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Pastimes : My House -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (2326)	10/7/2002 6:39:26 PM
From: Original Mad Dog	Read Replies (2) \| Respond to of 7689

All valid points. A few additional thoughts: 1. Sales tax in Chicago is high, though I picked it mainly because it's the region where I live. If you reduced it to 6 percent (about the national average), the 40K person's tax rate becomes about 38 percent, which is roughly the same as our hypothetical 150K person. 2. Some people with 40K in income do have mortgage interest deductions, but many do not. Even if they have houses, oftentimes unless they have a lot saved up (unlikely due to their income, but not impossible) they would only qualify for a mortgage of around 100K or so. And that would make their write off fairly modest and therefore would not dramatically change their tax rate. I think the statistics are that the majority of people in the 40K income bracket are not homeowners, but I may be mistaken and I don't have the exact figures at hand. 3. The earned income credit does not typically apply to a 40K person. It does apply at lower income levels and can result in little or no or even negative tax as I understand it. I am not a proponent of taxing people who make 20K a year. It's like the state putting their foot on somebody trying to climb out of a ravine and saying, "come on, climb harder!" I don't get why that is a good idea. I think Steve Forbes' intriguing flat tax proposal exempted people in this income range from any tax if I recall correctly. 4. State income and property taxes are still deductible. Consumer interest is no longer deductible (has not been for years). 5. There are definitely situations in which the rich pay more taxes on a percentage basis than the poor or 40K middle class person. My example was intended to illustrate that there are many, many situations in which the perceived inequity is just not there. And thames sider's basic point seemed to be that the rich can avoid paying a higher rate than the people of more modest means. I don't think I agree with that if he is talking about offshore trusts, which very few people use and are of dubious effectiveness under current law. But if he is talking about everyday things like the home mortgage deduction, combined with the regressive nature of sales and SS taxes, he has a point.