# The logic of tax cuts on the rich. **URL:** \ **Category:** Politics & Elections\ **Created:** [June 28, 2018, 10:05pm UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956 "2018-06-28T22:05:40Z")\ **Posts on this page:** 11\ **Page:** 6
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [July 11, 2018, 4:17pm UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/101 "2018-07-11T16:17:19Z")
> [@Ravenman](#): > > I think you and I are actually on the same page. When you quote me using a dozen words to describe a complex phenomenon, of course my statement can be refined, further explained, and caveats added. > > More precisely, the first quote you used about “more money is always more money” isn’t meant as a total rejection of tax impacts on work. Please refer to the context of the argument **k9** and I were having, in which he was arguing that the rich will cut their personal income drastically because of a relatively modest increase in their taxes. I was saying that the rich won’t do that, because more money is always more money, and people would be crazy to reduce gross personal incomes by $100k or more in response to a $50k increase in taxes. Don’t really want to go around again, but I do not feel that that is a good summation of my argument, not at all. I was saying that the extremely wealthy would cut their income relativity modestly because of a fairly drastic increase in income taxes. People who may reduce their personal incomes from 10 million a year to 9 million a year in order to avoid 2-3 million in taxes, but still be able to control that wealth through ownership of a growing company. I specifically said a few times I wasn’t talking about people making a paltry million or less. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [July 11, 2018, 4:58pm UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/102 "2018-07-11T16:58:47Z")
> [@k9bfriender](#): > > Don’t really want to go around again, but I do not feel that that is a good summation of my argument, not at all. > > I was saying that the extremely wealthy would cut their income relativity modestly because of a fairly drastic increase in income taxes. > > People who may reduce their personal incomes from 10 million a year to 9 million a year in order to avoid 2-3 million in taxes… Actually when I asked if the wealthy would reduce their incomes by $200k to avoid a $100k increase in taxes, you didn’t say they would not, nor did you say that the ultra wealthy would reduce their income by 1x to save 3x in taxes (a rather unrealistic situation anyway). You said my scenario of reducing income by 2x to save 1x in taxes was too simplified. ---
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [July 11, 2018, 5:22pm UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/103 "2018-07-11T17:22:00Z")
> [@septimus](#): > > 😕 Neither Class A nor Class B shares of Berkshire-Hathaway pay dividends. To an innocent bystander the difference between Buffet’s wealth on New Year’s Day 2018 and his wealth the year before might give an indication of how well he did in 2017 _ **but of course it has nothing to do with what’s entered on Line 37 of Form 1040.** _ > > Some on the right wing seem sad that the top 1% of American households earn _only_ 22% of the country’s personal taxable income. I hope that focusing on the huge amount of unrealized capital gains NOT reported on Lines 37 will help assuage that grief. I personally am not necessarily defending the rich; I’m just curious if there’s that much more income tax to be gained from them, or if a lot of this is just class warfare stuff. In other words, would raising taxes 40% on the rich get you a significant amount of money versus raising the overall tax rate by say… 1%? My gut feeling is that the 1% would be far more money overall, and that the 40% tax would essentially be more in the nature of a penalty than a real revenue generator. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [July 11, 2018, 5:59pm UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/104 "2018-07-11T17:59:31Z")
> [@bump](#): > > I personally am not necessarily defending the rich; I’m just curious if there’s that much more income tax to be gained from them, or if a lot of this is just class warfare stuff. > > In other words, would raising taxes 40% on the rich get you a significant amount of money versus raising the overall tax rate by say… 1%? My gut feeling is that the 1% would be far more money overall, and that the 40% tax would essentially be more in the nature of a penalty than a real revenue generator. According to the data below, the top 1% paid $542 billion in Federal income taxes, with an average tax rate of about 27%. All taxpayers paid $1.3 trillion in taxes, with an average tax rate of 14%. If you raised the average tax rate for all Americans to 15%, you’d get about $1.45 trillion in revenue by straight math (excluding all the important discussions we are having about whether increased taxes lower incomes, etc). If you raised taxes on the top 1% by five points (to ~32%), you’d also get about $1.45 trillion in revenue (with the same caveats). I don’t mean this to be a prediction of what would happen under new tax policies, just simply as insight into who pays the taxes and how much income comes from all Americans versus the very wealthy. > **[TaxFoundation-FF540.pdf](https://files.taxfoundation.org/20170201091804/TaxFoundation-FF540.pdf)** ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [July 11, 2018, 7:50pm UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/105 "2018-07-11T19:50:24Z")
[The _N.Y. Times_ offered an opinion on tax cuts for the rich](https://www.nytimes.com/2018/07/11/opinion/trump-republicans-tax-cuts-inequality.html?rref=collection%2Fsectioncollection%2Fopinion-columnists): > [@](#): > > More inequality? Yes, please. Federal tax policy in the 21st century has been like a tug of war. Thanks to President Trump, the rich are winning it once again. > > The top-earning 1 percent of households — those earning more than $607,000 a year — will pay a combined $111 billion less this year in federal taxes than they would have if the laws had remained unchanged since 2000. That’s an enormous windfall. It’s more, in total dollars, than the tax cut received over the same period by the entire bottom 60 percent of earners, according to an analysis being published today. > > Think of it this way: Income inequality has soared in recent decades, with the wealthy pulling away from everyone else and the upper-middle-class doing better than the working class or poor. Yet our federal government has responded by aggravating these trends. It has handed huge tax cuts to the small segment of Americans who need those tax cuts the least. > > "Most Americans would look at that and say `That’s not fair, and that’s not the result that we wanted from our lawmakers,’ " says Steve Wamhoff of the Institute on Taxation and Economic Policy, a Washington research group that conducted the new study. Polls support his argument… I see that the figures I quoted upthread were for 2012, when $435k was enough to get into the top 1%. For the latest year (2017?) it took $607k. That works out to 12% annual gains for that threshold. Did you average a 12% raise for each of the past three years? ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [July 11, 2018, 8:20pm UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/106 "2018-07-11T20:20:55Z")
It doesn’t really diminish your point, but I’m having trouble looking at the years 2012 and 2017 and seeing how you get a trend over three years. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [July 11, 2018, 8:44pm UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/107 "2018-07-11T20:44:14Z")
> [@Ruken](#): > > It doesn’t really diminish your point, but I’m having trouble looking at the years 2012 and 2017 and seeing how you get a trend over three years. :smack: I was … confused. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [July 11, 2018, 8:50pm UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/108 "2018-07-11T20:50:00Z")
Hell if you want to see confusion take a closer look at any math _I_ post here. ---
**Author:** ![Troy\_McClure](https://avatars.discourse-cdn.com/v4/letter/t/51bf81/32.png) [@Troy\_McClure](https://boards.straightdope.com/u/Troy_McClure)\ **Post date:** [July 12, 2018, 12:23am UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/109 "2018-07-12T00:23:45Z")
So much winning! [https://www.cbsnews.com/news/worker-wages-drop-while-companies-spend-billions-to-boost-stocks/](https://www.cbsnews.com/news/worker-wages-drop-while-companies-spend-billions-to-boost-stocks/) ---
**Author:** ![survinga](https://avatars.discourse-cdn.com/v4/letter/s/cab0a1/32.png) [@survinga](https://boards.straightdope.com/u/survinga)\ **Post date:** [July 12, 2018, 2:22am UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/110 "2018-07-12T02:22:45Z")
> [@CastletonSnob](#): > > Can someone tell me the logic in thinking that reducing taxes on the rich, who make up a significant portion of the country’s money will stimulate the economy? > > Simple logic should tell you that RAISING taxes on the rich would stimulate the economy. The logic is that with lower taxes, the rich will invest more of their money. Those investments will increase the productivity in the economy, as it’s assumed that investments will improve things and make us a more productive society. Then, as productivity goes up, wages will then go up. So, with these higher wages, people have more money, and they buy more stuff, and the economy grows more, and everyone gets a pony. In reality, there is a logic to it that seems to make sense. So, this has been tried a few times, and it’s generally not worked. Let’s take the most recent corporate tax cut. It’s still early, but so far there’s no indication that investment has gone up this year. What is likely to happen is an increase in stock buybacks & maybe more payment of dividends. This isn’t going to lead to that boom that was predicted. This is basic trickle down economics that hasn’t worked. > **[Investment Boom From Trump’s Tax Cut Has Yet to Appear (Published 2018)](https://www.nytimes.com/2018/04/30/business/the-tax-cut-buybacks-business-investment.html)** > > Analysts are still waiting for hard evidence that the new tax law is setting off the investment explosion that President Trump and Republicans promised. So, I guess it’s been tried a few times, and the empirical evidence doesn’t back it up. There’s still time for me to be wrong on the corporate tax cut. But I doubt it will do what the proponents predicted. It might generate some growth, but not nearly as much as advertised. One thing about the current tax cuts is that the timing was wrong, even if you liked the logic. We didn’t need anything like this in 2017, because the economy had already recovered and was reasonably healthy. If anything, we needed a tax increase to start lowering our deficits more. Instead, we got a decrease and higher deficits. The best time for tax cuts is when the economy is going into a recession. And the most stimulative group for tax cuts is probably the middle-class, who will have more money and buy more stuff…moreso than the rich. Our economic growth responds better to consumption, which a tax cut on a guy making $60K a year is going to result in more consumption. I’m not a class-warrior. I have nothing against the rich or anyone at any level of society. But the logic behind tax cuts for the rich just doesn’t hold up…or it hasn’t held up in real-world experience yet. I suppose you could make the tax rates so high, that the logic about taxing the rich holds. But we’re nowhere near those levels, as our top rates are in the 30’s. And even when we had 70% marginal high rates, via deductions and shelters, most people never paid anywhere near that. ---
**Author:** ![survinga](https://avatars.discourse-cdn.com/v4/letter/s/cab0a1/32.png) [@survinga](https://boards.straightdope.com/u/survinga)\ **Post date:** [July 12, 2018, 2:29am UTC](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956/111 "2018-07-12T02:29:33Z")
> [@Johnny\_L.A](#): > > And Reagan himself had to raise taxes, what…? Eleven times? after he cut taxes. Reagan was intelligent enough and (like him or hate him) loved the country enough to see that he’d made an error and to work to correct it. Reagan was actually a smart, pragmatic guy. He had an ideology. But he adjusted his tactics when the evidence pointed him to do that. I liked Reagan. And yes, after he initially cut taxes, he came back later and raised them. If he were alive today, and he stayed true to what he was in the 80’s, he would not be a Republican. [Previous page](https://boards.straightdope.com/t/the-logic-of-tax-cuts-on-the-rich/816956.md?page=5)