Do we really believe that if the rich are taxed at the older higher rates that anything bad will happen? If those foolish bankers that ruined their banks hadn’t collected their ungodly bonuses, would they really live any differently? Even if you own twenty houses you can actually only live in one at a time.
Two problems. The first is an incentive problem. Taxing income taxes the work done to earn the income, which discourages work. I don’t think this would turn out to be a significant problem, though, if by the older higher rates you mean Clinton era.
The second issue is one of public choice. Most people would agree that there are some government projects that have a greater economic benefit than the benefit that would appear in leaving the money in private hands (say, police departments) and some where this is clearly not so (bridges to nowhere). Other projects are controversial. But if you have a situation where 10% of a country pays 100% of the taxes, there’s no reason for the other 90% to not push for the less beneficial projects. They’re not going to bear any costs, and no matter what happens even the most crappily conceived project will end up benefiting some. So there’s an incentive to blow money on stupid shit.
Another effect is shifting effort away from productive work, and towards avoiding paying the tax. If a doctor, for instance, can save $10,000 by spending ten hours working with his accountant to set up a tax shelter, or make $5,000 by treating five patients, then the patients won’t get treated.
Or I own a small business. I can work fifty hours a week, and make $100K. Or I can work sixty hours a week and make $120K. But there is a 50% tax on earning over $10K a year. So the extra ten hours away from my family only earns me $10K. The more hours I work, the less per hour I am earning. How much overtime would you work if you were paid, not time and a half, but half time?
Another response is often to make compensation non-taxable. You don’t get a raise, you get invited to the executive planning sessions for two weeks in Hawaii every January. And we make it a point to have things for your spouse to do during the morning seminar.
IYSWIM
Regards,
Shodan
I can think of a very valid reason why that doctor should be treating those patients and not sitting with his tax attorney, despite the 10-Large. Because he’s a fucking doctor, ferchrisakes.
I have no empathy for people who put their great piles of money before all else. Less if it’s a doctor ignoring his patients for it.
Comparing to the old rates is problematic, since it is the entire tax code that matters - not just the rates. A high rate could be countered with multi-generational trusts, or huge tax free benefits packages, untaxed perqs of country club dues covered, etc.
The truly wealthy will get snippets into the code. You will get some money from them, but they will also work hard to hide more. There might be some action to reduce taxable income as well, depending on the person and their desire to work. A doctor might close his office early, a small businessman won’t invest in new hardware, etc. People DO respond to what the tax code tells them to do - just look at the accelerated depreciation for heavy trucks to see it in effect.
And that is what public visibility into what Congress is doing is good. Of course, what is stupid shit is a matter of opinion. Proxmire thought all sorts of stuff Dopers would support was stupid shit, remember.
And having a tax code which lets the rich pile on the wealth might lead to stupid shit also, such as market bubbles and a demand for high yield mortgage backed securities. The right will try to convince us that all this money will go into investments causing job growth - in fact much of it just bids up stock prices.
Then there is the moral argument - but once you agree that taxation is necessary, you are just arguing about the price. If we start with a budget built of more or less necessary things, we should raise money for them. You tax the rich because that is where the money is, and if you tax the poor too much they cut consumption and you have no demand for this wonderful investment to satisfy. (Which is where we are today.) So, you either borrow the money, which is bad unless it goes to the rich it seems, or you get it through taxes.
I’m assuming relative prosperity, since in a recession running a deficit is needed.
This is a good argument against confiscatory tax rates, but not against returning the rates to what they were during the Clinton years, which were hardly confiscatory.
I don’t see much of a problem with it, especially with the obscenely rich. I’m not talking doctor rich either (though taxing them a bit more probably wouldn’t hurt), but CEO rich. We used to have a 91% tax rate in the 1950s for income about $400,000 (about $3 million in today’s dollars) and our economy was doing just fine.
Incentives just aren’t the same when we’re at this level of affluence. Salaries are simply a way of keeping score instead of having an actual impact on the corporate executive life. The idea that a CEO is going to withdraw himself from the labor pool (“going Galt” as the Ayn Randers would say) because he only makes 3 million a year instead of 10 million is laughable.
But they aren’t his patients. Not all sick people in the whole country are his patients, as he only has time for some of them. Should he also not spend time with his family in order to fit in a few more new patients? Should he skip his continuing education?
Regardless of his profession, he’s a free individual living a in a free country; if he wants to take a week off of work so as to consult with a tax attorney on ways to reduce his tax liability, that’s his business, not yours.
As for the proposed confiscatory tax policy, what is the goal/justification? The OP’s thread title betrays malicious intent: not to make them pay their fair share, but to soak them, to hurt them, to tax them painfully out of some sense of vengeance directed, in particular, toward executives of failed banks who tried to maximize earnings for shareholders.
Rather than punitive taxation of the rich - not all of whom are bank executives of questionable business acumen - I suggest the following. Don’t like the way your bank is run? Pull your money out, tell the branch manager why you’re doing so, and then go park your savings in a bank whose executives hew to more conservative business practices. There are plenty of small-town banks around the country who are now bragging about how they haven’t taken any bailout money, a result of their smart lending policies. They’d be happy to have you walk in their door. [sub]Be sure to inquire about the free toaster.[/sub]
Some reasons : To keep the country from collapse. To get back some of the wealth the rich have hogged to themselves. Because the rich HAVE most of the money, therefor any remotely fair tax code will hit them hardest. Because they have benefited the most from society, and therefore own the most back. And so on.
If you accept that argument fully, it cuts way too far. It would mean that a doctor couldn’t take a vacation, because during that time the doctor could be treating the sick and dying. It would mean that if a son or daughter got sick with the flu, the parent doctor couldn’t go home and take care of him or her, because there are undoubtedly worse illnesses out there. Sure, in an emergency situation a doctor should always use their efforts to the utmost extent to save a life, but we have no moral claim on their labor. If people don’t get healthcare because there are too few doctor-hours available, that’s a systemic issue, not one of personal morality.
Absolutely.
But the choice isn’t between taxing someone making ten thousand a year and ten million a year the same. Rather, why not tax someone making a fifty thousand a year and ten million a year the same? Yes, status jockeying accounts for essentially all of the incentive for higher incomes at those levels. But the same argument applies to much lower incomes. Most people, except those in a very few select areas, can lead very comfortable lives on $40,000 annually. Why should we essentially subsidize middle class status jockeying (bigger houses, fancier cars, designer jeans, more prestigious degrees) over upper class status jockeying?
Make a strong safety net with public services to benefit everyone (e.g. universal healthcare), give people the opportunity to work toward a comfortable lifestyle, and then tax everything the same after that. It’s not a good idea to pedal the goodies-for-free fantasy to those who aren’t going to suffer because of higher taxes.
They haven’t “hogged” anything, it was given to them in a business transaction to which both parties agreed freely.
I recall having this discussion recently in another thread. Generally speaking, if a businessman is being paid a lot of money, it is because the people handing out paychecks (or the customers buying that businessman’s product) feel that his contributions are worth the pay. IOW, he had to give to get. To suggest that a businessman has not already contributed a value commensurate to his salary - that society has not already benefitted - is to suggest that all of his customers are idiots to pay so much for his product.
All of which is kind of beside the point. The OP spoke of true confiscatory taxation, i.e. executive bonuses being taxed at combined state/federal rates approaching 100%. If that’s the case, then the person so taxed hasn’t really benefitted at all from the work they did to earn that bonus, have they?
I’d say you’re cutting it way too thin.
**Shodan **was making the point that in order to protect his piles of cash, a doctor may have to do less doctoring and more tax-lawyering. Vactioning, spending time with his family, all the Norman Rockwell stuff (and even family emergencies) is just a part of normal life that one, even a doctor, has to manage. I don’t think there are many doctors who say to themselves … “It’s too bad I have to go to little Jimmy’s Little League game, otherwise I could have performed that liver transplant.” However **Shodan **was directly implying that patients were going to have to go by the wayside because Dr. Gityermitsoffmymoney needs to get some more Benjamins in T-bills, el fucking pronto. Not hardly the same.
I’ll give you one damned good reason: Because we live in a global economy now. You might have gotten away with high taxes in the 50’s and 60’s, when the rich had nowhere else to go.
Today, that’s not the case. Raise your tax rates to 70%, put a 40% tax on business, and watch your movers and shakers leave your country and come to say, Canada. Where we have 15% business taxes, no estate tax, capital gains and dividend taxes that will be half of the U.S’s, and a less progressive tax system.
It was the other way around in the past. Canada had higher taxes than the U.S. And guess what happened? Guess who helped build your Apollo program? Ex-Canadian aerospace engineers. Guess how many computer programmers, doctors, writers, and other highly paid skills left Canada and went to the US? It was a lot.
Then you have the problem of keeping businesses. Why would anyone possibly set up a factory in the U.S. and pay 40% on the profit of that factory, when they could set it up in Canada and pay 15%?
If you say, “In practice, American companies don’t pay that 40%, because of all the tax loopholes.” And that would be correct - and damaging to your economy. Every time a business makes a decision for the purpose of avoiding tax instead of maximizing pre-tax efficiency, it’s a deadweight loss on the economy. It doesn’t have to be lawyers and tax shelters - it can be deferring a project until the end of a tax year, or choosing to kill a project and take a tax writeoff rather than keep it going, or to set up a factory in a lower-tax state even though transportation is more expensive, or to outsource labor to another company to avoid the payroll tax. All kinds of business decisions are made for these reasons, and all of them wind up hurting the economy.
I think we should tax the rich more. I think the biggest risk is not that they will work less, or that of public choice - I think the biggest risk is that you can tax them more, but if they get “soaked” they and their money will just leave the country.
Its easy to be rich pretty much anyplace in the world. Its easier in a country with a fairly high standard of living and a low tax base.
(The U.S. does tax their expats - but people choosing this route just never come back to the U.S. People do this now).
I wouldn’t treat the middle class the same as the rich. Middle class income actually does get spent for the most part instead of hoarded, so it actually does “trickle down” to the poor.
It’s not to difficult. ‘Working more’ doesn’t always mean more hours for you personally. A doctor might very well have his schedule full, and more people call for appointments than he can handle. Should he hire another doctor to expand his business? Is the diminishing return worth the extra investment and more importantly risk? Maybe, maybe not.
Another issue that soaking the rich brings up is: volatility
Rich people pay lots of taxes in good years and quite often, practically nothing in bad years. Part of big money is big risk. Tying government revenue more closely to the highest tax brackets means that yearly revenue for the government isn’t exactly stable (See California). That might be fine if you have responsible politicians. But when was the last time a politician tucked away some government revenue for a rainy day?
Nonsense. The common people do the work; the already wealthy take most of the resulting profits. It’s not “agreed upon freely” by the workers since they seldom are in a position to walk away. And that’s ignoring things like executives bailing out of the companies they’ve destroyed with golden parachutes, or looting pension funds, or denying people health care until they die and pocketing the savings. Or using near-slave labor in third world nations.
The OP said no such thing.