"Under the current plan you are defending, using the 2011 tax rate as Married Filing Jointly with $11,600 standard deduction and having earned $100,000 income with $10,000 in capital gains for a total of $110,000 gross income. You pay at best 20% capital gains or at worst 28%."
Wait, hold it. Fact check. 20% on capital gains? No, its 15%, and only on capital gains over a certain amount (you can pay 0% under certain income conditions). I would know. There are state taxes in some places, but the federal rate is 15%. The only time you would pay more is if your capital gains income makes you regular income above AMT, which would have a deduction of 75,000 IIRC.
"So you have $8000 from net capital gains (after paying at least $2000 in tax)."
So paying a maximum of 1500 in tax, you get 8500 net.
"Your taxable income is $88,400( $100,000-11,600 standard deduction ) at 25%= $22,100 tax paid )"
Have you paid taxes before?
First of all, there are other deductions and credits BESIDES the standard deduction. Home mortgage, education, children, certain investments, charitable contributions, health costs, commuting costs, state taxes, legal fees, earned income, green energy,. etc. etc. etc. In many cases, it is worth itemizing over taking the standard deduction. About 40% of taxpayers do not use the standard deduction, and it has been estimated that many that do not itemize would actually save money by doing so, but do not have the time, knowledge, patience, etc.
Though most of those exemptions fade away with AMT, you can still deduct the big ones, and, you still pay a lower rate (28% vs 35%).
Secondly, taxes aren't all calculated at one rate. Even with ONLY the standard deduction, they'd only pay ~14,500 in taxes; a total of 16,000.
"Under my plan you have a total income of $110,000 with the first $24,000 tax free. That leaves you with $86,000 in taxable income, and you pay at 10% or $8,600. Your grand net total is $101,400."
Just in this example, if you got rid of the capital gains tax exemption, you'd have more people doing trading and speculation rather than investing. Trading and speculating does a lot, lot, LOT less to grow the economy. Moroever, it can even have a harmful affect by artificially fixing prices and baking in risk into the system.
"This requires federal spending cuts, especially in the military, ending all the wars including the war on drugs as well as ending the agencies Dr. Paul has recommended."
So if we collected a 10% flat tax, leaving payroll taxes, excise taxes, and corporate taxes in place, we'd lose about 300 billion in tax revenue. This comes from the fact that currently, the federal government collects about 12% of personal income. With your plan of 10% + the 24,000 tax free, I am going to guess that you go to 8.5%. That is a pure estimate, but I think it is pretty fair.
So 300 billion in tax revenue goes goodbye. That would make our deficit 1.5 trillion. Keep in mind, this is already with Obama's deficit reduction, which slashed medicare, social security, military spending, and welfare.
Where are you going to get that 1.5 trillion to balance the budget? You can get rid of every single penny of non-defense discretionary spending, and you'd save around 650 billion. This includes food stamps, housing aid, job training, pyschologists for jails, pell grants, roads, etc. etc. You could cut more defense spending to 600 billion, which obviously would come out of veterans benefits at least somewhat. That would save you an additional 300 billion.
Now what? Alright lets go after medicaid and unemployment. That would get you 400 billion. So now you have 1.3 trillion in budget savings, yet you STILL have a deficit!
"Under my plan you have an additional $16,500 income to spend which would be invested and lead to the creation of production and service jobs, increased savings and allow people to pay down debt."
Like I showed before, that number is actually closer to $8,000. Moreoever, you would overall put about 300 billion back into the economy/year.
Now, that would create jobs, especially the money that now goes to the middle and lower classes. But lucky for us, we already have an example of how this works. Obama put back 250 billion into the economy through tax cuts alone. And according to a lot of people, including Ron Paul, the stimulus didn't work. So by extension, the 250 billion in tax cuts did not work.
Now I differ in that, I think it did work. I think stimulus had an effect, just not an effect worth increasing our debt load. And, I think that is factually accurate that the stimulus brought down unemployment.
But every look at the economy, every kind of modeling, shows that compared to the government spending the money (remember, you aren't letting government tax less but spend the same, you want government to cut in whatever it loses in tax revenue), you gain at best 30% more efficiency. So you would, instead of adding 300 billion to the economy, you'd only add about 100 billion. Very optimistically.
"The present plan that you are defending stifles growth for the lower and middle classes and prevents upward mobility."
Maybe. But in our history as a country, our greatest period of prosperity was also a period of very high taxation, very high tax rates, and an incredibly complicated tax system with many deductions, loopholes, and exemptions. Correlation does not imply causation, but it is something to think about.
"Under the 2011 tax code Married Filing Jointly making $30,000 with no capital gains has a standard $11,600 deduction which leaves $18,400 taxable income at the rate of 15%. Tax owed is $2760. Net total income is $27,240.
Under my plan they would have a total income of $30,000 with the first $24,000 tax free. That leaves $6,000 taxable income with $600 paid. Total net income would be $29,400."
Alright, wait, fact check.
So under the current tax code, they'd pay $1,925 in taxes. Of course, assuming that the standard deduction is > itemizing. In fact, considering their income level, it is very likely that they are of the kind that pay 0% in federal income tax. Heck, even under a standard deduction, they would get a higher exemption with children, property taxes, EITC etc.
Plan for eliminating the national debt in 10-20 years:
Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a
Want DP delivered to your inbox daily? Subscribe here: