Progressive Nature of Tax Code

[haha]

One time while driving on a highway, I was pulled over. No ticket given. And I am white. My hispanic friend has gotten 2 tickets, in the 2 times he has been pulled over. But he has a white last name. And he had a white passenger one of the times, and a brother with a white name as a passenger the other time. Draw your own conclusions about police. But the facts are the facts. Oh, and I was driving a Ford, and my friend was driving a Honda. And he was speeding, and I made a lane change with signaling.

 

[FIREd]

A lot of them move to the UK, which doesn't tax income earned overseas. (that's why they have a lot of Arab oil men and Russian oligarchs living in London)

But unless they renounce their French citizenship, they may not necessarily evade French taxes.

If you have no income in France and own no assets in France, then you won't owe any taxes in France even if you remain a French citizen (as long as you pay taxes in your host country). So wealthy French citizens move with their assets to more tax-friendly places. A favorite is off course Switzerland (because of language commonality). Monaco is hard to get in. I think that the US is also a good alternative (high standard of living, relatively low income taxes, no wealth tax and reasonable cost of living).

 

[aenlighten]

Opposing arguments
Practical arguments
1) Can’t get blood from a turnip Don't bite that hand that feeds you Unless you also snap the neck?
2) Got to go where the money is The candle that burns twice as bright burns half as long and engulfs the one that burns slowly.
3) Some gov’t spending explicitly supports the poor. It’s silly to tax the poor or lower middle for this spending To whom much is given much is expected and who has more?

Incentive arguments
4) High earners make more per hour, consequently higher tax rates on them leave more level incentive to work If businesses pay time and a half to encourage overtime; What do you suppose the government charging time and a half does? Depends on whether the income or substitution effect predominates (never had any business pay me for overtime though)
5) It’s better to tax dumb luck than hard work (this may be identical to (4), or may be a “fairness” argument) Is a man not entitled to the sweat of his brow? Money is both individual and social.

Utility arguments
6) High income/high wealth have more to protect, hence should/would pay more for protective services The police are not their to protect you, they have no power until a crime has already been committed and you are bleeding in the streets. You must provide for your own protection. More to lose.
7) Same as (6), but expanded to entire social structure The rich send their children down private roads to private schools with their private security guards. Why should they have to pay the lions share for roads schools and social programs they will never use? Because those others vote and can assist in producing wealth or destroying it?
8.) Low income get more utility from marginal income, hence we increase total utility by shifting taxes to higher income The poor do not invest or create businesses with their extra income, How many jobs do ten thousand poor with an extra ten dollars each create compared to the business that could be founded from one rich person with an extra $100,000? More businesses are started by the poor who then become rich than the rich.

Social structure arguments
9 ) Prefer more uniform distribution of income/wealth – don’t like societies with extremes of rich and poor If the punishment for not working is the same as the reward for working, who would work? Would be a wonderful society if we only worked at what we enjoyed. Perhaps when all basic needs are readily taken care of.
10) Concentration of wealth gives excessive power to a few (this also supports wealth taxes) Those who have the most inv At least until it is taken away.

Fairness argument
11) Our system generates large (unfair) differences in opportunity, progressive taxes somewhat offset this Fewer people play the lottery when the prize is smaller Should we be encouraging lotteries?

Seriously, this is mostly a matter of extremes. Extreme equality can be as stifling as extreme inequality. The pendulum swings between these. While taxes are slightly progressive, this hasn't hindered the accumulation of top in the slightest, so are hardly as progressive as they could be, not that there isn't a lot of waste that could be cut as well.

 

[Independent]

These are the ones I disagree with, to varying degrees.

6) I dont quite understand. They have more to protect, thus should pay more in taxes? I'm not sure what you mean. People with more wealth can afford to pay for protection privately. I would guess that the wealthy would rather pay less in taxes and receive fewer services. You think the wealthy prefer more taxes for more services?
9) I strongly dislike uniform distributions of wealth. That seems like a terrible societal structure to have as a goal.
10) I'm not sure what you mean by excessive power. Influence on government? Ability to force people into involuntary contracts? Ability to circumvent the law?
11) This is an empirical claim. Has the increase in progressive taxes altered the beginning states? Has poverty decreased? Is equality of opportunity being realized, and more importantly, is progressive taxation the best way to achieve this?

Note: I listed 11 pros. If there were no cons, then even one of the pros would be sufficient reason for me to support progressive taxes. I don't need to agree with all 11. But responding on those you mentioned:

6) A person with a $1 million house thinks nothing of paying 10x as much to insure or protect it than a person with a $100k house. In fact, if you can show that the more expensive house is more likely to be targeted by thieves, then he/she would willingly pay more than 10x. Similarly, if a wealthy person and a poor person both believe they have an enemy who may harm them, the wealthy person will spend more on bodyguards. Again, the ratio might be more than 10x, as the poor person might spend zero.
I think that "private protection" only works to the extent that we have a public system as a base. Unless you really want to live in a distopia, you don't want a world of private armies.

9) Like many other things, I find the middle better than either extreme. I wouldn't want a flat distribution either, because I don't think the everyone is willing to expend the same effort. But I don't want third world distributions either.

10) Good point, because "power" is a fuzzy concept. Probably "influence on gov't, ability hire the best lawyers, control economic events". In some sense, it's also the feeling that the people who really shape the world the rest of us live in don't live in it themselves.

11) I'm not claiming that progressive taxes eliminate inequality of opportunity, or even realized poverty. They simply reduce some of the gross differences. Our progressive FIT isn't going to prevent the super-bright Harvard grad from making millions as an investment banker. It does mean that the kid who struggled to get through high school and works as a roofer gets to keep a higher percent of his income than he would with a flat tax. That's an okay result to me. There are certainly other things we can do besides or instead of progressive taxes.

 

[Independent]

Opposing arguements
Practical arguments
1) Can’t get blood from a turnipDon't bite that hand that feeds you
2) Got to go where the money isThe candle that burns twice as bright burns half as long
3) Some gov’t spending explicitly supports the poor. It’s silly to tax the poor or lower middle for this spendingTo whom much is given much is expected

Incentive arguments
4) High earners make more per hour, consequently higher tax rates on them leave more level incentive to workIf businesses pay time and a half to encourage overtime; What do you suppose the government charging time and a half does?B]
5) It’s better to tax dumb luck than hard work (this may be identical to (4), or may be a “fairness” argument)Is a man not entitled to the sweat of his brow?

Utility arguments
6) High income/high wealth have more to protect, hence should/would pay more for protective servicesThe police are not their to protect you, they have no power until a crime has already been committed and you are bleeding in the streets. You must provide for your own protection.
7) Same as (6), but expanded to entire social structureThe rich send their children down private roads to private schools with their private security guards. Why should they have to pay the lions share for roads schools and social programs they will never use?
8.) Low income get more utility from marginal income, hence we increase total utility by shifting taxes to higher income The poor do not invest or create businesses with their extra income, How many jobs do ten thousand poor with an extra ten dollars each create compared to the business that could be founded from one rich person with an extra $100,000?

Social structure arguments
9 ) Prefer more uniform distribution of income/wealth – don’t like societies with extremes of rich and poor If the punishment for not working is the same as the reward for working, who would work?
10) Concentration of wealth gives excessive power to a few (this also supports wealth taxes) Those who have the most inv

Fairness argument
11) Our system generates large (unfair) differences in opportunity, progressive taxes somewhat offset thisFewer people play the lottery when the prize is smaller

We're both trying to be brief, and may be talking past one another. I'll try to respond.

1) and 2) I think you are implying this "con": "Progressive taxes drive the most productive workers away". Like many of my "pros", really evaluating that becomes a numbers game - How many do you really lose? How does that compare to all the pros?
3) It looks to me like you are agreeing with me, though I would move your "To whom.." quote to the "Fairness" category.

4) I don't get your point.
5) Again, I think we are agreeing. Compare high and low income workers' paychecks. Look at the ratio of "sweat of brow" to "dumb luck" in those paychecks. I'm claiming that the sweat component is much higher in the lower paychecks. (I'm using "sweat" to represent all effort, not just physical effort.)

6) I think our whole system of laws, police, and prisons dramaticaly reduces crime. The number of actual arrests is small compared to the number of crimes that were never attempted due to the risk of punishment or the fact that the potential criminal is already in prison.
7) The ability to get rich in the US is based on the whole infrastructure of laws, contracts, education, financial stability, etc. People who succeeded obviously got much more financial benefit from this than others.
8.) You are implying this con: "The rich have a higher marginal propensity to save, therefore if we want to maximize capital accumulation we should see to it that they have lots of money." It's a solid con. But note, I think capital accumulation is a means to an end, not an end in itself. So this con doesn't outweigh the pros. To the extent that we want capital, we can get a lot from middle class people by providing tax benefits for small savers - the $100k invested by 10,000 poor each saving $10 is just as useful as the $100k invested by one rich person.

9) I don't get your point.
10) If "inv" means "invest", then I covered this in (8.)

11) You're proposing a con involving incentives. It's a reasonable con, but not directly addressing (11). I'd put it up with (4), which is the counter-argument.
I look at it this way: Worker A makes $100 an hour while B-K each make $20 and hour. We are going to collect $60 in taxes. Do the incentives work best with a flat 20%, so A gets $80 after tax while B-K each get $16? Or are the incentives better with A getting $70 after tax, and B-K each getting $17? To me, there is more total incentive to work in the second case because we've impacted 10 workers with higher utility functions, but that's pretty subjective.

 

[explanade]

Doesn't every industrialized country have a progressive tax system?

So are people leaving industrialized countries for developing countries because of progressive taxation?

 

[ladelfina]

#6) the US has 5% of the world population and 25% of the world's prisoners. But it's not as safe as many other places. Are Americans getting what they are paying for?

all the anti-progressive tax responders seem to be talking only about income taxes and leaving out regressive sales and other local taxes. I wonder how much progressivity is left when all is said and done. I guess it depends on your individual state/city/county.

 

[samclem]

#6) the US has 5% of the world population and 25% of the world's prisoners. But it's not as safe as many other places. Are Americans getting what they are paying for?

Raise your hands: All those who want to be as "safe" as the lucky citizens of China or Saudi Arabia.

The US has a strong cultural preference for individual responsibility, for holding people accountable for their actions. Our high incarceration rate is a largely a result of this. This has nothing to do with government spending.

If we lowered incarceration rates, there's good reason to believe that crime would go up.

[FONT=Verdana, Arial, Helv]From 1981 to 1996, according to Justice Department statistics, the risk of punishment rose in the United States and fell in England. The crime rates predictably moved in the opposite directions, falling in the United States and rising in England.[/FONT]
[FONT=Verdana, Arial, Helv]“These figures,” Mr. Cassell wrote, “should give one pause before too quickly concluding that European sentences are appropriate.”[/FONT]
[FONT=Verdana, Arial, Helv]Other commentators were more definitive. “The simple truth is that imprisonment works,” wrote Kent Scheidegger and Michael Rushford of the Criminal Justice Legal Foundation in The Stanford Law and Policy Review. “Locking up criminals for longer periods reduces the level of crime. The benefits of doing so far offset the costs.”[/FONT]
[FONT=Verdana, Arial, Helv]There is a counterexample, however, to the north. “Rises and falls in Canada’s crime rate have closely paralleled America’s for 40 years,” Mr. Tonry wrote last year. “But its imprisonment rate has remained stable.”[/FONT]

(I left the Canadian ref in there to fairly capture the meaning of the quote. I'm not sure it's germane).

Now, a lot of this incarceration is due to the "war on drugs", which I think is a dubious proposition at best. But, for the rest of it, paying to lock up those who forcibly take the lives and property of other citizens is a good use of tax money.

 

[armor99]

#6) the US has 5% of the world population and 25% of the world's prisoners. But it's not as safe as many other places. Are Americans getting what they are paying for?

all the anti-progressive tax responders seem to be talking only about income taxes and leaving out regressive sales and other local taxes. I wonder how much progressivity is left when all is said and done. I guess it depends on your individual state/city/county.

You are quite right ladelfina, there are many countries that you can walk down the street in any city at 3:00 am, and no one would ever try to assault you etc. But.... at what price to pay for such a society? Some of these same societies are so brutal on the individual rights of their citizens, that no one dares to break even minor laws because of the excessively hefty punishments for even small infractions. Yes... women still get stoned to death in certain countries for showing their face in public, or having lunch with a man that is not their husband or a family member.
I believe there is a certain "cost" if you will, of living in a free society as ours is. You do not need "papers" to freely move around the US, and people do not get abducted in the middle of the night never to be heard from again, just because they might have said the "wrong" thing, just a bit too loudly. But the flip side of that sort of freedom, is that a larger percentage of people will and do abuse their rights. Is it really so far fetched to think that in one of the freest countries on earth that you will have the most abusers of that freedom as well? I would think they would go hand in hand.

 

[Abreutime]

I believe there is a certain "cost" if you will, of living in a free society as ours is. You do not need "papers" to freely move around the US, and people do not get abducted in the middle of the night never to be heard from again, just because they might have said the "wrong" thing, just a bit too loudly. But the flip side of that sort of freedom, is that a larger percentage of people will and do abuse their rights. Is it really so far fetched to think that in one of the freest countries on earth that you will have the most abusers of that freedom as well? I would think they would go hand in hand.

This makes sense. I just have a couple points to make, with which you may not be in complete agreement. First, I think the US has become less "free" in recent years. The War on Drugs, the War on Terror, and the the War in Iraq (hey, I needed a third war to lament) have slowly chipped away at our freedoms. This came about after 9/11, as more and more people seemed quite willing to give up freedom for security. I'm not going to quote Benjamin Franklin here (just reference his quote ), but my hope is that people re-evaluate what it means to be a citizen of a country, and the role that government should play in their lives.

 

[ladelfina]

I guess I was thinking of the UK and European countries as to safety.

I don't believe rights can be abused.
That's just illogical. Something either is a right, or it isn't.

Is it really so far fetched to think that in one of the freest countries on earth that you will have the most abusers of that freedom as well? I would think they would go hand in hand.

Following this logic, the place with the most people locked up is the most "free"?

I don't want to derail this into whole 'nother discussion.. I was more thinking about taxation and what benefits people actually percieve for the monies spent. The statistics might indicate that:
- people in the US are 5x more violent/dangerous/criminal than anywhere else?
- people are 5x safer in the US than than anywhere else?
- people are wasting 5x as much money on prisons as anywhere else?
- a combination?

It's just one area of expenditure that might be questionable and should be examined, given its stark overemphasis.

 

[samclem]

This makes sense. I just have a couple points to make, with which you may not be in complete agreement. First, I think the US has become less "free" in recent years. The War on Drugs, the War on Terror, and the the War in Iraq (hey, I needed a third war to lament) have slowly chipped away at our freedoms. This came about after 9/11, as more and more people seemed quite willing to give up freedom for security. I'm not going to quote Benjamin Franklin here (just reference his quote ), but my hope is that people re-evaluate what it means to be a citizen of a country, and the role that government should play in their lives.

This is the oft-stated view, and it is true that we should guard our freedoms jealously and be ever vigilant about preserving them. Still, I think the "chipping away" of freedoms has been vastly overstated. Is anyone really afraid to criticize the government? Is anyone really afraid of getting "disappeared?" Have the new laws significantly hindered Americans from doing things they want to do? Frankly, I'm not too concerned if a foreign national gets delayed upon trying to enter the US if his/her documentation is not right. I don't care that those wanting to transfer $100K in cash have to show some ID. I don't mind walking through a metal detector before getting on an aircraft. These are just not significant losses of freedom.
Consider what will happen if there is another big terrorist attack--the public will demand a lot of highly intrusive security measures. Those who brayed and moaned about the common-sense measures now in place will lose all credibility and will be seen as at least partially to blame for the successful attack. In such an environment, imagine how things will go. Preventing such an attack is in everyone's interest, especially those worried most about the preservation of civil liberties.

It makes good sense to analyze the situation and weigh the pros and cons of any changes before railing against some very minor security measures. After all, we've always had restrictions, it's just a matter of degree.

 

[Texarkandy]

Tex may be so studly that he has never faced this demand. But as a lesser gent I have at times felt the bite of the P-tax.

Ha

Sinking to the level of personal attacks now are we?

 

[REWahoo]

This thread has clearly sunk to Soapbox level...

 

[Texarkandy]

This thread has clearly sunk to Soapbox level...

I hadn't noticed till you pointed it out - I just assumed that it was!

 

[ERD50]

I don't want to derail this into whole 'nother discussion..

Awww, why not? It has happened to a number of threads lately, why not this one?

The statistics might indicate that:
- people in the US are 5x more violent/dangerous/criminal than anywhere else?
- people are 5x safer in the US than than anywhere else?
- people are wasting 5x as much money on prisons as anywhere else?
- a combination?

I choose: ' a combination? '. I keep falling back on Ockam's Razor, and it seems to serve me well. I do think that ' a combination? ' is the simplest, most correct answer.

This is the oft-stated view, and it is true that we should guard our freedoms jealously and be ever vigilant about preserving them. Still, I think the "chipping away" of freedoms has been vastly overstated. Is anyone really afraid to criticize the government? Is anyone really afraid of getting "disappeared?" Have the new laws significantly hindered Americans from doing things they want to do?

I probably have related this story before, but one day I had a long conversation with my brother's FIL. He escaped from a communist controlled country in the early 60's (late 50's?). He told me about how his dissident Uncle's got 'disappeared'. He told me things that literally had my hair standing on end. I just shake my head when people get all worked up over perceived 'intrusions' into their privacy these days. Like some google adsense thing is going to make someone close to you disappear overnight. Get a grip.

As samclem says, we need to be vigilant. But we also need some perspective. I get up every morning, and pretty much do whatever the 'eff' I please, as long as it isn't interfering with someone else's freedoms. And I ask the same in return. I like it that way.

This thread has clearly sunk to Soapbox level...

well, ummm, OK, you're right! Or has it 'risen' to that level

-ERD50

 

[Notmuchlonger]

Its amazing how these threads start off so innocently. Then they blossom into a beautiful flower.

 

[ERD50]

So for those in favor of a progressive tax system, what do you think about a state run lottery?

IIRC, lotteries take money disproportionately from the poor, and give little in return. Sounds like a regressive tax to me. Are the Dems ready to abolish lotteries?

Some of the taxes mentioned earlier are flat taxes, not regressive taxes.

Recently, while researching info on SS disability payments (not as hard to qualify for as Martha would have you believe), I was shocked to see them give the example of Ms X winning a lottery as income that would offset their disability payment. Now, why on earth would someone receiving disability payments from me (the govt), be using that money to buy lottery tickets? I don't buy lottery tickets, so why should someone in dire straights use my money to buy lottery tickets?

http://www.socialsecurity.gov/pubs/11011.html

For example, a woman living in California gets a $500 Social Security widow’s payment and a $270 SSI payment. In June, she buys a lottery scratch-off card and wins $200 and reports that to the Social Security office.

Arggggghhhhh!!!!!! Are we in the Soap Box yet?


-ERD50

 

[NW-Bound]

... my brother's FIL. He escaped from a communist controlled country in the early 60's (late 50's?). He told me about how his dissident Uncle's got 'disappeared'.-ERD50

Just a quick detour.

Aleksandr Solzhenitsyn died a couple of weeks ago. I am sure some of us have read his popular-then books "The First Circle", and "One Day in the Life of Ivan Denisovich". I got them stashed somewhere. Time to read them again.

Sorry for interrupting...

P.S. I meant I will read them again to enjoy his great writing, and to appreciate the life I have had so far.

 

[ERD50]

Just a quick detour.

Aleksandr Solzhenitsyn died a couple of weeks ago. I am sure some of us have read his popular-then books "The First Circle", and "One Day in the Life of Ivan Denisovich". I got them stashed somewhere. Time to read them again.

Sorry for interrupting...

Not at all... I did see the notices in the news, but had never read him. Sounds like something I would connect with. Almost unbelievable what some people have dealt with in their lives, yet we are 'free' to be in a position to ponder the relative merits of a $4/liter box wine versus a $16/liter bottle of wine. And still, so many of us complain.


Thanks, -ERD50

 

[HFWR]

So for those in favor of a progressive tax system, what do you think about a state run lottery?

I'm ok with a progressive tax system; how about a progressive flat tax?

I think lottos are a lousy way to fund the government.

 

[Martha]

So for those in favor of a progressive tax system, what do you think about a state run lottery?

IIRC, lotteries take money disproportionately from the poor, and give little in return. Sounds like a regressive tax to me. Are the Dems ready to abolish lotteries?

Some of the taxes mentioned earlier are flat taxes, not regressive taxes.

Recently, while researching info on SS disability payments (not as hard to qualify for as Martha would have you believe), I was shocked to see them give the example of Ms X winning a lottery as income that would offset their disability payment. Now, why on earth would someone receiving disability payments from me (the govt), be using that money to buy lottery tickets? I don't buy lottery tickets, so why should someone in dire straights use my money to buy lottery tickets?

http://www.socialsecurity.gov/pubs/11011.html


Arggggghhhhh!!!!!! Are we in the Soap Box yet?


-ERD50

I am confused. What did I say that was hard to quantify?

So you want to direct each penny the disabled spends? Or just no lottery tickets? My autistic brother smokes. It is a really bad idea and makes it hard for him to pay his bills. How are we to stop him from smoking? Tell every store clerk that people on disability don't get to buy smokes? Show me your ID that confirms you are self supporting before you buy a lottery ticket or cigarettes?

Or make sure they don't get enough money to buy these things? Well, they don't have enough money to buy these things, but they do anyway. Life's little pleasures. The dream of a lottery win. The jolt of nicotine.

(I do support free nicotine substitutes and stop smoking programs for the poor. I also think state supported lotteries are a shameful way to raise money).

BTW, I support a progressive tax system.

 

[samclem]

BTW, I support a progressive tax system.

Who woulda guessed?

While I don't think it was perfect, I think the tax plan Fred Thompson was pitching had a lot going for it. I wish McCain would say something positive about this idea. (Here's a link to the study upon which Thompson's plan was based)
1) Folks could keep using the present tax system if they wanted (result--significantly increases the chance that this will get through Congress, since every person and group can keep using their pet loophole/incentive if they want)
2) Or, people can choose to use the flatter, simpler tax computation method. No itemized deductions, a high standard deduction ($12.5K for singles, $25K for couples), and a personal exemption of $3k per person (so a family of 4 would pay no tax on their first $37K of income). Cap gains and dividends would be taxed at 15%. All other income up to $50K (singles) $100k (couples) would be taxed at 10%. All income above this level would be taxed at 25%. There would be no other tax credits or deductions for those who choose to use the simplified flat-rate computation.

There were some unanswered questions (e.g do I have to use the old tax computation system to use my Roth money tax-free?), but I think this simple, relatively flat tax would have a realistic chance of passing and garnering some public support. It would sure get more attention than the tax ideas McCain is pushing now (which are miles better than BHO's plans, but hardly anything to capture the public's imagination, either).

 

[Marquette]

I'm still amazed that, even with being my normal conservative don't-wanna-get-audited self, our enrolled agent got our AGI down over $50k. Personally, I'd rather have a flat tax even if it meant I might have to pay more.

 

[Notmuchlonger]

I'm still amazed that, even with being my normal conservative don't-wanna-get-audited self, our enrolled agent got our AGI down over $50k. Personally, I'd rather have a flat tax even if it meant I might have to pay more.

Actually I was hoping it would all go back to where everyone was a serf. Then hopefully I would be one of the lucky ones born into some kind of royalty. I could be like the Lord of a manor. Ya that would be nice.

My luck though I would be stuck being the peon.