Tax on rich will bring in 63.67B per year

[laurence]

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%.

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.

+1 Isn't there a saying, "Don't confuse effort for work?". The guy pounding nails into 2x4's may have worked hard all day, but the value, as evidenced by the price paid for his labor, is less than that of the Doctor who saw patients all day. Any alternative to letting the market decide the value of labor is fraught with peril and potential for perversion/corruption.

 

[samclem]

. . . but I really like investing, so if I pay taxes to make better returns, I'm all for it, plus I can feel good about other people that my taxes helped.

So your idea is that somehow by paying more taxes, rather than investing that same money in the market right now, your overall return will be better and this is a good thing primarily because you'll be able to pay yet more taxes later and thereby help other people which will make you feel good.

Noted.

Umm . . .Welcome to the board.

 

[atlas888]

I'm proud that I can provide extra taxes..... so if I pay taxes to make better returns, I'm all for it, plus I can feel good about other people that my taxes helped.

I just came back from the supermarket, and I had to go up to the customer service counter there. I was glad to see your tax dollars at work , paying for the lottery tickets for people lined up to play the lottery and scratch tickets. They are quite obviously recipients of taxpayers largess. They asked me to thank you and hope you would give more.

 

[ERD50]

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

Nah, that does not compute.

Sure, dumb luck (good and bad) plays into individual success/failure. But so what? Tax laws are based on the total population, not individuals.

So, take 10,000 people who graduated in the top 5% of their High School class. Take 10,000 people who graduated in the lowest 5% of their class. Fast forward 20 years. I'm pretty sure the top 5% group median income will be significantly higher than the bottom 5% median income. Some of it will be determined by luck. And I chose "median" rather than "average" - maybe one of those bottom 5% won the lottery, or succeeded despite a poor early start. You never can tell.

Well, let's tax "good fortune".

Todd was born in America (+5%) with good genes and a good brain (+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%). ....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".

Excellent illustration and analysis FIREdreamer (and good add-on by Texarkandy)! I think that pretty well sums up why I am in favor of moderately progressive taxes. I'm not in favor of how some people twist that to be something it isn't, or just don't appreciate it.

Well done.

-ERD50

 

[kumquat]

Any alternative to letting the market decide the value of labor is fraught with peril and potential for perversion/corruption.

Unions representing Canadian government employees like to ask for "Equal pay for work of equal value". Don't your's?

 

[samclem]

Unions representing Canadian government employees like to ask for "Equal pay for work of equal value". Don't your's?

Yes, that's been the mantra of many labor groups. In general it translates to "Distort market forces to pay this special class more than the market rate."

 

[Independent]

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%.

Maybe we can agree on

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

I'm always frustrated by the suggestion that the only reason anyone would favor progressive taxes is that their own taxes would be lower because of this. I think that I was in the top 10% of wage earners for 31 years (I've never sat down to check the stasitics for all years). I can honestly point to reasons why my higher income relates to "more effort" than the average person. I also have to honestly say that I can point to reasons that amount to better-than-average luck. Yet, I favor progressive taxes (so does Warren Buffet).

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.

Yep, I'm not suggesting that the gov't tell employers what they can pay. I know that's on the agenda for some Obama supporters ("comparable worth"), but I think it's a very bad idea.

Progressive taxes are a different story.

 

[Independent]

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".

I think this is correct. The progressive taxes that we already have partially (that is, on average) amount to a higher tax on good luck than on hard work. To me, that's a "feature, not a bug".

 

[Independent]

Nah, that does not compute.

Sure, dumb luck (good and bad) plays into individual success/failure. But so what? Tax laws are based on the total population, not individuals.

So, take 10,000 people who graduated in the top 5% of their High School class. Take 10,000 people who graduated in the lowest 5% of their class. Fast forward 20 years. I'm pretty sure the top 5% group median income will be significantly higher than the bottom 5% median income. Some of it will be determined by luck. And I chose "median" rather than "average" - maybe one of those bottom 5% won the lottery, or succeeded despite a poor early start. You never can tell.


-ERD50

This is odd. I can agree with the 10,000 people example. I think it fits the part of my post that you quoted. However, I'm at a complete loss with "Tax laws are based on total population not individuals." I'm not saying I agree or disagree with that statement, I'm just saying I don't know what it means. Do you have a couple examples?

 

[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".

I think this is correct. The progressive taxes that we already have partially (that is, on average) amount to a higher tax on good luck than on hard work. To me, that's a "feature, not a bug".

Because we all know Todd doesn't work nearly as hard as Mike. Right?

How about Todd's colleague Sally, who grew up poor, was the 1st college grad in her family, worked her way through State Univ & borrowed her way through Med School, & works 80 hour weeks to make her 350k. Should her "excess earnings" be taxed at progressively higher rates on account of her "good fortune" too?

 

[DougViages]

I'm reading an insightful book now...

It seems to really have a descriptive grasp on the current situation, even though it was written 55 years ago. Atlas Shrugged ny Ayn Rand. It depicts a much poorer, less free America where individual initative is crushed and Washington controls all.

My DW said that if I wanted to see the country's future path, it was a good book to read.

It is scarily accurate!

 

[ERD50]

This is odd. I can agree with the 10,000 people example. I think it fits the part of my post that you quoted. However, I'm at a complete loss with "Tax laws are based on total population not individuals." I'm not saying I agree or disagree with that statement, I'm just saying I don't know what it means. Do you have a couple examples?

Sorry, I just meant something like:

The population of people with income in one range will pay X%, and the population of people with income in another range will pay Y%, etc.

The laws are not written such that if you were smart, or had good parents, or went to a good school that you are taxed differently from people in the same income. That's what I meant as "population" versus "individual".

There is no practical way to measure those things, but we can (do a poor job) of measuring income, so we do. And that's OK by me. And that is why I liked Firedreamer's post - on average, income will capture all that. I think it's about the best we can do with a (moderately) progressive tax system.

-ERD50

 

[dex]

It seems to really have a descriptive grasp on the current situation, even though it was written 55 years ago. Atlas Shrugged ny Ayn Rand. It depicts a much poorer, less free America where individual initative is crushed and Washington controls all.

My DW said that if I wanted to see the country's future path, it was a good book to read.

It is scarily accurate!

Anjolina Jolie bought the movie rights - should be interesting.

 

[ERD50]

The poor don't vote.

That's like saying "no one buys GM cars".

http://www.nonprofitvote.org/Download-document/America-Goes-to-the-Polls-Brief-2008-General.html

This paper says it is just the opposite -

The Electorate by Income

Under $30,000 make up 18% of the electorate
$30,000-$50,000 make up 19% of the electorate
$50,000-$100,000 make up 36% of the electorate
$100-$150,000 make up 14% of the electorate

and....

Over $150,000 make up 12% of the electorate.

Perhaps you meant to say "There is a higher % of voter turnout among higher income people"? But, since we each get one vote (theoretically), it sure looks like the poor place more votes than the rich.

And isn't Obama referring to "rich" as the top 2% or over $250,000? A smaller subset of that breakdown. That's not a lot of voting power, and that could be why they are targeted.

-ERD50

 

[dex]

And isn't Obama referring to "rich" as the top 2% or over $250,000? A smaller subset of that breakdown. That's not a lot of voting power, and that could be why they are targeted.
-ERD50

I think that is 250K for a family or 125 for a single person - but check that.

 

[youbet]

I think that is 250K for a family or 125 for a single person - but check that.

The $125k for singles was being used for some time, definitely during the campaign. But now the published budget proposal is using $200k for singles as the level where personal income taxes will be increased.

The $250k for couples and $200k for singles is really going back to the worse days of the marriage penalty that I was hoping would contine to diminish. Two life partners each making $200k will see no tax increase. Two married folks each making $200k filing jointly will get nailed with higher taxes. It makes me wonder if he chose those levels with a social agenda in mind.

 

[armor99]

Sorry, I just meant something like:

The population of people with income in one range will pay X%, and the population of people with income in another range will pay Y%, etc.

The laws are not written such that if you were smart, or had good parents, or went to a good school that you are taxed differently from people in the same income. That's what I meant as "population" versus "individual".

There is no practical way to measure those things, but we can (do a poor job) of measuring income, so we do. And that's OK by me. And that is why I liked Firedreamer's post - on average, income will capture all that. I think it's about the best we can do with a (moderately) progressive tax system.

-ERD50

Ah yes..... back to the "birth lottery" argument again. The idea that says that because you were born with certain abilities that others do not have, in this case intelligence, it means you have an "unfair" advantage over others. And it is only because of this "unfair" advantage that a certain percentage (like engineers, doctors, lawyers) can command the salaries that they do. And it is also the reason that these groups owe more to society (or people who were not born with above average intelligence). But why stop there? What of people who were born with above average looks, or athletic ability, or perhaps a business acumen? Not everyone is born with the same set of skills or abilities, but VERY few people (percentage wise that is) are born with virtually NO ability for anything at all.

I am an engineer by trade, and I hope that I get to keep my job or find other employment because I am somewhat good at it. Was I born with an aptitude for it?... sure... but it still took years of training and hard work to make it pay off into a profession for myself. Same with actors and sports stars. There was no "free ride" for me... and I think the same can be said of most successfull people. When people see those that are "rich" they are seeing the "after party" in a sense. What you do NOT see are the years of effort, sleepless nights studying or working, rejections endured, battles fought, etc.

Why is it that so many continually feel that they are entitled to more? I hear this sort of quasi reasoning all the time from lots of people. The logic being... "Well I work hard.... so I should get paid more"... Ok fine... why not choose a better paying profession? And then the excuses start.... I have no time... I am not smart enought.... the economy is bad right now... and on ... and on... and on some more. So after listening to all the reasons why they cannot achieve any more, I will always ask... "ok... so if you cannot do any more... then why do you think you deserve any more?" And it is usually followed by a deafening silence....

 

[wolfbay]

This is an interesting discussion. No matter what side of this tax argument you're on , shouldn't it be possible to simplify this arcane absurd document called the tax code?I know it's a reflection of the abuse of power of politicians, lobbyists and interest groups but if we can't even simplify this shameful unintelligible tome maybe there's no hope.

 

[samclem]

No matter what side of this tax argument you're on , shouldn't it be possible to simplify this arcane absurd document called the tax code?

I'm firmly on the record as despising the current tax code. Either a National Retail Sales Tax ("Fair Tax"), or a flatter income tax (more equitable sharing of the tax burden as a percentage of income with fewer exclusions) would be improvements over what we have. At least in the abstract. But in the real world, I'm happy to stay with the disgusting pile of undecipherable guano that is the current tax code rather than give the present group of government-loving, success-loathing "architects" of the stimulus plan a license to mess with the tax rules.

I'll stick with the mess we have. It is an abomination, but it could get worse.

 

[dex]

This is an interesting discussion. No matter what side of this tax argument you're on , shouldn't it be possible to simplify this arcane absurd document called the tax code?I know it's a reflection of the abuse of power of politicians, lobbyists and interest groups but if we can't even simplify this shameful unintelligible tome maybe there's no hope.

CF&P Foundation Prosperitas, March 2007: The Hong Kong Tax System -- Key Features and Lessons for Policy Makers
[SIZE=-1]Even after 60 years, the entire tax code is only about 200 pages[/SIZE]

 

[Rustic23]

Politicians have two means of buying votes, Pork, and the Tax Code. I don't see them cutting off an arm!

 

[explanade]

Heard that up to the '80s, all interest was deductible but Reagan and company didn't want to go anywhere near the mortgage interest deduction.

Some other facts, 1/3 of Americans have mortgages, 1/3 rent and 1/3 own their homes outright.

Also, for people thinking that 3% increase to the top two brackets is onerous, until the '80s, the top bracket had a marginal rate of 90%.

 

[ziggy29]

Also, for people thinking that 3% increase to the top two brackets is onerous, until the '80s, the top bracket had a marginal rate of 90%.

Nope, it was 70%. The 90% bracket was eliminated by the JFK-led tax cut of the early 1960s.

 

[ERD50]

Also, for people thinking that 3% increase to the top two brackets is onerous, until the '80s, the top bracket had a marginal rate of 90%.

explanade, this is getting to be a broken record with you:

asked -

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 --

and answered -

As long as we're honest that *any* tax increase does have at least *some* drag on taxable economic activity, ....

The question is not whether it is onerous, not whether it has or has not been done in the past, not whether it will be catastrophic, but the question is:

Isn't increasing taxes on the "rich" going to have some drag on the economy? Then why is it being done at the same time as a "stimulus" plan is being pushed?

-ERD50

 

[samclem]

Also, for people thinking that 3% increase to the top two brackets is onerous, until the '80s, the top bracket had a marginal rate of 90%.

Sorry, but no. The top rate any time in the '80s was 69.125%. You have to go back to 1963 to find a rate over 90%. And Kennedy pushed the scrapping of that high rate for a very good reason--it was hurting the US economy and leading to a decrease in overall tax revenue. When the top rate was lowered, tax revenues increased. It is entirely possible that increasing taxes now will have a similar impact, reducing tax revenue.