If you can name one person in the last thirty years who has been kicked down a class in America because of the payment of income taxes, by all means do it. I have no idea how you could possibly consider a 38% top marginal tax rate to be “social engineering” or confiscatory.
I think that is a difficult question. But, I don’t think one has to always know or agree on what is equitable to be able to pick which direction we should be moving in. Hell, in the current political climate, we aren’t even arguing about the direction. We are arguing about the speed. I.e., we know that inequality is increasing and there are people who are implementing policies that will almost certainly make it increase faster. Implicitly, these people seem to believe that “inequality isn’t increasing fast enough” (or perhaps, as you imply below, that they think it wrong to even consider inequality as a factor in the decision).
As for things one would look at, when inequality becomes severe, you have issues such as high crime rates, schools and living conditions that are so poor in some areas that the kids are at an incredible disadvantage to compete with other kids, etc., etc. Like I said, true equality of opportunity is impossible in any society that wants to allow for the incentives associated with having some people better off (and thus, their children having advantages) than others. But certainly, we need to not completely abandon the ideal…not even be willing to consider it as a factor at all.
On this issue, I include those of the libertarian persuasion as being “on the Right”.
However, your definition is ill-defined. One could come up with lots of different systems that have “non-discriminatory” laws that lead to different levels of inequality. The conservatives & libertarians seems to continually argue that we have to continue to go down a path that makes the laws ever more favorable for growing inequality. Admittedly, it isn’t justified in this way. It is justified as being necessary to “encourage investment,” “provide incentives and rewards for wealth creation,” “encourage those who create jobs,” but the effect is the same. And, the evidence that this strategy is actually the best way to “raise all boats” is non-existent. In fact, there is very good evidence that it is merely the best way to raise a few of the big boats. “Trickle down” economics has been shown to result in what truly is just a small trickle. On the other hand, “percolate up” economic policies seem to enrich everyone (still probably the rich more than the poor but with less extremes in the differential).
We are increasingly going toward a society where a vast proportion of the gains accrue to just a few people. Looking at the period from 1979 to 2000, we saw the real after-tax income at the median increase in percentage terms by little more than a third of what the average increased by (15% vs. 40%). [Of course, in dollar terms rather than percentage terms the ratio was even higher.] And, those at the very top, saw their real incomes increase by a percentage amount that was more than 10X that of the median. [In dollar terms, the ratio of the increase was more than a factor of 100.] Is this the sort of society we want…where the gains of the society are ever more concentrated for a fortunate few?
I should have made it clear here that I was talking about the top 1% since in fact, if you took an even smaller slice (like the top fraction of 1%), the ratios would be even more extreme.
Shodan, I’m still waiting to hear why someone who works to earn $50 million should pay tax on it, but someone who sits on his ass and inherits $50 million should pay nothing. Are we going to reward work, or are we going to reward sitting on your ass. Joe Scion has no incentive to achieve under your system.
Straw man. Nowhere have I said that I am opposed to wealth.
What I oppose is a system where the children of the super-wealthy get to live their lives tax-free. If you eliminate the estate tax, the capital gains tax, tax on interest and tax on dividends, that is what happens. No federal taxes on the leisure class. And to make the lives of the super-wealthy tax free while shifting the nation’s entire tax burden onto working people is unconscionable. Do the wealthy not derive benefits from our federal government? Why should they not help bear the burden? Defend this if you can. So far you’ve talked around the point.
What’s not been said yet is that Bush is giving himself a huge tax cut with this proposal. (At the expense of the middle class.) But I suppose we are far too jaded even to notice that conflict of interest.
As for the supposed devastating effects of tax on the wealthy, the top tax bracket under Eisenhower was 90%. And we all know about the resulting Great Depression of the 1950s, right? :dubious:
This is where I completely disagree. Equality of ***outcome ***is not a goal of our society, and so is not a measure of how good or bad things are working. There is no direction that we want to be moving in, as measured by outcome.
The goal of our society is equality of opportunity, and note that the OP actually spelled that out explicitly even though I don’t think (s)he realizes what it really means.
OK. I’ll stop busting your chops about that. 
Actually, this is where libertarians and conservatives part company. Libertarians argue about limitted goverment and fair taxation on the basis of personal liberty, while it’s the conservatives who talk about stimulating the economy and encouraging certain investment behavior. Libtertarians talk about not interfering in the economy*; conservatives and liberals talka bout guiding it, even if they want to guide it in different directions.
*or, more accurately, not interfering with the economic decisions of the citizens
This question of double taxation has come up before. This cartoon I think pretty well nails it on the head. In my opinion, any claim of “double taxation” is dubious at best. You make money. You pay tax on it. If you invest that money and make money on that, it is new income, not old. So you pay tax on that. Why is that so hard to understand?
The elimination of estate taxes is a boon to the rich. If I work hard for another 15 years, I might top the 3 million dollar mark for a career. I’ve paid taxes every step of the way. Suppose I hadn’t worked at all and simply inheirited the $3M. Why on earth should unearned income be untaxed and earned income taxed?
Would you advocate changing the current system so that every dollar (including the first) of an inheritance is taxed? If not, why is it OK to leave your kids $5,000 tax free but not OK to leave them $5,000,000? I believe these types of decisions should be made on principle, not on expedience.
I see three problems with this:
(1) All our decisions about how we run our society, the economic rules we set up, the taxation, etc. have distributional implications. To claim to do this in a distribution-blind manner is pure hogwash. What it really means in practice is that it is going to be done in such a way that it favors those who can exert them most political influence, in other word, the wealthy.
(2) As I have already mentioned, I believe true equality of opportunity is not realistic. However, to achieve even a degree of this does involve worrying about outcomes simply because the outcomes of one generation determine the opportunities for the next in a society where wealth transfer is allowed at all between generations. (In fact, it occurs even in the absence of direct inheritance of wealth simply because of access to better schools, better living environments, etc.)
(3) As the insightful letter from those Harvard Business School professors notes, at some point extreme inequality becomes very corrosive in a society. Even as one of the winners, I personally do not want to live in a society where it is necessary to have gated communities and such, and where (as one of the kids in Flint noted in “Fahrenheit 9/11”) some areas of our cities look much like the bombed out areas of post-war Iraq.
Yeah. That occurred to me after I wrote that part. I agree that libertarians tend to invoke different justifications although I find them no less ludicrous. 
Well, I know that libertarians tend to like simple overarching principles and I understand the attraction of that, I really really do. (That is why I find the mathematical modeling end of physics to be so much more fun than the more side where one has to go back into the mess of the real world.) However, I don’t think that life is really that simple. It involves trade-offs.
As I noted, I think anyone who claims that they really believe in “equality of opportunity” as the fundamental principle is full of it because true equality of opportunity is impossible to obtain. It is an ideal that must be weighed against other ideals. In this case, we have to make compromises from looking at the world from the point-of-view of the new generation (in which case I don’t see how we can justify any inheritance wealth transfer) and the point of view of the older generation (in which case there is justification for having such transfer in order that someone gets benefits from the fruits of their labors and has the incentives to continue to labor beyond the point of money that they need only for themselves).
What is so frustrating to me is that some people seem adamant in only looking at the issue from one point of view. They can only consider it from the point of view of the older generation and cannot comprehend the point of view from the younger generation who have done nothing to earn the wealth that they are born into.
jshore: I don’t see any value in you and I going thru the same argument for the nth time on this. Sorry if I don’t respond to your well thought-out post, it’s just that we’ve been down this road too many times before. And, frankly I don’t have a lot of interest in debating something like this EXCEPT on principle. I find arguments of expediency pretty boring, as they can be used to justify anything.
Yeah, I guess it is true that we have.
The only thing I’ll add is that I don’t think the distinction is between “principle” and “expediency” because I don’t see a need to weigh different and contradictory principles as “expediency”. I do see it as incorporating a certain amount of pragmatism and empirical data, but I wouldn’t use the word “expedient”.
I’ve already covered it twice. Perhaps you could read my responses.
Or, perhaps not.
Regards,
Shodan
Good question. I would let about the first $50,000 go tax free. Families that leave small estates and those that receive them could use a little break. If you’re getting a windfall above that, then tax all above $50,000 at regular rates. The principle is the same as behind graduated tax tables. Just have a line in the 1040 for including inheirited income, and one on 1040A to deduct the $50K . If it’s 50 or 100K for the limit would be the matter for debate.
Bob: I agree that, in principle, treating inherited income the same as earned income seems fair. It works easily for money, but gets dicier when we’re talking about assets. Where I see a problem is when parents want to leave assets to their children, but the kids end up having to SELL the assets, or part of the assets, in order to pay the tax. One solution would be to delay the tax payments until the assets are sold, but then that would just encourage people to leave assets instead of cash to their kids. And it gets even more complicated when the assets have strong sentimental value. Any thoguhts?
If you mean like the family farm, sure there should be a way to make it so the heirs don’t have to sell. Perhaps if the heirs use the assets in the same manner as the parents, then it would not be taxable.
That’s a good example in principle, but probably not a typical one. What if it’s the family vacation home? Or a collection of rare books? Given the small percentage of family farms in existence, I think other examples illustrate the problem better. I also think it would be extremly difficult, if not impossible, to legally define “use the assets in the same manner as the parents”.
Well, no you haven’t, except to scream “double taxation!” But I’ve shown that an estate tax is not “double taxation,” or at least that it can no more be properly called double taxation than the income tax I am paying. People are taxed on transfers of wealth. Inheritance is a transfer of wealth just the same as my income is a tranfer of wealth.
Moreover, inheritances are windfalls not earned by the person receiving them, and therefore should be entitled to less deference and less protection from taxes than the income I worked to earn.
On a different point:
We keep running up against this Libertarian idea that individuals invest money (and stimulate the economy) more efficiently than do governments. It would be easier to sustain that argument if we lived in a closed economic system under a one-world government. We do not.
If the US government spends money on a public works project, that money gets spent here in the US. Using my earlier example, if the government builds a bridge, it hires a contractor, and that contractor pays wages to its employees, and buys materials, and the economic effects of the spending are diffused through the local economy. (With the added benefit that the US has improved its infrastructure.)
If we instead take the millions we would have spent on a bridge and put it in a wealthy man’s pocket with a tax cut, he may spend the money here in the US, but then again he may not. Maybe he’ll hire ten new programmers for his company here in the US. Or maybe he’ll hire forty new programmers in India. Would those hires in India benefit the US economy?
Hell, maybe our millionaire buy a villa in Italy, providing exactly zero benefit to the US economy.
Why the assumption that wealthier rich people means a better world for us all? (Particularly in the context of the counterexamples I’ve raised?)
Right, the family farm is a dying breed and perhaps not the most appropriate example. Back to that in a moment.
Family vacation home. I don’t see taxing this as overly oppressive. If the heirs can’t pony up the tax up front, they could take a mortgage out on the property.
Rare books. That’s above my level and am not sure how it works now. If you left someone a Gutenberg Bible, I have no idea how the IRS would assess such a thing. My presumption is that works of art and collectibles would be taxed at fair market value at time of acquisition. If you inheirited a substantial collection you might have to sell some to pay the tax due.
Back to the family farm. Every time the Republicans trot out the estate tax, they tell the horror stories of the family farm being sold to pay the tax. I’m not convinced it’s that common. Besides, I don’t believe the only way to save the family farm is to allow everybody else to get million dollar windfalls tax free. There’s an excluded middle out there being ignored.
Oddly enough, you were the one to first use the term. Which I guess means you don’t know what I am saying, and that you don’t know what you are saying either.
Nope, you haven’t shown anything of the sort.
Once more. Pay attention this time.
Both true.
Now comes the hard part.
Suppose we have a system in which wealth is only taxed when it is earned. That is to say, wealth is only taxed one time. IOW, the only transfer that is taxed is the transfer completed in earning. Thus, we have one tax - the income tax.
Are you with me so far?
Now suppose we have another system in which wealth is taxed two times - once when it is earned, and once when it is inherited.
In such a system, how many times is taxation imposed?
Now compare the systems, and count the number of times taxes are imposed in each system.
Which system would you say is accurately described as having “double taxation” - the system under which wealth is taxed one time, or the system under which wealth is taxed two times?
Here’s a hint - “double” usually means “two times”. It doesn’t mean “one time”.
So fill in the blank - 1 + 1 = ?
Show your work for full credit.
Regards,
Shodan
Shodan,
I seem to have missed all the threads where you called for the repeal of the sales tax. After all, I already had my money tax when I earned it…Why should I then be taxed again when I go out and spend it?