# What if US Taxes Were More Progressive (More Brackets)? **URL:** \ **Category:** Great Debates\ **Created:** [March 21, 2009, 2:09pm UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258 "2009-03-21T14:09:12Z")\ **Posts on this page:** 14\ **Page:** 4
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [March 31, 2009, 6:10am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/61 "2009-03-31T06:10:59Z")
> [@IdahoMauleMan](#): > > Let’s leave the rates where they are, and cut government spending instead. Or, we could raise rates across the board, back to historically normal & sustainable levels, have greater government investment in central planning & the commons, & save ourselves some trouble. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [March 31, 2009, 6:17am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/62 "2009-03-31T06:17:25Z")
> [@Sam\_Stone](#): > > You’re right that it’s become almost impossible to cut the size of government once it has grown. Wouldn’t that be an argument for not growing it further? How about not adding another 200 billion per year of new spending? Realistically, _that’s_ not going to happen. It’s very hard politically to cut war spending or entitlements, so everything else got slashed [del]to the bone[/del] to the marrow in the years since Reagan. Our EPA regulators don’t even police; they just rely on private self-reporting. Our medical schools had funding cuts in the 1990’s to give the government short-term savings, & now that has to be made up. We have to increase spending to make up for decades of under-spending under the GOP. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [March 31, 2009, 6:24am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/63 "2009-03-31T06:24:03Z")
> [@Ruminator](#): > > People often cite that highest margin tax rates were 90% between 1945 and 1963 but interestingly, they always leave out the fact that the govt didn’t collect higher overall tax revenues [(as a % of GDP)](http://www.whitehouse.gov/omb/budget/fy2005/hist.html) during those years. One reason is the negative feedback loop as mentioned above. More likely, the top marginal tax rates created a disincentive to accumulation of vast wealth in taxable liquid form. Incomes far above the mean were far rarer, part of one’s compensation could be taken in tax-free benefits, & there were (in line with your point) more tax shelters then. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [March 31, 2009, 6:37am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/64 "2009-03-31T06:37:14Z")
> [@Sam\_Stone](#): > > …according to the [Tax Foundation](http://www.taxfoundation.org/research/show/23319.html), under Obama’s new budget the bottom three quintiles in the U.S. combined will only pay about 12% of all taxes, with the lowest quintile paying nothing at all (in fact, being net recipients of tax money), and the second quintile paying only 2.84% of all tax. Those two quintiles together make up over 40% of the population. In Canada, the bottom two quintiles pay about 6.7% of all tax. > > (Source for Canadian Data: [StatsCan](http://www40.statcan.ca/l01/cst01/famil88b.htm)) > The third quintile in the U.S. pays about 9.5% of all tax, and in Canada the number is about 12%. The 4th quintile pays about 17% in the U.S., vs 22% in Canada. And finally, the top quintile will pay about 70% of all tax in the U.S., vs only about 57% in Canada. > [@Digital\_Stimulus](#): > > According to [this page](http://sociology.ucsc.edu/whorulesamerica/power/wealth.html) from UCSC, in 2001 the top quintile in the U.S. had 84.5% of net worth and 91.2% of financial wealth. In [Canada in 2005](http://www.progressive-economics.ca/2006/12/07/wealth-distribution-in-canada/), the top quintile had 69.2% of net worth. Hmm. Looks like both countries are regressive, then. I suppose disparity in net worth outstrips disparity in income, but even with a flat tax, one would expect the numbers to be close. > [@Sam\_Stone](#): > > Canada, on the other hand, has been reducing taxes since 2006. The national sales tax has been lowered from 7% to 5%, our tax bracket ceilings have been bumped up (except for the top bracket), our personal deduction has been increased by about $700, and this year the government instituted tax free savings accounts where we can put up to $5000 per year in an account and collect interest or other capital gains tax free. I can’t find a number for the net lowering of our taxes, but I imagine it has to amount to at least 2% of GDP since 2006. That puts us right in line with the current U.S. tax system - except that our deficit 1/5 your size as a percentage of GDP, our debt is half, and we’ll be running surpluses again by 2013. Structurally, we have all the advantages over the U.S. right now. Sounds like you’re going through a Reaganist phase, which we have been doing for 25 years. You’re going to pay for these cuts in the long term as we are. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [March 31, 2009, 6:40am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/65 "2009-03-31T06:40:20Z")
[QUOTE=Sam Stone;10974711You happen to look at the issue through the filter of ‘social justice’ or ‘fairness’, where the absolute wealth of the rich matters. Not all of us care about that. We just want to figure out how to fund government most efficiently.[/QUOTE] Eh, but the question is, fund it to do what? Your government funds health care, ours does not. Ours does military R&D \*for the entire planet, \*yours does not. Our country is a major funder of the UN, & a global hegemon, whereas yours just takes in a shocking number of refugees. etc. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [March 31, 2009, 6:48am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/66 "2009-03-31T06:48:48Z")
> [@Ruminator](#): > > This is irrelevant. > > First, the primary means of taxation that this country agreed upon is the INCOME tax. It is not the ACCUMULATED wealth tax. The philosophy is to tax “activity” instead of “savings.” Therefore, you’re the one being dishonest by purposely redirecting the fairness of INCOME tax to the level of ACCUMULATED wealth. We do have a handful to taxes that deliberately attack accumulated wealth (such as the estate tax “death” tax) but these do not constitute the bulk of tax revenue. > > Second, your phrase “_% of net wealth_” is meaningless because wealth is not a zero-sum game. A. The estate tax has been repealed in the USA. B. Relative wealth, which sets prices of highly scarce goods, is zero-sum by definition. So, yes, it does matter. Or do you think that a man should be happy to get a raise which fails to keep pace with the inflation of the money supply? > [@Mighty\_Mouse](#): > > Net wealth has nothing to do with this. If I make 100k at age 40 and have accumulated 400k in net worth, should I pay a much higher tax rate than someone who makes 50k at age 25 and has negative net worth because of college loans. Ten times higher, hundred times higher, a thousand times higher. Should the 25 year old have a negative tax rate? > > Age, net worth and income are highly correlated. As people grow older (up to a point) they have higher incomes and net worth than they do when they are younger. So worrying about how much wealth people at different income percentiles is not just meaningless, it is fucking dishonest. Nobody could be dumb enough to make this argument honestly. Apparently, I’m dumb enough. Do you really think that a man with savings should be taxed only by his income at the present point, & a man with debt should simply be taxed according to his inflow without regard to his obligations? That’s simply taking a simplistic formula & declaring the only fair approach through failure of imagination. A child should be expected to think that is most rational. A grown man can be forgiven for seeing further subtleties. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [March 31, 2009, 6:58am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/67 "2009-03-31T06:58:56Z")
> [@Sam\_Stone](#): > > FICA contributions are decidedly different from income tax, or are supposed to be. Income taxes are supposed to go to help shoulder the burden of government for all, while FICA taxes are supposedly to pay for your own retirement. It’s not so much a tax as it is a foced savings plan, and saying you want to refund FICA taxes is basically saying you want to turn a self-funded retirement plan into a government entitlement like welfare. > > Now, I understand that the current implementation of Social Security is far from a proper retirement program, but the principle is the same. Social Security is supposed to be self financing, with FICA deductions taken from individuals then given back to them at retirement with interest. It is not a regressive tax. Actually, no, FICA is not kept in separate monies to be given back with interest. Perhaps you’re thinking of W Bush’s attempt to replace FICA with mandatory IRA’s. Or of IRA’s. FICA money goes into the general fund, & is used to fund the military (which, again, is largely overseas indulging imperialist fantasies). Most of the whinging about Social Security’s “unsustainability” is due to the fact that one day FICA will no longer pull in more than SS pays out, & we’re being prepared for the day when SS is canceled & the government welshes on us all. > [@](#): > > This is flatly untrue. The bottom quintile of Americans receives more in government payments than it pays in income tax. In terms of overall revenue, the bottom quintile is at -2.18% - net recipients of government funds. There is simply no wealth transfer from the poor to the rich occurring. There is a small wealth transfer from the rich to the poor. You just want to increase it. You know what else transfers wealth from the rich to the poor? Actually hiring poor people & paying them a living wage. Are you against that too? ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [March 31, 2009, 7:27am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/68 "2009-03-31T07:27:37Z")
I simply don’t buy the logic that higher tax rates necessarily increase tax avoidance behavior–certainly not to the degree that revenues go down. If the top marginal tax rate is 50%, those who dodge their taxes will be the same persons who dodge taxes with a top marginal tax rate of 32%. _The exact same set._ Anyone who can get away with something & is dishonest enough to do it will do it anyway. > [@Sam\_Stone](#): > > … high marginal rates … move the nation’s capital from those who have demonstrated ability to invest it productively and moves it to people who have no such ability. Simply put, Bill Gates or Burt Rutan or Warren Buffet or Elon Musk is much more likely to put $20,000 to use in ways that benefit society or build wealth than is an average middle class or lower class person. Taking resources from the most productive and giving it to the least productive will lower overall productivity. This is a bait & switch argument. You’re saying that because these men have demonstrated an ability to accrue wealth to themselves, that they are better at spending wealth to better society. _Non sequitur._ > [@Ocean\_Annie](#): > > I consider Social Security a sham tax to milk the least able to pay and least likely to collect in order to fund tax cuts for the wealthiest Americans. I agree with this comment. > [@Ocean\_Annie](#): > > These are workers who earn wages below the poverty line. These workers don’t own property. Most dropped out of high school and are likely functionally illiterate. This is the perpetual underclass, the weakest members of society and the most exploited by pay day loans and tax refund schemes. If these wage earners didn’t qualify for earned income credit, the U.S. poverty rate would \*officially \*be much higher. > > Considering the little they get, the taxes paid to FICA, sales, gas, etc., it’s hardly wealth redistribution. Given that they typically seem unable to accrue wealth, & certainly gov’t policy is in no way to give them wealth (as opposed to giving them subsistence & continuing dependency) this seems to be true. Despite GOP rhetoric, a _hand up_ will cost far more than a _more cheapass handout._ But of course the ruling class types don’t all want to give hands up, because that would mean they would have less relative-wealth advantage. Better in many middle-class & upper-class eyes to pat themselves themselves on the back for being rich enough to contribute 5% of income & still contribute “more” than a normal person who pays a traditional 10% tithe, never mind that then _less_ of their chunk of GDP ends up going to charity. The proud justify their behavior with a misuse of the phrase “absolute terms” (as if any unit of currency had either constant or intrinsic value) & an appeal to Mandeville. ---
**Author:** ![Grumman](https://avatars.discourse-cdn.com/v4/letter/g/43a26b/32.png) [@Grumman](https://boards.straightdope.com/u/Grumman)\ **Post date:** [March 31, 2009, 7:49am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/69 "2009-03-31T07:49:37Z")
> [@foolsguinea](#): > > You know what else transfers wealth from the rich to the poor? Actually hiring poor people & paying them a living wage. Not if you do it right. The whole point of hiring people is that the employee’s work (combined with the resources provided by the employer) _generates_ wealth, part of which is then given to the employee in the form of wages. ---
**Author:** ![Ocean\_Annie](https://avatars.discourse-cdn.com/v4/letter/o/8797f3/32.png) [@Ocean\_Annie](https://boards.straightdope.com/u/Ocean_Annie)\ **Post date:** [March 31, 2009, 12:59pm UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/70 "2009-03-31T12:59:20Z")
> [@foolsguinea](#): > > More likely, the top marginal tax rates created a disincentive to accumulation of vast wealth in taxable liquid form. Incomes far above the mean were far rarer, part of one’s compensation could be taken in tax-free benefits, & there were (in line with your point) more tax shelters then. To add to this point, the disincentive for gargantuan CEO compensation meant that more money was reinvested in the firm. Today, there is no incentive for CEOs to consider long term growth because compensation packages are negotiated up front with guaranteed severance, salary, bonuses, stock options, and perks regardless of CEO or corporate performance. It doesn’t take vision or ideas to fire workers, cut benefits, and dodge taxes to boost quarterly profits and dividends. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 31, 2009, 2:53pm UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/71 "2009-03-31T14:53:39Z")
> [@foolsguinea](#): > > Actually, no, FICA is not kept in separate monies to be given back with interest. Perhaps you’re thinking of W Bush’s attempt to replace FICA with mandatory IRA’s. Or of IRA’s. FICA money goes into the general fund, & is used to fund the military (which, again, is largely overseas indulging imperialist fantasies). Most of the whinging about Social Security’s “unsustainability” is due to the fact that one day FICA will no longer pull in more than SS pays out, & we’re being prepared for the day when SS is canceled & the government welshes on us all. I’m aware that Social Security is a essentially a Ponzi scheme. The point is that FICA taxes supposedly go towards paying later benefits right back to the person who paid the tax. It’s supposed to be a mandatory retirement program. This makes it fundamentally different in philosophy than income tax, which is simply money that goes to paying the cost of government. Get rid of FICA for the poor, and you’re essentially saying that Social Security is simply another welfare program. > [@](#): > > You know what else transfers wealth from the rich to the poor? Actually hiring poor people & paying them a living wage. Are you against that too? No, actually it doesn’t. Not if they are hired through normal market transactions. But yes, if you put a gun to someone’s head and force them to hire someone under conditions they don’t think will be profitable, then yes, you are forcing a transfer of wealth. I do not consider this to be a feature. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [April 1, 2009, 12:40am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/72 "2009-04-01T00:40:20Z")
> [@Sam\_Stone](#): > > No, actually it doesn’t. Not if they are hired through normal market transactions. > > But yes, if you put a gun to someone’s head and force them to hire someone under conditions they don’t think will be profitable, then yes, you are forcing a transfer of wealth. > > I do not consider this to be a feature. Are you making the distinction on whether one gets “value for value,” or what? My analysis of fundamental economic realities is that relative net transfer of value is the product of relative negotiating power, which outstrips any objective measure of the value of the service provided. Hm. I hadn’t thought about it this way, but… absent rule or custom dictating standardized measures of value (such as usury laws & mandated pay scales), wealth will gradually concentrate in the hands of those with more power, & since money _is_ power, eventually, this will accelerate. So it seems you’re right. In a libertopia, wealth will (first slowly, then more quickly) concentrate in the hands of the already rich & never transfer to the poor by Smithian mechanics. Huh. But why do you think that’s a good thing? ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [April 1, 2009, 1:03am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/73 "2009-04-01T01:03:06Z")
> [@foolsguinea](#): > > relative net transfer of value is the product of relative negotiating power, which outstrips any objective measure of the value of the service provided. What’s “objective measure of value of the service provided” ? I tried looking this up on google and couldn’t find anything on it. I’ve worked day labor jobs and office jobs and all those varied experiences taught that I never had any “objective” value. My shoe size is objective data… but my worth to society is **subjective**. I believe part of my ability to take advantage of the economy is due to the fact that I always remind myself that my “value” is subjective. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [April 1, 2009, 5:42am UTC](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258/74 "2009-04-01T05:42:37Z")
Exactly, Ruminator. That’s kind of my point. In a world where all prices are set subjectively, those with more power in a negotiation have the power to set prices in their favor. “He who has the gold makes the rules.” Without customary guidelines for wages & prices, this becomes a self-feeding cycle, & the economy moves further & further from equality. I think a stable equilibrium is reached once a royal family owns everything. [Previous page](https://boards.straightdope.com/t/what-if-us-taxes-were-more-progressive-more-brackets/490258.md?page=3)