Let's Tax The Rich!!!

[frank]

glippy: If you pay into ss for lots of years and then apply for it, no matter how much you make, how can you call it an entitlement? If you buy mutual funds for years and then when you retire you decide to cash them in, would that to be an entitlement?

 

[Mulligan]

I'm not a an expert on the government budget, but before we gouged anyone, I would not be opposed to letting Bush tax cuts expire and revert the federal budget back to 2008, before the stimulus program. 2008 budget was 20% less than this year. While this may not balance it, I would think it would stop the profuse bleeding of red ink. It hard to imagine but it was only a little over a decade ago that the federal deficit was being projected to being eventually paid off based on then government surpluses.

 

[SunsetSail]

In answer to the original question - No. It neither solves the issue of increasing sufficient revenue to solve government debt problems nor does it provide a beneficial incentive.

The problem with the premise of the question (not Midpack’s question, but the issue in general) is that in the context of an income tax ‘rich’ means high income. I can have a portfolio of $100 million in CA muni bonds with no other income and pay virtually nothing in tax so I wouldn’t be ‘rich’ according to the income tax system. My point is that if you have a high income you will be considered rich for income tax purposes. This definition includes the individual that grew up dirt poor but went on to make a large income through hard work and adversity by putting themselves through an undergraduate university and graduate school only to emerge with $250,000 in student loans. However, it doesn’t include the holder of the $100 million muni bond portfolio.

The call to tax the rich is merely a political move to gain the favor of certain voting blocks. It doesn’t even accomplish the goal of taxing those most able to handle the burden (I assume this is the stated goal). If a lawmaker raised the possibility of a tax on wealth at least they would be proposing laws that would actually accomplish the apparent goal.

Maybe I should start a poll to find out how many people here who are in favor of increasing the tax on the ‘rich’ are also in favor of a tax on wealth.

 

[scrabbler1]

I'm not a an expert on the government budget, but before we gouged anyone, I would not be opposed to letting Bush tax cuts expire and revert the federal budget back to 2008, before the stimulus program. 2008 budget was 20% less than this year. While this may not balance it, I would think it would stop the profuse bleeding of red ink. It hard to imagine but it was only a little over a decade ago that the federal deficit was being projected to being eventually paid off based on then government surpluses.

Important thing to remember here. When the Bush tax cuts were first enacted in 2001, some in Congress wanted to include triggers which would cancel or postpone the tax cuts is the projected budget surpluses did not materialize. These proposals went nowhere. The budget surpluses never materialized, but the tax cuts continued. Now, with record deficits, the tax cuts get extended anyway.

Only in Washington can policy makers (mainly Republicans but many Dems adopt a "mee too" attitude) advocate the same tax policy using diametrically opposite reasons. "Large projected budget surpluses, tax cuts for the rich. Large projected budget deficits, tax cuts for the rich."

"<Fill in the blank> budget or economic situation, tax cuts for the rich."

 

[haha]

Only in Washington can policy makers (mainly Republicans but many Dems adopt a "mee too" attitude) advocate the same tax policy using diametrically opposite reasons. "Large projected budget surpluses, tax cuts for the rich. Large projected budget deficits, tax cuts for the rich."

"<Fill in the blank> budget or economic situation, tax cuts for the rich."

Only 50% of tax return filers pay income tax, and the lowest strata may not even file.

So how could you cut taxes for these people who pay no tax anyway? In fact, many of them get payments. We have a situation where 50% of the population is all for raising taxes, since they will never pay them. And the another large % is all for raising taxes, as they work for governments and will get more in salary and benefits than they will ever pay in increased taxes.

If you earn good money, and are not a government worker, best to emigrate because the die is cast for us here in the land of the free.

Ha

 

[Westernskies]

We've had many discussions here about "tax fairness", most turn out like a coyote trying to eat its own tail...

On a cautionary note, now that the the hue and cry has apparently shifted from the relative merits of "tax fairness" to "tax the rich, they can afford it!" the same logic can and may be applied to LBYM'ers at every income level. If you have more than you "need" it is your moral and (soon-to-be, if the 50+% of the population who pay little or no tax sell their votes in favor of a proposal) ) legal obligation to subsidize those who have less. How you earned it, what you lived without to accumulate it, and what taxes you already paid on your "wealth" really doesn't matter- you are "rich" in the eyes of your fellow citizens who have less, and a target in the new economic redistribution climate.

 

[kombat]

Ex: Housing market if the tax deduction on mortgage interest is eliminated. Can you imagine the social implications of this? Where is the incentive to buy over renting? O.K. - some might say no incentive is needed. But...can you imagine the companies that would go out of business if owning a home became passe? Or ...why would anyone want to pay $800 of interest and only $200 principle if they can't deduct that interest. I'd think the entire amortization of a loan would also have to change. Like I said, this can get so complicated that my head hurts!

You realize that mortgage-interest-tax-deductibility is largely just a US-thing, right? Lots of other countries have mortgages without being allowed to deduct the interest, and somehow we manage just fine. We're not a nation of renters, or a barren wasteland littered with rusty backhoes. There's life after mortgage deductibility.

 

[kombat]

the estate tax is beyond cruel and should be immediately abolished. imagine having to pay 40% to 55% of your estate to the government because you died! this is nothing short of confiscation of wealth

+1

I've never understood the justification of people who would defend this particular legislation. A person works and pays taxes their whole life, manages to squirrel away a comfortable nest egg from what's left, and somehow the government thinks it has a claim on the remainder, too? They're just waiting for you to die, so they can come take it?

The estate is what's left after you've paid taxes. How can anyone justify taxing that remainder portion too? What makes it OK? Is it just because you've died, so you're not around to argue anymore?

It smacks of pure envy opportunism, in my opinion, utterly bereft of any remotely moral justification.

 

[kombat]

There ought to be no cap on SS taxes but there ought to be a means test for collecting SS

Then SS just becomes another wealth-distribution program, instead of the forced-savings program it was originally envisioned as.

There is already a welfare program for redistributing wealth from the rich to the poor - why repurpose SS into another one? If you want to boost payments under welfare, then just do it directly, rather than in a roundabout way that involves castrating what is supposed to be a federally-managed retirement income program.

 

[kombat]

You do realize there are functions performed by DHS that are specifcally listed and required by the Constitution, right?

But the DHS didn't even exist until after 9/11? So who was performing those functions prior to the genesis of the DHS? Why can't those constitutionally-mandated functions just revert back to whoever was doign them before DHS was created?

 

[GregLee]

So how could you cut taxes for these people who pay no tax anyway? In fact, many of them get payments. We have a situation where 50% of the population is all for raising taxes, since they will never pay them.

That's obvious. Increase payments to low income earners, who will then become disinclined to raise taxes (across the board), since that would lower the payments to them.

 

[scrabbler1]

Only 50% of tax return filers pay income tax, and the lowest strata may not even file.

So how could you cut taxes for these people who pay no tax anyway? In fact, many of them get payments. We have a situation where 50% of the population is all for raising taxes, since they will never pay them. And the another large % is all for raising taxes, as they work for governments and will get more in salary and benefits than they will ever pay in increased taxes.

If you earn good money, and are not a government worker, best to emigrate because the die is cast for us here in the land of the free.

Ha

What about Payroll (FICA) taxes? And in case you did not notice, it was cut in 2011, so even those who pay no income taxes received an increase in their paycheck due to this federal tax cut.

 

[scrabbler1]

The Flat Tax is another awful idea. I studied it a lot when it got a lot of publicity in late 1995 and into 1996 with Steve Forbes' presidential campaign and Congressman Dick Armey's book (which I bought and still own). Also, there was a terrific segment of Firing Line in late 1995 which featured a debate with 8 people, 4 pro-FT and 4 anti-FT. I don't have the transcript to the show but here is a review of it:

ONLY BUCKLEY COULD GET A RISE OUT OF FLAT-TAX DEBATE

Anyway, that show and Armey's book taught me a lot about the Flat Tax and why it is such a bad idea.

(1) The Flat Tax (at least Armey's proposal) was merely a ruse to cut the top rate on ordinary income and remove any federal taxation on interest, dividends, and cap gains.

(2) What makes the tax code complicated is figuring out the income subject to taxation, not the calculation of the tax itself. [I will grant that Schedule D and the worksheets which go with it were simpler in 1995-6] Looking up the taxes due in a table is as easy as (if not easier than) multiplying the taxable income by some percentage.

(3) Tax simplification can be achieved by reducing or eliminating deductions and credits, without flattening the rate.

(4) Tax simplification does not necessarily coincide with tax fairness. Sometimes, one can be acheived only at the expense of the other.

(5) For many filers, doing one's taxes is already as easy as the index-card sized tax form in Armey's book. Form 1040-EZ has only a few lines and is used by many filers. Form 1040-A is also pretty short. I have filed each of them in my lifetime and currently complete Form 1040-EZ for a friend of mine in about 3 minutes.

(6) The overall tax system consisting of the progressive federal and state income tax, the regressive property tax, the (justifiably) regressive FICA taxes, and the somewhat regressive sales tax, is already fairly flat because the regressivity of some of these taxes is roughly offset by the progressivity of the others. Therefore, flattening the federal income tax, the most progressive element of the overall tax system, will make the overall tax system regressive.

(7) Armey's Flat Tax was not revenue-neutral. He "assumed" there would be a tax cut for everyone so he kept the rate too low to generate the same amount of tax revenues as with the current system. His revenue-neutral rate would have to be higher which would create many winners at the high end of the income spectrum while creating losers everywhere else.

 

[samclem]

Lots of other countries have mortgages without being allowed to deduct the interest, and somehow we manage just fine. We're not a nation of renters, or a barren wasteland littered with rusty backhoes. There's life after mortgage deductibility.

There's a good case to be made that encouraging home ownership reduces US economic productivity. When you own a home, there's a lot of "friction" to leaving it and buying another one in a new location. Real estate agents need to be paid, all the PITA of fixing up the house and showing it to prospective buyers, the considerable costs of loan origination, appraisals, attorney fees, etc. All this serves to make the US labor force less mobile, and therefore less efficient (less likely to get a good match between skills/talents and job requirements, less efficient labor market, etc) than it would be if more people were renters. So, again, we have a negative second-order consequence from government's meddling in the free market.

 

[SunsetSail]

There's a good case to be made that encouraging home ownership reduces US economic productivity. When you own a home, there's a lot of "friction" to leaving it and buying another one in a new location. Real estate agents need to be paid, all the PITA of fixing up the house and showing it to prospective buyers, the considerable costs of loan origination, appraisals, attorney fees, etc. All this serves to make the US labor force less mobile, and therefore less efficient (less likely to get a good match between skills/talents and job requirements, less efficient labor market, etc) than it would be if more people were renters. So, again, we have a negative second-order consequence from government's meddling in the free market.

Good point. In this market, I would go so far as to say reducing US economic productivity includes a substantial boost to national unemployment rates especially when there are large deltas between regional unemployment rates. People just can't move to where the jobs are located if they can't sell their house.

 

[MasterBlaster]

Originally Posted by veremchuka
the estate tax is beyond cruel and should be immediately abolished. imagine having to pay 40% to 55% of your estate to the government because you died! this is nothing short of confiscation of wealth

I've never understood the justification of people who would defend this particular legislation. A person works and pays taxes their whole life, manages to squirrel away a comfortable nest egg from what's left, and somehow the government thinks it has a claim on the remainder, too? They're just waiting for you to die, so they can come take it?

The estate is what's left after you've paid taxes. How can anyone justify taxing that remainder portion too? What makes it OK? Is it just because you've died, so you're not around to argue anymore?

It smacks of pure envy opportunism, in my opinion, utterly bereft of any remotely moral justification.

If the estate tax - fair or not - allows me to pay less (other) taxes in my time then I am all for it. When I am gone, And the wife is gone, then we'll have no need for it anymore.

The other advantage of a confiscatory estate tax is the elimination of dynasties. We don't need a permanent upper class.

Is it wealth confiscation ? I'd have to say yes to that.

 

[MasterBlaster]

So that would put the top rate in Canada/Ont at 29% + 11% = 40%. That's lower than the us with CA at 35% + 10% = 45%.

I always thought canada was higher by about 5-10%. Did tax rates change in the past decade (haven't lived in canada since late 90s)?

Just so you know the top rate in california for 2010 was 10.55% for very high incomes.

 

[MasterBlaster]

We've had many discussions here about "tax fairness", most turn out like a coyote trying to eat its own tail...

On a cautionary note, now that the the hue and cry has apparently shifted from the relative merits of "tax fairness" to "tax the rich, they can afford it!" the same logic can and may be applied to LBYM'ers at every income level. If you have more than you "need" it is your moral and (soon-to-be, if the 50+% of the population who pay little or no tax sell their votes in favor of a proposal) ) legal obligation to subsidize those who have less. How you earned it, what you lived without to accumulate it, and what taxes you already paid on your "wealth" really doesn't matter- you are "rich" in the eyes of your fellow citizens who have less, and a target in the new economic redistribution climate.

Rather, we should tax the foregone human capital of those "rich" people who retired early. Perhaps a 50% foregone human capital tax would be only be fair.

 

[veremchuka]

If the estate tax - fair or not - allows me to pay less (other) taxes in my time then I am all for it. When I am gone, And the wife is gone, then we'll have no need for it anymore.

The other advantage of a confiscatory estate tax is the elimination of dynasties. We don't need a permanent upper class.

Is it wealth confiscation ? I'd have to say yes to that.

but you are looking at this only from your situation - you don't have a business to pass on. what about people that built a business over the past 25 or 50 years or multi generations and they want to pass that business on to their heirs. the estate tax has caused people to have to sell the business to pay the estate taxes upon the death of the owner. this is what i am referring to. why should the gubmint take away the ability of you passing your business to your children? this is absolutely anti capitalism and anti ownership of property. stalin, castro, chavez et al would approve of this tactic! and on top of that this is wealth that has been taxed, probably over and over... enough is enough!

btw, i do not own a business and i'm in the 15% tax bracket so i am not a rich fat cat with an axe to grind. this is a matter of fairness, a matter of the gubmint confiscating your property.

 

[Westernskies]

Rather, we should tax the foregone human capital of those "rich" people who retired early. Perhaps a 50% foregone human capital tax would be only be fair.

Perhaps. ...but only with a deduction for not winning the birth lottery.

 

[MasterBlaster]

but you are looking at this only from your situation - you don't have a business to pass on. what about people that built a business over the past 25 or 50 years or multi generations and they want to pass that business on to their heirs. the estate tax has caused people to have to sell the business to pay the estate taxes upon the death of the owner. this is what i am referring to. why should the gubmint take away the ability of you passing your business to your children? this is absolutely anti capitalism and anti ownership of property. stalin, castro, chavez et al would approve of this tactic! and on top of that this is wealth that has been taxed, probably over and over... enough is enough!

btw, i do not own a business and i'm in the 15% tax bracket so i am not a rich fat cat with an axe to grind. this is a matter of fairness, a matter of the gubmint confiscating your property.

We'll first off I agree it just isn't fair.

But really, to fund the govRment we can tax dead people more so that the living have a lower burden. I kind of like that argument. To not implement such means that you will have to pay more when living.

As per the family business/family farm thing ? Isn't there a $3-5M no-tax exclusion ? We can debate the exclusion amount, but how much is enough $10M, $100M ?

Per the Stalin/Castro thing - You have a point. But a very exaggerated point. If you don't believe me you should read some Solzhenitsyn.

 

[GregLee]

the estate tax is beyond cruel and should be immediately abolished. imagine having to pay 40% to 55% of your estate to the government because you died!

Cruelty to corpses. Shame!

 

[youbet]

As per the family business/family farm thing ? Isn't there a $3-5M no-tax exclusion ? We can debate the exclusion amount, but how much is enough $10M, $100M ?

The exclusion level is everything in the argument. I have little issue with an estate tax with a 5 mil exclusion. The number of estates above that is very small and therefore the estate planning industry, currently booming, would dwindle. A good thing.

An exclusion at one mil involves many more estates including many middle class folks and therefore promotes a large, costly estate planning industry. A bad thing.

But more than anything, the gov't dingalings representing you in Washington need to made some estate planning guidelines semi-permanent so people can make plans that are good for more than a few years and reduce the number of expensive trips they need to make to their attorney's/CPA's office.

 

[MasterBlaster]

Cruelty to corpses. Shame!

Yeah ! As if dying weren't bad enough ?

 

[veremchuka]

no exemption is needed for the estate tax because estate taxes are unfair wealth confiscation, period. again, communist and socialist regimes would agree this is a good idea and do it. this is very anti capitalist and that is what built this nation and gave it the greatest level of wealth and personal freedom in the history of the human race.

the poor don't derive anything from the estate tax, the government just squanders the money like it does with all revenues. the more they get the more they spend. instead of robbing the dead and stealing from their heirs we should cut government interference and reduce all taxes. perhaps this is not a popular idea here? seems anyone, well most anyone , that has done well enough to retire early would appreciate private ownership of property?