Patterico's Pontifications

11/16/2010

Calling Bull on “Taxing the Rich”

Filed under: General — Aaron Worthing @ 9:45 am



[Guest post by Aaron Worthing; send your tips here.]

Riffing off of an item last night, let’s talk about the generalized bull____ that’s been going around talking about taxing “the rich.”  How many times do you hear it?  “The Republicans want tax cuts for the rich.”  “Hey, let’s have a millionaire’s tax.”  Or just google the phrase tax cuts for the rich. Too many people act in this country like as if we tax a person’s wealth.  But when you are talking about the Federal Government, at least, its bull.

We do not tax the rich.  We do not tax wealth, at least not on the federal level.  We tax income.  And the difference is significant.

So when we talk about taxing the “richest” what we really mean is that we tax the people making the most money.  It’s a euphemism, or to put it more bluntly, it’s bull____. And this bull____ harms our ability to talk seriously about taxes.

I mean obviously if you make a lot of money, you are very likely to be wealthy if you have enough intelligence to hold on to it.  But that doesn’t make income a perfect proxy for wealth, and indeed, it often has little to do with wealth.

For instance, imagine two scenarios.

Imagine first a man has $5 million in the bank built up over a lifetime.  He withdraws all of it from the bank and keeps it under his mattress.  He has no investments, and no job.  He just lives off that money, living miserly and spending only on what is absolutely necessary.

How much does he pay in income taxes?  Nothing.  He has no income.  He only has wealth and spending.

Now imagine a second scenario.  A man is working a regular job and one day is struck (in his car) by a negligent driver.  His medical insurance doesn’t cover the accident, so he ends up paying $25K of his personal savings on medical treatment to rehabilitate his health and missing work that adds up to $25K of lost income.

So he sues the other driver.  The other driver has few assets, but has insurance covering him for $25K.  So he gets all of that, paying out a percentage to the lawyer he hired.

So how is he treated at tax time?  He is treated as though he earned $25,000.  But did he really make $25K?  No, that is just giving him back what the negligent driver more or less took from him.  Economically it is no different than if the negligent driver instead stole $25,000 from his bank account, and then was forced to give it back.  Indeed, he didn’t even quite break even, since his lawyer took his cut.  This year is a financial disaster for him, but the law would treat him merely like as if earned money working at his job.

And when you think about it, it is downright perverse to tax the highest income earners.  Tautologically, these are the people who figured out how to make the most money in a given year.  Now some of them might be people who merely won the lottery or won the genetic lottery with a nice inheritance, or merely “earned” interest based on money previously earned by other means.  But at the same time a person who has a business that is really taking off, ends up being punished.  Meanwhile the rich man who keeps his money under the mattress like in my example above pays no taxes.  But on average, who contributes more to the economy—the highest earners or the most wealthy? Who creates more jobs?

Of course the constitution requires us to tax in this way.  But still, it is important to remember what we are actually taxing, as we discuss how much counts as our “fair share.”  We are not taxing wealth.  We are taxing income, which closely corresponds to wealth, but even more closely corresponds to productivity.

Update: Slight edit for clarity and (more) proper grammar.

[Posted and authored by Aaron Worthing.]

159 Responses to “Calling Bull on “Taxing the Rich””

  1. Use your brain. Trickle down economics is a lie and a scam.
    Don’t fall for it, don’t be a pawn.

    Truth (9df40f)

  2. The numbers they use to define the evil rich and wealthy are equally wrong, AW.

    This is a good post, but hopelessly naïve. The left and the MFM do not discuss these issues in good faith. Never have. Never will.

    JÐ (306f5d)

  3. JD

    Well, maybe i can’t reach the hardcore left, but there is always the reasonable middle, who might get snookered [by the hardcore left].

    [Edited after the fact. –Aaron]

    Aaron Worthing (b8e056)

  4. You have identified the next great tax fight, Aaron. Either we implement a VAT-type tax, or we go after wealth. Or both.

    There is no other significant untapped treasure to plunder from us.

    Of course, a radical reduction in spending could forestall all of this, but I am not holding my breath.

    Ed from SFV (6edf50)

  5. “Twoof” above demonstrates my point quite nicely. Classic jealousy, class warfare, and basically an advocate for theft.

    JÐ (b98cae)

  6. Ed

    well, you would have to amend the constitution to go after wealth.

    But arguably we could put in some kind of tax on goods, sales tax or vat.

    Aaron Worthing (b8e056)

  7. I suspect some of the hardcore left, at least those who are Al Gore or John Kerry wealthy, are well aware of the distinction and prefer things this way.

    I’ve always wishes we would have a different system than income tax. Such as a nationwide sales tax. No need to progressivize it except to simply not charge tax on essentials.

    This doesn’t hurt Bill Gates very much (not that I mind), but I think it’s a fairer system. Those who produce the most are not taxed the most. I’m sure, like a balanced budget or term limits, there are flaws with making the system better in this way.

    Dustin (b54cdc)

  8. To be clear, I’m suggesting we stop taxing income altogether. No withholdings for social security, no income tax, etc. It greatly simplifies a lot of things.

    And then we charge a sales tax. Something like 18%, on everything except essentials (assume we can agree on what that means).

    There’s actually a significant segment of society that avoids taxation altogether by being illegally employed or participating in a black market, but these people still buy TVs and beer.

    This would probably depress the economy in the short term, but it would also increase employment and lead to more savings, so our economy could tend to be more stable.

    This does mean that the poor can avoid being taxed if they are struggling to feed and clothe their kids, and have an easier time getting a job to help with that. And the same is true of the middle class. Anyone who is actually struggling to survive won’t be paying much tax because they will be spending on essentials.

    It winds up being a tax increase on profitable crime, and I think the entire system is drastically cheaper to implement than the IRS.

    Dustin (b54cdc)

  9. You’ve got to be kidding me. Do you think for a moment, little man, that if you gave the wealthiest Corps and CEOs a tax break they’d offer you a job or give you a raise? Maybe in ‘Mamby-Pamby Land.’

    You’ve got a lot to learn about human nature, greed and the importance of profit margin.

    Pawns.

    Truth (9df40f)

  10. So how is he treated at tax time? He is treated as though he earned $25,000. But did he really make $25K?

    Uh, I’m pretty sure that real damages — damages that can be directly attributable to defendant — are not counted as taxable income.

    But at the same time a person who has a business that is really taking off, ends up being punished.

    Well, “punished” is an odd word, because it implies that nobody would want to be in his position.

    Yes, Mark Zuckerberg was punished a LOT in the past decade. But I don’t think many of us would mind having that “punishment”.

    Kman (d25c82)

  11. Truth,

    What are you talking about? I think if you make it cheaper to employ people, people competing to sell goods and services will see employees as less of a risk of their money.

    I am taking into account ‘greed’ without moralizing how the world works the way you are.

    Do you have anything to contribute except to screech that you hate rich people?

    Dustin (b54cdc)

  12. Well, “punished” is an odd word, because it implies that nobody would want to be in his position.

    I don’t think so. I’ve never heard “punished” used in this way, actually. Catherine Zeta Jones punishes her spouse if he speeds in his Ferrari.

    A tax generally leads to less of something. The reality is that we have to put a tax in there somewhere, anyway. Income, or sales, or wealth… you will wind up with less of it, naturally.

    Dustin (b54cdc)

  13. Perhaps, but its not like Republicans (at least those in power) are proposing a wealth tax to replace the income tax. They are proposing to just cut income taxes. Oh and eliminate the estate tax, which is a federal wealth tax.
    And while income is just a proxy for wealth – its at the levels we are actually talking about its a pretty good proxy. (33% bracket applies to taxable income of over $170,000 for single over $209,000 for married — and that means with deductions its probably not taking effect till you are earning over 1/4 million that year — and even thats only on the amount over the 1/4 million) To be sure, there are wealthy people who escape the tax, but essentially all the people who do pay the tax are wealthy.
    Oh. And your wrong about how personal injury suits work. Awards/Settlements for medical expenses and pain and suffering are not taxed. The award for wages would be, but then so would the wages. So tax wise – your example is not having a worse year than any other.

    TomO (a524c5)

  14. You’ve got a lot to learn about human nature, greed and the importance of profit margin.

    Pawns.

    Comment by Truth

    Here is economic ignorance strutting around the internet and pretending it is something other than a fool. There was a survey of college students a few years ago. This one sounds like a high school student but the principle is the same. They asked them what the average profit margins of various industries were. The answers were amusing. They guessed such numbers as 50% for retail stores where the real profit margin was 6% or less or, in the instance of food stores, where it is about 2%.

    Mike K (568408)

  15. And your wrong about how personal injury suits work. Awards/Settlements for medical expenses and pain and suffering are not taxed.

    TomO, I’m sure Aaron knows that. He explained it accurately. At tax time, you are taxed for your income, just as he said. He never said you paid income tax on your damage award.

    To be sure, there are wealthy people who escape the tax, but essentially all the people who do pay the tax are wealthy.

    True. but it’s much more accurate to admit that extremely wealthy people pay very little tax. It’s not a tax on the rich… it’s a tax on those who made the most money lately.

    I’ve always defined ‘rich’ as people whose money works for them instead of them working for their money. I realize many simply define it as people who have more than they do, which is politically convenient.

    Another point is that the GOP isn’t proposing much of a tax cut if they simply want taxes to remain where they are right now (some do, some don’t). I’ve been frustrated by how asking for the Bush/Obama tax level to stay in place constitutes some huge tax cut… as though a huge tax increase is the baseline we have to discuss from, rather than current tax levels.

    Dustin (b54cdc)

  16. Hey, try this. Educate yourself. The numbers speak for themselves. Google the phrase: “trickle down economics doesn’t work”.

    Do you think for a moment those congressmen you elected, in bed with Corporate America, sucking the milk from tea party anger and the the SCOTUS Citizens United ‘decision’ care a flip about you little people? They don’t. When it comes to a decision between: A) Doing what is best for America like cutting the deficit or, B) Lining the pockets of the Corps that funded their election, who do you think their daddy is? Are you that friggin naïve?

    Patriotism is not about helping America and the average American. It’s about making the average American believe that is your intent. A big huge difference.

    The top 10% saw 2/3 of the US income growth in the last decade. If it were their choice to give a few % more back to their country to make it better, do you think they would? Answer can be predicted almost along party lines.

    Truth (9df40f)

  17. They guessed such numbers as 50% for retail stores where the real profit margin was 6% or less or, in the instance of food stores, where it is about 2%.

    Comment by Mike K —

    I think what the naive, like ‘Truth’, are saying is that they would go into business for 50% profit margins. Those people are usually out of business soon. Everyone would happily charge the highest profits they could, but since we have a free market, they smart businessmen undercut eachother while staying viable.

    It’s not really about them ‘giving’ anyone else anything.

    Dustin (b54cdc)

  18. “So how is he treated at tax time? He is treated as though he earned $25,000. ”

    I’m not so sure that tort damages for injuries and sickness count as income for federal tax purposes.

    imdw (c982ed)

  19. Hey, try this. Educate yourself. [bla bla bla]

    You don’t have any argument aside from redefining terms to match your claims. But you’re pretending you’ve proven something that you don’t even touch upon.

    Of course democrats get more class warfare votes. That doesn’t prove anything, but I think you’re very naive to point this out after complaining about being being duped. It’s as though you’re just a hardened partisan with no interest in an honest discussion.

    Dustin (b54cdc)

  20. “So how is he treated at tax time? He is treated as though he earned $25,000. ”

    I’m not so sure that tort damages for injuries and sickness count as income for federal tax purposes.

    Comment by imdw —

    I just reread and I think I was wrong to correct Tom O on this.

    It’s true, you don’t pay tax on damages.

    Dustin (b54cdc)

  21. Twoof again proves my point. Class warfare and jealousy are their staples.

    JÐ (b98cae)

  22. He explained it accurately. At tax time, you are taxed for your income, just as he said. He never said you paid income tax on your damage award.

    No, he only said that the $25,000 damage award is treated like earned income at tax time.

    And he’s wrong about that.

    Kman (d25c82)

  23. No, he only said that the $25,000 damage award is treated like earned income at tax time.

    And he’s wrong about that.

    Comment by Kman

    Yeah, I was wrong. I just read it a completely different way.

    Dustin (b54cdc)

  24. Truth

    Ask yourself a simple question:

    Are you better off today than you were 4 years ago?

    Then you tell me if soaking the highest earners works.

    Aaron Worthing (b8e056)

  25. The point is, nobody should have any money but the government. And the government should be able to dole it out however it sees fit. Y’all just don’t get the point of view. /sarc or not.

    thomas (602da2)

  26. Are you better off today than you were 4 years ago?

    Then you tell me if soaking the highest earners works.

    Comment by Aaron Worthing —

    It really is a matter of putting aside some sense of retribution against the ‘villian’ rich and thinking about how to get out of the way of a great economy.

    Dustin (b54cdc)

  27. Clowns like “Truth” run the attitude that no one understands economics but them, but never have I seen one actually show any sign of actually having studied anything of the topic.

    SPQR (26be8b)

  28. I’d like to know where the $250K figure comes from. From what I’ve managed to find online the top tax brackets are all higher than that except for married-filing-separately. The 35% kicks in for them at $186,825. For me, as Head of Household, it would be $373,650. I can’t find anything that has $250K for any tax bracket now, so IF that gets changed everybody but rich married people filing separately will get bumped up into the highest highest bracket.

    Jaynie59 (18e5d1)

  29. Dustin:
    Your definition of rich is either meaningless or even more politically convenient. Lots of people have at least some of their money working for them in either 401Ks, CDs, Money Market or Savings accounts. Are we all rich now? Or do you only mean people who can earn sufficient money from investment that they don’t need to work to maintain a middle class/upper middle class lifestyle. In which case your talking about such a small percentage of the under 65 population that its politically useless. Why is it mistaken to call a hard working, but high earning professional (a banker, a surgeon, lawyer etc.) rich?

    TomO (a524c5)

  30. Aaron – could have asked that same question in 03 and would have gotten an answer that supported “soaking the rich”

    TomO (a524c5)

  31. Actually, what tax hikes has Obama even passed yet? We are in the tail of the Bush cuts so they now are at their highest – how does your question demonstrate anything.

    TomO (a524c5)

  32. Why is it mistaken to call a hard working, but high earning professional (a banker, a surgeon, lawyer etc.) rich?

    I don’t have a problem with you doing so, Tom. It’s just not how I choose to do so.

    Lots of people have at least some of their money working for them in either 401Ks, CDs, Money Market or Savings accounts. Are we all rich now?

    Yes, absolutely. Why don’t you realize I already said that? The more money you have earning money for you, the richer you are under the way I think. The less, the poorer. Of course, most Americans have it better than the rest of the world, so we could just say anyone with plumbing and a good roof is rich, too.

    I choose to ignore whether someone is ‘rich’ or not in making calculations about how we should set tax policy. You can see this if you read my proposal, but even if you disagree with me, I have already set up the project we’re on.

    I’m not into redistribution. I’m interested in the economy working well enough that jobs are plentiful.

    Dustin (b54cdc)

  33. There’s like 50 taxes alone in the health care bill, you stupid fool, plus an equal number in
    the Fin Reg bill, there was a whole host of increases in the first budget, affecting energy exploration and refining;

    narciso (82637e)

  34. Actually, what tax hikes has Obama even passed yet? We are in the tail of the Bush cuts so they now are at their highest – how does your question demonstrate anything.

    Comment by TomO —

    What are talking about, anyway? Aaron never mentioned Obama. I didn’t mention Obama’s tax hikes.

    “We are in the tail of the Bush cuts so they now are at their highest ”

    What language are you speaking?

    What I said was that we have a massive tax increase if the ‘Bush tax cuts’ were to expire, and that I reject the notion of calling it a tax cut to maintain current tax levels. It’s not clear what specifically you’re talking about or who you’re talking to, though, so maybe you should clarify.

    Dustin (b54cdc)

  35. Aaron – with the judiciary, including SCOTUS, corrupted beyond imagining, why would an amendment really be necessary for a congress and executive hellbent on a new revenue stream?

    Look at the breathtaking inaction the past two years. All bankruptcy law was blown to smithereens. Treasury accountability under the constitution? Nonexistent.

    I hope to God the ruling class fails, but I am convicted that in my lifetime, we will adopt a federal VAT/sales tax and/or wealth taxation.

    Ed from SFV (6edf50)

  36. TomO,

    It really comes across as if you just want to demogogue who is a good political target, by IDing who is and isn’t rich.

    You reject Aaron’s question: Does soaking the highest earner work?

    I sure seems as if you don’t care. You just want to soak ’em. Why? Cause they are ‘rich’. Aaron’s being much more precise to note we’re taxing income, not wealth or ‘richness’. The only casualty of this accuracy is ignorance.

    If Aaron or I point out you are relying on a contrived and extremely inaccurate definition of rich, you can’t move on from that to policy aimed at improving the economy.

    That’s why I came up with a much more rational definition of ‘rich’ and then noted it’s not relevant who is and isn’t rich. The only point of class warfare is to demagogue and moralize. I don’t have to worry about the setup of this system of ‘others’.

    It’s much easier to discuss how to set up tax policy without being imprecise. The entire purpose of calling a hard working and successful person ‘rich’ is to appeal to popular desire and emotion. I’m more interested in jobs.

    Dustin (b54cdc)

  37. apologies for my typos.

    Dustin (b54cdc)

  38. Sorry if that was unclear. My response was to Aaron’s comment just ask yourself if you are better than you were four years ago to determine if “soaking” the rich works. And my point is that, at least with respect to the income tax we are still living under Bush’s tax cuts. Also, those cuts were phased in over time and are now at full strength. So the rich are paying less taxes than they were 4 years ago. Yet the economy still sucks.

    TomO (a524c5)

  39. “You reject Aaron’s question: Does soaking the highest earner work?”

    Soaking? How about just Clinton era tax rates? Or reagan? Or Eisenhower?

    How about estate taxes? I suppose we can call estates rich with some meaning, right?

    imdw (90d0d7)

  40. . And my point is that, at least with respect to the income tax we are still living under Bush’s tax cuts. Also, those cuts were phased in over time and are now at full strength.

    Thanks for making yourself more clear.

    I still think it’s so much better to discuss this taxation if we simply call it what it is: a tax on income.

    I think Bush’s tax cuts led to many good results, including more revenue, but that spending has been so high that the economy is unstable. Both sides can score partisan points on spending, but that’s a major problem. I do not think reversing the tax cuts (which I call a tax increase, of course) will improve anything, because the economy would get even worse and revenue would go down. The deficit would increase.

    Spending is much more the problem than taxing is, right now.

    You say ‘the rich are paying less taxes than they were 4 years ago’. Is that the case? I thought JGTRRA made them come into place in 2003.

    Dustin (b54cdc)

  41. “You reject Aaron’s question: Does soaking the highest earner work?”

    Soaking? How about just Clinton era tax rates? Or reagan? Or Eisenhower?

    How about estate taxes? I suppose we can call estates rich with some meaning, right?

    Comment by imdw

    To be clear, imdw, I reject using the term rich as a justification for anything. It’s demagogury to appeal to that kind of notion.

    You’re taxing income, or sales, or an estate. I would prefer we not justify it because so-and-so has more money than some group of swing voters.

    We can justify it the way progressive taxation often is… because one group can afford it with less impact on their life. But as soon as we do that, we also get to ask about the other impacts.

    For example, a tax on an estate will curtail savings. That doesn’t mean it’s automatically wrong… I’m simply asking for a more accurate way of discussing these issues. When I called for a national sales tax to replace other taxation, I noted the impact it will have on sales.

    It’s a way of encouraging intellectual honesty.

    Since revenue went up after JFK cut taxes… and revenue went up when Bush cut Clinton’s tax levels, I think the answer to yours and Aaron’s question is “no.”

    Soaking the highest earner doesn’t work. If we were to repeal the Bush tax cuts, revenue would decrease.

    Dustin (b54cdc)

  42. Dustin:
    Nope. I reject Aaron’s implied answer that “soaking” high earners does hurt the economy. I don’t think it does, and I think the evidence presented to say it does is weak (in fact the last four years its reverse)
    As to why I want to tax the rich. I want to spend on things like a military, and Social Security, and Medicare. Those things cost money. Rich people can afford to pay with much less pain than poor people can. Taking and extra $80,000 from someone making $350,000 will certainly be no fun, but they still have more than enough money to have a very decent life. Taking $8,000 from someone making $50,000 puts them close to the edge already. If we have to take more I’d rather take it from the person who has it than not.
    But no, I don’t care about “soaking” for its own sake. That is just silly. I am simply against the extensive spending cuts that would be necessary to support your preferred equal taxation regime.

    TomO (a524c5)

  43. Estate taxes make an even better example. Ordinary folks, especially a family with a farm or a small business, may not make a pile of money. But the ONE time in their life when they may really need it is when dad dies and the business or farm gets passed on to the kids. Now they have an opportunity to employ others, to keep a business going, or to make other decisions that benefit their family, their community, and the wider economy. But instead, if the Dems get their way, the business or farm will have to be destroyed – sold – in order to pay off the 50% estate confiscation.

    That is taxing wealth – because the estate is not really (at least not always) income. It is often as much of an obligation as it is a benefit. If I inherited my dad’s business I’d have the responsibility for his employees and their families on my plate. And, thanks to the government, I’d have no capital to work with to keep them employed.

    Gesundheit (aab7c6)

  44. A rational system of taxation…

    Twenty-five years ago, or so, I read an Op-Ed (by whom I do not remember, but some economist of the day), that proposed a complete re-ordering of the tax system in the Country, at all levels:

    1- He proposed that the 16th-Amendment be replaced by one that financed the Federal Government by a nation-wide sales tax replacing all current forms of Federal taxation: income, capital-gains, gift, inheritance, business, corporate, etc; and that no other form/level of government would be allowed to levy such a tax;

    2- The States would be financed by a tax on income, and again, only the States would be allowed to levy such a tax, and only such a tax;

    3- All political division subordinate to the States would be financed by taxes on property.

    The theory behind this was that the property tax was levied by that level of government closest to the people, and would be most responsive to the concerns, desires, and wants of those people.

    That States would tax the income of their residents, and would promote pro-business policies that would encourage the growth of the economy, or not. And, if those taxes became regressive, or obnoxious, that people would relocate to a state more in keeping with their feelings about the level of income taxation – sort of what we see with people relocating from high-tax states such as NY, NJ, CA, etc, to low-tax entities such as FL, TX, NV, TN, etc.

    And, the Feds would tax consumption, since everyone does it: consumes, that is.

    Those that live large, will pay large.
    Those that live frugally and penuriously, would suffer small violation, and would ATBE have more to invest back into the economy, thereby encouraging further economic growth.

    AD-RtR/OS! (ba1e7c)

  45. I think that the estate tax at both the federal and the state level is a tax on wealth.All or much of it has been taxed as income or property as it was aquired.

    dunce (b89258)

  46. Wow – today this site seems to have a lot of the your-stuff-really-belongs-to-all-of-us types.

    Even if taxing the rich at a higher rate would not hurt the economy – what gives a majority the right to decide to take what belongs to a minority (any minority, whether it’s the rich or some disfavored producer like the tobacco farmer)?

    Gesundheit (aab7c6)

  47. (in fact the last four years its reverse)

    Clarify. What are you talking about? Are you pretending that if we tax income too much that we get less revenue? The entire notion of this, or just some specific example?

    Don’t you realize that the major reason the economy suffered in 2008 was not because of income tax levels? We had major problems in the banking industry that are completely unrelated. I don’t see how you can seriously intend your cherry pick segment of time to prove what you’re claiming it does.

    I am simply against the extensive spending cuts that would be necessary to support your preferred equal taxation regime.

    That’s much more honest.

    And we are spending way too much money. We need to cut all these programs in order to have a taxation level that doesn’t opportunity. Hell, we need massive spending cuts no matter what the taxation level is.

    Dustin (b54cdc)

  48. Do you think for a moment, little man, that if you gave the wealthiest Corps and CEOs a tax break they’d offer you a job or give you a raise?

    Well, let’s turn that around, shall we?

    Do you think for a moment, little man, that if you increased the taxes of the wealthiest Corps and CEOs they’d offer you a job or give you a raise?

    I doubt this sort of logic is what you were going for, but there it is.

    Since 1934, the country has never taken in more than 11% of GDP in income taxes, no matter how high (or low) the rates were. It’s never taken in more than 21% of GDP in total receipts, no matter how high, or low, the rates were.

    Raising the current tax rates back to Clinton-era levels would theoretically bring in $700 billion over ten years, but that’s assuming no subsequent tax avoidance once the rates kick in–people looking for extra tax rebates and deductions, along with deliberately reducing their salaries.

    People are arguing in various forums that the tax rates are the most important issue at stake right now, but they aren’t. The most important issue is getting the debt cleared out across all the sectors of the economy, but too many sacred cows would end up getting gored for that to happen. So we get this ridiculous can-kicking as pundits and politicians try to avoid dealing with the cold, hard fact that the party’s over.

    Another Chris (2d8013)

  49. BTW, is this troll “Truth” our old friend truthandjustice?
    Wasn’t he banned?

    AD-RtR/OS! (ba1e7c)

  50. Revenue went up after the Bush tax cuts because the economy was growing generally. In order to believe that the tax cuts were responsible for all the revenue growth – you have to believe that absent them the economy wouldn’t have grown. Thats clearly not true given the history of the 90s. By the same token G.H.W. Bush and Clinton raised taxes and we had both growth in revenue and the overall economy for about ten years.
    Point being that you need to present some better evidence that the current progressive taxation regime (or as you prefer “soaking the rich”) doesn’t work.
    If tax cuts really did always pay for themselves with higher revenue then we would all want a .00001 tax rate so that we could buy everyone their own McMansion and Porsche with the exploding gov’t revenue. It doesn’t work like that.

    TomO (a524c5)

  51. AD – actually, I think that sounds excellent. And it would allow states to compete, and to prove or disprove their various theories about taxation. We’d end up with much better systems in all the states. Or at least those that listened.

    Obviously, even in the current climate, some people will inexplicably continue to live in California.

    Gesundheit (aab7c6)

  52. Dustin – see my first comments in this thread. Twoof and TomO and dimwit proved them absolutely true.

    JÐ (85b089)

  53. JD, in what way am I arguing in bad faith?

    TomO (a524c5)

  54. I am simply against the extensive spending cuts that would be necessary to support your preferred equal taxation regime.

    I wish more lefties would just admit this is exactly what they are talking about.

    They ignore that Bush’s tax cuts increased revenue… or even deny it as TomO does (which is radical and his ‘last 4 years argument is obviously very poor). But at the end of the day, this is about taking more from the private sector so that programs democrats want can be massive.

    It’s a never ending cascade. That’s why spending has gone up, constantly. The problem is that the money doesn’t exist to fund what we’re spending. In the long run, we’re totally screwed if we don’t cut spending.

    The income tax argument is a lot simpler. We shouldn’t take as much as we can. We should take as much as we really need. Thanks to our deficit, that probably is the same thing. We need to pay down the debt by running a large surplus every year. We can’t cut or raise taxes enough to make that work.

    We have to go against TomO’s preference and have serious spending cuts.

    but along the way, we’re going to have demagogues call one class poor, one class rich, etc. They know it’s not an accurate way to describe the issues, but they just want their spending levels.

    Dustin (b54cdc)

  55. TomO, our income tax system is already hugely “progressive” in that those evil rich guys already are contributing far more in income tax than the “non rich”.

    Even after the Bush era tax rate cuts, the “rich” were contributing disproportionally more than before the tax rate cuts.

    SPQR (26be8b)

  56. How much more progressive must it be when the top 1% of earners, who account for 22% of earned income, pay 40+% of all income taxes?

    And the bottome 40% of earners pay nothing, and in fact, get some back by accessing the Earned Income Tax Credit scheme.

    AD-RtR/OS! (ba1e7c)

  57. Exactly, AD, those top 1% of AGI earners are already bearing far more than their “share” of taxes.

    SPQR (26be8b)

  58. TomO, our income tax system is already hugely “progressive” in that those evil rich guys already are contributing far more in income tax than the “non rich”.

    That’s why it’s convenient to pretend they are simply ‘rich’. This generalization eliminates detail. Someone paying half his income for Tom O’s preference that we not see spending cuts might seem really unfair if he’s not really living in a mansion or saving millions.

    I think it is quite radical to have a system where so many people pay no tax, while spending on entitlements is so high. But radical is the status quo today, and so it’s just annoying to see the people shouldering so much burden being called rich, even now, just because they are moderately successful.

    The whole project is demagoguery. It’s quite clear that Bush’s tax cuts increased revenue for the reasons Another Chris noted. There’s only so much the government can get. Before the Bush tax cuts, the government was going too far, hurting its own bottom line.

    Going back to that tax level, in this economy, would be a disaster. One way out of this analysis is to pretend people in the ‘top 2%’ have limitless money and are simply ‘rich’. It’s like a child begging for more allowance, not realizing her parents are struggling.

    Dustin (b54cdc)

  59. My liberal gf always complains about “tax cuts for the rich.” Over and over and over.

    I keep telling her increasing taxes on the rich 1) won’t generate enough revenue to solve our fiscal problems; 2) has unintended consequences including driving rich people out of the US economy, and destroying jobs; 3) most of all, is motivated by lefty envy politics (the poisonous notions that “excess wealth” is a product of “theft” from poor people, and that every significant private store of wealth is fair game for state seizure in the name of those “more deserving.”) If only “the people” could steal every tycoon’s dollar, every man would be king.

    She’s never had a course in economics or finance (kind of like BHO.) I’ll never convince her, but I love her anyway.

    gp (72be5d)

  60. The top 10% saw 2/3 of the US income growth in the last decade. If it were their choice to give a few % more back to their country to make it better, do you think they would?

    I see this “many people want to pay more of their income to the government!” meme from leftists all the time, and it’s utter nonsense.

    How many of these leftists turn down the refund on their overpayment of income taxes every year? How many of them refuse to take the tax deduction on their mortgage, or their student loan interest, or the myriad of other rebates and deductions available? How many send separate check or money orders to the Treasury, in addition to their regularly mandated tax burden?

    The contention that wealthy leftists want to pay more in taxes is a flat-out lie, and it’s proven as such every April 15. Wake me up when one of these wealthy leftist cretins decide to lead by example, and voluntarily send 90% of their income to the government every year. If they think sending more money to the government is so damn great, why don’t they take advantage of it when it’s freely available to them?

    Another Chris (2d8013)

  61. How many of these leftists turn down the refund on their overpayment of income taxes every year? How many of them refuse to take the tax deduction on their mortgage, or their student loan interest, or the myriad of other rebates and deductions available? How many send separate check or money orders to the Treasury, in addition to their regularly mandated tax burden?

    That’s a specious argument, Chris.

    Let me put this way: Would you like to rid the world of hunger?

    If yes, then why don’t you contribute to Oxfam?

    And if you don’t, does that mean that you are making a “flat-out lie” when you say you would like to rid the world of hunger?

    Kman (d25c82)

  62. I keep telling her increasing taxes on the rich 1) won’t generate enough revenue to solve our fiscal problems; 2) has unintended consequences including driving rich people out of the US economy, and destroying jobs; 3) most of all, is motivated by lefty envy politics (the poisonous notions that “excess wealth” is a product of “theft” from poor people, and that every significant private store of wealth is fair game for state seizure in the name of those “more deserving.”)

    (1) Of course it won’t solve all of our fiscal problems, but it can certainly help depending on — and to whom — it is done

    (2)

    Kman (d25c82)

  63. (2) Drive rich people out of our ecomony to WHERE?

    (3) That’s just BS. You don’t know me or my motivations.

    Kman (d25c82)

  64. Dustin:
    Well at least you concede now that I am not out just to “soak the rich”. 🙂
    Your just wrong about tax cuts increasing revenue. I’m not disputing the fact that revenues went up in the year after the Bush tax cuts went into effect. I am disputing that the tax cuts caused the increase in revenue. The economy was growing at the time, revenue goes up regardless. As counter examples I point out that revenue also went up after the 90’s tax increases. And that despite increasing tax cuts (as the Bush cuts phased in) the economy went to hell in 2008. I am not making the counter argument that tax hikes would be good for the economy. I am making the more limited argument that their is little evidence that current tax rates (or Clinton ones) are a serious drag on the economy. We have had both robust growth and serious recession so its unlikely that they are a major factor.
    And I don’t really want to increase spending either and would agree that we need to cut back some to bring the budget into balance (although I would also like some tax hikes to bring the budget into balance – and some of the spending cut should be military – I’m reasonably happy with Bowles/Simpson recommendation). But you want massive tax cuts that have to be paid for with even larger spending cuts. And no, I am not down for that.

    TomO (a524c5)

  65. Brilliant rebuttal, Kman. Brilliant.

    What? You were not being sarcastic? Oh.

    Never mind.

    SPQR (26be8b)

  66. While income tax is pretty progressive our overall federal tax system is much less so. FICA is regressive as it caps out around $107,000. Gas taxes are regressive as are tariffs. State taxes are generally much less progressive as well. Overall the poor are paying plenty in taxes (including federal taxes). And the 47% pay no income tax figure is true, but misleading as to overall tax burden.

    TomO (a524c5)

  67. Maybe kman would define the rich as a dollar figure in income, and while it is at it, kman could state how much of their income they do not deserve to keep.

    JÐ (b98cae)

  68. By the same token G.H.W. Bush and Clinton raised taxes and we had both growth in revenue and the overall economy for about ten years

    Post hoc fallacy.

    In the first place, the economy went right into a recession after Bush 41 raised taxes. In fact, one of the tax increases was targeted at luxury yachts…and it ended up killing the yacht-making businesses in the US.

    In the second place, when Clinton’s tax increases went into effect, the economy had already experienced 8 consecutive quarters of expansion, and a new sector (technology/dotcom) was emerging. The economy didn’t grow because of the tax increases; it would have grown without them, and we don’t know by how much. Further, the tax revenues would have increased anyway as a result of the already growing economy.

    Sometimes raising tax rates results in greater revenues. But you don’t know whether the revenues would have gone up just as much because of natural changes in the economy.

    However, it’s plain foolish to say that Clinton’s tax increases ushered in economic growth because the economy was already growing before Clinton was even elected.

    Some chump (4c6c0c)

  69. FICA is not regressive as benefits based on it are capped as well.

    That’s called “Hey Squirrel!” TomO, and we don’t think its an argument.

    SPQR (26be8b)

  70. And yeah, I think there are plenty of people that can afford to lose another 1% of their income before we cut another 1% for Medicare/Social Security. (although ultimately we will need to do some of both). The upper quintile of earners in the US live really well, and while I don’t begrudge us that. If a bill needs to be paid its the upper quintile that should be first to pick it up.

    TomO (a524c5)

  71. FICA is regressive as it caps out around $107,000

    Social Security taxes are capped because the benefits are capped. It has nothing to do with progressive/regressive taxation, it is essentially a defined-benefit retirement plan.

    Some chump (4c6c0c)

  72. Lefties don’t care about econ effect of taxes b/c they are either net takers or pollitically connected (see Kerry, Kennedy estate, Geitner, Rangel, etc.) Tax policy is primarily a way to control other peoples behaviour and money, and to prevent some smart, ambitious people from accumulating wealth and freedom.

    NewEnglandDevil (68ff46)

  73. Some chump: Agree that its a post hoc fallacy. My point was that the argument that G.W. Bush tax cuts increased revenue is the same post hoc fallacy.

    TomO (a524c5)

  74. Of course it won’t solve all of our fiscal problems, but it can certainly help depending on — and to whom — it is done

    No, it won’t–going back to the Clinton tax rates will only bring in around $70 billion a year, assuming no subsequent tax avoidance takes place. That $70 billion is only about 4% of last fiscal year’s deficit.

    Given the math, arguing that getting rid of current tax structure will help “depending on who it targets” shows that it’s not about fixing our fiscal situation, it’s about your social disapproval of people making a lot of money.

    That’s a specious argument, Chris.

    No it’s not–you can write a check to the US treasury, right now, today, if you want to pay a greater percentage of your income to the government. So why aren’t you and these rich leftists doing so? Do you not have the courage of your convictions?

    Let me put this way: Would you like to rid the world of hunger?

    Why would I desire something that I know is fundamentally impossible?

    Your entire counter-argument here is a red herring.

    Another Chris (2d8013)

  75. Labor has a very high tax rate – for example a married couple where both spouses are self employed and make $100,000 ($200,000 total) – will pay slightly more than $63,000 in federal income tax (including the self employment tax ) this equates to a 31.5% effective rate on all income.

    joe (6120a4)

  76. .com

    Wasn’t that one of those “bubble” schemes that collapsed, big time?

    AD-RtR/OS! (ba1e7c)

  77. SPQR why isn’t it an argument? Is there some reason we are only considering income tax instead of overall tax/federal tax? We certainly aren’t considering only spending paid for by the income tax as our major concerns have been SS and Medicare which are in theory funded by FICA. In reality its all one big pot of tax and spend and it would be silly to only consider a part of it.

    TomO (a524c5)

  78. Comment by Another Chris — 11/16/2010 @ 12:28 pm

    But, won’t the consumption of “red herrings” alleviate “world hunger”?

    AD-RtR/OS! (ba1e7c)

  79. When the Govt is running a deficit of 1400-Billion Dollars, how will that be solved by raising income taxes by 70-Billion Dollars?
    Plus, the additional taxes will, historically, depress economic expansion, thereby depressing the growth of govt revenues, or even causing them to contract.

    AD-RtR/OS! (ba1e7c)

  80. TomO, because the discussion is on income tax rates. Because FICA / Social Security has always been sold to the public as a self-funded scheme. Your attempt to distract when you are losing an argument is noted.

    SPQR (26be8b)

  81. SPQR….it is what trolls do.

    AD-RtR/OS! (ba1e7c)

  82. Sales tax – The argument that it is the most fair is a good argument, but – three significant policy issues with the sales tax
    1) A sales tax will be very regressive both from an income standpoint and from a generational stand point. A) The poor will spend a much greater share of income on necessities and therefore shoulder a much greater share of the tax than higher income individuals and, B) the younger generation, especially new families, spent a much greater portion of their income on the things needed early in life, first home, appliances for new home, necessities for the kids, clothing, things that older folks no longer need.

    2) the second issue with a sales tax is the transition from an income tax to a sales tax. for example, How do you treat two individuals, one who bought a home pre sales tax and one who bought the home post sales tax enactment, etc.

    3) The sales tax rate would need to be in the 20-30% range to generate the tax revenue needed by the government. – this will obviously create a serious distortion of the economy

    joe (6120a4)

  83. If it wasn’t clear, the politically connected don’t care b/c they don’t pay.

    NewEnglandDevil (ae55d7)

  84. @1

    “Truth”, I gave you the benefit of the doubt and went over to your link.

    Your link admits the evidence is anecdotal, and quotes a NY Times article (without a link, so I was unable to check out that article to see if the quotes were taken out of context).

    Why should I believe your claims, exactly?

    malclave (1db6c5)

  85. joe, that only assumes that a sales tax would only be levied against goods.
    If you include services, you pickup a huge amount of money at a low rate.
    Also, many things can be excluded to address concerns about regressivity, such as groceries, and medicines. You could also exclude utilities up to the “lifeline” level.

    AD-RtR/OS! (ba1e7c)

  86. Joe, to be clear, I addressed your 1) objections pretty well when I brought it up. If we had a national sales tax, we could simply not tax necessities. Houses up to $200,000, food, medicine, clothing costing up to $100 per article. Etc. I usually say this generally… I should this time too, but whatever you think is a bona fide necessity, assume we don’t tax that at all.

    You’re right to note the point of progressive taxation is to help the poor get what they need. I think my sales tax idea actually makes that much simpler.

    Your 2) objections are very interesting and I’ll have to think about that some. I honestly would just say let the chips fall where they may. Some people got that $8k tax credit on houses, and some didn’t. We just roll along with that.

    Your 3) that we would need the tax to be really high, is probably the hardest to discuss. We need spending cuts no matter what. We aren’t going to be able to achieve my idea on taxing, but we can fix the bigger problem on spending.

    I want to add, there’s a number of major benefits to my idea. It’s going to save a lot of enforcement expense (there will still be some). It shifts taxation away from individuals, onto people who have more stake (sellers) in being honest. It also taxes people who make money off the grid.

    I think it’s just a theoretical exercise at this point. I like the idea a lot, though.

    Dustin (b54cdc)

  87. Also, with a sales tax idea, you can give yourself a tax cut, if you have some kind of emergency, by not spending money on things you don’t need.

    Joe’s right this idea will lead to a distortion on the economy. It will also remove a distortion on hiring people.

    The rate will have to be substantial. I’ve heard estimations and they range. We are in a hole, and we do need substantial taxation in order to balance the budget and pay our debts, so we don’t leave them with our children.

    That’s the only reason I played along with TomO’s discussion about max revenue from taxes. If we had low debt, I would want taxes to be as low as possible. Before and after we pay off our debt, we need to make major cuts in spending in order for the country’s economic system working at all.

    Dustin (b54cdc)

  88. Dustin,

    I think that a flat tax or a vat tax is the only thng thats fair, someone earning ten times someone else pays ten times more, (even this is unfair as govt is for all men created equal) but thats as far as I go.

    The day govt is as efficient as the private sector is the day the govt was privatized

    EricPWJohnson (d84fb0)

  89. joe, if the Feds scaled back the Leviathan to it’s historical, late-20th Century size of 18-20% of GDP, why would the sales tax have to be any higher than 18-20%, particularly when you eliminate all of the other taxes that they collect, and state/local sales taxes (remember, under my – borrowed – scenario, states would be restricted to levying an income tax, and locals would be restricted to the property tax).
    Of course, one difficulty will be collecting that 20% on weed and blow sales, but at least you’ll clean up when the dealers buy their bling.

    AD-RtR/OS! (ba1e7c)

  90. A more reasonable scenario, which happens all the time.

    A gal works for a startup, doing circuit design. She takes a $50K salary cut (startups are poor) but is given a pile of options. However, she doesn’t have any real wealth so she cannot execute the options and so does not have the benefit of the 1-year holding period on stock.

    Five years later, after a lot of hard work, the company is sold for $200 million dollars. Our gal has options worth 1% of the company, or $2million. But she has to pay straight income tax on these AS THOUGH SHE WAS MAKING $2 MILLION EVERY YEAR. She pays 11% to California and 35% to the Feds on nearly all of it, for a combined hit of about $800K in income tax, leaving her with $1.2 million.

    Her big win after subtracting the salary cut is less than $1 million. Now, that’s fine and I’m sure that she’s happy to get it, but that’s all she’s getting. It solves a lot of problems, but she wasn’t rich when she started and she’s not really rich now. But she’s been taxed like she was Bill Gates.

    Oh, wait. No she hasn’t — Bill Gates pays only capital gains.

    Kevin M (73dcc9)

  91. Of course, one difficulty will be collecting that 20% on weed and blow sales, but at least you’ll clean up when the dealers buy their bling.

    Comment by AD-RtR/OS!

    It’s a bit of a catch 22, but I think we come out ahead if these people are paying some level of tax.

    In fact, EVERYONE would be paying some tax, practically speaking. They would all be more interested in the debt hole. They need to appreciate the fact that the government is spending a fifth of everything, at least. We all should be in this together. When Murtha wanted to name another post office after himself, people shouldn’t just roll their eyes and assume Richie Rich won’t notice the impact.

    I think a lot of people are hiding behind the mascot of progressive income taxation… the struggling family putting food on their table. By generalizing all the lower 40% of earners that way, we’re being extremely unfair as a society.

    And I also think we’re costing them jobs.

    Dustin (b54cdc)

  92. Kevin M, that was a great illustration.

    Dustin (b54cdc)

  93. Kevin, and next year, if she passes away with a net worth of $1.5million, she’ll be taxed again at more than $200,000.

    SPQR (26be8b)

  94. Dustin, under current trends, the Govt is spending 25% of GDP, and borrowing a fifth of that!

    AD-RtR/OS! (ba1e7c)

  95. “But she has to pay straight income tax on these AS THOUGH SHE WAS MAKING $2 MILLION EVERY YEAR.”

    If you realize a capital gain in a given year that’s when you pay taxes on that. Though I don’t think these are taxed at the 35% rate you quoted. How else do you want this system done?

    imdw (05d41e)

  96. Dustin, under current trends, the Govt is spending 25% of GDP, and borrowing a fifth of that!

    Comment by AD-RtR/OS! —

    It’s insane. And as they tax more, the GDP will go down, forcing them to borrow more.

    While spending more.

    This isn’t a good plan.

    Dustin (b54cdc)

  97. imdw

    posting someone’s personal information who has small children on a blog to win an argument is about as horrible as your grasp of economic fundamentals and all around fair play and understanding of boundaries.

    EricPWJohnson (d84fb0)

  98. But, she didn’t have a Capital-Gain, because she only held the stock for less than a year after cashing-in her options.
    If she would have exercised her options earlier, when she didn’t have any money to do so, then she would have had a C-G, and not income;
    but, because she didn’t have the funds to exercise those options at that time, she is stuck paying taxes on income from exercising the option to keep from losing it,
    and immediately selling the stock to pay for the option.
    Kapeesh?

    AD-RtR/OS! (ba1e7c)

  99. Sorry eric. Not me. But thanks for talking about capital gains!

    imdw (05d41e)

  100. Well said, EPWJ. I’ve had my complaints about you, but you clearly have a better idea of where the line is drawn, morally.

    Dustin (b54cdc)

  101. And imdw’s vague denial is a failure.

    Dustin (b54cdc)

  102. Dustin,

    It all comes donto the mother of all mothers of a rowdy ctting spending session starting in a week and continuing until someone blinks or loses an eye.

    EricPWJohnson (d84fb0)

  103. And again, we get the faux-poster excuse from IMaDickWad.
    I suppose that we’ll know when this cretinous excuse for humanity reaches maturity, for it will start owning-up to its’ actions.

    AD-RtR/OS! (ba1e7c)

  104. Isn’t the difference between the exercise price of her option and the price the stock is sold at in the buyout a capital gain? She bought the stock at a given price and then sold it at a higher price.

    imdw (e6d25a)

  105. It all comes donto the mother of all mothers of a rowdy ctting spending session starting in a week and continuing until someone blinks or loses an eye.

    Comment by EricPWJohnson —

    That is it.

    We can debate which tax policy makes the most sense or is the most fair, but the real problem is that we need to have this mother of all budget trimmings.

    Dustin (b54cdc)

  106. That’s because imdw does not understand the options scenario.

    But as usual, is not discouraged from opining.

    SPQR (26be8b)

  107. “Rich people can afford to pay with much less pain than poor people can. Taking and extra $80,000 from someone making $350,000 will certainly be no fun, but they still have more than enough money to have a very decent life.”

    “If a bill needs to be paid its the upper quintile that should be first to pick it up.”

    TomO – I’m very curious how you arrive at the above blanket statements. A couple making $350,000 generally will have mortgage payments, car payments and tuition payments that people making $50,000 will in addition to that combined 50% state and federal tax burden. The couple making $50,000 is likely paying minimal federal taxes and is likely eligible for tuition assistance.

    I submit you are in no place to just the lifestyles of others and don’t know WTF you are talking about.

    daleyrocks (940075)

  108. imdw,

    you need to come to grips with the very fact that you wittingly or unwittingly endangered someone’s family – who prosecutes people who kill people and you pretty much tried to tell them (the them who kill) here to find his kids.

    You need to understand that, no matter what happens on a blog, no matter what people call you, or ridicule you, its just F&^*ing words, but what you did, as unforgiveable as it gets.

    EricPWJohnson (d84fb0)

  109. judge not just

    daleyrocks (940075)

  110. Comment by imdw — 11/16/2010 @ 1:43 pm

    The stock, not the option, must be held for a specified minimum amount of time before you sell it to be treated as a Capital-Gain. If you sell before the minimum, it is taxed as ordinary income.

    AD-RtR/OS! (ba1e7c)

  111. 104.Isn’t the difference between the exercise price of her option and the price the stock is sold at in the buyout a capital gain?

    Not always. It depends on the type of options. Profit on NQSOs counts as W-2 income. ISOs may or may not be.

    Also, if a company is bought out, only rarely are the options cashed in the buyout. They are generally converted into options on the purchasing company’s stock.

    Some chump (4c6c0c)

  112. SPQR,

    Lets all go on ignore – he has a need and we are filling it – no one at all respond to him anymore – if the tree falls on a keyboard and prints out patterico’s home address, it doesnt make a sound – he needs the attention positive or negative

    The silent treatment is the only treatment

    EricPWJohnson (d84fb0)

  113. its just F&^*ing words,

    A-MEN

    Troll as hard as you like, imdw. Laugh at something nasty or be impenetrably dense.

    But don’t mess people people IRL over just f–king words. And for God’s sake… own up to it.

    Dustin (b54cdc)

  114. “Isn’t the difference between the exercise price of her option and the price the stock is sold at in the buyout a capital gain? She bought the stock at a given price and then sold it at a higher price.”

    Hush idiot.

    daleyrocks (940075)

  115. EPWJ, if I followed your advice, it would be to ignore two persons. imdw and you.

    SPQR (26be8b)

  116. Dustin 3) that we would need the tax to be really high, is probably the hardest to discuss. We need spending cuts no matter what. We aren’t going to be able to achieve my idea on taxing, but we can fix the bigger problem on spending.

    Dustin I agree the number one problem is the spending. The excessive spending is really the number one cause of the complexity of the tax code.

    The resolution of the regressive sales tax by the use of exemptions/floors for “necessities” is what will complicate the new “sales tax code” quickly morphing into something similar to the complexity of the current “income tax code” With all the exemptions, you will quickly morph into sales tax rates of 25-30%.

    Contrary to many arguments, enforcement will still be problematic with little if any reduction in enforcement/administrative costs – will only be a shift in enforcement issues.

    Also contrary perceived believe that more unreported income will captured since individuals who dont report income will still need to buy beer, cars, pay rent, etc., the barter world will still exist to hide the taxable sale.

    You still cant get around the generational regressiveness of a sales tax whereby young individuals and young families will pay a significant greater portion of the income in the form of sales tax

    joe (6120a4)

  117. SPQR

    🙂

    EricPWJohnson (d84fb0)

  118. Sorry. It wasn’t me dude. And I don’t know what’s vague about that simple statement. I’m sorry people were put at risk, but you’re barking at the wrong guy.

    “That’s because imdw does not understand the options scenario. ”

    Oh yes I was not aware of the holding period requirement. So lets get back to how you would rather have someone be taxed when they make 2 million in one year.

    imdw (a863d5)

  119. Joe

    Sales taxes are American, Progressive taxes were advocated by MArx, implemented by Lenin then adopted by Roosevelts advisor who was later found out to be a russian mole

    EricPWJohnson (d84fb0)

  120. Contrary to many arguments, enforcement will still be problematic with little if any reduction in enforcement/administrative costs – will only be a shift in enforcement issues.

    The tax code I’d like, with this sales tax idea, is drastically simpler. Anyone will be able to understand the entire thing in 20 minutes.

    My FIT book is larger than 5 of my Bibles.

    There will tax cheats, and there will be enforcement, but against businesses. I think it would work better, but then, I’ve got an active imagination.

    You still cant get around the generational regressiveness of a sales tax whereby young individuals and young families will pay a significant greater portion of the income in the form of sales tax

    I think you’ve got me on this one. I’m just accepting that problem.

    Dustin (b54cdc)

  121. #46. Exactly.

    (any minority, whether it’s the rich or some disfavored producer like the tobacco farmer)

    Or the Jews. There’s plenty of historical precedent for that. So why not now?

    Milhouse (ea66e3)

  122. Comment by joe — 11/16/2010 @ 1:53 pm

    Rule #1- Life isn’t fair;
    Rule #2- The individual is not burdened with the hours and hours, or the monetary expense, of filling out a 1040;
    Rule #3- If you still have concerns about this, see Rule #1!

    AD-RtR/OS! (ba1e7c)

  123. Isn’t the difference between the exercise price of her option and the price the stock is sold at in the buyout a capital gain? She bought the stock at a given price and then sold it at a higher price.

    Yes, technically it’s a cap-gain, but the tax code treats gain on assets (the stock, not the option) held for less than one year (try 30 seconds) as regular income.

    Kevin M (73dcc9)

  124. Side comment on the supposed fifty percent profit margin for retail stores–

    There is a bit of received wisdom lurking behind that, although even the received wisdom is not necessarily true.

    Essentially, it’s supposed that the original price paid for an item by the retailer is fifty percent of the price it charges as full retail. In other words, if you see a coat with original price of $200, you can assume the retailer paid $100 to the supplier. I should emphasize that while it is a common rule of thumb, it is often not true.

    Of course, that’s not a profit margin, that’s only a markup; and out of the $100 markup the retailer must pay for employee compensation, rent and overhead, supplies, debt service, advertising, etc. etc. etc. And of course the actual price paid by the consumer is generally less than the full retail price, with sales and clearance discounts, and can, when the retailer wants to discontinue an item or uses it as a loss leader, well under the price it paid the supplier. So the instances where it gets that full $100 markup are usually few and far between.

    But that supposed relation of price paid to supplier and full retail price may be the origin of the idea that stores have a fifty percent profit margin.

    kishnevi (865969)

  125. I’ve directly employed over 50 people at a time.
    I’ve made a good six figure amount doing so, and have held onto a good six figure amount after taxes.
    There is a point where it isn’t worth the hassle to add more employees, and it is easier to scale back and get the taxes, regulations etc. all settled down and just accept a lower gross income that yields a higher net with less hassle and less taxes and less overhead.
    So yeah, that gross revenue the government grabs deprives people of jobs… so me; greedy capitalist pig that I am; just decide to keep my money, not build a pool and not hire a pool service.

    I was raised from birth in a place where a home next to a meth house can go for $700K. I fixed up my home (which was NOT next to the meth house; got permits etc. so they raised my assessment.
    See how that works?
    I made money, paid permits fees and school district fees, kept the city permit office employed, employed some people to do the actual workmanship, bought fixtures and supplies plus sales tax. I paid into the system the entire way and in the end they reassess my parcel at a taxable amount of $1.7M and now I pay $17,000 a year in property taxes even though the increase is paper profits on sweat and blood.
    So yeah I’ll think long and hard about doing any more improvements.

    Going back to my episodes as employer of too many, those last six employees that maybe make me $30HR but trigger thousand of dollars of taxes layers of overhead and headaches? Nope. Been there.

    Here is the other thing… and some of the commentors probably fall into this category… some employees are idiots and can lose you $100HR… or more. Even good employees can lose you money, but the bad ones lose a lot fast. Of course the owner absorbs that loss, the employee still pulls his/her wage and then get unemployment when you fire them… usually they also claim some sort of previously unreported back, neck or shoulder injury immediately upon dismissal…
    bottom line?
    If I don’t make really good money for having employees, because it is a huge responsibility and overhead load… then I won’t develop the business, pursue very wealthy clients and persuade them to start a project and spend their money… and in an uncertain high tax environment, they might not be spending anyway.

    So that NYT article with anecdotal evidence can blow me

    SteveG (cc5dc9)

  126. The estate tax taxes wealth, and so do property taxes.

    Charlie Davis (c40b22)

  127. I paid income taxes on the money spent to improve my property. The “wealth” is on paper and the expense of the improvement is real and out of pocket.
    Estate taxes (which I am opposed to) is on realized (to the estate) wealth. Property taxes are on paper profits and there is no engine for recovery except a future sale.

    You are making the usual argument of someone who doesn’t face the problem…
    I understand that id I buy a property worth 1.7M that I need to pay the 1% of the 1.7M
    But if I improve the value of the property and they reassess me based on what I “could get” on the market… I’m not wealthy except on paper… in fact I may have borrowed money to improve my property, employ people and buy materials.
    So tell me why I should employ people to modernize my kitchen, my plumbing, my electrical, my bathrooms?
    It isn’t worth hiring people if every time I use my new low flow toilet (flushing twice… or maybe three times) costs me $50 in increased property taxes

    SteveG (cc5dc9)

  128. By the way… I paid school district fees, permit fees, inspection fees etc etc I paid for an architect, an engineer, a surveyor, and a fee to park a dumpster in front of my house, and for a person to guide the whole process through the city planning office. They required me to pay a general engineering contractor to underground my cable, telephone and electrical. Oh… and I had to pay to videotape my sewer line… which came back *ahem* clean, but the city dupe automatically said the report required me to run a new sewer line and upgrade the shared line which would be five figures here at least and I had to fight it.
    All of that counts towards my reassessment… although I guess I could lie to the city tax collector

    SteveG (cc5dc9)

  129. Oh yeah and I had to expand the garage to a full two car garage because city code now requires two covered spaces… and then they assessed me more because I have a two car garage… kill the rich with their two car garages!!!!

    SteveG (cc5dc9)

  130. Taxing the rich is nothing more than another tired talking point to incite class warfare.

    Pretty much all the rich people earned their wealth. Sure, some inherited and they get shows on whatever reality TV network you prefer to watch.

    Others collected their wealth while being paid representatives of the people.

    They also get to be elected in left-wing states on a pretty regular basis. Some get to spend their hard-earned money by divorcing their gay husbands and rejecting the very system that made them rich.

    Others, by guile and wisdom amass vast fortunes through manipulation of the markets.

    Some are paid vast amounts of money to do nothing than present their views with nothing more than hollow ideas and blow-dried hair.

    Others claw at the bottom of the free press for the crumbs that, indeed, trickle down from their corporate masters to provide some sort of viewpoint on op-ed pages that pretend to understand the American people.

    There is a significant difference between the people in power and the persons who run a cafe, a convenience store, a feed store, a farm or work on a production line and the ones who know how we should think.

    The difference is that the people are not stupid and they haven’t seen a whole lot to indicate the ruling class, right or left, is a lot smarter.

    Ag80 (827a00)

  131. Charlie

    The federal estate tax is a tax on the income of the inheritance to the family.

    And property taxes don’t exist on the federal level. And, i would add, they really don’t necessarily correspond to wealth. For instance, in texas you pay as much for a house you own free and clear as you do for one you have mortgaged up to your eyeballs. Now who exactly is wealthier?

    Anyway, i was talking on the federal level only. i don’t believe any state has a straight wealth tax, but i could be wrong. But i can say for certain about the FG.

    Aaron Worthing (b8e056)

  132. “But if I improve the value of the property and they reassess me based on what I “could get” on the market… I’m not wealthy except on paper… in fact I may have borrowed money to improve my property, employ people and buy materials.”

    The wealth isn’t just on paper: you have an improvement. You could have borrowed to buy the property too.

    imdw (e66706)

  133. wtf is wrong with you…
    yeah I have an improvement… so how does that improve my cash flow

    SteveG (cc5dc9)

  134. OK so I’ve employed and paid everyone, paid all my fees…not taxes *ahem*, fees.
    paid sales taxes etc and you… economic genius sniffs,
    “… you have an improvement” after all.
    Wow. and “you could have borrowed to buy the property too…” well, you got me there, but what if I didn’t?
    you are an economic idiot.

    SteveG (cc5dc9)

  135. “yeah I have an improvement… so how does that improve my cash flow”

    What cash flow? Aren’t we talking about property taxes? As AW points out, people who borrow and buy property still owe property taxes. So it would be with people who borrow and add value / improvements.

    imdw (c982ed)

  136. “The wealth isn’t just on paper”

    Is it on air?

    Idiot

    daleyrocks (940075)

  137. What cash flow?

    Try the cash flow that pays the property taxes, idiot.

    AD-RtR/OS! (ba1e7c)

  138. Stupid that pervasive and concentrated should hurt. It is a wonder imdw makes it through a day without getting run over in traffic.

    JÐ (306f5d)

  139. Any parent that would allow imdw out of the house without being on a leash should be prosecuted for Child Endangerment.

    AD-RtR/OS! (ba1e7c)

  140. OK, I haven’t read all the above, but, if someone hasn’t mentioned it yet by name, it certainly sounds like someone will soon enough, and that is the Fair Tax concept.

    I’m SORT OF in favor of this concept as I understand it, but with one EXCEPTIONALLY SERIOUS codicil:

    That is, passage of the tax should be tied directly and incontrovertibly to the full and complete repeal of the 16th Amendment, the one which allows the income tax.

    Otherwise, it is a foregone guarantee that there will be some “fiscal crisis” which requires the re-imposition of the income tax AS WELL AS the now somewhat less Fair Tax, “just for the duration”. Translate: Forever.

    IgotBupkis, President, United Anarchist Society (9eeb86)

  141. The same demand should be linked to any consideration of a VAT, also.

    AD-RtR/OS! (ba1e7c)

  142. Some friends of mine and I came up with what we thought were adequate descriptions of “rich” and “filthy rich”:

    1) Take whatever salary would be about the best you could reasonably obtain from almost any highly paid professional job, with some exceptions (rock musician, football player, options trader). We called it 100k then, it’s probably more than that now but still in that ballpark — so call it 100k for the moment just for numeric simplicity.

    2) “Rich” means your income from all non-salary sources — assets, interest on investments, stock dividends, etc., exceeds that salary level. For 100k and typical ROI, this would be about US$1 million…

    3) “Filthy Rich” means your income from all non-salary sources is such that you could give away a year’s income and make someone else classify as “rich”.

    IgotBupkis, President, United Anarchist Society (9eeb86)

  143. ______________________________________________

    How many times do you hear it? “The Republicans want tax cuts for the rich.”

    In honor of the type of person most likely to believe and claim that, I hereby post the following. A brief history on one of the heroes and darlings of liberal America:

    taxhistory.org

    [Franklin] Roosevelt reserved special scorn for the “clever little schemes” devised by tax lawyers, insisting that they posed a threat to the tax system, and even to society as a whole. “In this immediate problem the decency of American morals is involved,” he declared. “The example of successful tax dodging by a minority of very rich individuals breeds efforts by other people to dodge other laws as well as tax laws.”

    Such bombast carried the day in 1937, when FDR pushed a tax bill through Congress that tried to eliminate some of the more glaring loopholes. Other high points in Rooseveltian tax policy — including the Wealth Tax Act of 1935, the undistributed profits tax of 1936, and the tax bill veto of 1944 — were also rooted in a conviction that rich Americans were gaming the tax laws.

    But Roosevelt’s tax returns reveal him to be something of a hypocrite.
    At various points, both before and after his election to the White House, he indulged in the sort of tax avoidance that he claimed to find so objectionable.

    For instance, Roosevelt repeatedly urged Congress to end the tax-free treatment of interest on state and municipal bonds. The special treatment accorded to those financial instruments, he told Congress in April 1938, “has created a vast reservoir of tax-exempt securities in the hands of the very persons who equitably should not be relieved of taxes on their income.” Congress should act to end the injustice, he declared.

    Yet just a month before, FDR had filed a tax return indicating that he owned some $17,000 in tax-free bonds.

    FDR repeatedly claimed that he was exempt from the high tax rates on personal income that Congress had enacted — and Roosevelt had approved — in the revenue acts of 1934 and 1935.

    In a series of letters to internal revenue officials, Roosevelt insisted that he could not be taxed at the heavy rates imposed on rich taxpayers during the mid-1930s.

    Mark (3e3a7c)

  144. Oh

    I get it.

    I’m not adding value to *my property* but I am adding value to the property of the state.. and since I increased the value of the property, my rent should go up correspondingly.

    For a minute there I’d forgotten that private property ownership is an anathema to the left

    SteveG (cc5dc9)

  145. I just got my health insurance quotes for 2011… current plan is going up 41% for 2011.
    The cost curve just got bent up my….

    SteveG (cc5dc9)

  146. “Try the cash flow that pays the property taxes, idiot.”

    It doesn’t go up when you buy more house either, yet we have property taxes on that.

    “I’m not adding value to *my property*”

    Actually you are. And that’s what get property taxes reach. Not ‘cash flow.’

    imdw (8bb588)

  147. And that’s what get property taxes reach

    I know Engrish is a challenge for you sometimes, and even acknowledging your propensity for gibberish, the above was remarkable.

    JD (c8c1d2)

  148. JD – imdw can also make you some big money on used cars!

    daleyrocks (940075)

  149. That was yet another high point in its quest for being named Pubic Idiot Extraordinaire, that is a coward that hides behind multiple names and proxy servers to avoid being banned.

    JD (c8c1d2)

  150. JD – imdw can also make you some big money on used cars!

    I’m sure he was all in favor of Ca$h for Clunker$

    I know Engrish is a challenge for you sometimes, and even acknowledging your propensity for gibberish, the above was remarkable.

    Don’t bug about his mad Ebonic skilz, we’re still trying to get him past using Algebro as his chief mathematical tool…

    Regardless of his actual racial background, it’s pretty clear he was taught in an inner-city public school.

    IgotBupkis, President, United Anarchist Society (9eeb86)

  151. “JD – imdw can also make you some big money on used cars!”

    I’m still fascinated that people here don’t understand real interest rates, so much that they resist a simple model to show them.

    Ebonic? Man you people.

    imdw (8bb588)

  152. You people?!?!?!?!?! How freaking bigoted can you be?

    JD (560680)

  153. I think you know the answer to that, JD.

    Eric Blair (c8876d)

  154. I was realizing that in the imdw scenario that it wasn’t my property. Sorry to have gotten us off of the federal level. But the confiscation of wealth looks and feels the same. Every thing you do will be taxed before during and after

    steveg (c847f8)

  155. The GOP wants to borrow money from China to give tax breaks to the rich, payback for campaign support. That’s how you measure the patriotism of the GOP.

    Truth (9df40f)

  156. Loon

    daleyrocks (940075)

  157. Anyone care to bet where twoof is posting from? It would not know truth if it crawled out its weinerhole and did an irish jig on the end of twoof’s Pinnochio nose.

    JÐ (b98cae)

  158. All taxes are a redistribution of wealth or why bother.Some are needed like the defense of the country,police and fire,but many are just plain redistribution and social engineering.The under lying premise is that those who earned it must have an enlightened politician spend it because the earner is lackwit.

    dunce (b89258)

  159. Actually we don’t have to tax income at all. We did not as a country for more than 100 years. Having an income tax sets up a class envy that pits Americans against one another. Income taxes keep the wealthy rich and slows down the wealth creation of all other classes. We have the richest poor in the world here in the USA. People below the federal poverty line often have a cell phone, a car, cable TV, and are more likely to be overweight than the average American.

    Christopher Ganiere (22f2cc)


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