We certainly could do either of these things. Given that, why is nearly all of the furor over raising existing income tax rate?
While there is little debated about taxing actual wealth, there is a metric shit-ton of “furor” about the capital gains schedule. I’ll happily provide cites, just let me know how many hundred you’d like as a start.
Wealth disparity is increasing all over the developed world. Probably due to technology. Seems like all of the big new companies that went public in the last 20 years have a few hundred employees yet billions in capitalization. Big company/few employees means a few hundred people get very rich. Even Microsoft has never had that huge a workforce, maybe peaking at 100,000, whereas GM at its peak employed 3 million.
Now capital gains taxes, I think that rich people who rely primarily on capital gains for income should pay the normal income tax rate, but all other should pay a lower rate due to the risk inherent in investing. Work and investment should not be taxed equally because work carries no risk. You go to work, you get a paycheck. You invest, you could gain or lose. You already lose a little to inflation, then if you make a profit Uncle Sam gets his share. Once you get to around 25% tax rates or more, it’s basically either you lose or Uncle Sam wins assuming normal returns.
Wealth taxes are even worse. You already pay taxes on your income. You pay taxes again if you make money off the money you saved. A wealth tax taxes you again just because you saved money. That’s a really perverse incentive.
Employees don’t get rich when a company goes public unless they also happen to be stockholders in the company, in which case they can ride the usual wave of increased share value that comes with an IPO. Again, the confusion of income and wealth. It may be the case that companies which go public have been successful and thus can pay their employees more, or that companies which pay their employees more have happier or better employees and thus are more likely to grow to the size where going public makes sense, but that’s an indirect correlation at best.
It’s only a perverse incentive if you subscribe to Depression-era economics that fetishizes saving as an end in itself. For people who have lots of money–like, well above what they would ever use in a comfortable retirement–saving is a huge net drag on economic equality. Savings just sit there, either doing nothing or being loaned out by a bank to other rich people and corporations. Money spent on consumption circulates and creates jobs & transfers to the less wealthy much more quickly. In this particular sense (when it’s incentivized to be a waterfall rather than a trickle), trickle-down economics works better than encouraging hoarding.
Considering the average return before inflation is around 9.6%, and that inflation averages around 3.4%, how does that math work? Seems like I’m left with a 6.2% return, so even if Uncle Sam takes 25%, I’m still increasing my wealth by more than 4.5% on average.
I’m not disagreeing with your proposal, as it seems okay, at least at first glance, but that last statement is counter-intuitive.
45,000 per this http://www.spotlightonpoverty.org/ExclusiveCommentary.aspx?id=ab15c0c2-3b58-4382-a98c-6c5a20c227d2
4.5% is an unacceptably low return, IMO. Your money doubles once every 16 years at that rate.
Fortunately there are IRAs and 401(k)s, but people should be encouraged to save for things like homes and cars, rather than buying them on credit. Yet we give tax incentives for credit use, and penalize saving. It’s just not a good way to encourage financial responsibility in individuals.
Ultimately, I think everyone with more than a common understanding of the US economy and it’s recent history will know that what needs to be done is to reverse the escalating upward inequality of wealth, however exactly that be done. And so taxing the rich, at least the top 1% into which all the wealth is shifting, might not be such a bad idea, if it has some effect.
That just moves the wealth inequality around. Tax money enriches the Beltway, which in the last few years has caused a wealth disparity between the Beltway and well, the entire rest of the country. Raising more revenue for the federal government will only increase that disparity further.
Not to mention taxing my neighbor more doesn’t make me richer. It decreases the disparity, but makes me no better off.
Wealth disparity between the top 1% and the people is far far higher than wealth disparity between the people and the bureaucracy, or the federal government.
On what planet is 4.5%, after inflation AND 25% in taxes, unacceptable? I’ve had plenty of years where my return was less without taking inflation and taxes into account, and yet I didn’t stop putting money away.
I find it distasteful to by implication dehumanize a group of Americans who don’t deserve it by contrasting them with “people.” Surely we can talk about changing the tax and distribution structure without implying that all wealthy people are guilty of something and should be subject to treatment as non-people for it.
It is, but higher taxation of the rich doesn’t close the disparity, it just enriches the Beltway, creating a bigger regional disparity. Northern Virginia is getting close to New York in terms of concentration of wealthy people.
While not disagreeing with your main point, you don’t get to knock inflation off before you determine your taxes. You would pay 25% on 9.6%, leaving you with 7.2% Allow for inflation and your real gain is 3.8%
And in reality, most people don’t make 9.6% pre-inflation. That’s for the stock market. If you invest in bonds or real estate, you make even less, although some bonds and real estate are tax exempt or partially tax exempt. Which to me is more stupidity, the government shouldn’t incentivize certain investments over others. As if they would have any idea.
Ever hear of transfer payments? Tax the extremely high earners, then turn that money around and pay it to the below-average earners as a negative income tax. Very little stays in D.C. We already do this. We can increase the rate, and that money becomes “stimulus spending.”
You need to learn proper English. “People” is not the plural of “person.”
Yes, well, ultimately I don’t really care what the solution is, as long as it works, I suppose. In the meantime, the more people that recognize the existence of the problem, the better.
Like this, for example
Emphasis added. Can you show us how the math works out?
Keep in mind that our economy is about $16T/year. In order to make a measurable difference in the economy, let’s assume that we need inject at least 0.25% of the total into it. I’m just using that as a rule of thumb, but if you have a better one, that’s OK as long as you explain why it should be used.
n.b.: I would not at all oppose your plan, provided we were doing it in order to help people out. Claiming we are doing it because it’s good for the economy is B.S.