OT:Not fake news

Investing Strategies Mechanical Investing
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The US newspapers
have claimed our IRS tax agency, is still processing 2020 paper returns with refunds held up accordingly.

I usually plan to have to pay some tax to avoid refunds and use software with returns electronically submitted, so I haven’t run into this delay problem.

Until Saturday.

I received an IRS notice dated July 18,2022 (yep,NEXT week!) that my Form 8868 for extension of time to file an Exempt Organization Return had been approved. Approved on Dec. 31,2020. So I have until
Nov. 15, 2021 to file it. I guess I missed the deadline:-)

Now I have proof they are slooow. But it also shows they are overworked,confused, incompetent or
just typed something incorrectly, since I never (knowingly-who knows what my tax software or some
brokerage did) asked for this and don’t think I need it.

I guess I’ll join the crowd: it’s Biden’s fault :slight_smile:

rrjjgg

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Having been in the profession for forty years I can tell you It is really bad. Called irs on a client I had POA. Took 3 1/2 hours on hold before I spoke with a revenue agent. She was as polite as possible but obviously very frustrated. She said their office had 12 18 wheelers full of unopened mail. Said to prepare for at least one year before my correspondence would be acknowledged. Meanwhile their computers keep spitting out incorrect notices

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Makes a strong case for a flat or fair tax system.

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The IRS has been deliberately underfunded by a certain political party anytime they are in control.

Sometimes government incompetence is by design…

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If you believe in a flat tax you probably believe in flat earth

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If you believe in a flat tax you probably believe in flat earth …

Perhaps believing in the introduction of a flat tax rate in the US is much like believing in a flat earth.
I agree it might not get you far.

A flat tax itself seems to work just fine in quite a number of countries, so that belief isn’t unreasonable.
e.g., income tax due = [25% of income minus 5000 local currency units]. Change numbers to suit, 10% to 45% depending on the country.
Negative numbers are frequently refunded.

A “flat” tax is a system with tax payable proportional to income. Doesn’t sound so bad phrased that way.
A “progressive” tax should probably be called a quadratic tax or similar: tax due rises non linearly with income.

As it happens I have no problem with high taxes for rich people, nor even non linear functions.
(where I live essentially all of the tax is pretty linear based on consumption rather than income: 20% sales tax and hefty real estate taxes on purchase, mortgages and rent:
Like Mr Buffett, I have no objection to higher tax bills for rich people but don’t actually volunteer to pay more than is required)

But misnaming something purposefully for a political agenda somehow just rubs me the wrong way : )
When they call a linear tax or any tax system which is not quadratic “regressive” (opposite of progressive tax rates, get it?), evoking moving backwards, is just Newspeak.
It’s the most annoying propaganda misnaming since calling the revolutionaries “Bolsheviks” in Russia.
(that translates as majority but at the time they were a minority, even among the revolutionaries)

Jim

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But misnaming something purposefully for a political agenda somehow just rubs me the
wrong way : )

+++
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Then Social Security’s IRMAA, Income Related Monthly Adjustment Amount, must drive you Nutz!!!

sunray
a man “adjusted”

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But misnaming something purposefully for a political agenda somehow just rubs me the wrong way : )
When they call a linear tax or any tax system which is not quadratic “regressive” (opposite of progressive tax rates, get it?), evoking moving backwards, is just Newspeak.

Sounds persnickety to me.
Quadratic is a specific type of algebraic formula that has no place in this discussion, unless the tax rate is proportional to the square of the income level, which it rarely if ever is.
The term progressive taxation simply means that the tax rate increases, or progresses, as income level rises. The term has been used for many decades, long before a political belief system labeled “Progressive” became a common term, and the two are separate terms. It’s an unfortunate overlap, but the tax people were there first.
Regressive is a tax rate that decreases with rising income level.
Progressive and regressive tax rates are long standing terms, very Oldspeak if you will. I don’t know of a more descriptive term to use. Quadratic certainly ain’t it. If you want to change it you’re going to have to rewrite a whole lot of economic textbooks.

Elan

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A flat tax itself seems to work just fine in quite a number of countries, so that belief isn’t unreasonable. e.g., income tax due = [25% of income minus 5000 local currency units]. Change numbers to suit, 10% to 45% depending on the country. Negative numbers are frequently refunded.

Great idea, especially if all forms of income are included from wages and salaries to dividends and capital gains. Link the deduction to the poverty level, say $28,000 for a family of four, and a 25% flat tax should work well.

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Tongue in cheek…we can’t have a simple tax system. What would politicians do? What would blood sucking leacherous parasites (excuse me tax accountants and lawyers or am I confusing them with politicians) do? It would be a calamity…the service portion of our economy would immediately contract 25%. Turbo Tax couldn’t say the provide free software for easy returns and then charge $150.

Simplicity would simply never work.

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Quadratic is a specific type of algebraic formula that has no place in this discussion

Do read my post.
I said " should probably be called a quadratic tax or similar"
Clearly the curve in question might be quadratic or something else at different times or places,
but it is something that accelerates: tax rises super-linearly with income.

The point is that a real flat tax would be the same tax for everyone, e.g., $1000 per head. (The UK poll tax as a close example)
What is generally called a flat tax isn’t flat in that sense, it’s a tax that is linear with income: directly proportional.

By calling something which has non-linearly increasing tax with income “progressive”, it is edging into propaganda:
it connotes modern and open-minded rather than simply talking about what it is: a tax which rises faster than income.
And of course the term is chosen specifically because of those connotations.
Then “regressive” is then chosen as the opposite of “progressive”, making the newspeak even worse, but at least more blatant.
Yes, they are long standing terms as you note…but so apparently is the newspeak reason behind them, particularly “regressive”. So is newspeak, for that matter.
Sometimes “regressive” is used pretty reasonably to describe a tax that it actually higher on poorer people in numerical terms,
but it’s usually chosen by demagogues for other reasons: to vilify any tax scheme that is
insufficiently “soak the rich” for the speaker, whether it is or isn’t in any numerical sense.

My complaint isn’t against having different tax rates, it’s against the dishonesty of propaganda terms.
Mere innumeracy is bad enough when you see it, but purposeful obfuscation for an agenda is reeally annoying.

I don’t call pi “the eternal curse of the circle”. It’s just a number.

Jim

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Quadratic is a specific type of algebraic formula that has no place in this discussion, unless the tax rate is proportional to the square of the income level

A quadratic polynomial may have a linear term and a constant term, in addition to the squared term. So, for the tax rate to be quadratic it needn’t be proportional to the square of the income level.

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For most taxpayers, the US Federal income tax closely follow the equation:
0.3 * taxable income - 20000

income     tax    equation   error
 50,000    5,619    -5,000  -10,619
100,000   13,879    10,000   -3,879
150,000   24,879    25,000      121
200,000   36,579    40,000    3,421
250,000   48,579    55,000    6,421
300,000   60,579    70,000    9,421
350,000   75,379    85,000    9,621
400,000   91,379   100,000    8,621
450,000  108,879   115,000    6,121
500,000  126,379   130,000    3,621
550,000  143,879   145,000    1,121
600,000  161,379   160,000   -1,379
650,000  179,879   175,000   -4,879

For income above $600,000 the marginal tax rate is 37%. This is for taxable income (after deductions). In 2017, the top 1% (income above $515k) had an average federal tax rate of about 27%.

2017 taxes closely followed the linear equation:
equation2 = Income Taxes Paid = 0.27*AGI - 14000

                                [$ millions]         [$ millions]                         average          average              average
                 Number     Adjusted Gross Income  Income Taxes Paid  Income Split Point  Tax Rate  Adjusted Gross Income  Income Taxes Paid  equation2   error
    Top 1%      1,432,952         $2,301,449           $615,979            $515,371        26.80%         $1,606,089           $429,867        419,644   -10,223
    Top 5%      7,164,758         $3,995,037           $946,954            $208,053        23.70%         $557,596             $132,168        136,551    4,382
   Top 10%     14,329,516         $5,220,949           $1,122,158          $145,135        21.50%         $364,349              $78,311         84,374    6,063
   Top 25%     35,823,790         $7,561,368           $1,378,757           $83,682        18.20%         $211,071              $38,487         42,989    4,502
   Top 50%     71,647,580         $9,706,054           $1,551,537           $41,740        16.00%         $135,469              $21,655         22,577     922
  Bottom 50%   71,647,580         $1,230,446            $49,772             $41,740         4.00%          $17,174               $695           -9,363   -10,058
All Taxpayers  143,295,160       $10,936,500           $1,601,309                                          $76,321              $11,175         6,607    -4,568

https://taxfoundation.org/summary-of-the-latest-federal-inco…

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The point is that a real flat tax would be the same tax for everyone, e.g., $1000 per head. (The UK poll tax as a close example)
What is generally called a flat tax isn’t flat in that sense, it’s a tax that is linear with income: directly proportional.

Most common users of the English language would beg to differ.
https://en.wikipedia.org/wiki/Flat_tax
What you’re trying to define as a flat tax is commonly known as a head tax.

By calling something which has non-linearly increasing tax with income “progressive”
I still haven’t seen a reasonable alternative.

Elan

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A quadratic polynomial may have a linear term and a constant term, in addition to the squared term. So, for the tax rate to be quadratic it needn’t be proportional to the square of the income level.

Yeah, but if the coefficient of the squared term is zero it’s not really a quadratic polynomial, is it?

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For most taxpayers, the US Federal income tax closely follow the equation:
0.3 * taxable income - 20000


income     tax    equation   error
 50,000    5,619    -5,000  -10,619
100,000   13,879    10,000   -3,879
150,000   24,879    25,000      121

A majority of Americans earn well less than 100,000, so the formula is far off for most taxpayers.

*Bottom 50%   71,647,580         $1,230,446            $49,772             $41,740         4.00%          $17,174               $695           -9,363   -10,058*

Same here. For most taxpayers the linear formula is way off.

The American income tax system is moderately progressive, in the sense that the tax rate rises somewhat with income. (Although Warren Buffett will tell you it’s not quite so). However it is far from being a political Progressive’s wet dream, so there is a clear disconnect between the Progressives’ wish list and the current mildly progressive tax scheme.

Elan

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Yeah, but if the coefficient of the squared term is zero it’s not really a quadratic polynomial, is it?

Who said anything about the squared term being zero? I said the general quadratic could have terms other than the squared term.

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If you believe in a flat tax you probably believe in flat earth

Your juvenile insult reveals your classlessness.

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Regressive is a tax rate that decreases with rising income level.

Such as Social Security tax?

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Regressive is a tax rate that decreases with rising income level.

Such as Social Security tax?

Social Security withholdings are not a tax. They are payments under FICA, the Federal Insurance Contribution Act. They are a combination of a retirement pension system and disability/survivors’ insurance. The more you pay in, the more in retirement benefits you receive.

Elan

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