What is a fair amount of tax for the rich to pay?

Great Debates
41

Of course the amount that each needs to contribute is contingent upon not what it has to pay for, but how much it costs, whatever the “it” that society has decided to fund is, be it war or healthcare for all.

Should taxation be progressive? Yes. And currently it is barely so (pdf).

Given our current budget needs I personally I see the value of having an additional marginal tax rate above our current top of 35% that starts at $373,650 … maybe a 38 or 40% bracket for income over $1 million and a significantly higher capital gains rate if your total income including capital gains exceeds that amount as well. Our tax structure would still be lower for the wealthiest than most of the rest of the Western world.

42

I know 90% is too high. I know 30% at this level is too low. Where the optimal level is in terms of pain I don’t know, and I don’t know where it is in terms of investment also. You might have done better positing that Bob was using his wealth to feed the poor, or to back startups. Unless it was a startup like in the good old days which had no reasonable business plan and spent its money on expensive furniture.
Now, money going to the government might build bridges to nowhere or Republicans’ salaries (both total wastes) , but it also might fund basic scientific research that pays off more than a startup, or infrastructure improvements which can save immense amounts of time for everyone. If you are going to base your opposition to taxes on the opinion that people can spend their money better, maybe you should enforce this through tax breaks or something. I’d rather leave people alone to spend what they wish, given that if they make a reasonable choice or not they are giving a fair share of money to be spent by the will of the people, flawed as it might be.

43

I’ve never heard it was that high, but regardless, you left out why we had economic growth despite high taxes. I’m sure it was just an oversight on your part, that you weren’t trying to, you know, trick anyone by diverting their attention…

Anyway, as I’m sure you know but just neglected to put in your paragraph here, the reason the US could afford high tax rates at the time while still growing economically was because we, in effect, had a monopoly on manufacturing. Seeing as how just about everyone else who had significant manufacturing had just gotten the crap kicked out of them because of the whole war thingy and all that.

Sadly, this state of affairs was impossible to maintain forever, since one of the things we spent all those lovely taxes on was helping everyone else rebuild THEIR economies and manufacturing. We selflessly did this because we really, REALLY cared…and also because they were captive markets just waiting for all our goods and services. Which is why we were able to have a relatively high tax rate (though I’d need a cite showing it was over 90% post WWII) and still be able to expand both economically and expand tax revenue.

Of course, it’s funny how when they lowered that tax rate the government didn’t exactly go broke, ehe? In fact, they SEEM to have brought in increasingly higher tax revenue despite lower tax rates…hmm. Wonder how THAT could be? Any thoughts on that?

I’ll let someone else deal with the rest of your post, if they are so inclined.

-XT

44

But the supposed disincentive of a high tax rate didn’t seem to be operating, did it? Individual executives still worked hard even for that smaller amount - in fact they had relatively lower salaries and still managed to go to work every day and help the economy to boom. In 1961, when the tax cuts hit, we still had a lot of the advantages you mentioned.

Maybe the reason was because both Republicans and Democrats know the taxes were going to pay off the WW II debt, and being patriotic didn’t mind paying for the late war. When we recover we will have a big debt to pay back also. Can we expect an equal level of patriotism, at least for the Iraq war debt? Perhaps CEOs, grateful that Mr. Bush saved them from Saddam’s WMDs, won’t mind paying a bit more, and won’t storm out of their oak-paneled offices in a snit at the unfairness of it all?

45

Here.

46

Right. The thing though is that the optimal level is going to be closer to 30% than 90%. And, as I’m sure you realize, that actual tax rate today on the top earners IS higher than 30%. IIRC from previous threads on this subject, it’s actually over 40% these days (perhaps 41%?). It’s been pretty steadily rising for the last 5-6 years, and it never dropped down to 30% even at it’s lowest.

I don’t really know either, since it’s not exactly my specialty, but would agree with an earlier poster that it’s pretty close to optimal now. As I said, it could probably be tweaked up a bit, but it’s not like it’s seriously out of whack and needs to be bumped up 20 or 30%.

Why? Unless Bob is a complete idiot, he isn’t stuffing his $10 million into a mattress or burying it in the yard. No matter how you figure it, Bob’s money is doing SOMETHING. Is he investing in bonds, T-Bills or other government instruments? Stocks? Money Markets? Real Estate? Other purchases such as houses, cars, golf clubs, swimming pools or boob jobs for Bob’s trophy wife? Hell, is he spending it all on hookers and blow? Well, all that money gets back into the economy and keeps someone going, even if it’s just the pimps and drug dealers. And the beauty is that, no matter what Bob does with his portion of his money WE get our cut, right off the top! I mean, what’s not to like about that? We get the benefits of Bobby boys capital investments which translates into even MORE revenue, plus we get to tax tax tax! It’s a win/win!

Even if it’s just a startup we STILL. Someone had to make that expensive furniture after all. Plus, the startup presumably is going to hire SOMEONE, even if they end up simply writing web pages for Pets.Com. We’ll get our cut of the IPO funds as well. And even if they just poured the money into a hole, we still got to tax Bob AND the startup guys exorbitant salaries at least until they go completely tits up. Again, it’s a win/win for us.

Anyway, I’m mostly just tongue in cheeking here, though obviously I at least believe this all to be roughly true as well. I don’t think ‘fair’ has anything to do with optimal, either from the perspective of bringing in more revenue for the government OR for expanding our collective economy. I don’t believe that ‘fair’ is what the world is about, either, nor do I think it’s the governments job to MAKE things ‘fair’. The governments job is to make sure we get our cut, to make sure the playing field is level, to make sure companies toe the lines we set out for them…and then to get the fuck out of the way and let those companies lay those fucking golden eggs! :wink:

-XT

47

No, you are wrong. Your link is to federal taxes as a percentage of GDP, not federal taxes collected in inflation adjusted dollars. The real GDP (inflation-adjusted dollars) has been growing (http://www.ers.usda.gov/data/macroeconomics/Data/HistoricalRealGDPValues.xls), so your very link proves you wrong and it shows that the federal taxes collected in inflation-adjusted dollars have been growing. What goes through your mind to call someone dishonest when the data you’re citing shows very clearly that you are the one that is wrong? Did you seriously not know that real GDP has been growing or did you think that nobody would call you on this? I am really curious.

48

Funding unprofitable startups so the furniture company can sell overpriced furniture looks to me like throwing rocks through windows so the glass company can sell new windows, to me. Sure, it’s economic activity, but not all economic activity is wealth-creating.

49

Same as everyone else.

What it should be is 0% on income and 23% for the Fair Tax.

50

What do you mean we could “afford” high taxes because of certain economic conditions? Even if we did have a monoploy on manufacturing, what difference would that make to our ability to raise or lower taxes in our own economy? What magical effect does manufacturing have on a country’s ability to set tax levels? We’ve had consistent growth in manufacturing output since after WW2 so why shouldn’t we have the ability to riase taxes now?

The Marshall Plan, the money we spent helping other economys, was less than $13 billion or about $115 billion adjusted for inflation. We spent four times that much fighting the Korean war, so what’s foreign aid got to do with anything? Our exports to the countries we helped then are exponentially bigger now than they were then.

And when Reagan cut income tax from 70% the country started ringing up huge deficits with zero extra economic growth to compensate. Reagan then raised taxes every year after on low/middle incomes to try and make up the revenue lost giving tax cuts to the wealthy, and it’s this redistribution of income over the last few decades which is responsible for the fiscal trainwreck we have today. We have a broke and hugely indebted middle and lower earners and an increasing share of national income going to top earners giving them tons of excess cash that helps create all the bubbles we’ve seen over the past couple of decades. The last time the top 1% made the share of national income that they do now was 1928. Go figure.

And go and look at the actual tax revenues over the past few decades, then look what happened when Bush cut taxes and didn’t do a Reagan and raise other taxes to compensate. Then tell me that cutting taxes brings in higher revenues. Put the numbers up so we can all have a good laugh.

51

Go us, let’s fuck the economy up even worse!!

52

Alas; it’s apparent the OP is not wealthy.

You see, there is an enormous difference between income and wealth. Very few “rich” are dependent on income, and the fact that our tax system is geared toward income and not wealth is what makes it so inequitable and chaotic.

Let me give you a simple example. Let’s call me Bill Gates*. Years ago I started a company which was quite successful; I’ve kept most of the original stock I had. It’s now worth $50 Billion. I went to my friend Warren and borrowed a billion dollars, using my stock as collateral. I live off my billion dollar loan, making payments on the principle to Warren out of the billion, and using the rest for expenses. I have no income and therefore pay nada zip zero in federal income tax. The feeble-minded policy makers out there have confused income with wealth, so I’m living pretty large without paying federal income taxes (just like 47% of other folks in this country). I have an assortment of other tax shenanigans to make sure various heirs don’t pay too much on my estate, either.

My point is that taxing income is a poor way to tax “the rich.” Period.

If you must tax income, Mr Dibble has the numbers about right.

*Not my real name.

53

CARPE DIEM: History of the U.S. Tax Code, Highest Marginal Rate Here is a chart with the tax rate on the rich since 1913. We are at a very, very low point in taxing the rich. How are the economy and the debt doing?

54

Interestingly enough, you seem to be making the point that in America the very wealthy end up paying very little taxes.

Huh.

Someone in GQ is using your name arguing that the wealthiest Americans are carrying the rest of us with all the income tax they pay. You may want to check that out.

Anyway. In general the very wealthiest do owe much of their real wealth to capital appreciation which is only income when they sell it. But. Bill Gates, as your example, had a salary of $901,667 in fiscal 2004 (the year I could easily find) and $175.6 million in dividend income. So maybe not the best example of no income.

Warren Buffett claims an income of a more modest $46 million/year (which is taxed at 17.7%)

Larry Ellison "drew just a $1 million salary, but realized $182 million from the exercise of vested stock options " (in 2006)

They are claiming incomes, sizable incomes, just incomes that are not taxed so high. Relatively low even.

55

Why do you fail to mention what inflation-adjusted income level that top rate applied to compared to today? Why do you fail to mention the loopholes that were available during that time? Maybe because this comparison you are attempting to make is completely invalid? Do you think it is a good idea to give a huge incentive for high-earners to try to relocate to other countries with lower tax rates?

If only the economy was so simple that you could just change one variable and everything would be peachy… Hint: it’s not.

56

The dishonest thing would be if it were not in inflation dollars - which I explicitly said I didn’t think to be the case.
The only reasonable way to measure the tax burden is as a percentage of the economy. Otherwise, what is being done is like someone whose income doubled and whose taxes went up by 10% complaining about paying more. Technically he is, but his tax rate has clearly decreased.

57

Maybe he is paying for broken windows.
I agree that the government can’t make things fair, but when it is allocating or taking money, then there is a reasonable obligation for it to be done in a fair way - which is what this thread is about, I think.

58

Depends. As much as you reasonably can w/o affecting economic growth. As a pure WAG I would assume a tax rate (all taxes combined) of roughly 20-30% of income on poor/middle class people that steadily increases until it hits 50-60% or so for the top incomes.

Take Rand Rover’s nightmare and make it 10% worse. Then I’ll be happy.

59

In the last 10 years corporate profits have tripled and income for the top 5% has grown dramatically. All during a time when almost everyone else saw their incomes stagnate or decline.

The result of this? No new jobs were created. The decade 2000-2010 saw 0 net jobs. Even under Carter, with his 70% income tax rate, we saw net job creation. We also saw net job creation under Eisenhower with a 91% income tax rate.

If reaganomics works why did Eisenhower with a 91% income tax rate and income growth spread among the population see more job creation than Bush where the top tax rate was about 36%, corporate profits tripled and income for the top skyrocketed? The opposite of what reaganomic supporters said would happen actually happened. If you give all the money to the top, they keep it. They don’t invest it in fields that create good domestic jobs.

Right now corporations have 1.6 trillion in cash reserves. That is double the amount of the stimulus and could create 6-10 million jobs. And corporate profits are up $280 billion/year over what they were when the recession started. Where are the good paying jobs? The money is likely going to go to dividends and mergers. Wall street bankers paid themselves $145 billion in 2009, roughly 1% of GDP. So you’ve got about 1.6 trillion in cash reserves, corporate profits of 1.5 trillion or more a year, wall street bankers paying themselves $145 billion a year.

In the meantime, 15 million people would love to earn $40,000 a year. A grand total of $600 billion a year. A fraction of corporate profits and cash reserves would eliminate the unemployment crisis.

So this reaganomics lecture doesn’t intimidate a lot of us. We’ve lived through seeing it as a facade.

60

I haven’t finished reading the thread yet, but I’d like to propose a radical alternative: bell curve. Let me try to flesh this out: (in reference predominately to income tax)

People towards the bottom would pay next to nothing as their income drops below $30k. Represents the fact a dollar from them hurts them more. Sounds like it would encourage people to stay lower, but the curve ramps up slowly enough that they dont’ feel a huge pinch from each extra dollar earned.

Also drops off at the upper income level: this sounds really weird at first, but I was thinking about Bill Gates, the guy is rich because he took the risk and founded a massive company. So as a rich guy he’s paid a ton of taxes. His company this year will pay more in taxes than all of us combined. And he also created employment–thereby creating more tax revenue. I say give him a break. Encourage the rich so seek super-richdom. They aren’t even benefiting from the social system (picture taking a private helicopter from your gated estate to your private airport, where you take a private jet to your private island). The richer they get, the less they draw from society. Reward that. If you were to calculate it out, it might look like at $1million you pay $200grand, but then at $2million you continue to pay that same or similar $200grand.

It just doesn’t seem right that we say 20% across the board, such that a person making $100,000 might pay $20,000 and billionaire might pay $200million dollars. A single billionaire will pay more than 10,000 people combined!

Think about that for a second, under the even percentage system why even bother taxing people below $100,000?

Then recognize that all the tax revenue is coming from the meaty middle chunk. They are the ones truly benefiting from society, using public parts etc. Recognize it as a system where that group represents where the money comes from and where the money goes to. UHC then represents a way to provide low cost health care to that segment. And with all public resources view the side effect has a handful of low income earners also benefit.

Obviously there aren’t as many golden eggs, but that is where you redefine your federal budget and lower it to match the money available.