10% paying 66% of taxes in unfair to the other 90%?

Great Debates
21

Well, let’s see here, Mr. Z. Let’s say I’m a single person with no kids working for minimum wage, full time. (Yeah, right, but let’s suppose.) In fact, considering the job market, let’s say I’m working for above minimum, maybe $7.00 per hour. That’s $1,120 per month, gross; once Uncle and my friends in the state capitol and the local counting house take their share, we’re down to around $600-700 per month.

Here in DC, an apartment in even a shitty neighborhood is going to cost you $300 or so a month. That’s half your net gone right there. Phone, if you want one, is going to cost you $40 a month. Hopefully your landlord pays gas and electric. If not, that’s gonna be at least $100 a month.

If you have a car, there’s gas, which is around $1.65 a gallon here. Filling up twice a month, which you can get away with if you live close to work, will cost you, oh, $50 a month if you have a 15-gallon tank. Gotta have insurance, too, or you can’t drive. Well you can, but you know what I mean. If you DON’T have a car, you’re riding the Metro, which is no less than $1.10 per ride each way. $2.20 a day for 20 working days a month is $44. If you live more than 3 miles from work, it’s going to be more.

So, so far we’re already up to at least $484 in monthly expenses out of our $700 monthly pay. We haven’t even covered food, clothing, medical . . . so where are the savings going to come from? We can be fairly sure our minimum wage job doesn’t have a 401(k).

I can’t even believe I would need to explain any of this to you. I know you know it, and understand it, too.

22

How would you tax wealth itself? does that mean that if I have $150,000 in savings or a retirement fund that I have to pay 37% tax on it each year? That would certainly bridge the income gap quickly.

Another thing to think about is how much wealth the rich (the truly rich) create through jobs, investments and expenditures. But that too is another thread.

Any stats on corporate tax being lowered?

23

Mr. Z - Decreasing marginal utility, in essence, means that the utility (i.e. pleasure, wellness, etc.) a person receives from an additional good (in this case, money) decreases with each additional unit of the good received. Bill Gates was probably pretty happy earning his first 100K. Is he as happy earning the same amount today? Probably not. You say you make 100K. Is an additional five thousand dollars a year going to make as much of a difference to you as it would to a person earning ten thousand dollars? (Remember, DMU refers to utility on the margin not the actual basket of goods that 5K buys you.)

Again, please explain why this does not factor in. The people in Stockholm are waiting.

24

avalongod

For your numbers to work, the percentage of the country’s money that the rich earn must be greater than the percentage of the country’s taxes that they pay. So just how would the top 6% end up with only 34% of the country’s wealth if they’re making more than 50% of the country’s income?

Gilligan

This is just a repeat of avalongod’s point, which I have refuted.

oldscratch

So? He did mention the percentage for 6%. Must he provide every single detail?

25

Rhythm-I am sure you have me at a great disadvantage here, but I will give it a shot.

It sounds to me like you are saying that the value of a given sum to a person is best represented as a proportion of their total income. So a billion dollars to Gates is like $1,000 to me. And by extension, Bill should have no problem paying a billion bucks to my grand.

I guess that would be true if Bill and I lived the same lifestyle. If I lived the lifestyle of someone in an apartment who had $50 a week spending money and drove a 13 year old car, then you would be righ. An extra grand would’t mean a whole lot to me. But if I am liveing near or just under my means, any extra money increases my lifestyle or increases my financial security.

AM I off base or on the right track here?

If I read you right, the most equitable way to tax individuals then would be to tax tthem at the same proportion of their income. So I would have to pay $35K and the guy making $10k per year should hold the same value on $3,500, right?

26

I don’t have any numbers but I am sure that the poor do not use the court system the way the rich do.First they cannot afford it.and Second how much do they have to lose.
Use the OJ trial as an example of what I am saying.They would have just thrown most of us in jail,but OJ had money and could fight. How much did that cost us taxpayers?
How much has the microsoft trial cost us?Poor Bill.
How many rich people have pull enough to get a little more paving done,or any number of perks that go with their status.

27

pldennison

I agree that it easier for the rich to keep their wealth, but I think that is just the way it is, and doesn’t bespeak of any unfairness. Besides which, that it already reflected in there not being any income tax below a certain level. As for institutional factors making it “nigh impossible” for the poor to save money, I disagree. If you look at most of the poor, you will see that the major factors keeping them from moving up are decidely non-institutional: dropping out of school, early marriage, divorces, illegitimate children, too many children, drug abuse, etc.

28

Did you read what I said? I said that for the purposes of his argument his numbers are useless. Without talking about how much real wealth the bottom thrid have it really doesnt matter. For example if the bottom third possess only .1 percent of all wealth in the united states then his argument is worthless. I’m not saying that is the number, but until we can see the actuall numbers for wealth and taxes there isn’t much point in debating who pays a greater share.

29

Oldscratch you must have missed my post. I asked you what wealth had to do with it.

We are talking about the income tax rate which is based on annual income, not ongoing wealth. I do not think we want to see a wealth tax.

30

When you listen to talk radio, you get what you deserve. The “Tax-the-middle-class-&-help-the-rich” Bastard forgot to mention the TOTAL tax burden. You see, us working stiffs pay about 18% fica/futa taxes, while the rich who get their $$ from dividnds/capitolgains, etc, don’t pay this. Even if they do, Bill Gates pays the same fica as I do. Social Security is around 40% of the federal budget, so us working stiffs pay 100% of that 40%, while the rich pay 0%. And, there is sales tax, which is a “tax the middle class” tax.

And for krisakes, a “flat tax” would NOT be 10%, more like 20%. Every flat tax scheme that has been proposed would INCREASE the income taxes for 80% of the taxpaying public, they are all givaways for the rich. YOU would pay more. Gates would pay less. GOOD IDEA! :rolleyes: And in memoriam, :wally

31

Dan said

I am a slow putz at that. Could you please explain youself a little here. While I enjoy your ranting, and wild assertions, I am having trouble following.

And I was NOT advocating the flat tax. I was just taking Rhythms point and running with it. Sheesh.

Now, time to go collect all of my capital gains and stock dividends off which I live haaaa hooo hoooohoooo…that’s a joke son!

32

pldennison said:

Not to make light of the situation of the poor, but you’re just a bit off with your numbers here.

At seven dollars an hour, that’s actually $1190 a month (even considering two weeks off for vacation, and most people making this much aren’t going to take off two weeks of unpaid time) or $14,280 a year. Now, I used to have a job where I made $15,600. And I can tell you, I never paid the ungodly amount in taxes that you’re talking about here. At the most, including my share of my health insurance, which you did not include, I paid 22 percent in taxes. So, that’s actually $928 or so gross a month.

Say we move our single, poor person here to Denver, so I can speak with some authority.
Shitty apartment: $400/month
Utilities (if water paid): $50/month
Food: $40/week, or $160/month
Phone: $27/month
Bus tokens: $3/day or $66/month (based on 22 working days/month)
So that’s $703 a month in fixed costs, leaving $225 a month for whatever else. That includes clothes and such.

You’ll notice I included the bus, instead of gas. A car is a luxury, and it’s more economical to ride the bus, especially in bad neighborhoods, where bus service tends to be very good. And I included health insurance, which you may be lucky ehnough (as I was) to receive from work. Considering you spend half of the rest on incidentals, that still leaves you with a little over a hundred bucks you could be saving. Is this stellar? No. At ten percent, is it way more than the average American saves? Yes.

I’m not saying it was a good life, but it was possible.

33

justwannano made a good point that supports what I was saying: the rich do use a great deal of the resources that taxes go to support. True, they aren’t much of a drain on AFDC or Medicaid (although seniors in high income brackets are in fact entitled to Medicare, and they use it, too), but they benefit much more from the advantages of other kinds of spending.

A hell of a lot more money was spent on the Michael Milken trial than on the average trial for a low-income felon. The SEC needs a lot more people to ensure that Bill Gates’ assets are legally utilized than they need for mine. If a millionaire has two private planes and a helicopter, right there he’s using much more of the resources that the FAA devotes to general aviation than I ever do. If the government funds science education or basic research, wealthy investors in companies that hire scientists or sell applications of basic research are going to get higher profits. Sure, these things benefit poorer people too, but nowhere near so lucratively.

So Mr. Z and SouthernStyle, I can’t buy the argument that somehow we each “owe” the same amount, or even the same income percentage, for the things that “we all benefit from.” If some people make lots of money, good for them, but it’s ridiculous to think that they owe everything to their own vision or leadership or brilliance and nothing to the fact that the government gave out tax breaks for developing enterprise zones, or funded technology research that they used in their products, or relaxed investment restrictions, or protected their overseas assets with the awareness of US military might, or caught and prosecuted a brilliant hacker who was trying to destroy their network, or funded intermodal transit projects so their employees could take the bus to work.

Sure, these are things “we all benefit from,” but some of us save $500 a year from them and some of us make a billion dollars. Sure, there’s no way to evaluate exactly how much of their wealth was a result of advantages provided by government spending and how much resulted just from their own wonderful ideas, but “the more you get out, the more you put back in” is a good rule of thumb. 37% for the top income tax bracket is far too low.

Kimstu

34

Mr Z, I did not say YOU advocated a flat tax, but some did. Ok, look at your pay stub. See that “fica & futa & hospital or medicare tax”? You pay 8% fica on up to about 80K in WAGES, not other income, and your employer pays the other 8%, but as that is payroll $ he does not have to pay you, you are effective paid les, ie, in reality, you pay both halves, so that is almost 16%. Then there is FUTA, ie unemployment, which tops out at 40K, again of wages ONLY. Finaally there is the 3% medicare tax, again paid on wages only. So we have all these federal taxes, which are paid by wage-earners only, that your talk-show guy forgot to mention. It’s STILL taxes, and you STILL gotta pay them, so leaving them out of the equation is bogus, and a BIG LIE. Sales taxes, again paid more as a % of income by non-rich, could reasonably be excluded, as they are local, but they serve to balance out the whole tax burden. Rich folks, as a % of TOTAL tax burden, pay less of their income % in taxes than the upper middle class.

35

Hold it Dan, I see where you are getting at. You are assuming that the rich don’t work. Buddy, If you and your wife both make $50k a year, you are “the rich” who are paying 50% of all taxes, along with social security and fica.

I am a working stiff too. But some think of me as one of the Rich who should be soaked. Funny, I don’t seem to be able to locate that vault filled with cash and jewels.

36

What’s it got to do with whether the rich work or not? Nobody’s proposing an “idleness tax”; we’re just saying that those who have more money, however they get it, should contribute more money, and that’s not really unfair because they do in fact tend to use a lot of certain kinds of resources. In other words, the rich should be soaked, and I say that in the full awareness that by many people’s standards, “rich” includes me.

Kimstu

37

Mr Z, I am defining “rich” as the top 1%. But in any case, even if the “somewhat rich” DO pay fica, all the other 90% do also, so you have to figure fica, etc into the total figures. When you do so, they are nowhere near as unbalanced. (since we have the other 90% paying about 9 times as much fica, etc.).

38

Ryan:

quote:


I don't pretend to know much about the math of economics...but it seems to me that you just said that for my numbers to work, the minority of people would need to make a significant portion of total income. Then you say 6% of the population make ONLY (ahahahah, muahaha...sorry I had to cry a little bit for that poor top 6% only making a third of the total US income...they need to work harder) 34% of the total income...I see this as supporting my point, not disconfirming it.

It seems to me to make sense to tax higher incomes in a higher income bracket because they have the extra $$$ to spare...oh I know it is tough for some people to balance the lexus, the mansion, the trips to the Mediterranean, and the private schools for the kids...but still this is relative to people struggling to survive on minimum wage. You make more cash, you carry a bigger part of the burdon.

Such is the price of success.
39

In rereading this, I see that I missed avalongod’s first post and just repeated it. Sorry about that, avalongod.

40

Well this is my first post ever on SDMB so here goes…

I could go on for a long time about this issue (I studied in grad school…five years ago and suffer from selective amnesia over the whole grad school experience) but I really only want to go on about a few issues.

  1. The marginal utility of income. There is no “proof” (at the peer level of economic research) that the marginal utility of income is decreasing (i.e. an extra dollar to a millionaire does not add to his happiness as much as it would for someone making $25,000). I am not saying it isn’t rue, and insitinctively we believe it to be true. That is why I believe (purely my own opinion) why most people find a progressive tax palatable.

Advocates of a flat tax seem to beleive either the that marginal utility of income is constant or, since it is really a speculative concept at best, that any system which makes a distinction is inherently unfair in that it treats people differntly under the law.

I am not familiar with any real current research but my recollection is that when all taxes are considered that people tend to pay a flat tax rate.

  1. Corporate tax. Although a coporation tax seems reasonable, it is in fact, unreasonable in this fact, a corporations income is just the income of the individual stockholders. When a corporation is taxed all it’s shareholder are taxed at that coporate rate, whether they be gazillionaire Bill Gates or some of the struggling masses. Gazillioanires might own more stock, but a lot of regular folks have a lot tied up in pensions, 401k, etc. Plus, if the comapny pays out dividends you are taxed twice…once at the corporate taxe level and once at the personal income tax level when all they are doing is distributing earnings.

  2. Consumption Tax. Now before you throw stones, I am not talking about a sales tax. You can have progressivity and a consumptions tax. Baically folks are taxed on their yearly consumption, not income, and that schedule can be a progressive one. Why might this be preferred? Well one of the things that is generally true is that consumption over one’s lifetime is much smoother then their income. We tend to borrow when we are younger, save throught the middle years and then live off that savings when we are older. Certainly our income tends upward, but it nto as volatile over our lives as income. Now a progressive income tax basically punishes those whose income fluctutaes a lot from year to year (i.e. salespeople have this a lot). I can do the math but I won’t.

Also an issue of fairness and efficiency would dictate that htose who consume the same over their lifetimes should be taxed the same, not those whose incomes are the sam over their lifetimes. After all we derive benefits from consumption and not income.

Ok I go on to long. (please pardon my misspellings and grammatical miscues)