That’s your definition of fairness and many disagree.
Fairness can also be defined by deliberately ignoring the “marginal utility of money” and charge everyone the same %. That’s also a reasonable sense of fairness. You disagree with it, I know.
Anyways, we do not adjust the price of hamburgers, haircuts, bottled water, rice, cars, homes, etc based a particular individual’s income. If McDonald’s charges 99 cents for a hamburger, it’s the same price of 99 cents to me, you, or Bill Gates. It’s only government taxes (and sometimes college tuition fees) that charges varying prices based on current income.
Well sure. You can define fairness as not charging those poor rich people who work so hard for the economy anything. You can define it as charging everyone the same absolute amount. But do you have a reasonable definition of fairness - not considering the evils of taxation - under which these make sense?
Actually we do. Our society has various levels of products in all these areas which allow people to spend a reasonably consistent value of money on these products. The Times yesterday had an article about $550 designer pants that look just like Dockers. While people who buy them must derive some additional value from them, I suspect quite a bit of it is that the utility of the money they spend to them is not that far from the utility of the money normal people spend at Macy’s or WalMart.
Sure Gates could spend 99 cents at McDonalds. He could also drive a beat up heap he bought off a used car lot. Bet he doesn’t, because the cost to him of a luxury car is less than the cost of the beater to some kid right out of college.
People can slum because they enjoy it - that is different.
We don’t tax churches. Many of them aren’t exactly skimping by. And exempting churches from taxes has nothing to do with rhetoric about “fair or unfair.” Would it be better for the country if they were taxed? I dunno.
As for not taxing the businessman, yes I could see how a government could rationalize not taxing a rich person if the government thought he could bring economic growth to the area. It wouldn’t look like a straight exemption though. It would be disguised as a tax moratorium or creative subsidy. This scenario also wouldn’t have anything to do with fair/unfair – the government in this case is simply making an objective bet that not taxing the businessman to lure him to the area would bring jobs, thereby increasing the overall tax base. The government basically is doing it by calculated greed vs trying to dole out “fairness.”
That’s market segmentation and different from what I was talking about. I’m emphasizing that we don’t charge different prices for the exact same item/service by first examining what buyers’ incomes are.
When I get a haircut, the barber does not ask to see my last 12 months of paystubs to calculate how much he should charge me.
There are plenty of people who can do what the financial experts did. Many are in jail where they belong. If bilking and lying to your customers is a talent. They have clearly demonstrated it.
Hell ,Paulson almost scammed us into turning the entire economy into his piggy bank. Then ,once he got the reign over TARP he changed his mind. Where is the value in what they did?
I’m still not sure if I get the “taxes aren’t fair crowd”. Fact 1: rich people pay more than their “share” of taxes relative to their income. Fact 2: taxes are more “fair” to rich people now than they were in the recent past. Fact 3: the proportion of income earned by the rich is greater than it was in the recent past.
So let’s now make taxes more “fair”. The only possible outcome is that the rich will pay less taxes and everyone else will pay more, where “everyone else” is somewhere between 80-90% of taxpayers.
Is this really what the people screaming about this want? To raise taxes on most Americans? Not only that, a flat tax with a large exemption for the first n dollars would mean that the poor would pay even less taxes than they do now. So are the advocates really proposing a change to the tax system that would end up with the poor and the rich paying less taxes than they do now, and the middle-class paying more?
Not really. If we’re going to have an income tax as citizens then let it be about income. Other issues should be dealt with separately. The incentive door is a big part of what makes it so complicated.
I suppose you’re right.
Unless a much simplified tax code encourages business big and small and creates a better economy for all. Some folks believe that’s the case with a flat tax but from the reading I’ve done in the past few days it’s still in question. Part of the overall economic picture isn’t just the tax code but costs of goods and standard of living which is too complex to get into here.
I appreciate this explanation and will give it consideration. It’s just that for those who cry the rich should pay more a flat tax does that. The rich do pay considerably more and we might be able to eliminate a lot of tax shelters by simplifying the tax code. I do recognize that we could simplify the tax code a lot and still have a progressive tax system.
I guess the question for me is how much of this should we do through the income tax code, but I suppose, realistically, no matter how we distribute the burden someone is gong to bitch. Thanks for the input.
Then that means you will raise them during a bust, which is the worst possible thing to do. What needs to happen is build up a surplus during booms and then use that surplus to continue funding govt or temporarily lower taxes.
The reason we are in the trouble we are now is that Bush cut taxes during a boom and then when the economy went south, and we had two wars to fund, we had to go into massive deficit spending.
In the 50s the tax rate on those making over 3 million a year was 92 percent. Congress ,who works for them, kept chopping it down. Now it is 28 percent. For the top 400 ,the IRS says they paid 16 percent. The top 400 made about 1.4 trillion dollars last year. If we cranked their rate up by 10 percent, we would solve a lot of our budgetary problems. They would survive quite fine.
So the rich got what they wanted. Did they invest in industry and jobs? Of course not, they invested in the Financial instruments the banks sold. They don’t have any interest in job creation. They just want more money. Their wealth went up 16 percent last year while the economy and jobs tanked.
People eat the sophistry of taxing the rich with a spoon. They will create jobs. Did they? hell no. They rewarded themselves and others like them with huge salaries ,bonuses and retirements. Did that create jobs. Nope. They invested in banking instruments that destroyed homeownership.
The rich have no interest in job creation unless it makes them richer. That is why they move jobs overseas. They know it is bad for America, but they don’t care. They just want more money.
We have a lot of debt. It was their doing. They should be paying for fixing it.
This is where people diverge and no agreement will ever result. You’re looking out outcome. I,and other, look at process. The process is either fair or it isn’t. It doesn’t matter how many people wind up paying what. I start with two tenets. 1) The government should keep taxes (revenues) low across the board. As low as they can while doing the things they need to do. 2) People should be treated equally, as we all have an equal responsibility to contribute to the government coffers. I thin it is fair that we not all contribute the same dollar amount (though the argument could be made), but that we all contribute the same percentage. In essence, we all work the same X number days for the government and the rest of the year for ourselves. Very similar to tithing. How much should you contribute to your church? X%. Simple. Fair.
Now, we know that not everyone can pay. Some can’t pay anything because they don’t have a job. Some are disabled, etc. And others have such a low income that if we extract money from them there’s a likelihood that we’d have to give them back more in government services. So, we establish some cut off point—and income of $X thousands of dollars. No it is not a pure flat tax, but it gets us closer to fairness. Why should Person A have to work January thru May for the government and Person B have to work only from January thru March?
Now, I also think that it would be a good thing to have those who do not pay any taxes contribute something. As I’ve mentioned elsewhere on these boards, they can spend a few days a year cleaning up beaches and parks, painting local schools, sweeping streets, etc. I really think this would be a good thing for society and the people doing the work themselves. I know I feel better when I pay my fair share on anything from a restaurant tab to taking care of family members and paying my taxes.
I think the simple question is: should the system be fair? Or just result in the greatest number of people paying taxes the least amount in taxes possible?
No problem, you need the help. So far you have advocated a tax system that will lower taxes on the rich, have even more people at the low end get a free ride, and raise taxes on the middle class. Then you want to lower tax rates during a boom, which leads to having to raise them during a bust so that you’ll have less demand and prolong an economic turn down. I’m looking for the trifecta of poor public policy. How about returning to the gold standard?
The outcome doesn’t matter, only that the process is that which you define as “fair”. Or did you not mean what you wrote? Feel free to retract or to clarify.
Dan, your initial
is not completely true (warning, pdf), or rather is only true under particular definitions of “rich”. The biggest share relative to income is not paid by the top 1% or the next 4%. The 90-94.9%ile pays the biggest share relative to income - that group, with an average income of $144K, pays 32.2% of total income to total taxes, while the top 1% pays 30.9%. The entire lower 99% averages 29.4% of total income paid for total taxes, so they don’t even pay much more per unit income than the average Joe. The lower 20% does get off a little easier, paying 18.7% of their income to total taxes.
Now I suspect that this board has an over representation of well educated professional sorts that are likely clustered near enough that $144K average that they fall into the 90-95%ile or pretty damn close. And likely few who make enough to be in that top 1% ($348K plus in 2007).
Is it “fair” that the 90-95%ile group pays more of their total income in taxes than does the top 1%?
Thanks, I love facts. They are often surprising. I wonder if the reason that the 90-94% crowd pays higher taxes is because a fair amount of their income is subject to payroll taxes, but for the ultra-rich it is negligible because it is only on the first $70K-something of salary.
It’s pretty funny looking at that PDF. Essentially it’s saying that the outcome of the current tax system is pretty much what the advocates of the flat tax would like to have. Most people pay close to their share of taxes relative to income, with those at the bottom paying relatively less. Using CosmoDan’s exemptions, the first 20-40% of households would pay no taxes at all (state, local or federal) and we’d need to spread their current share of taxes over the rest, giving a tax rate of somewhat more than 31%. That would be a tax increase for 60% of households and some hard to calculate number of households in the 2nd quintile. That means that the tea party demographic would pay more. They could take solace, however, in knowing that the richest 1% would pay less.
All of the above, however, ignores that fact that we have a huge deficit. The actual tax rates would need to be a higher for a while, or there would need to be draconian budget cuts in the range of 20% plus. I’d start with Medicare as it’s a win-win: waste less on health care for old people and then when they die early we’d save money on social security as well.
This would make quite a platform: We are going to raise your taxes, lower them on the richest 1%, have the free-loaders on the bottom pay nothing, and cut your Medicare benefits. I’m not sure I’d want to give that speech to armed Tea Partiers.
I always figured the folks making from approximately $90k-$110k were getting hosed the most because most or all of their income is subject to the SS tax. It’s become a struggle for the hearts and minds of that group because the wealthy tell them “If only the government would get off your back a little, you could be rich like us!”, while the working class and struggling middle class are telling them “The wealthy business interests have been sucking us dry, and you’re next.”
Also, the numbers in that PDF indicate that state and local taxes aren’t all that progressive. I’m betting some of these struggling states are way too reliant on sales taxes.