Let's Tax The Rich!!!

[ERD50]

In 2005, the top 1% averaged $1.07 million after all federal taxes.
Multiplying by 1.13 million families in the top 1%, I get $1.2 trillion in after federal tax income.

If that number grows as fast as the projected (nominal) GDP between 2005 and 2015, it will be $1.8 trillion.
The projected budget deficit for 2015 is $606 billion.

It looks like it would take about 1/3 of the after federal tax income to cover that deficit.

Again, I wouldn't recommend that. But I would say that we could cover about a third of the deficit by increasing the average FIT rate on the top 1% from 19% to about 27%.

So you say raising the avg rates on the top 1% from 19% to 27% could (statically modeled) collect about 1/3 (29% by my calcs) of that deficit. Where does the other 67%-71% come from?

-ERD50

 

[clifp]

So you say raising the avg rates on the top 1% from 19% to 27% could (statically modeled) collect about 1/3 (29% by my calcs) of that deficit. Where does the other 67%-71% come from?

-ERD50

The traditional sources of magically creating money.

Eliminating government waste and fraud, getting rid of corporate tax loopholes and corporate welfare, cutting defense, and plus the ever popular new Green economy.

I am sure I missed a few.

 

[jdw_fire]

I don't know about Singapore but would Switzerland have lower tax rates?

Cost of living is really high, even before the Swiss Franc hit historic highs against the dollar. I visited there 4 years ago and it was crazy expensive back then.

There are certainly enough tax havens, like Monaco, but you have to renounce your citizenship right? As long as you're US citizen, doesn't matter where you live. Even if you make most of your income overseas, after a certain amount, you still owe Uncle Sam.

Now, would wealthy Americans have same opportunities to generate income in these other countries (putting aside the cost of living in nice developed countries)? Monaco is a beautiful playground if you're rich, but unless you're selling yachts, there's not much infrastructure for many types of business. Won't be as easy to found a high-tech startup there, for instance.

well said. all these concerns about the wealthy leaving the USA because of higher taxes are just not well thought out. they wont leave, and even if they did they would still owe the tax. they wont renounce their US citizenship.

 

[missionfinder]

To me this is just different. Let me first say that I will be upfront and say that I would prefer to have better services and higher taxes. I am OK with taxes being increased. I do think there is unnecessary spending in the budget but by and large would prefer to raise taxes than do draconian cuts to services I think are needed.

But, I have just never thought the inheritance tax was fair. The money was already taxed and I just don't think there should be tax on leaving your money to others.

Have you ever sent the IRS more money than you owe? Choose not to take large deductions you can take? Put your money where your mouth is and voluntarily increase your own taxes. I wonder how much the government would raise if all the people I've seen who say they were ok with higher taxes stepped up to the plate and actually did it?

 

[missionfinder]

are you so sure? maybe people making that much money arent working for the money anymore, maybe they are working because they love to work or love the power.

How do you know this? How much is too much? Maybe they enjoy an expensive yacht, huge home and private plane as much as you enjoy things you can afford which others with lower incomes cannot afford.

 

[Independent]

So you say raising the avg rates on the top 1% from 19% to 27% could (statically modeled) collect about 1/3 (29% by my calcs) of that deficit. Where does the other 67%-71% come from?

-ERD50

The $61 billion spending cuts the R's have proposed for the remainder of FY2011 seems like a good start in "discretionary, non-defense". Though I think cutting the IRS budget is shooting yourself in the foot unless we simplify taxes.

Then it's medical costs. I believe we've talked about that one before. That's the elephant in the federal budget.

Long term (after 2015) we need to adjust SS. I'm sure we should raise the retirement age, after that any combination of benefit cuts and tax increases work for me.

(I got the 1/3 this way: 1.13 million taxpayers averaging $1.56 million of before tax income in 2005, grossed up by 51% to reflect increase in GDP from 2005 to 2015, divided by $606 billion.)

 

[Independent]

If these people have the sense that I think they have they will not hang around to be milked. Singapore beckons, as do Switzerland and number of other places that have a lot over the US.

Ha

We've had much higher tax rates on dividends and capital gains in the recent past. In fact, dividends had always been taxed at the same rates as ordinary income up to 2002. The top capital gains rate was 25% or more for 50 of the 55 years from 1945-1999.

These 15% rates for capital income are a recent change to tax policy.

I don't recall any flood of rich people renouncing citizenship and moving all their assets overseas in those many years of higher rates.

 

[Westernskies]

Where does the other 67%-71% come from?-ERD50

Stimulus money?

 

[Texas Proud]

Like I said, I'm not one of the people suggesting that we should close the whole deficit by taxing the rich. But when I look at the numbers, it doesn't seem so absurd to me.

In 2005, the top 1% averaged $1.07 million after all federal taxes.
Multiplying by 1.13 million families in the top 1%, I get $1.2 trillion in after federal tax income.
If that number grows as fast as the projected (nominal) GDP between 2005 and 2015, it will be $1.8 trillion.
The projected budget deficit for 2015 is $606 billion.

It looks like it would take about 1/3 of the after federal tax income to cover that deficit.

Again, I wouldn't recommend that. But I would say that we could cover about a third of the deficit by increasing the average FIT rate on the top 1% from 19% to about 27%. And, we could do that without increasing the 35% top marginal rate on labor. We would go back to days when dividends and capital gains are taxed at about the same rates as labor income.

One of the problems with a high cap gain tax is that it can be avoided... and when the rate is very high it is avoided...

You do NOT have to sell cap assets if you do not what to....

Believe me... I did a number of proformas for rich people back in the early 80s on how much a sale of something would cost them... almost all the time they decided to not sell...

So, raising the cap gain tax will not bring in much, if any, new revenue...

 

[Texas Proud]

We've had much higher tax rates on dividends and capital gains in the recent past. In fact, dividends had always been taxed at the same rates as ordinary income up to 2002. The top capital gains rate was 25% or more for 50 of the 55 years from 1945-1999.

These 15% rates for capital income are a recent change to tax policy.

I don't recall any flood of rich people renouncing citizenship and moving all their assets overseas in those many years of higher rates.

Some people seem to forget that even with the high tax rate here... it is usually much worse in other major countries... remember the song "The Taxman" by the Beatle's IIRC, it was 1 for you, 19 for me... or a 95% marginal tax rate....

 

[Westernskies]

Have you ever sent the IRS more money than you owe? Choose not to take large deductions you can take? Put your money where your mouth is and voluntarily increase your own taxes. I wonder how much the government would raise if all the people I've seen who say they were ok with higher taxes stepped up to the plate and actually did it?

Missionfinder, you seem not to grasp the concept of spending OPM "Other Peoples Money"; the mission statement of the HTFC " higher tax fan club".

It's easy to be sanctimonius when it's not your money....

 

[FinanceDude]

Have you ever sent the IRS more money than you owe? Choose not to take large deductions you can take? Put your money where your mouth is and voluntarily increase your own taxes. I wonder how much the government would raise if all the people I've seen who say they were ok with higher taxes stepped up to the plate and actually did it?

How about this.......we actually CREATE jobs, so people can PAY taxes, and that would work. Anyone think that if we had 6% unemployment rather than close to 10% that the govt would collect more money?

It's easy to say "tax the rich" until you're one of them..........

 

[Westernskies]

How about this.......we actually CREATE jobs, so people can PAY taxes, and that would work. Anyone think that if we had 6% unemployment rather than close to 10% that the govt would collect more money?

FinanceDude, that's just crazy talk... Everyone knows taxes need to come from the idle rich, not the working class.

 

[M Paquette]

well said. all these concerns about the wealthy leaving the USA because of higher taxes are just not well thought out. they wont leave, and even if they did they would still owe the tax. they wont renounce their US citizenship.

Heh.

Renunciation of U.S. Citizenship

persons who wish to renounce U.S. citizenship should also be aware that the fact that a person has renounced U.S. citizenship may have no effect whatsoever on his or her U.S. tax or military service obligations

Oh, and they may also owe expatriation tax.
Expatriation Tax

 

[explanade]

Have you ever sent the IRS more money than you owe? Choose not to take large deductions you can take? Put your money where your mouth is and voluntarily increase your own taxes. I wonder how much the government would raise if all the people I've seen who say they were ok with higher taxes stepped up to the plate and actually did it?

What does that have to do with tax policy?

A few people volunteering to pay more than they owe isn't going to make a difference.

We're talking about tax rates across a large swath of households.

A lot of the super rich, like Buffett, have advocated for higher marginal rates. But those few willing to pay more for the sake of what they believe is the public good are offset by others who think their taxes are too high and look for ways to reduce their tax liabilities.

 

[Westernskies]

But those few willing to pay more for the sake of what they believe is the public good are offset by others who think their taxes are too high and look for ways to reduce their tax liabilities.

a "few willing to pay more for the sake of what they believe is the public good" pretty much sums it up...

 

[haha]

I am getting something useful from this thread, beyond that many members figure that they will never be counted among the "rich", no matter who is defining that group. And that is, get that money into a Roth now, even if it costs me more short term. And maybe pay cash for a dwelling, to get that no longer necessary flow off Arrogant Avaricious Uncle's radar.

What a mess. I am a little shocked (but only a little by now) by the absolute lack of any morality beyond "my guys are going to grab whatever you rich bstds can't protect, 'cause you suck."

Ha

 

[explanade]

Believe it or not, some can discuss public policy issues such as taxation without being motivated solely by personal circumstances.

That is, one's stance on these issues isn't based only on self-interest.

Hard to believe, isn't it?

 

[haha]

Believe it or not, some can discuss public policy issues such as taxation without being motivated solely by personal circumstances.

That is, one's stance on these issues isn't based only on self-interest.

Hard to believe, isn't it?

Oh no, that is quite common. It is called lying. We can all be virtuous as long as the personal cost seems low.

As you won't believe me, consult the voluminous literature on the social psychology, sociology and political science in this area.

Ha

 

[youbet]

Oh no, that is quite common. It is called lying.

Ha

Once again, Ha hits the target dead center!

 

[samclem]

I am getting something useful from this thread, beyond that many members figure that they will never be counted among the "rich", no matter who is defining that group. And that is, get that money into a Roth now, even if it costs me more short term. And maybe pay cash for a dwelling, to get that no longer necessary flow off Arrogant Avaricious Uncle's radar.

And, I'm not sure the promised Roth tax free status is the bulletproof shield many believe. Why wouldn't Roth gains be taxed, if all the other promises/"understandings" are also being re-examined? We probably wouldn't see a direct tax on Roth withdrawals per se, but there are many ways to include Roth proceeds in other formulas for income so that taxes increase as Roth money is withdrawn.
Ants, prepare to help out the grasshoppers. Don't be greedy now.

We can all be virtuous as long as the personal cost seems low.

I think it's possible to separate our personal situation and offer honest opinions about what would be best for everyone without respect for personal gain. But it's indeed a twisted version of "charity" that involves using someone else's money. The guy that puts $10 in the Salvation Army kettle has earned far more points in my book than the anguished activist who cries out day and night for higher taxes for the benefit of the poor.

 

[FinanceDude]

Believe it or not, some can discuss public policy issues such as taxation without being motivated solely by personal circumstances.

That is, one's stance on these issues isn't based only on self-interest.

Hard to believe, isn't it?

"Some can", I am not including you in "some" pending further discussion...............

 

[youbet]

We probably wouldn't see a direct tax on Roth withdrawals per se, but there are many ways to include Roth proceeds in other formulas for income so that taxes increase as Roth money is withdrawn.

I concur. Taxes on Roth IRA's will creep in like a slow moving cancer and, as you say, will not be applied directly to withdrawals but will involve withdrawals counting as income for determining Medicare premiums, eligibility for deductions, etc.

Ants, prepare to help out the grasshoppers. Don't be greedy now.

I dread this.

 

[HFWR]

Fourteen pages and counting.

I'd have thought we'd solved this by now...

 

[M Paquette]

This whole fuss is fundamentally how do we match up taxation with spending. We've seen arguments for more taxation of various sorts, and suggestions as to possible spending cuts here and there, but none of them have come close to covering the current deficit.

Rep Paul Ryan had a roadmap that would eventually balance the budget, although the total national debt will still rise to over 100% of GDP by 2050. His own party appears to have backed away from supporting this plan, however, in favor of rearranging the deck chairs on the sinking budget.

It might, perhaps, be time to contemplate adjustments to non-discretionary spending, to the benefit of state and federal government, by adapting a program structured along the lines of an older proposal suggested for Ireland's fiscal problems.

A Modest Proposal for Preventing the Children of Poor People in Ireland from being A Burden to Their Parents of Country, and for Making Them Beneficial to the Public

I profess, in the sincerity of my heart, that I have not the least personal interest in endeavoring to promote this necessary work, having no other motive than the public good of my country, by advancing our trade, providing for infants, relieving the poor, and giving some pleasure to the rich. I have no children by which I can propose to get a single penny; the youngest being nine years old, and my wife past child-bearing.