Forgot password?
Blogs > bbuckwwheat > Rural Mental Ruminations

Income Tax follow up to Smarty's Wealth question  

bbuckwwheat 65M
Ask me for a photo
65 posts
10/14/2020 3:29 pm

Last Read:
12/13/2021 10:43 am
Income Tax follow up to Smarty's Wealth question

Smartasswoman asked what we considered wealthy What do you consider wealthy. Rather than hijack her post, I thought that I would list a few ideas here.

This is a short clip of my one comment there
The tax system that I would like see would be absolutely no deductions or exemptions, then a progressive percentage (as we have now) on incomes at 2 times the poverty level. Note that the poverty level increases with number of dependents, so that takes care of the exemptions. The tax rates could be much lower raise the necessary federal needs.

In a brief back and forth, Smarty voiced concern about charitable giving and the housing market if there are not deductions. Yes, there are advantages allowing a deduction for charitable giving. It leverages the contribution against the tax advantage, i.e. if you were in a 35 percent tax bracket, you can give $,000 charity and only have a net expense of $6,500. And yes, the AP reports that 2018 charitable contributions were down about 1.1 percent from 20. Religious institutions saw a 1.5 percent drop, but has been seeing steady drops for several years prior the change.

I would contend that giving is instilled in as they see that behavior in their parents. While such a deduction in the tax code might encourage those that did not have that example, those that did will likely give regardless of the tax code. And if the tax code is simplified, but collects the same simple percentage (above 2 times the poverty level), people will still have the same amount give. For example, I about percent of my gross income in federal taxes in those years, regardless of having itemized or the standard deduction.

As housing (the mortgage deduction), there has been speculation that the deduction raised the price of housing, or allowed people purchase a home that was slightly more expensive than without the deduction. The NY Times reported in April 2018 that home selling prices did not fall as expected. Granted, this was a short time after the changes.

What do you think?

Private mailbox at my blog bbuckwwheat
Fayette, Iowa
bbuckwwheat 65M
Ask me for a photo
6265 posts
10/14/2020 3:30 pm
Just so that all the words are present

Smartasswoman asked what we considered wealthy What do you consider wealthy. Rather than hijack her post, I thought that I would list a few ideas here.

This is a short clip of my one comment there
The tax system that I would like to see would be absolutely no deductions or exemptions, then a progressive percentage (as we have now) on incomes at 2 times the poverty level. Note that the poverty level increases with number of dependents, so that takes care of the exemptions. The tax rates could be much lower to raise the necessary federal needs.

In a brief back and forth, Smarty voiced concern about charitable giving and the housing market if there are not deductions. Yes, there are advantages to allowing a deduction for charitable giving. It leverages the contribution against the tax advantage, i.e. if you were in a 35 percent tax bracket, you can give $10,000 to charity and only have a net expense of $6,500. And yes, the AP reports that 2018 charitable contributions were down about 1.1 percent from 2017. Religious institutions saw a 1.5 percent drop, but has been seeing steady drops for several years prior to the change.

I would contend that giving is instilled in children as they see that behavior in their parents. While such a deduction in the tax code might encourage those that did not have that example, those that did will likely give regardless of the tax code. And if the tax code is simplified, but collects the same simple percentage (above 2 times the poverty level), people will still have the same amount to give. For example, I paid about 10 percent of my gross income in federal taxes in those years, regardless of having itemized or the standard deduction.

As to housing (the mortgage deduction), there has been speculation that the deduction raised the price of housing, or allowed people to purchase a home that was slightly more expensive than without the deduction. The NY Times reported in April 2018 that home selling prices did not fall as expected. Granted, this was a short time after the changes.


Private mailbox at my blog bbuckwwheat
Fayette, Iowa


Paulxx001 67M
22642 posts
10/14/2020 6:42 pm

 I'd say that you've given this some thought. As a person who's spent half his business life measuring the debits and credits, you make a lot of sense.
True about instilling a pattern in your kids.
So... ya do taxes do ya?
My investment strategy these days is focused on the Lotto and that one in 14 million chance 🤞 for salvation.
Yep... ❗😮


bbuckwwheat replies on 10/14/2020 7:46 pm:
If by doing taxes, you mean that I prepare income tax returns for others - NO.

I am a numbers person and am analytical as well. My career was one analyzing a situation, running scenarios and developing options and cost estimates for clients and then designing the selected option (if one was selected). One of my coworkers once said at break when a math problem came up, why would we need a calculator, we have bbuckwwheat.

I do not like paying any more tax than is necessary, but to have to pay someone to do your income tax return because of the complex tax law is just insult to injury. I did my own tax forms for many years, but when I retired, I used an accountant to make sure I had not missed things - and I had on my state forms. So the first year the accountant saved me money on state income taxes. I may eventually return to doing it myself as I have an example, but that remains to be seen as with the accounted, the forms are filed electronically and the return of excess taxes is much sooner than if I mail in the forms.

Someone said that the definition of insanity is doing the same thing over and over and expecting a different result. That is what I think of the USA income tax code. So I have looked at the "Fair Tax" and other ways to simplify things. I am not so sure of the Fair Tax as it would be a national sales tax on most new goods, and to keep it from being regressive, each household would receive a check to cover the necessities that would be taxed, based on household population.

I plan another post on corporate income tax. Stay tuned.

PonyGirl1965 58F
22090 posts
10/14/2020 10:54 pm

 Giving is instilled in children. I raised my kids to give and to volunteer.

Taxes are so confusing now. I wish we could simplify somehow.
Toss out the reams of rules, laws and such BS. Write something simple and fair.

To me, a peon, it is unfair to tax my money when I earn it. Then tax it again when I spend it. So I save. And they tax that. It's wrong.

Wealthy is a state of mind. It's not having to ask how much something costs. It's not worrying f you have enough money to cover the purchase.


bbuckwwheat replies on 10/15/2020 7:44 am:
"Taxed when I spend it" must mean a state sales tax. Does OK have a state income tax? Iowa does, as well as a sales tax, but most food products are exempt from the sales tax, and in August there is a back to school weekend when school supplies and most clothing is exempt from the sales tax.

I have no issues with taxing earnings on savings (and investments). I am not sure if the estate and or inheritance tax is good policy. If there are no deductions (trying to influence behavior), then it seems like a wealth tax, albeit only a one time tax. These taxes do have the effect of reducing the potential for dynasties, but I do not think that they do an effective job of it.

The trouble with a complicated tax code is that most people cannot afford to pay someone to look at all the tax shelters.

pocogato12 71F  
37235 posts
10/15/2020 6:01 am

 I am so sick of being the bank for others. I do not aspire to be "wealthy" in terms of money but it would be nice to have more than I need to I can help someone else a bit. I am part of middle America that is getting taxed up the wazzoo and the tax rules now are too convoluted for me so I have to get an "expert" and pay- yet again
(Virtual Symposium Group) use Virtual Symposium Group


bbuckwwheat replies on 10/15/2020 8:25 am:
Prior to the 1930's the social safety net were private organizations. Churches for the majority of those organizations. And it was typically local. The Amish are still that way. Then there was social security. Originally for those with an industrial style job. I can remember when the self employed were added to the system in the 1960's. Then in the 1960's the Great Society came into being. That included Medicare. Prior to these programs, the safety net was local and those receiving assistance found ways to reduce their reliance. In Iowa there were county homes for the indigent and less capable. Those that were capable worked the farm to help support the system. Now, it seems that the safety net is more anonymous and there is more attitude that "I am owed." Many use the safety nets as intended, but with less local awareness, it seems easier to abuse the system.

As to middle America carrying the bulk of the tax burden, 2017 data for individual returns show that returns with adjusted gross income of $208,000 or more paid 59.1 percent of the total income tax that year (about 5 percent of the returns). Households with AGI of less than $83,000 (about 75 percent of the returns) paid about 14 percent of the total income tax collected that year. I know it feels like the middle class ($45,000 to $163,000) are overburdened, but the top 5 percent have an average tax rate of 23.7 percent while the average rate for all returns making more than $42,000 (half of the returns) is about 16 percent so the rate for the middle class is about 10 percent ($41,000 to $145,000 income range). This matches my experience over the last 20 years of my working career.

I am not trying to diminish your feelings. I would assume that every income bracket feels that way.

A simpler tax code would at least be transparent to all, and would maybe help reduce the feeling that the middle class is paying more than the rich.

bearcatbearcat 61M
Ask me for a photo

7/2/2021 6:13 am

 All taxes are collected by force, literally extortion, theft.

All tax money is stolen, then run through a wasteful and incompetne bureaucracy.

If you want or need something you can and should pay for it yourself, and you are free to voluntarily pool your money with others to buy things. But no one owes you anything you did not earn.

You don't owe taxes to feed, educate and house lazy people. Your money is literally your life, and only YOU should decide how it is spent.
Who is John Galt?


Become a member to create a blog