I Want to Increase Wealthy Refunds

From a Democrat, no less

Published on February 20, 2005 By NJforever In Politics

Yesterday, I heard a rather comeplling argument for increasing the wealthy's refund. I've been thinking it over, and the more I think, the more it makes sense. And I've been thinking about enough to bring me very close to bolting my party on the issue. In fact, if I were to hear one more argument that I think makes sense, I probably will.

Anyway, to the argument. In a discussion about it (not neccesarily with me, but I was hearing it), the person said this: The government should increase the refunds the wealthy get, not only because they worked hard to be wealthy, but because then the middle class and poor would have an incentive to work hard enough to become wealthy, because they will be able to keep more of the money they make.

Perhaps you do not find this argument compelling. But I do. Of course, there is a good reason I find this sensible. The Democrat who brought this forth was none other than my dad.

Comments

TheFazz

on Feb 20, 2005

I disagree with you on here. The middle and lower classes have enough of an incentive to become rich, and they don't need any more. In fact, this may just increase the distaste the poor and middle class have with the wealthy. They may feel the wealthy get more than their share of refunds back.

I think that this 'incentive,' however negligible, would be easily nullified by the amount of money the government would lose.

NJforever

on Feb 20, 2005

I disagree with you on here. The middle and lower classes have enough of an incentive to become rich, and they don't need any more. In fact, this may just increase the distaste the poor and middle class have with the wealthy. They may feel the wealthy get more than their share of refunds back.I think that this 'incentive,' however negligible, would be easily nullified by the amount of money the government would lose.

Hm. You've given me some food for thought. Thanks for your insight. I'm now a little less close to bolting the party.

ParaTed2k

on Feb 20, 2005

You make a decent point, but then again, so does Fazz. My recommendation to the government would be to go with a flat tax (after a set amount of income, indexed to cost-of-living per locale), and get out of the "social engineering" business completely.

Sturgee

on Feb 20, 2005

I have to disagree with Fazz. I would say that there is plenty of incentive already for the "poor". But, I've seen people turn down raises or jobs with higher salaries, because the added percentage of tax that they would incur for the added income would drop their take-home income to levels lower than what they currently have. It's like the saying: "A fine is a tax for doing bad, a tax is a fine for doing well". This discourages people from excelling or being more productive. I agree that the "wealthy" should pay a fair share, but 10-15% of a wealthy income is HUGE compared to what the lower and middle income families pay. Plus, the more money that ANYBODY takes home, the more they spend. Granted, they probably won't spend all of it, but they will spend some percentage of it as disposable income. When you talk about the wealthy, and the thousands of dollars that they would keep and spend on purchases and services, it would add significantly to the US economy, helping to create jobs and grow businesses. What they don't spend will get invested. Both of these actions will boost the US economy, helping to generate more tax revenues for the government anyway, despite lower rates on the individuals.

kingbee

on Feb 20, 2005

I've seen people turn down raises or jobs with higher salaries, because the added percentage of tax that they would incur for the added income would drop their take-home income to levels lower than what they currently have.

how much were these people taking home to start with? i'm not calling your statement into question as not being factual, but i have a difficult time imagining an employer giving a substantial raise to an employee who can't figure out a way to have his or her withholding adjusted. if theyre that rich, why arent they smart?

Sturgee

on Feb 21, 2005

These aren't the rich folk that I'm talking about. These are the middle class, who are having a difficult time getting to the "upper" middle class or higher levels of the economic food chain. There is less incentive to bust your ass for more money when you know that the government is going to take a significantly larger portion of it. As their income slowly goes up, the tax burden increases from 15% or so, to 18%, then to 25%, and eventually, if you hit the "upper" middle class, you'll have at LEAST a 28% tax burden, if not in the 30-40% range. Having withholding adjusted won't change what your annual tax burden will be. It may change how much you pay monthly or quarterly, but if you underpay by too much, you'll pay penalties on top of the tax owed at the end of the year.

In order to "double" your take home pay, you'd have to have your income increased by MORE than double, due to the increased tax rates on the higher income. If everybody paid a set rate, then there would be plenty of incentive. In that case, your income would double, your tax would double, but your take home would double as well ($50k at 10% = $5k tax, $45k take home; $100k at 10% = $10k tax, $90k take home). As it currently stands, that $100k would net you closer to $70k than $90k. Sure, it's about 50% more take home than you currently have, but your income is 100% more. Where's the other 40-odd%? The government takes it. Where's my return on investment (investment here being education costs, time spent in either longer work hours or taking classes, etc.)? I invest a lot to get the income increase to climb the economic ladder, but the government takes more and more of it, leaving me with a smaller and smaller increase in take home pay. If you are right on the cusp of an income bracket, you could conceivably lose money. Not a very fair system, much less providing good incentive to really increase productivity in the country.

NJforever

on Feb 21, 2005

Hm. Both sides are giving some very valid points. After some careful thought, I'm probably going to agree with Ted. It's probably best for everyone if the government got out of "social-engineering" altogether.

kingbee

on Feb 22, 2005

Having withholding adjusted won't change what your annual tax burden will be. It may change how much you pay monthly or quarterly, but if you underpay by too much, you'll pay penalties on top of the tax owed at the end of the year.

In order to "double" your take home pay, you'd have to have your income increased by MORE than double, due to the increased tax rates on the higher income

i mentioned adjusting withholding because the title of the article refers to refunds and your intial comment mentioned people turning down raises or promotions because they werent gonna be taking home any more money. before moving on to the real issue, lemme say anyone who turns down a raise that doubles their salary because they arent getting exactly double the take home pay dont deserve half what he's earning now.

of course, he's gonna pay more taxes...until the day he wises up and buys a home. or takes advantage of a number of other ways in which people who earn twice his former salary hold on to their money.

it's pretty difficult to sympathize with anyone who has more dollars than sense.

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