I don’t see how that follows.
Yea, at least during the current recession the savings rate grew, which means consumption must’ve fallen more then income.
The problem we’re facing is that the rich save more money when given tax cuts, and the poor spend more.
http://www.bloomberg.com/news/2010-09-13/rich-americans-save-money-from-tax-cuts-instead-of-spending-moody-s-says.html
This is the precise opposite of the last few decades’ tax philosophy.
The only logical thing to do, to keep money in circulation, is to tax the rich more, encouraging them to spend more, and giving them loopholes when they do. If they don’t like it, they can move out of the country.
I’ve heard this argument and it seems to be a non-starter. Does the money that the poor pay in taxes hit them harder than the rich? Absolutely.
Does my electric bill, gas bill, car payment, mortgage, food, clothing, cable, internet, gasoline, entertainment, dining out, gifts for family, vacations, college for children, (insert anything here), affect me more than it does Bill Gates? Absolutely. Even though I’m sure the amenities I enjoy on my vacations pale in comparison to the luxury he enjoys on his vacations, my vacation budget hits my wallet harder than his vacation budget hits his.
This is an advantage to being rich. We accept it when it comes to every single thing in life. But when it comes to taxes, we feel a need to compensate for it somehow. Why only taxes? Why shouldn’t, for example, my electric bill be on a sliding scale, subsidized by the government, that hits my budget the same way Gates’ electric bill hits his budget?
Or they hire less people, take less risks, start less businesses, create less jobs.
Not that I’m against raising taxes (across the board)… but there’s definitely a downside, especially during a fragile recovery.
Thats because it doesn’t follow. At least it does follow any better than an income tax. The gas tax is different, its basically a use tax.
But more importantly the notion that there should be some correlation between how much value you get from government and how much you pay in taxes is hard to justify.
If that were really the principle behind government, then we should privatize schools, public transportation, and a whole slew of other t6hings that you could operate on a use tax basis.
An income tax is still probably the most equitable method of taxation even if it is messy.
Which is a better measure of how you avail yourself of government services-- how much you make or how much you spend? If I make $10M, but live in my nice little ranch home, I need less government than if I make $5M and have 2 vacation homes and a fleet of luxury cars.
No, it isn’t. It’s quite simple: whenever possible, one should pay for what one uses.
I’m OK with that. Or at least, means testing those things like education.
Depends on your definition of “equitable”.
People either use their income on consumption or savings. Given the pretty huge interventions by the US gov’t in banks and the like in recent years, it seems pretty crazy to say that people who invest their income aren’t taking advantage of gov’t services.
Wait, is your argument that progressivity is not defensible in taxation because we don’t use it everywhere?
How does buying a million dollar home consume more government services than buying a $100K home?
Does the production of income consume any government services? When you produce all taht income, is the security and stability of teh government helpful in anyway?
So we should charge people ona sliding scale for public education? Can we make the payment schedule progressive?
How about public transportation? Should we elimiante government subsidies for public transportation and convert that into a means tested direct subsidy to commuters? How is taht system and better than what we have now? I guess the folks who don’t have kids would be able to live ina society where all kids get educated without bearing any of the cost of living in that sort of society.
I think the notion of a la carte government is stupid.
I guess i would use John Rawls theory of justice (original position, veil of ignorance and all that). I think that in that society, we would have a tax that took marginal utility of income and wealth into account.
I think it goes far beyond that. I think the the production of income is dependent on government services. The primary research conducted by government has been pretty important in developing the internet. Government regulation of the ariwaves has been instrumental in the develoment of the cell phones and wireless technology, the FDA has been instrumental in the pharmaceutical industry, the federal government subsidizes every medical internship in the country, the list goes on and on and on. It is a rare person who can claim to have made their money absent any government facilitation.
Because the electric company offers the same thing to everyone: electricity. Government offers a lot more to a wealthy person than it does to a broke person.
No need to soil your loin clothes, but I didn’t see your plan. When will it be forthcoming? I don’t think anyone expected a few paragraphs to be a comprehensive overhaul guide to our present tax code.
You can tell us why your plan would be the way to go, whatever that is, or the current plan is best along with the 3.5 trillion of budget we have this year and the 1.5 trillion dollars of debt going with it too that is over 40% of the budget.
Yes, I would say most able bodied poor are not paying enough taxes, although not necessarily from the income tax. For the working poor, and some middle class that get the earned income credit, when the federal government actually gives them more money than they ever put in, yes, I think something is wrong here and they are not paying any share at all, but actually benefiting tremendously by getting far more back than they ever paid in. Many poor and some middle class families also qualify for plenty of food stamps, section 8 housing, etc..
How much rate do you think the middle class pays now when it is all said and done with the income tax, SS tax, Medicare tax, real estate tax, sales tax, gasoline tax, sin taxes, and a much longer list of taxes?
Maybe probably the poor don’t pay any federal tax, the working poor and some middle class tend to get more money back from the federal government when they file taxes. But I imagine most middle class people are paying into federal taxes, I guess it depends on what rate you define middle class. I certainly am paying into federal taxes, and I’m not that far up on the income ladder.
When the rich die, keeping the death tax would be one way to deal with that. There could be other ways if you worried about the rich not paying their fair share, but more than likely the rich are already paying far more than you realize now, and I’m sure would be with any new current plans when it was all said and done. If other proposals are not sufficient, there are plenty of ways to deal with getting more money out of the rich.
Again, how much are your typical working middle class people paying now on ALL taxes? I’d say it’s close to 40% when you figure in all taxes. If the rule of thumb is that we work from January 1st to the middle of May to pay ALL of our taxes, that rate is pretty much in line with about 40% of our income already. It’s easy to be a naysayer to anything, so let’s see your plan on how you would fix it and keep all happy.
People have thrown around the statistic that more than 50% of American receive more in direct federal subsidies than they pay in federal income taxes. This ia somewhat misleading statistic because it includes social security recipients and minors. If you were only talking about able bodied folks between 18 and 55 the percentage is much lower but still unacceptably high. I think everyone should have skin in the federal income tax game but I think it must be very progressive.
We should exclude the first 15K of income from social security taxes and eliminate the cap.
We should eliminate the zero rate federal income tax bracket.
We should add a few more brackets at the high end with marginal tax rates as high as 50%.
We should reduce medicare and military spending.
We should clean up the tax code.
I hope more start realizing the military spending is one of our biggest expenses. If this site is correct, we pay far more for the military than what is generally reported. Some 1.5 trillion if everything is figured in. Look at the top 15 countries of which we outspend all of them combined, yet probably 12 of them are our allies.
I didn’t say they weren’t taking advantage of gov’t services. And we rescued the banks not to save the banks, but to save the entire economy. However, that was a very unusual situation, and I would hope we would not base our entire tax strategy on something that might happens once in a 100 years or so.
The recent intervention was just a prominent example. The point is the federal gov’t does a lot for investors and savers, even beyond the recent large interventions. The SEC, the FED, the patent office, etc.
And even if you ignore those, I really don’t think its obvious that someone gets more out of the gov’t when they consume goods as opposed to when they invest their money. The army is protecting the safety of the companies I own shares in as well as my personal property. The FBI prosecutes investor fraud as well as property theft. etc etc.
So I don’t think its obvious that a person who spends all their money on consumables gets more of an advantage out of gov’t spending then a person that invests it all in pork-belly futures.
But how many businesses do ‘the rich’ start? I’m talking… let’s say a new tax bracket at three million dollars single filer income, whatever the equivalent would be for a family, what, five million?
There’s a guy out there who made five. billion. dollars. He was screwing with the stock market. He didn’t make any jobs. He took some risks, but he didn’t hire any people worth a damn. There’s dozens who made tens of millions in my state. And they just go mad with the money.
Fuck 'em with a jackhammer, they’re addicted to it anyhow, tax 'em and they’ll just work harder.
Most companies I know of, small businesses, the owner isn’t making a million a year before he starts it.
Now, admittedly, this may affect venture capitalists, but I’m not that concerned there, I think they’ll adapt.
Note: Yeah, I’m feeling a little bitter these days, as the city crumbles around me, they keep hiking the tolls on the bridges, and these asshole traders wear thousand dollar undies. We did okay in the 60s with high taxes.
Flat tax? Eliminate deductions? Ridiculous. To see why, let’s first look at businesses. Under the Generally Accepted Accounting Principles, businesses measure how much money they make in three different ways: revenue, income, and profit. Each of these is calculated differently:
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Revenue is all the money that comes in (almost – there are some monies that aren’t revenue, but they’re usually minor and don’t result from business activity).
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Income and profit are complicated and deeply intertwined, but for the purposes of this discussion, I’ll simplify – profit is the difference between sales and cost of goods sold.
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Income is the difference between revenues and expenses. (Actually, under the most current accounting standards, “profit” has replaced the word “income,” and the definition of profit I gave has never been used by anybody but retailers, but… K.I.S.S.) Revenues are a lot more than cash register receipts, and expenses are a lot more than what you paid for your inventory.
Businesses don’t pay tax on revenues – that would be insane. Spending $900,000 on inventory and selling it all for $1,000,000 is different from charging $1,000,000 for your services, and paying nothing but rent and utilities. We tax income, because that is what mostly evenly spreads the burden, and you can’t calculate income without deducting expenses from revenues.
Likewise, individuals have revenues (wages, tips, interest, unemployment benefits, etc.) and expenses (rent/mortgage, food, bills, etc.), but what an individual is allowed to deduct as expenses is severely restricted: the standard deduction for a single taxpayer is $5,700 for 2010, and the personal exemption is $3,650, bringing the total of untaxed revenue up to $9,350 – yet the poverty threshold for 2010 is $11,136. The largest single expense in almost everyone’s life – housing – is not deductible, except for the maddeningly indirect (and incomplete) mortgage interest deduction. People who have large expenditures for medical/dental care, taxes, charity, mortgage interest, or business can itemize, and they still get the personal exemption, but most life expenses are not even close to being covered.
In short, individuals are treated very differently from businesses, and are shortchanged with respect to deductible expenses – and you guys want to take away what little consideration they get?
I want MORE deductions: more allowance for real-life variation in minimum living expenses, more acknowledgment that lower-than-poverty is not the ideal expense structure for the low-earner trying to get ahead. You think your tax return is too complicated? No one’s twisting your arm, making you invest in tax-deferred accounts, forcing you to hunt down every deduction. The system ALLOWS you to work it – if you don’t want the trouble, be my guest and work for wages, keep all your money in a passbook savings account, and take the standard deduction.
This very close to my proposal but mine is a little more sweeping.
First you define income as “money that comes in”. Earned income, capital gains, corporate profits, dividends, interest, inheritance, gambling winnings - all income (I).
Flat tax rate (r) on income. No deductions. No “special” taxes with caps for social security or medicare.
That sucks for the poor, right? So let’s simplify benefits while we are at it.
Everyone gets the same fixed benefit (B). No food stamps, heating oil subsidies, rent subsidies or other welfare.
On tax day, you calculate your taxes
T = rI - B
If T is positive, you send the feds a check. If its negative, they send you one.
I did the math on this a couple of years back. r = 17% and B = $15k is revenue neutral. 20% would eliminate the deficit.
(ill check my math to make sure i remembered the numbers correctly)
Rich people would pay more tax than they do now (because most of their income is taxed at a lower rate now). Middle class families come out at about the same(housewives come out ahead). Working poor are much better off. People on welfare are a bit worse off.
Adjust r and B to suit your ideology.
Some consequences:
Those 6 billion hours of tax preparation go away, to start with. Intuit goes out of business.
Admin costs for IRS and benefits programs are dramatically reduced.
There is no need for minimum wage ( because of B ) so market can set rates. Hourly rates will drop at the low end but that’s ok because even a small amount of income is worth working for - there are no cases where you can get more by staying on welfare. Net result: less people out of work. More people contributing to the economy.
Loss of mortgage deduction hurts house prices a bit but that’s OK. High prices are not intrinsically a good thing. They won’t drop that much if the UK’s experience is any precedent.
Special interests whine because their loopholes are all gone.
Pubbies whine because undeserving poor get money that they haven’t earned. They get the same money as everyone else though and my model has them actually going out to find jobs because they won’t be penalized for it.
Dems whine because they don’t like flat taxes.
What’s not to like?,
And to actually answer the OP…
There was a movement among moderate republicans until recently to institute a value added tax, but that has already been predemagogued by the more rightward members of the party.
There is probably a broad consensus for getting rid of a lot of deductions but, because so many special interests (people with mortgages especially!) will object, it’ll never happen.