You can't cut income tax on people who do not pay income tax. That's why people call Obama's "tax cuts" welfare.
There are four types of things that are relevant for the current tax debate:
- A reduction/increase in marginal tax rate rate: this is when the gov. looks at the tax brackets and says, I'm going to reduce the tax liability for this bracke by x%. This is what the Bush tax cuts were all about- he reduced people's marginal tax rates by a percentage.
- A deduction, which reduces your taxable income: this happens above the line, meaning, you take your gross earnings and subtract the deductions. From that, you get your adjusted gross income, which is what you're taxed on. So, say, the standard deduction works like this. The effect is that, depending on where you are within the tax bracket, you might go down adn pay a lower marginal tax rate.
- A tax credit: this is a below the line "deduction." It reduces your tax liability. So, let's say you owe 5,000 in taxes, and you get a 2,500 tax credit. You only have to pay 2,500.
- A refundable tax credit: this is also a below the line deduction, but you get it back even if your liability is 0. So, if you owe 0 in taxes, but get a 2,500 refundable tax credit, you get a check in the mail for 2,500 (plus whatever refund you'd get anyway).
The problem I have with Obama's tax plan is that he has TONS of refundable tax credits. Basically, this means that he's not just reducing the tax liability for people; he's giving people free money.
At the same time, he is raising the marginal rate of taxes for higher earners.
My dad explains it like this- I know it's long, but it's VERY clear.
The difference is in the source of the money. Obama's plan proposes taking from one group of citizens and giving to another group of citizens. Alaskan's dividend comes from the sale of one of their natural resources, which again, according to the constitution of Alaska, belongs to the citizens of the state. Not all citizens participate in the work needed to get the oil out of the ground, but after it is sold, we no longer own that particular barrel of oil. A tangible good is being exchanged for profit.
That's just not true. If you just use the standard deduction, you'll see that people with 7,500 don't pay any taxes.
Taxes are so complicated. And I'm sorry, I feel like half the people on the board- on both sides of the issue- don't have enough understanding on how they actually work to make assumptions. This is why we have tax professionals.
Look, that's an ideological difference. I"m fine with that way of thinking. Just call it what it is. It's not a tax cut. It's a stimulus payment, welfare, a hand-up. Whatever you want to call it. Just don't call it a tax cut, cause that's not what it is.
Obama is a genius. Seriously. I don't agree with any of his policies, but no president has ever won by saying he's going to increase taxes and increase entitlement programs. SO he's doing those exact things, but calling it a tax cut. MAGIC!
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You can't cut income tax on people who do not pay income tax. That's why people call Obama's "tax cuts" welfare.
There are four types of things that are relevant for the current tax debate:
- A reduction/increase in marginal tax rate rate: this is when the gov. looks at the tax brackets and says, I'm going to reduce the tax liability for this bracke by x%. This is what the Bush tax cuts were all about- he reduced people's marginal tax rates by a percentage.
- A deduction, which reduces your taxable income: this happens above the line, meaning, you take your gross earnings and subtract the deductions. From that, you get your adjusted gross income, which is what you're taxed on. So, say, the standard deduction works like this. The effect is that, depending on where you are within the tax bracket, you might go down adn pay a lower marginal tax rate.
- A tax credit: this is a below the line "deduction." It reduces your tax liability. So, let's say you owe 5,000 in taxes, and you get a 2,500 tax credit. You only have to pay 2,500.
- A refundable tax credit: this is also a below the line deduction, but you get it back even if your liability is 0. So, if you owe 0 in taxes, but get a 2,500 refundable tax credit, you get a check in the mail for 2,500 (plus whatever refund you'd get anyway).
The problem I have with Obama's tax plan is that he has TONS of refundable tax credits. Basically, this means that he's not just reducing the tax liability for people; he's giving people free money.
At the same time, he is raising the marginal rate of taxes for higher earners.
My dad explains it like this- I know it's long, but it's VERY clear.
Subject: The Tax System - Explained With Beer
In 1983, Reagan signed legislation raising
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They are more likely to need it and spend it which will push the money back into the economy.
That's just not true. If you just use the standard deduction, you'll see that people with 7,500 don't pay any taxes.
Taxes are so complicated. And I'm sorry, I feel like half the people on the board- on both sides of the issue- don't have enough understanding on how they actually work to make assumptions. This is why we have tax professionals.
Look, that's an ideological difference. I"m fine with that way of thinking. Just call it what it is. It's not a tax cut. It's a stimulus payment, welfare, a hand-up. Whatever you want to call it. Just don't call it a tax cut, cause that's not what it is.
Obama is a genius. Seriously. I don't agree with any of his policies, but no president has ever won by saying he's going to increase taxes and increase entitlement programs. SO he's doing those exact things, but calling it a tax cut. MAGIC!
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Remember the "Patriot Act"?
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I love your first post in this thread.
Just had to jump in, I just read an article in our local newspaper.
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