016 [2 favorites]


it was silly how the Beatles, the Stones, and ABBA had to evade the confiscatory taxes as they did.

They didn't have to do shit. They were all rich-as-fuck wankers who chose -- not had to, chose -- to play silly-ass games with their residency to avoid the taxes that their nations had determined through fair and democratic processes were their fair share.

This is the good part of global taxation; there's little point in playing silly games with your residency because your home country just doesn't give a shit.

The really bad part is that global taxation doesn't work by actually collecting money from rich wankers who are playing silly-ass games with their residency; it works when rich wankers just stay home instead of pretending to be Bermudan or whatever. Which means the people who have to actually deal with it are overwhelmingly just common schmucks who happen to work abroad, not rich wankers. If we ever decide to fund the IRS again, it would be really great for them to set up the tools to just accept foreign tax documents directly in lieu of filing, at least for simple incomes from OECD countries.
posted by ROU_Xenophobe at 9:04 AM on April 18, 2016 [11 favorites]


Awhile back I was on a family trip to visit other family in Florida, and we took a ferry cruise along the coast a bit, seeing all the homes and scenery. There's some fucking amazing houses down there on the coast, very droolworthy, and I had a moment where I thought to myself, "What kind of work generates the kind of the income necessary to own these homes?" Then I remembered- other people's.

Since this is Florida in particular, keep in mind also that you have an unlimited "homestead exemption" that prevents creditors from being able to touch your primary residence, no matter how valuable it is. So homes also become a vehicle for asset protection for, e.g., doctors worried about malpractice claims. Or anyone who might consider themselves at risk of declaring bankruptcy.
posted by indubitable at 9:09 AM on April 18, 2016 [6 favorites]


Thankfully someone screenshotted this because no way am I linking to the scum-of-the-earth Daily Mail.
posted by EndsOfInvention at 9:16 AM on April 18, 2016 [9 favorites]


My financial life is simple enough that doing taxes basically means copying numbers from a couple forms the government sent me onto another form which I send to the government. I'd be quite pleased if they cut out the middleman (me).
posted by uosuaq at 9:28 AM on April 18, 2016 [3 favorites]


You can volunteer to help people do their taxes. I will put in a personal recommendation to use TaxAct. You don't have to buy any software and the filing price seems to be the same or less than TurboTax in most cases. The upselling is still there.
posted by soelo at 9:37 AM on April 18, 2016


Why does the government fail to deduct the proper amount of taxes from our paychecks? Here's a hint: it's not because calculating that proper amount is difficult. We live in an era when running a very complication computation a billion times only takes a day or two for someone with even modest computing power. No: they do this because it adds complexity to the system, because it induces taxpayers to fill out forms and hire tax prep companies.

The government doesn't deduct anything from my paycheck. My employer deducts taxes from my paycheck. And my employer doesn't have a complete picture of my financial situation (spouse's income, other sources of income, actual deductions). So they truly do not have any way of accurately calculating my witholding. Even the government wouldn't be able to do it, because they don't have mid-year visibility into things like charity donations, mortgage interest, local property tax, and so on. They get that stuff at the end of the year. The government would be better positioned to do it than my employer, but even they couldn't do it accurately. It has nothing to do with computing power. It's about having all of the information, and the number of variables involved.
posted by primethyme at 9:45 AM on April 18, 2016 [6 favorites]


[Comment removed, maybe enough of the "this is my personal line in the sand on taxation" stuff.]
posted by cortex (staff) at 9:46 AM on April 18, 2016 [2 favorites]


In Canada when you onboard at most jobs there's a tax form to fill out that specifies withholding etc. It's trivially easy to e.g. get them to take off more (or less) to account for your circumstances and make tax filing simpler in April.
posted by feckless fecal fear mongering at 9:48 AM on April 18, 2016


People with excess capital are a demonstrable drag on an economy. I don't agree with every aspect of how economics is done, but there are very simple explanations for why it ends up costing everyone in a society when some participants in the economy have so much surplus capital they can't invest it fast enough to beat or match inflation.

Reminds me of when blood pools in specific parts of the body, and doesn't drain away fast enough.
posted by ZeusHumms at 9:48 AM on April 18, 2016 [3 favorites]


That is the metaphor I use, ZeusHumms; money is like blood, it only works when it circulates. And when blood pools and doesn't circulate, you get gangrene.
posted by emjaybee at 9:50 AM on April 18, 2016 [4 favorites]


Reminds me of when blood pools in specific parts of the body, and doesn't drain away fast enough.

And then it persists for more than four hours and you have to contact your physician.
posted by Faint of Butt at 9:51 AM on April 18, 2016 [9 favorites]


In practicalities, another reason not to let the IRS do your taxes is I don't trust them to aggressively look for your best "discounts."
posted by corb at 9:53 AM on April 18, 2016 [1 favorite]


This was one of the discussion topics on this weekend's Real Time with Bill Maher, and the dumbest talking point that one of his conservative panelists (Mary Katharine Ham) tried to deploy is that it would somehow expose taxpayers to having their information stolen from the IRS by Chinese hackers. Entirely missing the point is that the IRS already has all this information.
posted by jimw at 9:53 AM on April 18, 2016 [4 favorites]


I had a moment where I thought to myself, "What kind of work generates the kind of the income necessary to own these homes?" Then I remembered- other people's.

Occasionally it would be nice to have a concrete reminder of this, like an infographic showing the number of people whose earnings and spendings make people and corporations their income. I used to think of this as "How many CDs were purchased to make Britney Spears her annual income?"
posted by ZeusHumms at 9:57 AM on April 18, 2016


There shouldn't be any need for anyone to aggressively look for discounts. It should be simple.
posted by chaiminda at 10:03 AM on April 18, 2016 [8 favorites]


Disagree - tax literacy is low, and whether that's a product of education or the tax code, it's true.

There's a great meme going around Facebook right now. Unless you explicitly take a money management class, you're pretty much on your own when it comes to figuring out taxes. We've been so invested in shoving young people into University studies (whether it's right for them or not) that we're not teaching some of the most important things they're going to need.

I worked telephone technical support for TurboTax last year, and I was constantly heartbroken and horrified by how little people understand about taxes. And SO MANY PEOPLE think they are guaranteed a refund! (Thanks, Block, for your vapid "Refund Season" commercials, you assholes.) They would call in SCREAMING because they thought they were supposed to get back every penny they paid in, they were going to go to Block if we didn't make sure they got everything back.

And then there are the people who obsess about their refunds, and rather than change their withholding so the government doesn't keep their money all year, leave it because they "need the refund to catch up on bills". NO! If you're not handing it over to the IRS all year long, you've got it to keep your bills caught up! Your goal should be to break even - owe nothing, get nothing back. Current co-workers are horrified by the notion.
posted by MissySedai at 10:09 AM on April 18, 2016 [18 favorites]


In practicalities, another reason not to let the IRS do your taxes is I don't trust them to aggressively look for your best "discounts."

Deductions should not be so convoluted that you could easily miss any.

On another note: I've used turbotax (online/software) for the last few years because they already have my data and it's easy but now I regret paying them the big bucks (this year I gave up, exasperated, and paid for federal + 2 states without even getting the right discount attached...ugh). Is there any way that I can file fairly easily (ie, paying someone/something to do a decent amount of the work) without giving my money to an organization lobbying for these policies? Is going to a CPA equally bad?
posted by R a c h e l at 10:11 AM on April 18, 2016 [4 favorites]


In practicalities, another reason not to let the IRS do your taxes is I don't trust them to aggressively look for your best "discounts."

Did you just not read above where another commenter specifically mentions that's what the IRS did for them?
posted by odinsdream at 10:17 AM on April 18, 2016 [11 favorites]


Maybe, if corporate lobbying is responsible for perpetuating the US tax climate, any attempt to reform the tax system should also deal with closing down tax prep companies (and buying out shareholders).
posted by ZeusHumms at 10:17 AM on April 18, 2016 [1 favorite]


There shouldn't be any need for anyone to aggressively look for discounts. It should be simple.

So on one hand I agree with this: It should be simple.

But then I think about my situation. I'm a graduate student who does international research that is funded by grants. These grants are counted as income--because the list of expenses that are exempt is not very fine-grained. The result is that I end up paying tax on these grants, despite the fact that they're in no way really equivalent to "income."

The downside to simplicity (in this case) is that some years I end up owing a lot of tax that I really can't afford, because I get put into a higher tax bracket. Luckily, this year my grants were small enough that I ended up getting a refund. If I had ended up owing money I would not be able to make rent, because I am very low-income.

So I'm interested in how other systems might handle this.
posted by Kutsuwamushi at 10:17 AM on April 18, 2016 [4 favorites]


Ugh, last year I used TurboTax, and after almost filling out my return, they said, "Your taxes are too complicated. You need to upgrade to the Deluxe$$$ version."

Hah, I got this message for wanting to include a 1099-MISC that was reporting way, way less income than the Deluxe upgrade would have cost me.
posted by prize bull octorok at 10:22 AM on April 18, 2016 [1 favorite]


When I say discounts, I mean that jiggling the tax software really helps me figure out how to best accrue deductions next year. I like deductions, in part because I don't think a simplified tax is going to actually lower our taxes, unless we went to a flat tax or something.
posted by corb at 10:48 AM on April 18, 2016


They seem to have taken it down, but Planet Money did a really neat series a few years back where they created a fake Presidential candidate who would only promote proposals that all economists could agree on. One of them was getting rid of *all* special interest deductions. I don't think it would lower everyone's taxes, or even most people's, but it would make them fairer.
posted by chaiminda at 10:55 AM on April 18, 2016 [3 favorites]


I'm really surprised to learn that Turbotax is so expensive in the U.S. I only paid $20 to file both my federal and provincial returns in Canada, and it was free when I didn't have an RRSP or investments and was only working off a T1.
posted by northernish at 11:04 AM on April 18, 2016


Northernish, I think if you have a simple enough return, you can get away with it being free or $20. It's the people who have part-time jobs or work in two different places or are freelance/consultants or own their own businesses or only lived in one state for part of the year and in another for another part of the year or have weird investment schedules or own rental properties or (or, or, or, or) that get slammed by turbotax.
posted by EmpressCallipygos at 11:13 AM on April 18, 2016 [1 favorite]


Any Canadians here looking for a good solution to filing your own taxes should take a look at Simple Tax. It's totally free, they only ask for a donation at the end. I've used it for two years after getting soaked by an accountant that came highly recommended. The interface is easy to use, it saves your information year to year, and it is really good at helping you find deductions you didn't know you were entitled to, and also can help optimize your return if you file jointly by moving deductions around. At the end, you just e-file and get a PDF copy for your records, which you can go back and regenerate whenever you want.
posted by [expletive deleted] at 11:14 AM on April 18, 2016 [5 favorites]


We live in an era when literally the only group of Americans whose income has not been stagnant for decades are the very rich, less than one decade after rich bankers and investors playing fast and loose with credit default swaps damn near sent us spiraling into a global depression, and we are still having to make the case that it is okay to tax the hell out of those greedy bastards so the rest of us can get decent schools and stable bridges. A lot of the top .05% are going to wind up in hell, and a fair percentage ought to be in jail right now. Having to pay more taxes should be the least of their worries. After 35 years of stagnant income for everyone else, they are really lucky America's poor haven't started sharpening their guillotine blades.
posted by Pater Aletheias at 11:15 AM on April 18, 2016 [39 favorites]


[Comment removed, maybe enough of the "this is my personal line in the sand on taxation" stuff.]

Sorry--I was typing my jeremiad when you posted that and I didn't see it.
posted by Pater Aletheias at 11:17 AM on April 18, 2016


In Canada when you onboard at most jobs there's a tax form to fill out that specifies withholding etc. It's trivially easy to e.g. get them to take off more (or less) to account for your circumstances and make tax filing simpler in April.

They do this in the US too. Your W-4 helps you determine your withholding, but there is also a line where you can specify an additional amount to be withheld if you want.


What I don't get is, lets say that you are taking the standard deduction, your income was level throughout the year and that's it. No mortgage interest, student loan interest, etc. The amount of taxes that you owe will not equal the amount taken from your paycheck, even though that should be the easiest calculable. This gets complicated if you are paid hourly because employers calculate the amount to deduct based on the assumption that you will earn that amount for each paycheck during the year.

I guess I can see how the IRS could fill out most of the information for you, but if you have a complicated tax situation, the IRS may not be able to do that accurately and you'll have to use someone to help you anyways. If what Warren's office says is true, then 2/3 of people are using the EZ form? They should be able to do their taxes themselves, maybe if we taught it in school people wouldn't have to pay someone to do something relatively easy.

I used a tax preparation service exactly once because I was 18 and had never done taxes before and I thought that's just what you do. The took their $160 fee out of my $300 refund (and this was when my return was still super simple!) and I never went back to another tax preparer ever again.
posted by LizBoBiz at 11:18 AM on April 18, 2016


Is there any way that I can file fairly easily (ie, paying someone/something to do a decent amount of the work) without giving my money to an organization lobbying for these policies? Is going to a CPA equally bad?

A couple years back I had a sufficiently high time-to-money ratio that I entered my info with four different online tax services. They all came back with pretty much the same results (and all would have been free for me to file with given my income). Weirdly, they don't all handle rounding the same way on sub-dollar values, but it doesn't make much difference in the outcome. That was with multiple income sources in multiple states of residence.

This year I picked the service I used for filing based on whether they'd let me use info from last year's return for free (TurboTax & HR Block have historically not let me do that when I've tried to file with them two years in a row; unsure if they've fixed that.) FreeTaxUSA's pretty good and doesn't do much upselling, so I stuck with that again.

Depending on how complicated your financial life is and how complicated your state's tax returns are, I recommend doing the state tax return up to the point of filing with one of the online services purely as an error check, then actually filing using whatever free options your state provides. It's usually really fast if you've already gone through the info once. The $10-15 the "free" services charge for state filing is nothing compared to what people get hit for at any of the seasonal storefronts that advertise with people in costumes, but it's not nothing.

getting rid of *all* special interest deductions. I don't think it would lower everyone's taxes, or even most people's, but it would make them fairer.

No matter how much work I put into keeping track of medical expenses, charitable donations, and that sort of thing, I've never managed to exceed my standard deduction. It's bullshit that a) we're putting so much work into subsidizing various economic behaviors through the tax code, and b) we're limiting most of those subsidies to the behaviors it takes a lot of money to choose, like mortgages and electric vehicles. If that stuff's meant to be about the environment rather than a handout to electric car manufacturers, then I ought to be able to deduct money spent on bicycles. And likewise for mortgages: if it's about keeping people housed, then the money's better spent helping everyone with housing, not just the ones who can buy.
posted by asperity at 11:20 AM on April 18, 2016 [8 favorites]


I love the way American conservatives can take some thing that the vast majority of advanced nations manage to handle significantly measurably better and declare it impossible to improve, even a little. Voting, healthcare, tax filing - none of them actually have to be this bad. The way they are is a choice, not some natural law.
posted by Proofs and Refutations at 11:20 AM on April 18, 2016 [45 favorites]


I mean that jiggling the tax software really helps me figure out how to best accrue deductions next year

Nothing in the proposed legislation would prevent people from submitting different deductions than the ones in the prepared forms.

More importantly, though; deductions, credits, exemptions... all of these complicated rules, favor those with the time and knowledge to know to take advantage of them. People rarely know what they're entitled to better than the government does, as evidenced by my hometown spending its own funds to educate people on how they can claim the EITC. When a city government has to step in and help people get money that's rightly owed to them via the federal tax code, I don't think it's out of line to tell the feds to have the opening bid be "everything the feds already know the taxpayer is entitled to."
posted by tonycpsu at 11:26 AM on April 18, 2016 [8 favorites]


The fact that anyone can seriously argue for a 98% tax on any portion of income is just gross.

Out of curiosity I did quick search for "Elon" on MetaFilter. As expected, a lot of admiring comments for what would have been absolutely impossible if gains on sale of his first startup were taxed at 98%.
posted by shala at 11:40 AM on April 18, 2016 [3 favorites]


I had a tax year when federal withholding came out perfect -- nothing owed to them, nothing owed to me. Pretty cool, I know.
posted by paper chromatographologist at 11:41 AM on April 18, 2016 [3 favorites]


Out of curiosity I did quick search for "Elon" on MetaFilter. As expected, a lot of admiring comments for what would have been absolutely impossible if gains on sale of his first startup were taxed at 98%.

Or maybe NASA would have been doing them. Taxed money doesn't just vanish into the ether.
posted by Etrigan at 11:43 AM on April 18, 2016 [27 favorites]


I had a tax year when federal withholding came out perfect -- nothing owed to them, nothing owed to me. Pretty cool, I know.

Wow, that's like that time in November when I was listening to "November Rain" and just as the most fabulous part of the song came on it started to rain.
posted by asperity at 11:47 AM on April 18, 2016 [11 favorites]


fyi: MoveOn did try to get Elizabeth Warren to run. I can't recall why she said no?

https://www.runwarrenrun.org/
posted by bitterkitten at 11:53 AM on April 18, 2016


Or maybe NASA would have been doing them.

NASA would have been manufacturing electric cars? Maybe. Or maybe the US would have had extra funds to invade Iran.
posted by shala at 11:53 AM on April 18, 2016 [2 favorites]


NASA would have been manufacturing electric cars? Maybe. Or maybe the US would have had extra funds to invade Iran.


Number one, not being able to afford a war certainly hasn't stopped us before, and number two, if you think "we can't afford it" is what's keeping us from invading Iran, well, I wouldn't be surprised based on your posts in this thread.
posted by Pope Guilty at 11:56 AM on April 18, 2016 [6 favorites]


So, it's okay for Elon to take gobs of money from the government but not okay for the government to take some back?
posted by entropicamericana at 11:58 AM on April 18, 2016 [16 favorites]


Socialize risk, privatize reward.
posted by a lungful of dragon at 12:01 PM on April 18, 2016 [20 favorites]


Number one, not being able to afford a war certainly hasn't stopped us before, and number two, if you think "we can't afford it" is what's keeping us from invading Iran, well, I wouldn't be surprised based on your posts in this thread.

I have no idea how your "number one" is any different from "number two", but thank you for your comment on how 98% tax rate may have an effect on innovation.
posted by shala at 12:02 PM on April 18, 2016


Holy crap, that EPI article linked by Pater Aletheias is illuminating, using real (not just nominal) wages. Having higher education didn't translate into higher real wages for workers:

"The data do show that college graduates have fared slightly better than high school graduates since 2007. This is not because of spectacular gains in the wages of college graduates, but because college-graduate wages fell more slowly than the wages of high school graduates. Notably, despite wage declines in both 2013 and 2014, those with advanced degrees are the only ones who have returned to their 2007 real wage levels.

As with wage deciles, a closer examination of how trends in wages by education differ for men and women is also illuminating. Figure F provides cumulative wage trends for men over 2007–2014, while Figure G provides these wage trends for women. For both men and women, those with 'some college' experienced the largest losses between 2007 and 2014, while only men with an advanced degree experienced significant gains."
posted by cynical pinnacle at 12:03 PM on April 18, 2016 [3 favorites]


So, it's okay for Elon to take gobs of money from the government but not okay for the government to take some back?

I think you got the chain of events mixed up a bit.
posted by shala at 12:08 PM on April 18, 2016 [1 favorite]


In Sweden, the four-page tax form comes in the mail already filled out. In 15 minutes we are done.

Oh good gods. As if I didn't already have enough reasons to wish I lived in Sweden.

Thank you, Elizabeth Warren, for your efforts to make tax filing simpler and less painful. This is desperately needed in the USA, for all kinds of reasons.

I worked as a paid tax preparer for a short time. When I got an insider's view of how many of the companies' business models actually worked - relying heavily on predatory refund anticipation loans offered to low-income and tax-illiterate people - I resigned in disgust. (And don't even get me started on how horrified I am by the FATCA and the heartbreaking dilemmas that US citizens abroad are facing in its wake.)

I've never used TurboTax to file my own returns. I don't want to pay Intuit (or anyone else, for that matter) a single penny that I don't have to in order to file, and I prefer to know as much as I can about what's going on with my tax situation and do my calculations manually. I've prepared all my federal, state, and municipal tax returns myself, on paper, since the 1980s...even though in recent years I've done the actual filing part online via Free File Fillable Forms.

It usually takes a great deal of time and effort to locate, read, and understand all the instructions that apply to my situation, though - and this is true even for someone who is tax-savvy, web-savvy, and has a relatively simple self-employment situation. Even after that time-consuming work is done, there can still be technical hurdles. As scruss wrote above, if you use Free File Fillable Forms and errors are found on your return, it's rejected and you get an email back with a very user-unfriendly error code. This has happened to me every year. It's really easy to make mistakes. So every year I've had to Google the cryptic error code (the IRS error-decoding-tool wasn't helpful for me), figure out what it meant, and correct the error(s) myself before my return was accepted. This year it took me two 10-hour workdays to go from sitting down with all my business receipts and paperwork to being completely finished with filing federal, state, and municipal forms and making payments. And I am a meticulously organized record-keeper, with formal education in accounting!

There is a lot of confusion and obfuscation, too, even with IRS publications that should be as straightforward as possible. This page, for example, makes it sound as if everyone who makes below $62K should use software to prepare their return, and everyone who makes above $62K should use Free File Fillable Forms. It's not clear that anyone, of any income level, can use Free File Fillable Forms as long as they know what they're doing and can do the calculations on their own.

And even experienced CPAs aren't infallible, of course. When my ex and I lived in Canada and had a complicated cross-border tax situation, we paid an accountant (one that came highly recommended) $1500 to complete our tax returns for both the US and Canada. When I reviewed the accountant's work, I caught an error that would have been costly if it hadn't been caught. That experience was one of the things that motivated me to study accounting myself. I wanted to know enough to do everything myself, even if my tax situation got really complicated.

Still, I can't help but envy the Swedes. People should be able to do their taxes themselves, within a reasonable length of time, without an advanced education in accounting - and trust that they're not going to get fleeced.
posted by velvet winter at 12:09 PM on April 18, 2016 [12 favorites]


This year it took me two 10-hour workdays to go from sitting down with all my business receipts and paperwork to being completely finished with filing federal, state, and municipal forms

I'm seriously not being snarky, but that is not convincing me to NOT spend $60 on TurboTax and be done in less than 2 hours for me and my spouse (taking the politics of Intuit out of the argument, that is).
posted by archimago at 12:22 PM on April 18, 2016


I think you got the chain of events mixed up a bit.

America is an oligarchy that isn't going back to Eisenhower-era taxation levels any time soon, so worrying about that mythical 98% tax bracket seems a bit silly. That said, it is fair to point out that your example of an arch-capitalist whose later electric car venture would ultimately fail due to this mythical tax rate also currently receives billions from federal and state governments to subsidize the manufacture of said car, while only paying 2016-era corporate, income and investment taxes. Seems like "Elon" managed to get himself a pretty sweet arrangement going, no?
posted by a lungful of dragon at 12:24 PM on April 18, 2016 [9 favorites]


aka "an interest-free loan to the government with a 3-12 month repayment period".

Ah, but there is a glorious moment when your tax refund arrives in the mail. That blessed interval between, "hey, a cheque for me!" and the dispiriting realization that this was your money all along.
posted by ricochet biscuit at 12:27 PM on April 18, 2016 [2 favorites]


I'm seriously not being snarky, but that is not convincing me to NOT spend $60 on TurboTax and be done in less than 2 hours for me and my spouse (taking the politics of Intuit out of the argument, that is).

Well, the whole point of this discussion is that the tax preparers have put a thumb on the scale of this particular decision.

That said, I hope nobody is taking away from this thread that they should feel embarrassed or ashamed for using tax prep services. As with a lot of other things in our capitalist society, relatively-powerless individuals doing their best to get by within a fucked-up system shouldn't be shouldering the blame for how fucked up the system is in the first place.
posted by tobascodagama at 12:29 PM on April 18, 2016 [11 favorites]


This year I got an email from the Canada Revenue Agency with my notice of assessment (not directly, but an email saying "log into your CRA account and view this message") a week or so after filing, which shocked me a bit. They've been putting some serious effort into making things better/easier. There is a list here of NETFILE-certified software. There are much better (free or pay as you can) options out there than turbo tax.
posted by quaking fajita at 12:39 PM on April 18, 2016 [1 favorite]


There are some things I just don't have the fight in me to fight. I totally get the fact that doing my own taxes by paper is keeping the money out of the hands of Big Tax Prep (and I'm smart enough to be able to figure it out though it would take me 2 10-hour work days to do it) but the ease and peace of mind I get from a small fee that I am fortunate to be able to choose to afford is OK with me. Because I'm exhausted by having to claw for everything (e.g., bought and installed a brand new toilet three months ago and the insides are already malfunctioning, fighting with the manufacturer to replace the part, can't find the part I need after driving to every plumbing supply house within a 50-mile radius because they already stopped making the parts for this model, and am almost at the point of just ripping it out and buying a whole new unit because the stress).
posted by archimago at 12:46 PM on April 18, 2016 [5 favorites]


That said, it is fair to point out that your example of an arch-capitalist whose later electric car venture would ultimately fail due to this mythical tax rate also currently receives billions from federal and state governments to subsidize the manufacture of said car, while only paying 2016-era corporate, income and investment taxes. Seems like "Elon" managed to get himself a pretty sweet arrangement going, no?

Oh sure. Except there would be nothing to "fail" to begin with. That's all I'm saying.
posted by shala at 12:47 PM on April 18, 2016 [1 favorite]


thank you for your comment on how 98% tax rate may have an effect on innovation.

Using those taxes to sponsor education and research would likely have a net positive effect on innovation.

The corporations whose CEOs were highest paid in 2015. I'll asterisk the ones that are possible innovators, though also possibly not very important innovators anymore.

1. Discovery Communications
2. Liberty Global
3. GAMCO Investors
4. Microsoft *
5. GoPro
6. Liberty Media / Liberty Interactive
7. Oracle *
8. Qualcomm *
9. NorthStar Realty Finance
10. CBS
11. Viacom
12. Disney
13. MBIA
14. Yahoo!
15. Regeneron Pharmaceuticals *
16. AMC Networks
17. Salesforce.com
18. Vertex Pharmaceuticals *
19. Incyte *
20. Time Warner

And that #19 CEO? He made $32,691,026 (on the books anyway). This is 410 times the median salary at Incyte. Let's say he paid 98% income tax above $250,000; he'd go home with $649,000, which is still 8x the median salary and 15x the lowest salary there. And looking at Incyte's income statement, they claim just $6.53 million in net income, which is 1/5 of what the CEO was paid.

Perhaps if income tax was so high, Incyte would have reinvested their gross income rather than paying it to their CEO, and there would be more innovation after all.

Elon Musk is clearly an outlier in every sense of the word. What are the chances the CEO of Discovery Communications is going to walk away from his $156,077,912 salary (2,229 times the average pay for their employees) and start building something innovative himself?
posted by Foosnark at 12:58 PM on April 18, 2016 [27 favorites]


"She's taking on TurboTax and other predatory companies."

Turbotax is not a company, Intuit is a company. I know, I know, it's Vox.com's fault - that appears to be their inaccurate one-line summary of their own article and it has now propagated all over the web.
posted by w0mbat at 1:09 PM on April 18, 2016 [5 favorites]


I know I keep harping on the marginal rates we had in mid-20th C. America, but nearly all modern business would be impossible without the innovations produced by such heavy taxation. No interstate highways, no Internets, no computers, etc. Certainly no Tesla.
posted by a lungful of dragon at 1:10 PM on April 18, 2016 [30 favorites]


why should I get myself locked into an illiquid investment

Somehow I read this as "Illithid investment" and I was all like "Down with mind flayers!"
posted by freecellwizard at 1:19 PM on April 18, 2016 [14 favorites]


I love how this is legislation that was loudly advocated by a University of Chicago economist working in the White House during Obama's first term in office before Senator Warren was a Senator.

And yet reading this thread, you'd think Elizabeth Warren was championing a liberal cause that overturns both mainstream economic theory and centrism that's destroying the current Democratic Party.
posted by politikitty at 1:28 PM on April 18, 2016 [2 favorites]


This may be a derail but I would say GoPro is an innovator. Any company that actually makes things would have to innovate (or steal). And I am shocked that the company sells enough of those little cameras to have their CEO be the 5th highest paid!
posted by LizBoBiz at 1:29 PM on April 18, 2016


And I am shocked that the company sells enough of those little cameras to have their CEO be the 5th highest paid!

For what it's worth, most of his compensation comes from stock awards from when the company had an IPO. And GPRO stock is now pretty much at an all-time low because investors don't think GoPro can innovate beyond making more $300 "action" cameras.
posted by peeedro at 1:52 PM on April 18, 2016 [1 favorite]


I could care less who gets the praise for fixing it, I want to filing to be simpler. I want people to get more of their refund b/c they are more accurate and didn't have to pay for the privilege. If the tax prep industry loses about 90% of their revenue along the way, that's just gravy.

I'm excited that someone introduced a bill, but I have no real illusions that this bill will leave committee, or drive any action at all. The IRS is apparently handcuffed til 2020, and keep getting their resources cut. Meanwhile, tax prep companies spend tons on marketing and lobbying. Further cementing their perceived necessity and preventing any nuanced discussion about alternatives.

I was really hoping improved filing would be one of the US Digital Service's projects. But it appears too politically complicated.
posted by stobor at 2:00 PM on April 18, 2016 [1 favorite]



Or maybe NASA would have been doing them. Taxed money doesn't just vanish into the ether.


This is wrong-headed. Maximizing revenue is not equivalent to not discouraging economic activity. It's ridiculous to think Elon Musk would push for such a high selling price if he was only getting 2% of the proceeds.
posted by politikitty at 2:02 PM on April 18, 2016


You think he'd want a lower price if he were only getting 2%? (Also, marginal tax rates, not entire income)
posted by feckless fecal fear mongering at 2:04 PM on April 18, 2016 [3 favorites]


the ease and peace of mind I get from a small fee that I am fortunate to be able to choose to afford is OK with me
This is exactly what a tax-prep company should be providing: their knowledge and business process to save you time in filing your return, with a quality assurance. For that, they can charge a fee and people can make their own cost, skill and time calculations to choose between a paid preparer and the DIY route. When they are lobbying to change the tax code to make the DIY route more difficult and/or pushing these predatory loans, they have overstepped their bounds. When the government tries to limit this activity, it is accused of abuse. This is a familiar pattern.
posted by soelo at 2:11 PM on April 18, 2016 [1 favorite]


As an author, I have weird taxes. Sometimes I've paid quarterly taxes, sometimes I haven't. Sometimes I have royalties, sometimes I don't. Sometimes I sell three books in a year, sometimes I sell none. Given that I am chronically ill and my daughter is disabled, sometimes we have SSDI, sometimes we don't. Sometimes we have medical bills that exceed the deduction limit, sometimes we don't. So on any given year, I might qualify for EIC or I might jump up a tax bracket or two.

Because the money is so unsteady, I have given up having an accountant do my taxes. I never know if I will have the money for him to do them or not. So I use TurboTax and it walks me through the stupid, complicated situation I'm in on any given year, and I am happy to pay the $80 bucks (Small Business & Home) because I get to deduct it next year from my business expenses.

So even if this law were passed, I expect I would still be paying somebody (be it Intuit or my CPA) to do my taxes. But glory hallelujah, I would finally be off the hook for doing them for every elderly member of my family. Please, please, please let this law pass.
posted by headspace at 2:32 PM on April 18, 2016


For anyone wanting to avoid Big Tax Preparer, I have used Excel 1040 for the last 10 years or so, and it has always made me very happy. It doesn't do state taxes, though.
posted by polecat at 2:36 PM on April 18, 2016 [6 favorites]


If you can't come up with a LOT of other Great Innovations besides Tesla's Electric Cars made possible by our regressive taxation system, then it's not an argument worth making. It could just as easily be argued that with a 98% top rate, we'd have had electric cars years earlier... and flying cars too (not a valid argument either).
posted by oneswellfoop at 2:38 PM on April 18, 2016 [8 favorites]


Kitteh, if you live overseas, and make less than $93000, using the 2555EZ form is actually pretty simple once you work through it a couple times. Depending on if you have taxable assets back home, or (God help you) you own your own business outside of the states, it can be very simple to file your taxes. It is still a pain in the ass, and it takes time, but it's something you could almost definitely do yourself. Feel free to memail me, but I am most definitely not a tax accountant.

As for the online filing programs, I was pretty incensed when they stopped mailing out the tax book and announced that, hey, here are all of these third party companies you should totally give your tax info to! Nothing bad could possibly happen! The first two or three I tried to use freaked out when I tried to use the foreign earned income form (2 flat out didn't have it, another had it, but couldn't seem to parse it, leaving me to find another online filing program). Since then, I print out the forms I need, rather than try to figure out which one of them will work. I am most profoundly not a fan of doing taxes through an online third party.
posted by Ghidorah at 3:22 PM on April 18, 2016


Excellent post, kliuless.
posted by CarrotAdventure at 3:44 PM on April 18, 2016


Kitteh: Also, things that would make your tax situation complicated in the US may not be complicated when you live overseas. For example, someone above mentioned freelancers as a group that gets stuck with complicated IRS filings, but when you're filing from overseas having income from 20 sources, none of which you're an employee of, it's treated the same as if you had just been a regular employee in a single company.
posted by Bugbread at 3:46 PM on April 18, 2016


This thread is basically the rant the Lady Fez gets to hear every single year since I've refused to pay H&R Block for whatever it is they do. I do the work. The IRS also does the work. They are the final arbiter on whether I did the work properly so why not just have them do the work? Effin' bungwaffles. I mean, I write software for a living. I'm able to digest a highly technical manual written by people with poor communication skills and use the information to produce good work. But doing taxes just leaves me feeling shame and inadequacy. It shouldn't be like this.

Not to mention the hidden costs of the whole Trial of the Pyx. For $REASONS I had to mail physical documents this year. I don't do physical documents. So that's an additional $25 for envelopes, photocopies, a stapler, staples, and postage. By this time next year I will have lost or tossed the envelopes and stapler so I'll need to go buy them again.

I still "use" the tax prep software industry as a sanity check on my own work. I fill in the information and answer the questions but then stop right after the refund/shortfall numbers are given. The numbers never actually match up but they're usually close enough that I feel confident in my work. This year, though, the first app I used pegged my resident state income tax at >$2000 than my work or the other software. Here's to hoping that TaxACT is just crap software.

So, yes, please. Please simplify this mess. Please don't ally with the prep industry against the tax paying public. And states? You need to clean your houses too. The hours of fun that provided yesterday scared the Lady Fez into hiding alongside the pets. The people (I'm including pets here) who have to live alongside me thank you from the bottom of their hearts.
posted by Fezboy! at 4:06 PM on April 18, 2016 [8 favorites]


This year it took me two 10-hour workdays to go from sitting down with all my business receipts and paperwork to being completely finished with filing federal, state, and municipal forms

That sounds more like being behind on general business bookkeeping than having particularly complicated taxes.
posted by Jacqueline at 4:10 PM on April 18, 2016


Fezboy!: " By this time next year I will have lost or tossed the envelopes and stapler so I'll need to go buy them again. "

Unlike many of the problems brought up in this thread, this is a problem with a surprisingly simple solution.
posted by Bugbread at 4:15 PM on April 18, 2016 [3 favorites]


I'm thinking business idea: I could write an app where people give me money to use my stapler! DISRUPTING STAPLERS
posted by asperity at 4:40 PM on April 18, 2016 [8 favorites]


Or maybe NASA would have been doing them. Taxed money doesn't just vanish into the ether.

Actually, it kinda does. You wouldn't make that trade, you'd keep your Paypal shares, and NASA would still be underfunded.
posted by pwnguin at 6:15 PM on April 18, 2016


If you can't come up with a LOT of other Great Innovations besides Tesla's Electric Cars made possible by our regressive taxation system, then it's not an argument worth making.

It's difficult to get too hypothetical, but precisely a LOT of tech companies were started thanks to VC funding. I'm guessing the whole VC concept wouldn't even exist in a 98% tax rate world. E.g.:

- Google was initially funded by $100K from a Sun co-founder, and later by VC money. Not sure if Sun co-founder would have had 100K laying around ready to invest in a risky startup in a 98% tax rate world

- YouTube founded by early PayPal employees, and funded by VC money

- Facebook was obviously founded by a bunch of one percenter kids, whose parents may not have had enough money to send them to Harvard in the first place.

- Amazon founded by a guy who used to be a VP at a hedge fund

- Netflix was founded by Hastings, who got a payout from his previous startup.

And that's just "old-school" stuff by 2016 standards, skipping all the current who's whos of startup world, which are all funded by VC money.
posted by shala at 6:51 PM on April 18, 2016


I'm guessing the whole VC concept wouldn't even exist in a 98% tax world.

You speak as if the >90% top bracket world is hypothetical, even though it actually happened in the 1950s. During that time, contrary to your assertion, venture capitalists were definitely a thing.
posted by tonycpsu at 7:06 PM on April 18, 2016 [12 favorites]


I know I keep harping on the marginal rates we had in mid-20th C. America, but nearly all modern business would be impossible without the innovations produced by such heavy taxation. No interstate highways, no Internets, no computers, etc. Certainly no Tesla.

Citation needed, as they say. I'm not so sure that you're not mixing up correlation and causation here. Sure, core innovation boomed as a result of the Cold War, Space Race, and Arms Race, but was it really caused by abstract high taxation, or by specific defense-related actions out of pure fear of those commies? That covers Internets and I guess computers if you really push it. Interstate highways was a defense measure as well, and one can argue whether or not it was a net-positive.
posted by shala at 7:11 PM on April 18, 2016


Sure, core innovation boomed as a result of the Cold War, Space Race, and Arms Race, but was it really caused by abstract high taxation

and those were paid for how
posted by feckless fecal fear mongering at 7:12 PM on April 18, 2016 [2 favorites]


and those were paid for how
You're missing my point.
Denmark, Belgium, or Netherlands have high income taxes (not 98% though), but no Cold War per say. There must be a LOT of innovation coming from those three.
posted by shala at 7:17 PM on April 18, 2016


Sure, core innovation boomed as a result of the Cold War, Space Race, and Arms Race, but was it really caused by abstract high taxation

and those were paid for how
posted by feckless fecal fear mongering


with concrete high taxation?
posted by DoctorFedora at 7:18 PM on April 18, 2016 [2 favorites]


I'm guessing the whole VC concept wouldn't even exist in a 98% tax world. E.g.: Google... YouTube... Facebook... Amazon... Netflix
And those companies are an argument FOR Venture Capital?
posted by oneswellfoop at 7:34 PM on April 18, 2016 [3 favorites]


You speak as if the >90% top bracket world is hypothetical, even though it actually happened in the 1950s. During that time, contrary to your assertion, venture capitalists were definitely a thing.

I think you're mixing up income tax and capital gains tax. All my previous comments assume that commenters here are advocating that both income and capital gains are taxed at 98% marginal rate. Capital gains tax has never exceeded 25% in the 1950s, which was lower than it is today, at least for short term capital gains tax. So yes, in that hypothetical I don't see how VCs are possible.
posted by shala at 7:45 PM on April 18, 2016 [1 favorite]


Denmark, Belgium, or Netherlands have high income taxes (not 98% though), but no Cold War per say. There must be a LOT of innovation coming from those three.

Wait, your argument is now about other countries and their higher tax rates instead of the US? OK, let's follow the moving goalposts.

First, we'll set aside the fact that those countries all have higher amounts of social welfare spending relative to GDP -- governments that do more have to spend more, so we're definitely comparing apples to oranges here.

But even accepting your premises, you're still wrong according to a seemingly reputable source, with the countries you named all ranking in the top 25 of global innovation. The US is of course doing well at #5, but the Netherlands is ranked ahead of us, as is Sweden with its notoriously high taxes. Denmark's just 4 percentage points behind us, and Belgium's not exactly looking like a dystopian hellscape either. The methodology looks a bit more complicated to analyze in detail for the purposes of an Internet argument, but the factors they're looking at pass the smell test for me.

Or if you don't like those results, take a look at those commies at Bloomberg, who find similar results. None of the countries you mentioned are ranked poorly, despite their much higher levels of taxation.
posted by tonycpsu at 7:47 PM on April 18, 2016 [11 favorites]


oneswellfoop: "And those companies are an argument FOR Venture Capital?"

...yes? All of those sites (except Netflix) have contributed to making life a damn-sight better for me than it was without them.
posted by Bugbread at 7:49 PM on April 18, 2016 [1 favorite]


All my previous comments assume that commenters here are advocating that both income and capital gains are taxed at 98% marginal rate.

I can't speak for other commenters, but the "soaking the rich" link the FPP that points to a 98% tax rate does so only for income taxes, so you're not really engaging with the actual proposals.
posted by tonycpsu at 7:51 PM on April 18, 2016 [1 favorite]


(That's not a defense of VC funding, by the way. VC-funded companies may be, as a whole, terrible, but those specific examples are companies that have improved my quality of life and the quality of life of many people I know.)
posted by Bugbread at 7:53 PM on April 18, 2016


I can't speak for other commenters, but the "soaking the rich" link the FPP that points to a 98% tax rate does so only for income taxes, so you're not really engaging with the actual proposals.

I didn't get that impression from the thread, given common knowledge that the rich are making by far the most of their money off capital gains as opposed to W-2 income. Steve Jobs was making a $1 salary for instance. And Bezos' salary is $84K or something like that. But hey, if all you guys are talking about is income and not capital gains, then you've got a lot surprises ahead of you. :) And if you are in fact including capital gains, then again, no, VCs are not possible in my opinion.
posted by shala at 8:03 PM on April 18, 2016


OK, well, my cursory Cmd-F "capital gains" shows nobody advocating for anything close to 90%+ capital gains rates. If I missed someone arguing for that, please make it clear who you're responding with so it doesn't look like so much of a straw man.
posted by tonycpsu at 8:12 PM on April 18, 2016 [3 favorites]


Nice to see Australia is on the right track for once: our (or, at least, my) tax returns have been getting easier and easier every year, to the point that last year I logged in to MyGov and clicked I think a total of about three buttons and had a (modest) refund in my bank account within the week.

The government already has all this information. They are the biggest collectors of data in the world. They know literally everything about you that has been written down on an official form at some point in time. The reason everything is so complicated is to cover up their own ineptitude (which, in many places, is finally being reversed).
posted by turbid dahlia at 9:14 PM on April 18, 2016 [2 favorites]


First, we'll set aside the fact that those countries all have higher amounts of social welfare spending relative to GDP

It's almost as though if people aren't punished with homelessness for spending their time creating things in lieu of conventional employment that more things get created.

Funny, that.

I feel like the conversation about taxing rich people v innovation misses some important questions like, "Are the things these trust fund kids making inherently more valuable than what a kid in the Bronx might invent if he didn't have to work 3 fast food jobs to survive on minimum wage?"

Which voices need to be louder in our society?
posted by Feyala at 11:27 PM on April 18, 2016 [19 favorites]


And yet if you make a typo on your tax return, the IRS will pretty quickly send you a note with what they've calculated your taxes to be.

For values of "pretty quickly" equal to "within 8-24 months" in my experience. Or add an additional 6 months to that timeline if you're paper filing.

I'm all for the IRS telling us what info they have on our income at the time we file, and getting to that point would probably not be an insurmountable technological obstacle, but they seem to be very far from being able to do that now.
posted by phoenixy at 2:09 AM on April 19, 2016


Oh, and since I never get to use my Free File Fillable Forms story -- one year I used it to do my taxes. For some unfathomable reason, they had two versions of the app that year, one in Silverlight and one in Flash. I my return randomly ended up in one app and my boyfriend's return was in the other. One of the two apps -- I forget which one -- had a bug where if you typed too fast, the numbers you were typing would be entered in the wrong order.
posted by phoenixy at 2:20 AM on April 19, 2016 [2 favorites]


I mean if we are talking about $1,000,000, a 98% tax would still leave you with $20,000. And since this is the top marginal tax bracket we are talking about, you still have the profits from amounts below $1M as well. If there is a dollar to be made somewhere, someone's going to make it, even if the tax is 98%. That's just capitalism.
posted by LizBoBiz at 5:32 AM on April 19, 2016 [2 favorites]


If I missed someone arguing for that, please make it clear who you're responding with so it doesn't look like so much of a straw man.

If you only jack up income taxes to 98% marginal and leave cap gains untouched, all you're going to do is piss off a bunch of upper middle class people of the lawyer and doctor kind, and a few single-digit millionaires. Everybody richer than that would be just laughing at you all the way to the brokerage.

You would also see a return of 50s era alternative forms of compensation to high paid employees in the form of daily martini lunches and retreats, aka family vacations, expensed back to the employer with no questions asked, wink wing, nudge nudge. And a bunch of small and mid size business owners will start moving all their income to dividend income and capital gains income.
posted by shala at 5:36 AM on April 19, 2016


FWIW, New York State *REQUIRES* Online Sales Tax Filing. They ACH the remittance from the company checking account, and it's all free.

No-one to seek rents there, obvs.
posted by mikelieman at 6:32 AM on April 19, 2016


fyi: MoveOn did try to get Elizabeth Warren to run. I can't recall why she said no?


From the horse's mouth:

https://youtu.be/K9gW3XQ0wZU?t=42
posted by humboldt32 at 6:44 AM on April 19, 2016


> "Denmark, Belgium, or Netherlands have high income taxes (not 98% though), but no Cold War per say. There must be a LOT of innovation coming from those three."

Since the appropriate response to this is, "Er ... yes, there certainly is, in fact," I'm not entirely sure what point you're trying to make here.
posted by kyrademon at 6:59 AM on April 19, 2016 [9 favorites]


If you only jack up income taxes to 98% marginal and leave cap gains untouched...

I am aware of the lengths to which people will go to avoid taxation, yes, which is why some proposals suggest treating cap gains as ordinary income. However, the specific bogeyman you've cited, this 98% top marginal rate, was only put forth with respect to income taxes. Many other proposals mentioned in the FPP suggest more modest marginal rates that would be amenable to the additional step of eliminating the distinction between capital gains and income and as far as I can tell wouldn't lead to the End of Innovation as We Know It.

I really just feel like you're reaching for a point here by attacking a caricature of the proposals being seriously considered combined with a mish-mash of things said by various commenters here. Rates much higher than our current income and capital gains rates have been employed by the US and other nations at various times, and somehow we haven't had to build a Thunderdome yet.
posted by tonycpsu at 7:00 AM on April 19, 2016 [10 favorites]


You're probably right. I was mostly responding to the overall pitchforks and torches feel of this thread, like the comment I pasted below, or this, rather than specific linked proposals. I'm relatively new to MetaFilter, and mostly came for interesting nuanced discussion, but this thread surely wasn't it, at least for me. Maybe I need to stop using number of favorites as a strong metric.

I would also point out that a lower capital gains tax is pretty much the definition of a regressive tax, since it's essentially a tax break for getting your income from being rich rather than from working. If anything, we should be taxing capital gains brutally since if high taxes on your capital gains would be meaningful, you're already rich enough to afford it.
posted by Pope Guilty at 7:13 AM on April 18 [30 favorites +]

posted by shala at 7:51 AM on April 19, 2016


Some people disagree with your (mostly weak) premises and have given you several empirical reasons why. Not automatically stepping in line with your views is not a lack of nuance. Perhaps consider why your opinions are not sufficiently convincing.
posted by a lungful of dragon at 8:53 AM on April 19, 2016 [9 favorites]


If there is a dollar to be made somewhere, someone's going to make it, even if the tax is 98%. That's just capitalism.

Depends on what you mean. I can imagine three options:

Option 1: Investment flows to lower tax rate countries. The dollar is made, just not taxed in the US.

Option 2: Tax loopholes. The dollar is made, but sits in company coffers, unexposed to personal income taxes. Instead stock is bought back and retired, and executive SEP IRAs bounce in value using whatever strategy landed 50 million dollars in Mitt Romney's IRA.

Option 3: Capitalists just learn to accept 2 percent of the original returns. Presumably what you meant, because two percent is better than zero percent. And that's an unfortunate simplification. Two percent is twice as generous as the "ideal" solution to the dictator game, but offers made in that part of the spectrum are often rejected. But even if you assume all players in investment are homunculus economicus, and thus making the vast majority of investment decisions, there are other factors to consider, such as the cost of capital, return rates for muni bonds (tax exempt at federal, and often state and local), etc.

So an investment that was expected to return 30 percent before the regime change does not transform into an investment returning 2%, it transforms into an investment returning 2 percent of that: 0.6%. Imagine you're a lender and someone comes to you with an opportunity to build a new chip factory, and the highest bid the board will approve based on this is 0.6%. The range of possible results is -100% up to positive 0.6%. The minuscule possible upside seems dwarfed by the risk of downsides. Zero looks like a much more attractive default investment rate. The factory does not get built, employees are not hired, and the money sits untaxed under a mattress.

This is the argument in favor of the Laffer Curve, which is notoriously laughable, chiefly because it's used to promote tax cuts away from optimal taxation. Brownback is destroying my home state of Kansas based on this principle and it's not even close to working. But this 98% proposal is on the wrong side of even Piketty. We should question the assumption that 98% is anywhere close to the optimal number for state taxation, let alone the moral questions of legitimizing theft.
posted by pwnguin at 9:17 AM on April 19, 2016 [2 favorites]


This is the argument in favor of the Laffer Curve, which is notoriously laughable, chiefly because it's used to promote tax cuts away from optimal taxation.

"This is very controversial. Does anyone know what Vice President Bush called this in 1980? Anyone? Something-d-o-o economics. 'Voodoo' economics."
posted by entropicamericana at 10:53 AM on April 19, 2016 [2 favorites]


Pwnguin, you make good points. But just because everybody wouldn't, doesn't mean nobody would.

Im not trying to argue for a 98% tax. I woukd support whatever produces the best outcomes.
posted by LizBoBiz at 4:41 PM on April 19, 2016


Why do neoliberals and anti tax conservatives hate America so much? They hate democratic socialism and the welfare state, which were WWII era American innovations. They hate progressive income taxation, pretty much the only uniquely American innovation there's been on taxation. It's like the American political immune system is attacking it's own white blood cells. Such a waste.
posted by saulgoodman at 4:33 PM on April 20, 2016




Really? I'd always read it attributed to the New Deal era. You learn something every day. It was definitely a tax scheme the American people once enthusiastically supported.
posted by saulgoodman at 5:45 PM on April 20, 2016


The really mind-blowing thing to me is the National War Labor Board... which during the two world wars, supported equal pay for women, unionization, and had the power to reject pay increases for executives.

I can't even imagine politicians agreeing to that today.
posted by Foosnark at 6:02 AM on April 21, 2016 [3 favorites]


They also fixed prices for pretty much everything. For a country about to lead a Cold War against communism, it's a strange thing to see a PhD in agricultural economics and future president of the American Economic Association dictating prices, or future President Nixon tasked with rationing tires. Extraordinary times call for extraordinary measures, I suppose.
posted by pwnguin at 6:17 PM on April 21, 2016 [3 favorites]


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