Some thoughts on taxes

[LinusK]

The share of national income going to labor (vs. capital) has been falling for decades. But the decline has been particularly steep since about 2000. (Chart about 3 paragraphs down.) Real wages have remained mostly stagnant, even while productivity has more than doubled.

The real (inflation adjusted) income of median households has been nearly flat for decades. Meanwhile, between 1979 to 2012, the share of all national wealth owned by the richest 0.1% of households rose from 7% to 22%.

What all that means is that more and more money is flowing to people who own things, while less is flowing to people who work.

You may or may not see that as a problem, but if you do, these changes in the tax code could address it.

1.) Social Security taxes. Currently, Social Security taxes are paid on the first dollar you make, and then you stop paying them after $118,500. I propose eliminating the cap on Social Security taxes, and sheltering the first $12,000 of income from them altogether.

Secondly, I propose imposing Social Security taxes on all income, rather than just income from work. Together, these measures would “save” social security indefinitely, while simultaneously allowing for a decrease in the tax rate.

2.) Copyright taxes. The government provides a copyright to corporations and individuals who create new books, movies, songs, and other material. I propose a fee for copyrights: free for the first 10 years, cheap for the following 10 years, and increasingly expensive after that. The fee would be voluntary: if you didn’t pay it, the work would fall into the public domain.

3.) Patent fees. Patents are a big business, particularly in high tech. Apple was recently ordered to pay $533 million, for example, to Smartflash, a company Apple described as a “patent troll.”

“Smartflash makes no products, has no employees, creates no jobs, has no U.S. presence, and is exploiting our patent system to seek royalties for technology Apple invented,” said Rachel Wolf, spokeswoman for Apple. “We refused to pay off this company for the ideas our employees spent years innovating and unfortunately we have been left with no choice but to take this fight up through the court system.”

A full 90 percent of tech patent cases are filed by patent trolls.

Apple, on the other hand, is no stranger to suing over patents. It sued Samsung, for example, over a patent “which consists of a one-sentence claim about the ornamental design of an electronic device, accompanied by nine figures depicting a thin rectangular cuboid with rounded corners,” and was awarded $1.049 billion in one of its lawsuits.

It costs around a thousand dollars to file for a patent in the US. I propose adding a patent fee of, say 1% of the value of the patent, after five years, if you want to maintain it.

4.) Trademarks. The US government protects trademarks, which can be extremely valuable. Last year, U-Haul had to pay $62 million for using the word “pods,” for example. Several years ago, a jury awarded Adidas nearly $305 million in a lawsuit over its trademarked three-stripe shoes.

Forbes says Google’s trademark is worth $44.3 billion. Microsoft: $42.8 billion. WalMart: $36.2 billion. Etc.

I propose a trademark fee, for companies that want to use US courts to maintain their trademarks. Say: 0.5% or so.

5.) Additional tax brackets. Currently, the top US tax bracket is 39.6% of taxable income over about $400,000. I propose bumping it to 45%, and 50% for taxable income over $1,000,000.

[AdamF]

Copyright needs a complete overhaul, but charging fee is not a good idea. It would strongly favor rich corporations.

The value of patent is whatever you can litigate out of your competitors. I don’t see how else you could put a dollar value on it. And income from lawsuits is, I believe, already taxed. The same goes from trademarks.

[up_the_junction]

The US has a military budget for 2016 of approx. $610 billion. Well, at lest the part they call ‘military’. Billion.

According to this site, the US is servicing a national debt of $18 trillion: http://www.usgovernmentdebt.us/
More taxation?

[Grumman]

@LinusK

2.) Copyright taxes. The government provides a copyright to corporations and individuals who create new books, movies, songs, and other material. I propose a fee for copyrights: free for the first 10 years, cheap for the following 10 years, and increasingly expensive after that. The fee would be voluntary: if you didn’t pay it, the work would fall into the public domain.

This is a violation of an international treaty which the United States has ratified.

I propose a trademark fee, for companies that want to use US courts to maintain their trademarks. Say: 0.5% or so.

And this is an amazingly terrible idea. Trademark law is at heart a consumer protection law: it is a way to stop dishonest businesses from tricking people into buying an inferior product by passing it off as their competitor’s superior alternative.

[octopus]

Until there are any real constraints on spending, especially wasteful pork, new taxes, especially Social Security which isn’t supposed to be general funds aren’t called for.

[LinusK]

@up_the_junction

The US has a military budget for 2016 of approx. $610 billion. Well, at lest the part they call ‘military’. Billion.

According to this site, the US is servicing a national debt of $18 trillion: http://www.usgovernmentdebt.us/
More taxation?

I’m not sure I understand. If you’re worried about the debt, increasing taxes would tend to mitigate the problem. If you think the US is spending too much on the military… I agree.

I’d encourage you not to worry about the debt, though. The $18 trillion is an inflated figure, and the deficit has fallen from about $1.4 trillion to 0.5 trillion over the last several years.

[LinusK]

@Grumman

This is a violation of an international treaty which the United States has ratified.

I didn’t know that. You have a cite?

And this is an amazingly terrible idea. Trademark law is at heart a consumer protection law: it is a way to stop dishonest businesses from tricking people into buying an inferior product by passing it off as their competitor’s superior alternative.

Duly noted. On the other hand, they’re also enormously valuable assets the value of which are made possible by tax-payer funded courts, law, and law enforcement.

[Ravenman]

Social Security quite simply doesn’t need that money. The trust fund would grow to trillions of dollars over time, money that could be put to much better use than perpetually sitting around earning interest and never being paid out.

[Ruken]

@LinusK

The share of national income going to labor (vs. capital) has been falling for decades. But the decline has been particularly steep since about 2000. (Chart about 3 paragraphs down.) Real wages have remained mostly stagnant, even while productivity has more than doubled.

Do your data use the same deflator for compensation and productivity?

[Flyer]

@Ravenman

Social Security quite simply doesn’t need that money. The trust fund would grow to trillions of dollars over time, money that could be put to much better use than perpetually sitting around earning interest and never being paid out.

The “trust fund” is a polite fiction. All that paper surplus has been spent as fast as it’s been collected.

[Grumman]

@LinusK

I didn’t know that. You have a cite?

It’s the Berne Convention for the Protection of Literary and Artistic Works. I might go find the relevant sections later, but that’s what you’re looking at.

[XT]

@Flyer

The “trust fund” is a polite fiction. All that paper surplus has been spent as fast as it’s been collected.

They use the surplus to buy US treasury securities, so no…it’s still there. Earning interest. Just like Ravenman said. It’s not a polite fiction…it’s more a neat accounting trick, allowing the US to have it’s cake and eat it too (as long as US securities stay the rock solid investments they are and have been). However, he’s also right that Social Security doesn’t need those extra funds, and basically it would mean it buying up more bonds. Also, it was never supposed to be funded by rich people, it’s supposed to be retirement insurance. What the OP is proposing would shift that fundamental concept.

[ITR_champion]

Also, it was never supposed to be funded by rich people, it’s supposed to be retirement insurance. What the OP is proposing would shift that fundamental concept.

That may have been true when the Roosevelt Administration introduced Social Security. It’s not true now. Back in the 30’s, the retirement age was later than the average time of death. In other words, Social Security was an insurance program, designed to protect people who lived longer than expected against crushing poverty when they could no longer work to support themselves.

Over the years, it’s changed to something totally different. An ordinary person now expects to collect a lot of money from Social Security. So it’s not an insurance program protecting people against unlikely circumstances; it’s rather an investment opportunity, with the unique feature that everyone is forced to participate and the government determines both what we invest and what returns we get.

But it is interesting that Democrats rush to defend a law which imposes higher taxes on the poor than on billionaires.

[LinusK]

@Ravenman

Social Security quite simply doesn’t need that money. The trust fund would grow to trillions of dollars over time, money that could be put to much better use than perpetually sitting around earning interest and never being paid out.

One of the reasons the $18 trillion figure is inflated is so much of the debt is money the government owes to itself. (When you owe money to yourself, it’s not really debt.)

The Social Security fund is not a big pile of $100 bills. It’s made of up of Treasury notes. The actual money is spent elsewhere, and replaced with a government bonds. No matter how much is paid through SS taxes, it never just sits there.

[Lord_Feldon]

@ITR_champion

Back in the 30’s, the retirement age was later than the average time of death.

Life expectancy at birth was below 65, but babies don’t pay taxes. The average worker has always been expected to make it past retirement age.

[LinusK]

@Ruken

Do your data use the same deflator for compensation and productivity?

It’s not my data.

But compensation is real earnings - inflation adjusted.

Productivity is a measure of the real value produced per worker over time - also inflation adjusted.

Virtually any source that compares real earnings to productivity will show the same gap.

So I guess my question is, what are you getting at? Do you have a source that shows that compensation has kept up with productivity?

[LinusK]

@Grumman

It’s the Berne Convention for the Protection of Literary and Artistic Works. I might go find the relevant sections later, but that’s what you’re looking at.

I’ve only skimmed it, but it has a number of provisions like this one:

Protection in the country of origin is governed by domestic law.

And the US has changed its copyright laws a number of times without - so far as I know - getting any other country’s permission.

[UltraVires]

If we raise the cap on social security tax, will we also raise the benefit payout? I assume no.

The cap is a realization that the benefits that will be received is a meager amount only for sustenance living. If a person makes $50 million per year but will not see a percentage of that in retirement, but pays 15% on the entire amount nonetheless, then this isn’t a contribution, but a tax.

See how well a 15% income tax hike on the rich will make it through Congress. This is part of the reason I have somewhat seriously proposed that individuals should not have their taxes withheld by their employer, but pay estimated quarterlies just as small business owners do. There would be a revolution with 90% of people becoming Republicans when people see the true cost of taxation instead of getting a “refund” at the end of the year.

[Ruken]

@LinusK

It’s not my data.

But compensation is real earnings - inflation adjusted.

Productivity is a measure of the real value produced per worker over time - also inflation adjusted.

Virtually any source that compares real earnings to productivity will show the same gap.

So I guess my question is, what are you getting at? Do you have a source that shows that compensation has kept up with productivity?

They’re not your data. But you presented them, so if you take some ownership of your citation we might know if we actually have something real to talk about. Where do the numbers actually come from? They’re probably from EPI via BLS and BEA. Do they include taxes and transfers? Do they make sense? I sure wouldn’t want to live, in 1970, on the 1970s equivalent of my compensation today, using whatever deflator that plot is using. I already asked what deflator they’re using. Did you check? CPI? IPD? Using both gives us apples and oranges and nothing to talk about.

What am I getting at? I’m trying to determine if you are presenting a real phenomenon, based on the data and methodology.

[Ravenman]

@LinusK

One of the reasons the $18 trillion figure is inflated is so much of the debt is money the government owes to itself. (When you owe money to yourself, it’s not really debt.)

The Social Security fund is not a big pile of $100 bills. It’s made of up of Treasury notes. The actual money is spent elsewhere, and replaced with a government bonds. No matter how much is paid through SS taxes, it never just sits there.

But if you don’t want it to be spent on SS benefits; why issue all that debt? You could just raise income taxes (or reform the income tax however you wish) if you want to spend the money on something else. Raising cash for the trust fund for the specific goal to spend that money elsewhere is, well, dishonest. Dishonest budgeting, I guess.