tag:blogger.com,1999:blog-14162253.post2443449749175248731..comments2024-03-28T18:57:15.124-06:00Comments on Wash Park Prophet: Combined Tax Rates In 2019 For Certain Colorado TaxpayersAndrew Oh-Willekehttp://www.blogger.com/profile/02537151821869153861noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-14162253.post-743468634010578402019-03-01T13:00:02.223-07:002019-03-01T13:00:02.223-07:00The 2 pertinent parts are: "* Repeal the earn...The 2 pertinent parts are: "* Repeal the earned income credit and replace it with a refundable income tax credit dollar for dollar for self-employment taxes paid and FICA taxes paid by individuals, and an income tax credit dollar for dollar to employers against FICA taxes that they pay.<br />* Replace the 10 percent, 12 percent, 22 percent, 24 percent tax rates with a 25% tax rate."<br /><br />Basically, what this does is create a situation with a combined payroll and income tax marginal rate of 0% up to the Standard Deduction (about 24K of AGI), and then combined payroll and income tax rates of 25% up to about $100K of AGI. It also makes it less expensive for employers to hire low wage workers at any given wage. For example, it allows an employer to pay $14 per hour at the cost of a $13 per hour worker in the status quo. But, overall is close to revenue neutral with only a modest tax cut to lower income workers.<br /><br />But it helps low $$ taxpayers by:<br />1. Making tax returns much easier to do (less time and money to tax prep) with much lower audit risk (the working poor has the most audits now due because EITC is hard). This also means that withholding tax will more closely track tax due so fewer and smaller end of year tax checks to write, and fewer and smaller refunds too.<br />2. Eliminates all payroll and income taxes for the working poor, instead of first providing welfare at very small $$ and then very high marginal tax rates just a little bit later, as it does now.<br />3. Ends extremely high marginal tax rates (more than 50% now) as EITC is phased out for the working poor trying to break into the middle class, making the effort seem futile for them. In general marginal rates are much more stable.<br />4. This removes a tax penalty for self-employed people that buy health insurance vis-a-vis people with employer provided health insurance.o<br />5. The capital gain/corporate tax change ends a big incentive to trade machines for labor in the tax code when absent taxes labor would make more economic sense preserving jobs at the margins.<br />6. The corporate tax change discourages piling up big cash reserves as tech firms do today in many billions getting $$ back into the economy which favors job creation.<br />7. The corporate tax change discourages excessive leveraging with debt rather than equity, which makes firms more robust in recessions. So, less layoffs and business failures in downturns. But, this means growth is less charged in upturns.<br />8. This prevents big windfalls for a subset of the rich now, which is good for the economy since the rich spend $$ on stuff with lower multipliers than the less rich.<br />9. This makes tax and financial tricks less useful which shifts resources from gaming the system, in ways that are dead weight loss or favors decisions that would be bad ones but for tax considerations, to uses that favor economic value in terms of fundamentals helping those economy and promoting job creation.<br />10. This means the marijuana industry won't need the same huge margins just to cover taxes and that will reduce marijuana prices and tax fraud in that industry.<br /><br />Not a cure all but solve a lot of deep tax code flaws that spill over everywhere.<br />andrewhttps://www.blogger.com/profile/08172964121659914379noreply@blogger.comtag:blogger.com,1999:blog-14162253.post-78344007091031048662019-02-28T06:20:02.186-07:002019-02-28T06:20:02.186-07:00Hi Andrew,
How would these changes (your suggesti...Hi Andrew,<br /><br />How would these changes (your suggestions) affect folks (net) on the lower end of tax brackets?<br /><br />One of my kids is low income. Household income around 60k with no kids. My appreciation of her tax situation is that mandatory medical insurance increases her effective tax rate about 100%. How would she be affected?<br /><br />Cheers,<br />Guy<br />Guyhttps://www.blogger.com/profile/15789570230699865921noreply@blogger.com