Tax Cuts Extended to All Americans

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Dear old Dad said it best 40+ years ago when I was young and impressionable; we were discussing the rich vs. poor paradigm.

"A poor man never gave me a job or a paycheck, son"

I've seen that before and it's never made sense to me. I'll use "middle" and "high" instead of rich and poor.

Suppose 100 middle income couples buy new houses @ $200k each. That's $20 million of total construction, which provides jobs for some number of plumbers, roofers, etc.

Compare that to one very high income couple that spends $20 million on a single house. That provides jobs for some number of plumbers, roofers, etc.

It looks to me like just as many people were employed building houses for the 100 middle income as for the 1 very high income. So it's clear to me that lots of plumbers and roofers can accurately say "Middle class people gave me a job". (Actually, I don't think anyone "gives" jobs, but that's the common language.)

Looking at actual incomes, 30 years ago the "middle" people in the 2nd, 3rd, and 4th quintiles of income had about 48% of total income, while the "very high" in the top 1% had about 9%. So the middle provided a lot more jobs than the very high.

The ratio has narrowed, the middle's share has dropped to 41% while the top share is up to 18%, but that still means the middle provide more jobs than the top.
 
My point is that if you are in the top 1%... or even 5% of income... you are closer to rich than middle class... not matter what you do with your money...

I agree with that.

My point is that "rich" is a loaded word and is thrown about pretty freely these days. I think many people in the middle class would assume that someone who is "rich" would be regularly getting and/or doing a lot of the things that were on our didn't list. We've never subscribed to movie channels either. Never bought a first class airline ticket. And I still don't have a smart phone. But I did pay taxes well into five figures.

Tying this back into taxation, we have to be aware that politicians practice class warfare in order to get and maintain power. And with that power they accumulate real wealth doing the bidding of the truly wealthy. Bashing families that make $250k a year and raising their taxes such that they have a much harder time saving for their kids' education, saving for their own retirement and donating to charity isn't really productive for society. I'm not accusing you of doing this but our Congress Critters would be more productive watching over government spending more closely so they don't always have to resort to demonizing the "rich" while inventing more ways to tax them.
 
Here's one example- Sen Jim De Mint Republican of SC, says he won't vote for the compromise because it reinstates an estate tax.

Well, on principle I would also oppose any estate tax. But still, in the real world of today, a $5 mln exemption seems more or less reasonable. I don't know if this is indexed, likely not as lawmakers always like a hidden tax increases imbedded in their doings.

I'm eager to see how many politicians are prepared to 'hold their breath until they turn blue' when they can't get just what they want (for many conflicting values of 'want').

"I've got a little list... they'd none of them be missed." :rolleyes:
 
Suppose 100 middle income couples buy new houses @ $200k each. That's $20 million of total construction, which provides jobs for some number of plumbers, roofers, etc.

Compare that to one very high income couple that spends $20 million on a single house. That provides jobs for some number of plumbers, roofers, etc.

It looks to me like [-]just as many[/-] many more people were employed building houses for the 100 middle income as for the 1 very high income.

I'd edit your response this way, to emphasize your point. It's pretty clear that even a $20MM home isn't going to have 100+ bathroom, etc. Many more people are going to be employed serving the millions of average folk than the thousands of high income folk. And I'm not sure that building a Maserati employes more people than a Camry, or that there are more private chefs employed than casual dining employees, or that there are more personal stylists than barbers, etc. etc.
 
Calling oneself "rich" is tacky. Calling others "rich" is rude. So no one is "rich" and we are all middle class. Some of us are just more "comfortable" than others, that's all.;)
 
Maybe I'm not following you, but don't your statements contradict?

You say (correctly) that 'a very high proportion... of personal income taxes are collected from the top income earners.'

But then you seem to say that these are the people who should have their taxes raised?

-ERD50

You posted tax shares but not income shares. I think the contradiction resolves itself when you look at both.

The columns in the table below are percentage shares of income, "social insurance" taxes, and individual FIT.
The first four rows are the first four quintiles of families by income. The top two are the highest quintile - I split it into two parts representing 19% and 1% of households.


INC SIT FIT Quintile
04% 04% -3% Lowest
08% 10% -1% Lower Middle
13% 17% 04% Middle
20% 25% 13% Upper Middle
37% 40% 47% 81-99%
19% 04% 39% Top 1%


Anybody who favors a mix of dedicated social insurance taxes and "progressive" general fund taxes will probably find that this result makes some sense. Some people will say the top don't pay "enough", others will say they pay "too much". I think that's pretty much in the eye of the beholder.

Note that the negative FIT numbers in the third column are the result of running a welfare program (EITC) through the FIT system and calling the result "tax". IMO that's deliberately misleading, and both the R's and the D's are to blame. I'd prefer to see the taxes and the welfare split out separately.

http://www.cbo.gov/publications/collections/taxdistribution.cfm
 
Some people will say the top don't pay "enough", others will say they pay "too much". I think that's pretty much in the eye of the beholder.

Note that the negative FIT numbers in the third column are the result of running a welfare program (EITC) through the FIT system and calling the result "tax". IMO that's deliberately misleading, and both the R's and the D's are to blame. I'd prefer to see the taxes and the welfare split out separately.

Congressional Budget Office - Data on the Distribution of Federal Taxes and Household Income

Yes, and it's the complications you mention (mixing welfare credits and taxes) that make it hard to know where we stand, or where we should go. But I think that's intentional.

-ERD50
 
I've seen that before and it's never made sense to me. I'll use "middle" and "high" instead of rich and poor.

Suppose 100 middle income couples buy new houses @ $200k each. That's $20 million of total construction, which provides jobs for some number of plumbers, roofers, etc.

Compare that to one very high income couple that spends $20 million on a single house. That provides jobs for some number of plumbers, roofers, etc.

It looks to me like just as many people were employed building houses for the 100 middle income as for the 1 very high income. ....


That seems true, but I don't think that is where the phrase "A poor man never gave me a job or a paycheck, son" is targeted. It's about creating businesses that hire the people to serve that consumption. Yes, the workers are being hired to build houses, but they are not each individually getting their paychecks from the homeowner. A contractor is dealing with their payroll, insurance, scheduling, taking on risk, etc, so that all those workers can be organized to complete a job. For that, I expect the contractor to make more money, even become 'rich' ahead of the laborers.

So in general, it is the 'rich man' and not the 'poor man' providing the paycheck. And most of them earn it, because they are a little more motivated, a little more risk taking, a little more organized to do that kind of work. Many of the laborers just want to show up and do their job and that's fine. But don't expect to get 'rich' that way.

Many other businesses really take an influx of capital to get off the ground. A group of 'poor' people just aren't likely to to get that going.

I think there was a circular discussion on this earlier, with someone saying without all this consumption there are no jobs, but without the business there is no product to consume, and round-round. It seems clear that it takes all the pieces of the puzzle, but I'd wager that on average, employers are richer than employees. Hence the phrase.

-ERD50
 
It's about creating businesses that hire the people to serve that consumption.

Two sides of the same coin, no? One can't exist without the other. So who gets credit?
 
Easily? Really? You seem to live in a very different world from mine. My wife and I just retired from being college professors, and our combined income, with 39 years of seniority, never came close to $250,000. It was about a quarter of that. That $250,000 sure sounds rich to me.

Really?! I figured a college professor would make a LOT more than that. Heck, I have a friend who's just a teacher in the public school system, with maybe 13-14 years of service, and HE makes about a quarter of that! And I shouldn't say "just a teacher", as his work is important, and he's probably not paid enough...but I just figured a college professor would make more.
 
Two sides of the same coin, no? One can't exist without the other. So who gets credit?

I don't care about assigning 'credit' to either group. Is my butcher serving me, or do I keep my butcher in business? Who cares? It works.

I'm only interested in seeing things work better, and all these tax complications make it hard to even sort out what direction our policies should take.

-ERD50
 
Really?! I figured a college professor would make a LOT more than that. Heck, I have a friend who's just a teacher in the public school system, with maybe 13-14 years of service, and HE makes about a quarter of that! And I shouldn't say "just a teacher", as his work is important, and he's probably not paid enough...but I just figured a college professor would make more.

I think it matters at what college you teach.... when I got laid off I was going to try and teach at the local college.... and found that the starting pay for someone in their business school was in the $45K range... it was a community college, but still....

I don't think that some small 4 year institutes pay that much more...
 
It is remarkable easy to argue why taxes should be lower. It's also easy for folks to admire their own efforts and acknowledge the correlation between that effort and the rewards they enjoy.

At some point in my working life I have been in each of the deciles of income distribution. I worked hard and made some smart choices, but much of my achievement was good fortune. It is the same for most others. Bill Gates and investment bankers included. The more fortunate need to pay a greater share of taxes (certainly greater than is being paid today) and also invest in ensuring more people have greater access to wealth generating opportunities.

The propserity of the baby boom generation was created by the generations before us, the effort they made and the taxes they paid.

The selfishness of our generation is like a disease and our children will suffer the consequences because we are not investing in the infrastructure they need to prosper.
 
It is remarkable easy to argue why taxes should be lower. It's also easy for folks to admire their own efforts and acknowledge the correlation between that effort and the rewards they enjoy.

At some point in my working life I have been in each of the deciles of income distribution. I worked hard and made some smart choices, but much of my achievement was good fortune. It is the same for most others. Bill Gates and investment bankers included. The more fortunate need to pay a greater share of taxes (certainly greater than is being paid today) and also invest in ensuring more people have greater access to wealth generating opportunities.

The propserity of the baby boom generation was created by the generations before us, the effort they made and the taxes they paid.

The selfishness of our generation is like a disease and our children will suffer the consequences because we are not investing in the infrastructure they need to prosper.

The trouble is that our taxes will not ever be spent on infrastructure- they will be spent on vote buying.

We are on a downward path. Lower taxes at least keep some money in private hands where there is some chance that it will be used productively. At this point in US history, there is zero chance that government will use money for the general benefit and especially for the future, where there is no unionized or other powerful voting block.

Ha
 
Calling oneself "rich" is tacky. Calling others "rich" is rude. So no one is "rich" and we are all middle class. Some of us are just more "comfortable" than others, that's all.;)
On this board we can't even agree on a definition of "net worth", so I suppose "rich" is a term way out of our comprehension.

I can pretty well guarantee that to the state of Hawaii and the federal government, we look darn poor. And it's all by their rules.
 
At this point in US history, there is zero chance that government will use money for the general benefit and especially for the future, where there is no unionized or other powerful voting block.
Yes, I believe the Citizens United decision will see to that. I never knew corporations and unions were people with First Amendment rights, but hey, what do I know?
 
we have "such a low tax rate" because we have not yet woken up and smelled the coffee. our low tax rate isnt sufficient to pay for our significant safety net. so by your logic we need to get rid of welfare, SS, medicaid, medicare, unemployment insurance, the new health care reform, etc. and maybe even some of our military and then our people will be more successful. well if we do that then our low tax rates might be sufficient to pay for our government. while that might be an interesting discussion but i am not willing to part with all of those programs (that is not to say that i dont think they need some changes) so i am thinking tax rates (more specifically the tax rates on higher income) will need to go up.

I don't recall giving an opinion on the point the economist was making, so by my logic, I provided no opinion for you to comment on. I was simply providing information I had heard.
 
Yes, I believe the Citizens United decision will see to that. I never knew corporations and unions were people with First Amendment rights, but hey, what do I know?
Well, they do pay taxes just as humans do. I wonder when unions and corporations will start serving on juries and signing up for Selective Service?
 

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That seems true, but I don't think that is where the phrase "A poor man never gave me a job or a paycheck, son" is targeted. It's about creating businesses that hire the people to serve that consumption. Yes, the workers are being hired to build houses, but they are not each individually getting their paychecks from the homeowner. A contractor is dealing with their payroll, insurance, scheduling, taking on risk, etc, so that all those workers can be organized to complete a job. For that, I expect the contractor to make more money, even become 'rich' ahead of the laborers.

So in general, it is the 'rich man' and not the 'poor man' providing the paycheck. And most of them earn it, because they are a little more motivated, a little more risk taking, a little more organized to do that kind of work. Many of the laborers just want to show up and do their job and that's fine. But don't expect to get 'rich' that way.

Many other businesses really take an influx of capital to get off the ground. A group of 'poor' people just aren't likely to to get that going.

I think there was a circular discussion on this earlier, with someone saying without all this consumption there are no jobs, but without the business there is no product to consume, and round-round. It seems clear that it takes all the pieces of the puzzle, but I'd wager that on average, employers are richer than employees. Hence the phrase.

-ERD50

I think you're putting the most positive possible interpretation on the phrase, and I agree with much of what you say.
IMO, the phrase usually gets corrupted into "We shouldn't tax rich people because they 'create' jobs." And taxes are the topic of this thread.

It reminds me of a Peanuts strip where Snoopy was jogging and his heart and legs were arguing about who was "more" important. Or, arguing which wheel on a bicycle is more important.

I'd say that in our complex economy, we need lots of specialists - plumbers, engineers, accountants, salespeople, customer service reps, managers, etc.

Like you say, in most businesses managers bring all the other people together into a coordinated team. That's an important contribution to the whole and is usually well compensated. In smaller businesses, the owner is often the top manager.

Most businesses also need financial capital, and that may come from middle class stockholders or savers, middle class sole proprietors, rich successful entrepreneurs, rich heirs, etc.

When I look at the economy, it seems that most wage earners do not work for businesses that are owned and managed by a successful proprietor/entrepreneur. Most work for stockholder owned corporations, partnerships, sole proprietorships, etc.

My problem with the phrase is the notion that the rich owner/manager is somehow so important that they need to have special tax rules for all rich people (not just the owner/managers). I think we need all types of labor and all types of capital.

I don't think that progressive taxes cause any harm to our economy just because they sometimes impact successful manager/owners. The before-tax rewards of those jobs are high enough to attract plenty of people even with progressive taxes.

(This is a little like saying NFL teams will have no trouble filling their rosters even if the most successful players pay pretty high taxes. The after-tax rewards still far exceed anything else those individuals might do.)
 
I think you're putting the most positive possible interpretation on the phrase, and I agree with much of what you say.
IMO, the phrase usually gets corrupted into "We shouldn't tax rich people because they 'create' jobs." And taxes are the topic of this thread.

It reminds me of a Peanuts strip where Snoopy was jogging and his heart and legs were arguing about who was "more" important. Or, arguing which wheel on a bicycle is more important.

I'd say that in our complex economy, we need lots of specialists - plumbers, engineers, accountants, salespeople, customer service reps, managers, etc.

Like you say, in most businesses managers bring all the other people together into a coordinated team. That's an important contribution to the whole and is usually well compensated. In smaller businesses, the owner is often the top manager.

Most businesses also need financial capital, and that may come from middle class stockholders or savers, middle class sole proprietors, rich successful entrepreneurs, rich heirs, etc.

When I look at the economy, it seems that most wage earners do not work for businesses that are owned and managed by a successful proprietor/entrepreneur. Most work for stockholder owned corporations, partnerships, sole proprietorships, etc.

My problem with the phrase is the notion that the rich owner/manager is somehow so important that they need to have special tax rules for all rich people (not just the owner/managers). I think we need all types of labor and all types of capital.

I don't think that progressive taxes cause any harm to our economy just because they sometimes impact successful manager/owners. The before-tax rewards of those jobs are high enough to attract plenty of people even with progressive taxes.

(This is a little like saying NFL teams will have no trouble filling their rosters even if the most successful players pay pretty high taxes. The after-tax rewards still far exceed anything else those individuals might do.)

Here are a few facts about those insignificant small business owners; many of whom would be negatively impacted by higher taxes, from the US Department of Commerce to chew on... (#4 is especially interesting with unemployment hovering around 10%)

How important are small businesses to the U.S. economy?
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Small firms:[/FONT][/FONT]
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]• Represent 99.7 percent of all employer firms.[/FONT]
[FONT=Times New Roman,Times New Roman]• Employ half of all private sector employees.[/FONT]
[FONT=Times New Roman,Times New Roman]• Pay 44 percent of total U.S. private payroll.[/FONT]
[FONT=Times New Roman,Times New Roman]• Generated 65 percent of net new jobs over the past 17 years.[/FONT]
[FONT=Times New Roman,Times New Roman]• Create more than half of the nonfarm private GDP.[/FONT]
[FONT=Times New Roman,Times New Roman]• Hire 43 percent of high tech workers (scientists, engineers, computer programmers, and others).[/FONT]
[FONT=Times New Roman,Times New Roman]• Are 52 percent home-based and 2 percent franchises.[/FONT]
[FONT=Times New Roman,Times New Roman]• Made up 97.5 percent of all identified exporters and produced 31 percent of export value in FY 2008.[/FONT]
[FONT=Times New Roman,Times New Roman]• Produce 13 times more patents per employee than large patenting firms.[/FONT]

[/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Source: U.S. Dept. of Commerce, Census Bureau and Intl. Trade Admin.; Advocacy-funded research by Kathryn Kobe, 2007 ([/FONT][/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]www.sba.gov/advo/[/FONT][/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]research/rs299tot.pdf[/FONT][/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]) and CHI Research, 2003 ([/FONT][/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]www.sba.gov/advo/research/[/FONT][/FONT]
 
Re: Independant:
My problem with the phrase is the notion that the rich owner/manager is somehow so important that they need to have special tax rules for all rich people (not just the owner/managers). I think we need all types of labor and all types of capital.

Point of fact, I agree. Rich people should not have special tax rules. Unfortunately, the Federal Tax code does not agree, and so "rich" people are taxed at a special (ie., higher) tax rate than the "average Joe".

So, if you don't want the rich to be taxed at a special rate, do you advocate a flat tax for everyone?
 
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