Income Tax Reduction (2007) Bill [Passed]

[Verily]

Income Tax Reduction (2007) Bill

The 10% tax levied on all income for the first $7500 earned above any designated threshold is reduced to 0%.


(Sponsor: Afleitch)

[Ebowed]

Am I interpreting this correctly?

a.) The first $7500 you earn is tax-free.  If so, I have no problem with that.
b.) If you make $207,500, that extra $7500 is tax-free.  If so, I don't support it.

[Verily]

Afleitch should correct me if I am wrong. However, my impression is that what this bill does is eliminate the lowest rung on the tax ladder, or perhaps simply the lower end of the lowest rung on the tax ladder. This does technically affect everyone, but it affects those earning the least the most as it removes the largest part of their income from taxation (note that it doesn't move where the rungs are located).

[afleitch]

Afleitch should correct me if I am wrong. However, my impression is that what this bill does is eliminate the lowest rung on the tax ladder, or perhaps simply the lower end of the lowest rung on the tax ladder. This does technically affect everyone, but it affects those earning the least the most as it removes the largest part of their income from taxation (note that it doesn't move where the rungs are located).

Yes. It's designed to be simple overall, but proportionally it lifts many poorer workers out of income tax altogether. I would be open to coupling it with a 1% tax rise for those earning over a set income (as in, the exceedingly wealthy) and reducing Earned Income Tax Credits so that income stays in the pocket without being taxed or subsidied. It would balance the cost out a little more but still be disproportionately better for lower income earners.

For the record, the body of this bill was written during the time we discussed putting the Budget to the side and to hell with keeping track of incomings and expenditure. Which is why I left out a cost analysis

I can present that as best I can to the Senate should they wish.

[Bacon King]

The wording is a bit confusing. "Any designated threshold" sounds like it could mean any tax bracket.

[Verily]

Afleitch should correct me if I am wrong. However, my impression is that what this bill does is eliminate the lowest rung on the tax ladder, or perhaps simply the lower end of the lowest rung on the tax ladder. This does technically affect everyone, but it affects those earning the least the most as it removes the largest part of their income from taxation (note that it doesn't move where the rungs are located).

Yes. It's designed to be simple overall, but proportionally it lifts many poorer workers out of income tax altogether. I would be open to coupling it with a 1% tax rise for those earning over a set income (as in, the exceedingly wealthy) and reducing Earned Income Tax Credits so that income stays in the pocket without being taxed or subsidied. It would balance the cost out a little more but still be disproportionately better for lower income earners.

Raising the highest tax bracket to 36% from 35% would be fine with me as a way to recoup the taxes given back in this bill. However, as Bacon King has stated, "any threshold" is a bit vague.

Although, actually, the bill as written does not quite eliminate the lowest tax bracket, nor does it account for marriage status (civil union status in Atlasia) or head of household status. (See Wikipedia for what that would entail.) I think we could word it so as to actually do so, however.

[Small Business Owner of Any Repute]

Afleitch should correct me if I am wrong. However, my impression is that what this bill does is eliminate the lowest rung on the tax ladder, or perhaps simply the lower end of the lowest rung on the tax ladder. This does technically affect everyone, but it affects those earning the least the most as it removes the largest part of their income from taxation (note that it doesn't move where the rungs are located).

That's my interpretation as well.

For the most part, everyone (except those who make under $7,500) will get an equally sized tax cut of around $750.  I ran the numbers when he was first considering the idea, and it's actually amounts to a drop in the bucket so far as tax revenue goes.

In addition, this bill is incredibly well timed.  With Ben Bernake raising concerns about providing a stimulus package, boosting the average lower- or middle-class worker's take home-pay by $750 a year will have a significant (positive) economic impact that will be seen as soon as the first quarter of 2009.

[Small Business Owner of Any Repute]

Afleitch should correct me if I am wrong. However, my impression is that what this bill does is eliminate the lowest rung on the tax ladder, or perhaps simply the lower end of the lowest rung on the tax ladder. This does technically affect everyone, but it affects those earning the least the most as it removes the largest part of their income from taxation (note that it doesn't move where the rungs are located).

Yes. It's designed to be simple overall, but proportionally it lifts many poorer workers out of income tax altogether. I would be open to coupling it with a 1% tax rise for those earning over a set income (as in, the exceedingly wealthy) and reducing Earned Income Tax Credits so that income stays in the pocket without being taxed or subsidied. It would balance the cost out a little more but still be disproportionately better for lower income earners.

Raising the highest tax bracket to 36% from 35% would be fine with me as a way to recoup the taxes given back in this bill. However, as Bacon King has stated, "any threshold" is a bit vague.

Although, actually, the bill as written does not quite eliminate the lowest tax bracket, nor does it account for marriage status (civil union status in Atlasia) or head of household status. (See Wikipedia for what that would entail.) I think we could word it so as to actually do so, however.

To recoup the costs of this bill, I don't think you'd need to even raise the top tax rate by 0.1%, little less 1%.

[Speed of Sound]

Afleitch should correct me if I am wrong. However, my impression is that what this bill does is eliminate the lowest rung on the tax ladder, or perhaps simply the lower end of the lowest rung on the tax ladder. This does technically affect everyone, but it affects those earning the least the most as it removes the largest part of their income from taxation (note that it doesn't move where the rungs are located).

Yes. It's designed to be simple overall, but proportionally it lifts many poorer workers out of income tax altogether. I would be open to coupling it with a 1% tax rise for those earning over a set income (as in, the exceedingly wealthy) and reducing Earned Income Tax Credits so that income stays in the pocket without being taxed or subsidied. It would balance the cost out a little more but still be disproportionately better for lower income earners.

Raising the highest tax bracket to 36% from 35% would be fine with me as a way to recoup the taxes given back in this bill. However, as Bacon King has stated, "any threshold" is a bit vague.

Although, actually, the bill as written does not quite eliminate the lowest tax bracket, nor does it account for marriage status (civil union status in Atlasia) or head of household status. (See Wikipedia for what that would entail.) I think we could word it so as to actually do so, however.

To recoup the costs of this bill, I don't think you'd need to even raise the top tax rate by 0.1%, little less 1%.

Without an economy, we'll never know.


As for fixing the problem of families....Im thinking, maybe $7500 per person in the household? I suppose that would require us to add a clarification for those under a certain salary then though, as I could see someone having 50 kids just to not pay on thier $350,000. Granted, htey would still need to care for the kids somewhat, but still......I think you get what Im saying.

[Verily]

Afleitch should correct me if I am wrong. However, my impression is that what this bill does is eliminate the lowest rung on the tax ladder, or perhaps simply the lower end of the lowest rung on the tax ladder. This does technically affect everyone, but it affects those earning the least the most as it removes the largest part of their income from taxation (note that it doesn't move where the rungs are located).

Yes. It's designed to be simple overall, but proportionally it lifts many poorer workers out of income tax altogether. I would be open to coupling it with a 1% tax rise for those earning over a set income (as in, the exceedingly wealthy) and reducing Earned Income Tax Credits so that income stays in the pocket without being taxed or subsidied. It would balance the cost out a little more but still be disproportionately better for lower income earners.

Raising the highest tax bracket to 36% from 35% would be fine with me as a way to recoup the taxes given back in this bill. However, as Bacon King has stated, "any threshold" is a bit vague.

Although, actually, the bill as written does not quite eliminate the lowest tax bracket, nor does it account for marriage status (civil union status in Atlasia) or head of household status. (See Wikipedia for what that would entail.) I think we could word it so as to actually do so, however.

To recoup the costs of this bill, I don't think you'd need to even raise the top tax rate by 0.1%, little less 1%.

Without an economy, we'll never know.


As for fixing the problem of families....Im thinking, maybe $7500 per person in the household? I suppose that would require us to add a clarification for those under a certain salary then though, as I could see someone having 50 kids just to not pay on thier $350,000. Granted, htey would still need to care for the kids somewhat, but still......I think you get what Im saying.

Couldn't we just reduce the taxation level on the lowermost bracket from 10% to 0%? That way, as the brackets rise with inflation, we won't have to readjust all of the time to pull more of the bottom rungs out of the income tax (as inflation drives people's incomes artificially upwards).

The lowest tax bracket is approximately where this legislation wants to draw the line anyway, at least for single persons.

[afleitch]

Couldn't we just reduce the taxation level on the lowermost bracket from 10% to 0%? That way, as the brackets rise with inflation, we won't have to readjust all of the time to pull more of the bottom rungs out of the income tax (as inflation drives people's incomes artificially upwards).

The lowest tax bracket is approximately where this legislation wants to draw the line anyway, at least for single persons.

Spot on.

I'll provide some structure behind what a reduction of the 10% rate to 0% would entail. It isn't a formal abolition of tax as has been noted, though on paper it has the same effect. It's not that you don't pay tax, but rather you pay a 0% tax rate thus allowing the existing tax and allowance structure to remain the same. Should the need arise for a tax increase, the 'tier' remains in place to be utilised without extra legislation to re-establish it and move around tax brackets. That means that those filing individually/jointly etc will not have to 'refile' or be re-bracketed. What exists remains the same, the tax is merely reduced. Every other income tax bracket remains the same.

The cost of the cut is just an estimated $14 or 15 bn out of the $1.1 trillion raised through income tax each year. As Mr Moderate pointed out, it is a drop in the ocean and should the Senate wish the cost be met through other means then I can understand that. All that would then be required is a slight upward adjustment in the upper tax bracket

The effect of such a cut, IIRC would mean that every Atlasian earning around $16,000 a year will pay no income tax. While that doesn't seem like much on paper, again statistically that is between 20 and 26% of working Atlasians and couples who file jointly. I don't see the need to play about with allowances and tax rates, simply to make the reduction and if need be, a slight raise in the highest tax bracket. Yes, everyone get's a tax cut but the higher you earn the less impact that has. It has it's greatest impact at the very bottom; it lifts people out of the tax system and makes low paid work more attractive than welfare.

But I agree the wording requires amending. I propose the following amendment;

Income Tax Reduction (2007) Bill

The 10% tax rate levied upon the first $7500 of earned income above existing personal allowances is reduced to 0%.

----

Hopefully that makes the legislation a little tighter

[Verily]

I like the wording, but the 10% bracket is actually at $8,025 now, not $7,500; it adjusts for inflation each year, I think.


Income Tax Reduction Bill

1. The tax rate levied upon the first $8,025 of earned income of single persons or married persons filing separate tax returns above existing personal allowances is reduced to 0%.
2. The tax rate levied upon the first $16,050 of earned income of married persons filing joint tax returns above existing personal allowances is reduced to 0%.
3. The tax rate levied upon the first $11,450 of earned income of heads of households above existing personal allowances is reduced to 0%.
4. The above values shall be adjusted for inflation every subsequent year following 2008 such that all income in the lowest bracket shall remain untaxed.

[Verily]

Does anyone have any critiques on the above wording? If not, I'd like to offer it as a friendly amendment.

[Speed of Sound]

No critiques here, looks good to me.

[afleitch]

I accept the amendement as friendly and would like to thank the Senator for his work.

[Verily]

Senators have twenty-four hours to object to the friendly amendment.

[Sensei]

This legislation has my full support.

[Verily]

Twenty-four hours having elapsed, the amendment is adopted.

[Verily]

Over twenty-four hours having elapsed, I motion for a final vote on this legislation.


We are now voting on the final passage of the following legislation. Please vote Aye, Nay or Abstain.


Income Tax Reduction Bill

1. The tax rate levied upon the first $8,025 of earned income of single persons or married persons filing separate tax returns above existing personal allowances is reduced to 0%.
2. The tax rate levied upon the first $16,050 of earned income of married persons filing joint tax returns above existing personal allowances is reduced to 0%.
3. The tax rate levied upon the first $11,450 of earned income of heads of households above existing personal allowances is reduced to 0%.
4. The above values shall be adjusted for inflation every subsequent year following 2008 such that all income in the lowest bracket shall remain untaxed.


Aye

[Jake]

Sure

[Sensei]

aye

[afleitch]

Aye

[Bacon King]

Aye

[Speed of Sound]

aye

[Ebowed]

Aye