Tax on rich will bring in 63.67B per year

[ziggy29]

Nobody is arguing for higher taxes, just saying they may be necessary and that it doesn't lead to the economic catastrophe that opponents claim -- like the current economic catastrophe, which we arrived at with lower taxes than in the '90s.

As long as we're honest that *any* tax increase does have at least *some* drag on taxable economic activity, I'm cool with that. There are more than ten trillion reasons why we probably have to reluctantly raise taxes (though I'd rather gradually but consistently cut spending when the economy doesn't require as much spending). But let's not pretend it's good for the pace of taxable economic activity, which we sorely need right now.

I don't think lower taxes were the reason for this catastrophe as much as reckless borrowing and lending on real estate, fueled by recklessly low interest rates from the Greenspan Fed and irresponsibly high appraisals to make the sale, and coupled with national policy encouraging marginal risks to own homes and "creative" financing options. If anything, given the mortgage interest deduction, higher tax rates would encourage larger mortgages for the tax dodge. All of these reckless inputs are independent of lower taxes.

I have no problem with the statement that we need to raise taxes. Unfortunately, we've backed ourselves into that corner. What I reject is the idea that it doesn't come with a price tag of reduced taxable economic activity, primarily buying stuff and employing people. And it's critical, therefore, that we don't take it too far, especially while the economy is this delicate.

 

[Gone4Good]

Unfortunately, you did not show proper humility and gratefulness for the benefits granted to you by fortune when you entered this world.

To the contrary. I'm quite well aware that I have won the lottery of life. I am one of those "high income earners" and as hard as I've worked for it, I know that my income is dependent on so many other things over which I had no control or influence.

Meanwhile I'm surrounded every working day by people who were born into privilege, attended the best Ivy League schools Daddy's money could buy, make extraordinary sums while still in their 20's and early 30's, and have an attitude of "How dare they increase my taxes, I EARNED this money!"

Yes. From those people, I would very much like to see a little more humility.

 

[atlas888]

Remember the Ten Years After song, " I'd like to change the world" ? : Tax the rich, feed the poor, till there are no rich no more : Not there are no poor no more.

 

[samclem]

I recall after he won the Iowa primary, some Fair Tax advocates were hoping he'd make a statement about it and as I recall he didn't.

You recall incorrectly. The Fair Tax was central to his campaign (I remember it well, because it was one of the few positions he took with which I agreed).

He's still actively supporting the idea today.

Newsmax.com - Huckabee: ‘Dude, Where’s My Country?’

Michigan Messenger » Huckabee: Fair Tax not Big Three Bailout

 

[explanade]

As long as we're honest that *any* tax increase does have at least *some* drag on taxable economic activity, I'm cool with that. There are more than ten trillion reasons why we probably have to reluctantly raise taxes (though I'd rather gradually but consistently cut spending when the economy doesn't require as much spending). But let's not pretend it's good for the pace of taxable economic activity, which we sorely need right now.

I don't think lower taxes were the reason for this catastrophe as much as reckless borrowing and lending on real estate, fueled by recklessly low interest rates from the Greenspan Fed and irresponsibly high appraisals to make the sale, and coupled with national policy encouraging marginal risks to own homes and "creative" financing options. If anything, given the mortgage interest deduction, higher tax rates would encourage larger mortgages for the tax dodge. All of these reckless inputs are independent of lower taxes.

I have no problem with the statement that we need to raise taxes. Unfortunately, we've backed ourselves into that corner. What I reject is the idea that it doesn't come with a price tag of reduced taxable economic activity, primarily buying stuff and employing people. And it's critical, therefore, that we don't take it too far, especially while the economy is this delicate.

I can agree that ideally we wouldn't have to raise taxes. Of course if the initiatives in health care and energy work out as Obama hopes, then we may get returns in the form of cost savings from those programs which are going to be financed with those tax increases.

And no, tax cuts earlier in this decade didn't cause our present problems but I'm not so sure they were completely benign. Besides the excesses in real estate, there was a lot of gambling in private equity and hedge fund activities, which were unregulated.

Hedge fund managers famously claimed the exorbitant fees they collected as capital gains rather than income. It's certainly conceivable that with cheap money and low taxes, a lot more risks were taken than otherwise would have been the case.

 

[ERD50]

Originally Posted by Dog
I'm still confused at how 95% of Americans will receive a tax cut when a good portion of the 95% don't pay income taxes.

Good question.

I had not seen this apparent impossibility refuted so I did some googling.

Americans for Tax Reform



-ERD50

Those who don't pay income tax still pay FICA. Unless you're a hedge fund operator, and there aren't too many of those left.

Are you saying that Obama is proposing that we reduce the FICA rate? I had not heard that.

-ERD50

 

[samclem]

There are two ways the administration could deliver on the promise to cut taxes for "95% of working Americans" despite the fact that 1/3 of Americans don't pay taxes:
1) Define "working" to be the same as "paying taxes," thereby getting around the mathematical impossibility problem. I don't think Obama will do this.
2) Redefine what a "tax cut" is. This appears to be the route favored by the administration. Their "refundable tax credits" will be distributed as checks from the Treasury to families that have no income taxes due. Thus, these families get a "tax cut"--from zero to less than zero. In years past, checks from the government were known as "payments."

 

[atlas888]

As it stands, Mayor Bloomberg pointed out, less than 1 percent of New York City residents pays 50 percent of NYC taxes (40K household out of 8.5 million people) Placing more tax burden on the rich is not only counterproductive but not fair. And I am not one of the rich.

The Feb 27 2009 editorial of WSJ also correctly points out that even if the government takes everything the top 7 percent of all top earners made (with adjusted gross income of over $ 200000 a year), it would not be enough to cover the new proposed budget. When people are facing a budget restrain, we look at cutting back our spending, and not come up with a budget that has over 9000 earmarked pork. (over 40% comes from the supposedly fiscally responsible GOP)

 

[Hal3]

Wealth and Taxes

There are really people that believe they can just create wealth by pulling a lever in a voting booth.

That's almost as funny as creating wealth by printing up Collateralized Debt Obligation derivatives in the Guernsey Islands. Ha Ha Ha. - Hey, they fooled us so far. The Treasury and the "FED" are buying them up like hotcakes on our behalf!

 

[atlas888]

That's almost as funny as creating wealth by printing up Collateralized Debt Obligation derivatives in the Guernsey Islands.

It is almost as funny as creating make believe wealth and solutions by printing up US dollar bills nonstop in the Treasury.

 

[deserat]

To the contrary. I'm quite well aware that I have won the lottery of life. I am one of those "high income earners" and as hard as I've worked for it, I know that my income is dependent on so many other things over which I had no control or influence.

Meanwhile I'm surrounded every working day by people who were born into privilege, attended the best Ivy League schools Daddy's money could buy, make extraordinary sums while still in their 20's and early 30's, and have an attitude of "How dare they increase my taxes, I EARNED this money!"

Yes. From those people, I would very much like to see a little more humility.

If you've read the Millionaire Next Door, time will take care of that attitude and their lot in life. I believe the wealth was lost in three generations for those who tried to 'mollycoddle' their offspring and allowed them to have a sense of entitlement. Human beings usually don't appreciate that which they don't earn and a sense of entitlement is usually accompanied with an unwillingness to do the work when the going gets tough.

Additionally, it seems as though you are painting a broad-brush judgement to a group of people based on your personal experiences. Frankly, I believe you will be one of the survivors and possibly your family, too, if you imbue in them the same values that got you where you are and don't try and make it too easy for your offspring.

As for what society brings us, yes, that is what society is for and we do have a collective responsibility to provide for that. What is at issue is what should be provided collectively versus personally. Me, being a much more strict Constitutionalist, I believe in common defense (the military) and regulation of money and of commerce. I don't believe in the federal government controlling or providing healthcare, education or many of the others things which have creeped into the federal government's purview since the 1940's and FDR's follies.

In the case of this president and congress, the expansion of the federal government into the daily lives of many is breathtakingly audacious to me and scares the hell out of me with with to regards my assets. I've sacrificed for many years living below my means and all I see as a logical conclusion of this massive expansion is a huge money grab in the future from people like me who deferred gratification.

Our choices in life lead to consequences - some good and some bad. Asking me to pay the consequences for someone's bad choices when they are able-bodied is a collectivist mentality which largely demotivates people who can produce - where's the incentive?

 

[Jay_Gatsby]

Maybe most people wouldn't set it at that level, but everyone has their own thresholds over which they'd say "what's the use" of continuing to grind it out in the workforce.

We may all set that bar at different heights, but one thing is clear: the more the fruits of your labor are taxed away from you, the closer everyone is to deciding that laboring isn't worth it any more. At some point we could reduce the incremental value of work to the point where it seems like only a sucker (or someone who loves what they do) keeps working.

And frankly, the more we see the responsible bail out the irresponsible, the more we see producers forced to give their production to consumers, the more we take from the ant and give to the grasshopper, the more people we'll see deciding to become the grasshopper. And when that reaches a critical mass, IMO we're doomed.

I'm not against a safety net, especially in times like these -- but I am against a general shift in mentality that increasingly taxes production and heavily subsidizes (and therefore indirectly encourages) non-production. Tax increases on the successful and the increased means-testing of benefits and programs, I fear, could do just that.

This sounds like the plot of Atlas Shrugged by Ayn Rand:

Atlas Shrugged - Wikipedia, the free encyclopedia

"The main crux of the book surrounds the decision of the "men of the mind" to go on strike, refusing to contribute their inventions, art, business leadership, scientific research, or new ideas of any kind to the rest of the world. Each man of ability eventually reasons (or is convinced) that society hampers him with unnecessary, burdensome regulations and undervalues his contributions to the world, confiscating the profits and sullying the reputations he has rightfully earned. The peaceful cohesiveness of the world begins to disintegrate as each of these men of ability slowly disappears and society loses those individuals whose mental effort allows it to continue functioning."

Piece of trivia from the Wikipedia entry for Ayn Rand:

In New York, she formed a group (jokingly designated "The Collective") which included future Federal Reserve chairman Alan Greenspan, a young psychology student named Nathan Blumenthal (later Nathaniel Branden) and his wife Barbara, and Leonard Peikoff, all of whom had been profoundly influenced by The Fountainhead.

 

[Independent]

Interesting discussion. I'm a successful, small business owner who would be well over the $250k threshold. Me and my partner built our company the old fashioned way, through hard work, person financial risk, dedication and yes, luck. I'm in the tech industry and I can assure you most of the people I know who have big, successful companies did not build their companies this way. They leveraged their connections from business school, family friends, etc. to obtain venture or private equity funding. Their only goal was to build the company big enough to either go public and cash in or sell to a big corporation and cash out. In no way did they work harder or take more risks than I did. I come from a very disadvantaged background, I'm the first person in my family to graduate from college and I don't think people who don't have the same history can even imagine the hurdles you have to overcome. In effect you have to be smarter, work harder and possess a greater motivation to achieve than those born into more fortuitous circumstances. I have no problem paying more taxes if it benefits our society as a whole. I do mind paying higher taxes if they are swallowed whole by our obscene military industrial complex. It's the 800lb gorilla in the corner nobody wants to mention. Easier to go after the unemployed, public housing moms and other deadbeats. I'd keep doing what I do no matter how high the taxes because I value the freedom and control I have over my career and I derive great satisfaction from providing high-paying jobs for the people who work with us.

Thanks for the post.

 

[HornedToad10]

To the contrary. I'm quite well aware that I have won the lottery of life. I am one of those "high income earners" and as hard as I've worked for it, I know that my income is dependent on so many other things over which I had no control or influence.

Meanwhile I'm surrounded every working day by people who were born into privilege, attended the best Ivy League schools Daddy's money could buy, make extraordinary sums while still in their 20's and early 30's, and have an attitude of "How dare they increase my taxes, I EARNED this money!"

Yes. From those people, I would very much like to see a little more humility.

This attitude has nothing to do with "rich" versus "not rich", but everything to do with humanity. Go to a welfare bank and you will find an identical sense of entitlement. The only difference is that the rich use the term "I earned" and the "not rich" use the term "I deserve". In any socioeconomic class, there are always those who push your buttons and feel entitled to an ever-increasing standard of living for no better reason than because they feel they "deserve" one.

Really there needs to be humility and appreciativeness in everyone.

 

[armor99]

I'm just pointing out the math.

Because of an increase to the marginal rates, the $250k household would pay a few thousand more in taxes.

Does that really break the camel's back and get people to say, "Screw it, I'm not going to work for the Man anymore" and walk away from that income?

I think most Americans, who earn maybe a fifth of that income, would love to have that problem.

As for the merits of the tax policy, you can research the rates for the highest brackets over the history of this country and you'll see that the country managed to grow despite much higher rates.

The "taxes are going to kill the incentive to work and create jobs" warning has been cried far too often.

I have read, and think I really understand what you are saying here. I have heard this opinion before, and on the surface it sounds fairly good. If "fill in the blank" policy is a net good to 80% + of the population, then we should probably do that.

But here is my problem with that sort of thinking. What if I happen to find myself in that unfortunate 20%? Am I to be held "captive" by the majority? Let's say that I want to start up a company and to do it I need a loan. My business plan is solid, but it requires me to take out a loan that according to the govt is more risky than 80% of loans most people take. It would certainly be a true statement, then again, everyone in america does not start their own business. And I guess that is sort of the point I am trying to make. According to the Forbes list of richest people in the world, something like 2/3 rds of them were made in a single lifetime, without the benefit of any inheritance.

Companies like Google, facebook, and Microsoft are good examples of that. Where are the next generation of entrepaneurs going to come from if you begin to erode the profit motive? Companies create new and better products only to make more profit.... not because they "feel" this would make the world a better place etc.

I find it interesting that the world completely ignores the achievements of a man like Bill Gates. Software that his cmpany has created, has enabled countless other companies to create new and innovative products that without it could not have happened. But when Bil Gates gives away his money (the fruits of that effort).... he is cheered as a hero. So by that line of thinking that would mean that if he gave away every penny he ever earned, and went to go live in a cave, then he would be the worlds greatest hero? I guess I will never be able to make sense of that....

 

[atlas888]

Increasing the taxes on people who has attitude issues are not going to teach them humility, nor would it entice people who use welfare as a way of life to show appreciation. So often nowadays, taxation , especially for many voters , becomes punitive based on class envy.

 

[eridanus]

In New York, she formed a group (jokingly designated "The Collective") which included future Federal Reserve chairman Alan Greenspan, a young psychology student named Nathan Blumenthal (later Nathaniel Branden) and his wife Barbara, and Leonard Peikoff, all of whom had been profoundly influenced by The Fountainhead.

Alan Greenspan? That whole "less regulation" thing worked out well for us.

Atlas Shrugged has one of the funniest monologues in American fiction.

 

[eridanus]

Increasing the taxes on people who has attitude issues are not going to teach them humility, nor would it entice people who use welfare as a way of life to show appreciation. So often nowadays, taxation , especially for many voters , becomes punitive based on class envy.

The poor don't vote. The middle class doesn't like higher taxes either.

We increase taxes because we're running a deficit, and no one can agree on how to cut the budget.

 

[HornedToad10]

Federal taxes can be raised without *too* much issue, but state taxes are worse and cause more problems for the state. California tax rate is going up "temporarily" to the 10-11% range, so where is the incentive to start a new company in California instead of Oregon, Washington, etc. You personally have to pay higher taxes, and you have to pay higher salaries to get and keep good employees.

I've already had friends who got multiple job offers and it was financially beneficially to take a lower pay job in Washington than one in California. One friend had 85k California, 75k California and 75k Washington and he took the Washington job because, adjusted for Cost of Living and taxes, it is higher paying than the 85k California job.

This is less of a problem for the Federal government since moving out of the U.S. is more inelastic than just switching states, but it is something to consider.

I'd have less issues with the raising taxes bit if it wasn't such a blatant attack on the "rich". It's not like the government is saying, "We have a huge deficit and so everyone's taxes are going up and we are all sacrificing. Or at least some people's taxes are going up and some are staying the same.

Instead, it's a straight out vote-grab of: We're taxing the rich and lowering the taxes of everyone else. If you raise the taxes on 20% and lower the taxes of the other 80%, then the 80% who are getting all the benefits will vote for you....Potential Tyranny of the Majority. Just need to be careful that raising taxes, government policies, etc. don't go too far.

 

[Independent]

"Surely not a view shared by the other, less [fortunate] productive, 80% of the population."

Edited portion in bold

Sam, I see that you replaced "fortunate" with "productive". I think this goes to much of the disagreement I see on this topic.

Some people think that:
A. Hard Work => High Productivity => High Income

I think that:
B. ( Hard Work +- Dumb Luck ) => Productivity, and that ( Productivity +- More Luck ) => Income

You seem to be putting yourself in the group that endorses "A". i.e. higher incomes are proof of higher productivity and harder work.

I'm sure that hard work does not translate directly into more productivity and income. I've worked with people who were paid $250k per year, and others who were paid $25k. I'm sure that the $250k people didn't work 10x as hard as the $25k. At most, it may have been 2x, but I'm being generous with that estimate. Even if they contributed 10x as much to the company's profits, it's clear to me that most of the extra came from the good luck of being born with more talent, more support from family, better schools, being the the right place when the company was bought out or the department was reorganized, or whatever.

I'm not even sure that Productivity => Income. I have trouble believing that the different income levels between CMOs and CEOs really reflects higher productivity, rather than the customary way we set CEO compensation.

If I expand "Productivity" to include "what you do for society" (which seems like the right measure when I think about tax policy), the link is even less certain. Imagine the lawyers who litigate a complex mineral claim disagreement. They may be very well paid, and the winning team might well be "worth" their pay in terms of adding profit to the winning company. But I'm not sure that they really added any value our society. I could go on to think about the CEO of Bear Stearns @ $50 million per year, or hedge fund managers @ $100 million, and compare them to electricians at $50k or engineers at $100k. I have trouble believing the ratio of incomes reflects the ratio of value added.

This doesn't mean I think we should confiscate all incomes above x, it simply means that I think "fortunate" deserves a significant place in the discussion.

 

[samclem]

If I expand "Productivity" to include "what you do for society" (which seems like the right measure when I think about tax policy) . . .

I sure hope it never comes to this, but I suppose it might. The government decides that the occupational code for "mason" is especially meritorious and income will be taxed at 5%, while "litigator" is less meritorious and income from this activity should be taxed at 35%.

it simply means that I think "fortunate" deserves a significant place in the discussion.

Maybe we can agree on

"Surely not a view shared by the other, less well compensated 80% of the population."

We may disagree on the value society does or should place on an activity and an individual's particular performance of this activity, but "compensation," which takes into account all aspects of supply and demand, is the final cold metric, all boiled down to one number. How lucky you are, how hard you work, how talented you are, how rare your skill is, how much people are willing to pay for your services--it's all there, mixed together, in that single number. Beautiful, simple, and arrived at by mutual agreement between the individual and the rest of the world.

 

[haha]

I sure hope it never comes to this, but I suppose it might. The government decides that the occupational code for "mason" is especially meritorious and income will be taxed at 5%, while "litigator" is less meritorious and income from this activity should be taxed at 35%.

No that you mention it, this one may be OK.

Ha

 

[FIREd]

This doesn't mean I think we should confiscate all incomes above x, it simply means that I think "fortunate" deserves a significant place in the discussion.

Well, let's tax "good fortune".

Todd was born in America (+5%) with good genes and a good brain (+5%). He grew up in an upper middle class family (+5%). Todd's Papa and Mama lived in a safer and nicer neighborhood (+5%) which allowed Todd to attend a good high school (+5%) which fostered Todd's natural abilities. Due to his good grades, Todd attended Harvard (+5%) which his family was able to afford (+5%) to become a doctor with an annual income of $350,000 (+5%). Therefore Todd should pay 40% in taxes on his income.

Mike was born in America too (+5%), but was unfortunately not as genetically gifted as Todd (+0%). He grew up in a poor family (+0%), living in a poor, rural area (+0%). His high school sucked (+0%) and it didn't foster his natural abilities. Therefore Mike didn't go to college (+0%). Mike found a job, bagging groceries at the Piggy Wiggly (+0%) making $20,000 a year with overtime.

So Todd should pay 40% in taxes on his income and Mike should pay 5% in taxes on his income... Which is similar to what they would be paying under our current tax code (give or take).

In other words, we already tax "good fortune".

 

[Texarkandy]

Well, let's tax "good fortune".

Todd was born in America (+5%) with good genes and a good brain (+5%). He grew up in an upper middle class family (+5%). Todd's Papa and Mama lived in a safer and nicer neighborhood (+5%) which allowed Todd to attend a good high school (+5%) which fostered Todd's natural abilities. Due to his good grades, Todd attended Harvard (+5%) which his family was able to afford (+5%) to become a doctor with an annual income of $350,000 (+5%). Therefore Todd should pay 40% in taxes on his income.

Mike was born in America too (+5%), but was unfortunately not as genetically gifted as Todd (+0%). He grew up in a poor family (+0%), living in a poor, rural area (+0%). His high school sucked (+0%) and it didn't foster his natural abilities. Therefore Mike didn't go to college (+0%). Mike found a job, bagging groceries at the Piggy Wiggly (+0%) making $20,000 a year with overtime.

So Todd should pay 40% in taxes on his income and Mike should pay 5% in taxes on his income... Which is similar to what they would be paying under our current tax code (give or take).

In other words, we already tax "good fortune".

No, no, no, no, no - you've got it half wrong here - Those six zeros should each be -5% for Mike. So Mike should get a tax "refund" of $6,000 by your example above!

 

[HFWR]

Ok, I confess. My real name is "Mike"...