One point I’d like to make about compassionate conservatives. Both this particular friend and another I can think of as well as several family members, are the kind of people who joyfully reach out to help others. They just happen to think that the government does a pretty inefficient job with it’s entitlement programs and there’s a lot of abuse and people who milk the system. A lot of them have run into examples which tend to confirm their notions. You may not agree and the big picture may show that the numbers reveal a different story about the overall economy, but for many conservatives the image of them kicking those in need to the curb is complete crap. It’s not about whether we help others or not. It’s about how that help is delivered.
I do not disagree with this statement in so far as it goes. Americans “with” do give when it touches their heart and there are a variety of causes that touch each of their hearts. And when they give the give joyfully.
The problem is it is really that that sort of giving that is relatively inefficient and unlikely to get to many in need. It is about how it is delivered. And despite their notions they don’t do it anywhere near as well or as fairly as we do it when we work together by way of our government.
Taxing and spending have been divorced from each other since Reagan.
If you wanted to pass a law that said that any tax increases on the rich must be used to reduce the deficit then fine but that also implies a spending freeze in the middle of a recession. That is “shoot yourself in the face” stupid.
It sounds like you have been ignoring most of the posts in this thread. Social programs may be wealth redistribution but this is not inherently unfair for a whole variety of reasons.
Riiiiight. Because that is what Clinton did with his increased revenmues from his tax hikes.
First of all, can you name three people on this thtread who have advocated 90%+ rates (I can only think of one whacko but I may have missed one so I am asking fro three).
The question isn’t whether taxation affects optimal economic decisionmaking. it does. Let me repeat that, TAXATION DISTORTS ECONMIC BEHAVIOUR and higher levels of taxation distort that behaviour more than lower levels of taxation. The question is whether that distortion overcomes the additional revenue generated by that tax.
The reason this is important is not because we are trying to figure out how to maximize the federal revenue but because the argument for decades in favor of tax cuts has been that tax cuts pay for themselves in additional revenue. This has resulted in a flurry of tax cuts that were not accompanied by spending cuts. This has led to a budget deficit that would require China levels of growth to grow our way out of.
quote]United States federal budget - Wikipedia
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What’s your point? That Obama is finally putting the iraq and Afghanistan wars “on the books”. See note in the last bush budget (I presume the note is in all his budgets)
The financial cost of the Iraq War and the War in Afghanistan are not part of the defense budget; they are appropriations.
Now see the note in First Obama Budget:
***Department of Defense (including Overseas Contingency Operations) ***
The first Obama budget was 3.55 trillion the last bush budget was 3.1 trillion. 2/3 of the difference is accounted for by increases in nondiscretionary items.
There are a lot of other important details but the has weighed in on the casue of the current deficit:
Now this is not entirely fair because the stimulus spending under Obama (that I beleive saved our global economy) is not being counted against him in the spending column but the beneficial effects of the stimulus spending is being credited to him.
When you say indirectly you are saying that taxes on the rich eventually affect the poor as well?
Other than mandating health insurance (and perhaps a few regressive taxes on things like cigarrettes and alcohol), I don’t see what taxes you are talking about?
Are you of the opinion that we are going to pass an 800 billion dollar stimulus billl every year from now on? Or are you saying that we might hit another recession in the future and that might call for more stimulus spending at some point in the future?
Are you saying that Obama is planning on running HIGHER deficits than Bush going forward in all years good or bad, because I think you will see that once the tax reverts to what we had under Clinton, you won’t really see a significant increase in teh deficit over what we had under Bush assuming all other things being equal? Or is your criticsm that he isn’t planning on cutting the deficit in the middle of a deep recession?
You are comparing apples to oranges. Take two individuals one with high income, one with low income. ALL OTHER THINGS BEING EQUAL, an extra dollar of income is worth more to the lower income individual than the higher income individual.
Thats right the graph of taxation does not take into account government benefits. I don’t deduct the value of the services of the fire department to your income when they come and save your house when I count your cinome tax liability. Your friend seems to think that Food stamps are a form of negative taxation. that is not how most people view this sort of stuff but, whatever.
The capital gains rate and the dividend rate was 15%. The richer you are the more of your income is from capital gains and dividends.
His married friend pays $6,324.00 in social security tax (a bit more if they are a two income family), your friend pays double that because he is paying both the employer and employee sides of the payroll tax because he is both employer and employee. In other words, he is paying half that self employment tax in his role as employer not as wage earner. I don’t know how your libertarian friend’s married friend is getting away with paying $6K federal income tax on 130K of income but he is obviously doing something differently than your libertarian friend. If they are not similarly situated taxdpyers then why should they be taxed the same?
I’d like to point out that when you have comprehensive statistics (like we do in this case), anecdotal arguments are particularly inappropriate.
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I think all of his “real numbers” are anecdotal while the numbers in teh cahrt show the numbers as applied to a population. I also think your friend is taking liberties when he defines things like foodstamps and other means tested benefits as a negative tax.
I still have trouble understanding how your friend’s married friend pays only 6K in federal icnome tax on 120K of income unless he is donating a lot of his money or has some serious medical problems.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213
Now stop your bellyaching.
http://www.truthandpolitics.org/top-rates.php
This really wasn’t hard to dig up.
http://www.taxfoundation.org/publications/show/151.html
I guess if you want to pick nits, the income tax rates on the same amount of income has actually gone down because the brackets are adjsuted for COLI every year and there is some sort of surtax that has expired.
Does this mean you were sure about the income tax rates?
If his examples were actually representative of the universe of people usbject to the income tax then sure its relevant but if not (and the disconnect with the national statistics shows it is not), then they are jsut anecdotes.
My reaction to someone who claims to be libertarian has a lot to do with my preconception that most libertarians fall into one of three categories.
The folks that just don’t want to get hassled for smoking dope or getting married to someone of the same gender (I call these social libertarians).
The folks that just don’t want government and think that the markets would provide everything the government currently provides if given half a chance (I call these anarchists/Ron Paul acolytes).
The folks that just don’t want to pay taxes (I call these freeloading opportunists).
My reaction to the first is: You can get social liberties through enlightened democratic governments, in fact you might want a reasonably robust government to protect your right to smoke yourself into oblivion or spend the rest of your life in the same miserable state of marraige as the rest of us.
My reaction to the second is: You’ll hopefully grow out of it.
My reaction to the third one is: Pfft!
Thats not what people are talking about when they talk about double taxation. When you earn $100 and pay $20 income tax, you have paid tax on it once. When you invest the remaining $80 and it goes up to $150 you are not taxed on that $80 again, you are only taxed on the new $70. If they taxed you on the entire $150, then you would be getting double taxed on $80.
When people talk about double taxation, they are usually talking about one of a few circumstances. When you own stock in a company, the company gets taxed on its income. Then when that company distributes those taxes to you in the form of dividends, you gat taxed on that dividend income. Some people claim that this is unfair because the same income is being taxed twice.
My marginal tax rate has exceeded 50% for most of my working life, it hasn’t made the prospect of higher pay any less attractive. If the marginal tax rate were high enough, it would take a larger pay raise to incentivise me but it would still provide an incentive. But generally Iagree, that the amrginal tax rate on vacation days is zero.
You can tell your friend that he might consider converting some of his salary to dividends. As long as he isn’t a pig about it, it might save him a few percent. People engage in this type of stuff all the time. For example, a doctor will frequently buy his office in S corp and then rent it to his own practice. The money he extracts from his practice in the form of rent is not subject to payroll taxes but is just as deductible as a business expense, etc as long as he doesn’t get too piggy about it and try to jam his entire income through the lease. people do the same stuff with loans to the practice.
Private charity is generally far less efficient than our means tested benefits. We dont’ make people beg for them (so they may not feel the same level of shame) and we don’t get a thank you for paying our taxes (so we don’t experience the same sense of gratitude) but if your objective is to alleviate debilitating poverty then things like the food stamp program is far more efficient and effective in fighting hunger than private charities (this is not a knock on private charities and they serve their purpose but they could not feed America’s hungry if we got rid of food stamps).
Didn’t see the comment you were responding to. Besides all things not being equal, when a poor person has an unexpected bill, he typically must decide which bill not to pay or cutting back on essentials. I challenge DSeid to come with a plausible case where cutting back the first dollar is as painful for the rich as for the poor. Fire the maid. Sell the mansion and buy a smaller house. Sell the summer home. The marginal value of the last dollar spent for the rich is going to be a lot smaller than for the poor. That doesn’t mean that the rich guy won’t go bankrupt, but assuming he still has income he is unlikely to be homeless after it.
Yup, discuss the ridiculous extremes.
We were discussing the concept of “marginal utility” and that taxes should be set according to how much that marginal dollar that would go to taxes is “worth” to the individual.
Believe it or not most who are in the top 5% do not have maids or “mansions” or summer homes. Some however have bills that use up most of their income and somehow have more debt than savings. Some, despite the fact that their paychecks are much larger than most others still feel a strong need for that marginal dollar. I know some of them who lost a lot in the market crash and have college tuitions and large mortgages to pay with an income that isn’t quite as large as it had been in years past.
And believe it or not not everyone under the 50%ile is going to on the street if they don’t have that marginal dollar or would notice it much if it wasn’t there. They have savings and no large bills coming due.
If one was to use marginal utility alone then the underwater wealthier individual may have more utility for that marginal dollar than the thrifty lower middle or working class individual, and should therefore be taxed at a lesser rate. Obviously that makes little sense. The point of my post was merely to point out that limitation of the concept.
I’m not arguing that people with lots of money can be as stupid as people with little money. (I know some.) But surely you agree that the dollar that keeps you from getting kicked out on the street has more value than the dollar that keeps you in a 3,000 sq ft. house instead of a 1,500 sq. ft one. I was being extreme since you were, but the principle holds all the way up and down the income range. I know people who moved into a smaller but still nice house when a job was lost. People sell and move into apartments. I’m not denying that it is difficult for people with an income loss to recognize it. But being unwilling to give up a toy or a vacation is a far different thing than being unwilling to give up food.
I hope we aren’t at the point where poverty starts at the fiftieth percentile. I suspect that the bills for the poorer person looks a lot different from the bills of the richer one.
Remember, we’re talking about fair tax policy here. Surely you don’t think that a rich person who has a lot of bills and has overspent should get a break on taxes. Donald Tump has gone bankrupt several times but has managed to avoid sleeping in a box.
Just think about the value of a dollar to you now versus when you just got out of school or were in school. I bet there is stuff you buy now without thinking about it which you would think about then.
It is true that marginal utility is based on wealth to a certain extent, though the additional dollar is income, but remember we are talking about increasing the tax on the nth dollar of income (n being large) not the first.
The alleged limitation of the concept only emerges when it is abused. Of course you can find people with identical marginal utility at different incomes. That is purely a function of individual preference and is kind of beside the point. Some people are more motivated by money and others less so, and this is reflected in the marginal utility function just as much as in the utility function.
Diminishing marginal utility has bite when individuals consider their own economic decisions. It’s useful to compare an individual’s marginal utility evaluated at different levels of income because then you can start to say things about that individual’s choices. But you can’t really say much when you try to compare individuals to each other.
Of course I agree with that, but we are talking about being fair to the poor, to the wealthy, and to all points in between. You seem to only want to discuss the two poles.
No I do not. And that’s why I am having a problem with marginal utility as the justification for the fairness of a progressive tqax code. I believe in a progressive tax code and the concept of marginal utility appeals to me. Yet marginal utility does not suffice to ethically justify a progressive tax code as fair on its own because it would just as logically conclude that the overspending rich person should get a break compared to the thriftier working class one, and that conclusion is nonsensical. To modify your first example, how does marginal utility shake out when it is one higher income individual who is at risk of having to sell his or her current house (albeit a nice one) vs a lower income (not poor) individual who would use the same marginal dollars to by a new HDTV while they stay in their current (smaller) home?
Utility of the nth dollar is not linearly associated with the size of n even though we believe it should be.
I think you can make the somewhat crude argument that progressive taxes are less distortionary because of diminishing marginal utility. We value public goods and we have to pay for them; the most “ethical” way to do so is at the lowest cost to social welfare.
The last point first: but it is being proposed to use it in that way, to decide what is fair based on marginal utility between individuals and assuming that that varies linearly with size of income.
As to the first point. The marginal utilty of the nth dollar is a function of how much greater n is than the commitments made for the income. When I was a resident, once my rent was paid and I had enough to buy groceries and pay the bills additional dollars had little utility for me even though n was pretty damn small. I had few commitments and obligations other than going to work. Now I have four kids, college bills, a large mortgage … and concern about saving for the remaining ones’ colleges and for retirement someday. I actually care more about the nth dollar now. I still should pay more tax now.
http://www.cbpp.org/cms/index.cfm?fa=view&id=3090 The top 400 ,who are cleaning up since Bush, have had their taxes cut year after year. Those who take the most, get the breaks. Why is that a good idea? They have the political sway to make it so. You can not justify it by need or pretend they deserve it. They just make it that way because they can.