Abolishing Personal Income tax - What do you say?

[xkcd0137]

Sometimes I wonder why the rich think the poor are the parasites of this society.

I don't think the rich or the filthy rich even have time to THINK about poor. Its only when they are parted from their Hard-earned Millions and Billions that they get philosophical.

Imagine being worth just $82.5 million instead of $100 million.. now this poor chap will be able to provide for his next 50 generations ONLY (Sorry for offending you, Anil). How will his 51st generation survive??

 

[Mr.J]

How does it result in being invested back in national economy?

The money you put in stocks is put to use by the company. That's going to pay off their debts, or acquire new assets for expansion etc. So it's going back in national economy.

Example: I have 100 shares of a company that I bought for Rs 10 which is now trading at Rs. 1,000 after 10 years. Now how does LTCG help the company? The value of the stock would have been at Rs 1,000 based on the merits of the company and not if it attracts LTCG or STCG in the hands of the public shareholder.

Low LTCG tax means you're more likely to put money in stock market. If the LTCG tax is high then you'll stick with safe investments, usually the money being parked in banks. While it is used by banks in some ways, none of them are direct investments like stock market. That money is not in economy till you withdraw and spend it.

I hope I've addressed your points.

 

[psyph3r]

Quoting a reddit user's comment (on same article) who has put in better words than I can -

Typical randian comment, going off on a tangent and insinuating stuff that isn't even mentioned in the article just by looking at a infographic that was just shown as an example.

 

[vivek.krishnan]

Today the major gripe of the 4% (or near about) of the income tax payers/assessees is that not only are they paying income tax but are also taxed for good and services. If you abolish income tax, then you are actually paving a way to increase your consumption tax which will burden the lower / no income group.

The main answer is that its much easier to target indirect taxes vs direct. Secondly, the govt keeps much of the basic essential stuff (much, not all) under 5% or 0% taxes. Plus, compliance gets shifted from individuals to companies/service providers.

 

[skoka123]

The money you put in stocks is put to use by the company. That's going to pay off their debts, or acquire new assets for expansion etc. So it's going back in national economy.


Low LTCG tax means you're more likely to put money in stock market. If the LTCG tax is high then you'll stick with safe investments, usually the money being parked in banks. While it is used by banks in some ways, none of them are direct investments like stock market. That money is not in economy till you withdraw and spend it.

I hope I've addressed your points.

I think you are missing the point. I have sold my company shares at Rs 10. No matter what the current market price is I cannot get a penny more for the shares that I already sold. Now, whether more people to are going to buy the shares of my company from the open market or not due to low LTCG is none of my concern as they are not my shares anymore. It belongs to the shareholders.

Again, I think you are wrong in assuming that money in banks is idle money for the economy. It were we would not be having Mallya, Neerav Modi etc. Bankers and the govt would prefer that people park their money in banks and preferably FDs so that that money can be used for giving out cheaper loans.

 

[Mr.J]

I think you are missing the point. I have sold my company shares at Rs 10. No matter what the current market price is I cannot get a penny more for the shares that I already sold. Now, whether more people to are going to buy the shares of my company from the open market or not due to low LTCG is none of my concern as they are not my shares anymore. It belongs to the shareholders.

Again, I think you are wrong in assuming that money in banks is idle money for the economy. It were we would not be having Mallya, Neerav Modi etc. Bankers and the govt would prefer that people park their money in banks and preferably FDs so that that money can be used for giving out cheaper loans.

Yes but by selling those shares you've got the capital from the people who bought those shares instead of taking a loan for capital.
And the value of shares that you hold goes up (or down) based the price of share. That increases (or decreases) your companies worth.

Now if your question is why companies are listed on the stock market in the first place then I don't have an answer to that. Parle, for example, is not listed on stock market. It's a private company that's doing very well.

 

[skoka123]

Yes but by selling those shares you've got the capital from the people who bought those shares instead of taking a loan for capital.
And the value of shares that you hold goes up (or down) based the price of share. That increases (or decreases) your companies worth.

Agreed, but how does the increase in the share price of the shares already sold help the company? How does increase in the companies worth help the company and contribute to the national economy? Unless the company sells part of the remaining holding it will not benefit. That in turn will have a negative impact as selling by the promotors of a company is an indication of trouble to come.

 

[Mr.J]

Agreed, but how does the increase in the share price of the shares already sold help the company?

Change in price of those shares is also reflected in shares held by promoters.

How does increase in the companies worth help the company and contribute to the national economy?

They can take higher loans for expanding their operations which goes back in the national economy by employment of additional employees, taxes on new assets acquired etc.

Unless the company sells part of the remaining holding it will not benefit. That in turn will have a negative impact as selling by the promotors of a company is an indication of trouble to come.

Sorry what? You've lost me.

And no disrespect but it sounds to me that you don't know what you're talking about, at all.

Public company - Wikipedia

en.wikipedia.org

Use above link as starting point and go from there.

 

[skoka123]

Change in price of those shares is also reflected in shares held by promoters.


They can take higher loans for expanding their operations which goes back in the national economy by employment of additional employees, taxes on new assets acquired etc.


Sorry what? You've lost me.

And no disrespect but it sounds to me that you don't know what you're talking about, at all.

Public company - Wikipedia

en.wikipedia.org

Use above link as starting point and go from there.

The feeling is mutual. It is better not to argue with people like you. Thanks.

 

[Rockfella]

All I can think of is investing in ELSS mutual funds to save around 30k tax per year

 

[codelad]

Always found it weird how the establishment touts black money as the root of nearly every problem, and also their idea of fighting corruption by eliminating black money. Isn't it supposed to be the other way round?

IMO, black money is a boogey term flaunted at citizens by successive governments:

1. To coax income tax from folks who haven't figured (or don't have) the means to dodge it. This basically includes everyone who is not mega-rich or a politician.

2. And to show themselves to be "fighting" against something (for the people, no less), all the while conveniently ignoring the real issue at hand - corruption (and mismanagement, to an extent).

Also, it's hard to believe that getting rid of income tax affects state revenue to the point of crippling the country, as often claimed. Income tax very likely makes up a small portion of the state revenue.

Finally, at the risk of stating the plain and obvious - contrary to what people are led to believe, nearly everyone here pays (ever-increasing) taxes all the time, in one guise or another - GST, petrol/diesel, etc.

 

[Mr.J]

The feeling is mutual. It is better not to argue with people like you. Thanks

Edit: I wasn't arguing with you, but when you said "Unless the company sells part of the remaining holding it will not benefit", I literally didn't know what to tell you.

 

[chiron]

Canada has heavy taxes and expensive insurance but you are taken care of if things go bad, I def prefer paying 30% of my income as tax.

 

[red dragon]

I'm not sure of the present now, but ages ago, when I was a student, public ( and mostly free) education system wasn't bad at all. I completed all my education ( till PhD ) for free ( with taxpayer's money)
So when I got my first job in India, happily paid the taxes.
I really know nothing about economy, but being a product of the "parasites" can say with full confidence, if you don't give the "parasites" a chance...India will loose her greatest strength...the millions of "parasites", who won't give a **** about the obstacles but just study harder and harder to come out of that parasitic life and help the next generation of "parasites"
In my limited understanding, India is still not in a position of abolishing personal tax completely..may be lower it some more gradually?
But please don't kill the dreamer who didn't choose his/her "parasite" parents.

 

[y2s]

Agreed, but how does the increase in the share price of the shares already sold help the company? How does increase in the companies worth help the company and contribute to the national economy? Unless the company sells part of the remaining holding it will not benefit. That in turn will have a negative impact as selling by the promotors of a company is an indication of trouble to come.

Right: Market price changes have no direct impact on a companies finances after it has sold its shares (for the most part). Though fundamentally true, A very myopic view - The share price determines a lot more than one might think and can literally make or break companies regardless of how well or badly they are managed. The value of the capital markets is an input to gdp calculation. This number will control the countries ability to borrow and will also impact interest rates at which the country is able to borrow. This will further have a cascading effect through the entire economy.

That is why , a shares increase or decrease in price directly contributes to the national economy in pretty much every way. The increase in a companies worth is essentially the creation of VALUE. The higher this value the better. I would even go so far as to say, public equity markets are perhaps the best and largest value creators for pretty much any economy today.

In regards to tax. I don’t think it’s necessarily a bad thing. Reducing or eliminating taxes isn’t the solution. Demanding accountability for how our taxes are spent is the need of the hour. Perhaps simplifying the tax code and making it equitable can help increase compliance and improve the tax base.

I would be happy if taxes didn’t somehow go up. Unfortunately this is likely the case and like everywhere else in the world, the brunt will be borne by the middle class. The rich will find creative ways to get out of paying whilst the poor will get the hand outs.

 

[chiron]

I'm not sure of the present now, but ages ago, when I was a student, public ( and mostly free) education system wasn't bad at all. I completed all my education ( till PhD ) for free ( with taxpayer's money)
So when I got my first job in India, happily paid the taxes.
I really know nothing about economy, but being a product of the "parasites" can say with full confidence, if you don't give the "parasites" a chance...India will loose her greatest strength...the millions of "parasites", who won't give a **** about the obstacles but just study harder and harder to come out of that parasitic life and help the next generation of "parasites"
In my limited understanding, India is still not in a position of abolishing personal tax completely..may be lower it some more gradually?
But please don't kill the dreamer who didn't choose his/her "parasite" parents.

By parasites are you talking about the civil service system? Or govt employees in general?

 

[blitzkrieg811]

i think by parasites he means the people that study for free on taxpayer money.

 

[Mr.J]

By parasites are you talking about the civil service system? Or govt employees in general?

No, he's using the language of privileged people who think people who get stuff like healthcare and education for free are parasites.

 

[rdst_1]

No taxes are going to go down or get abolished anytime soon. We should be ready to pay even more taxes because of
a) Our evergrowing population (most of which is poor) and our socialist structure.
b) Little to no accountability on how our taxes are used.

So, the only way that works is to either get comfortably rich here or migrate to a country which does use it's taxes judiciously and provides good benefits to it's tax paying citizens.

 

[chiron]

i think by parasites he means the people that study for free on taxpayer money.

i studied for free on taxpayer money. guess im a parasite.