I like the MFitz diagram.
(Of course I would. I’m an anarchist)
If you are saying the gross amount paid by an individual member of the 400 is more than the gross amount paid by an ordinary person, why yes, of course it is. But even so, the average person FEELS their lesser amount much more sharply than the super rich. If your income is 147 million, and you pay out 28 million in taxes, you can somehow manage to survive on the remaining 119 million. You aren’t going to have to worry about paying the mortgage to keep a roof over your head or sweat whether to buy groceries or prescription in any given week. As I read in a book on the wealthy elite, “After the first million, the lifestyle doesn’t really change very much as your income goes up.”
Thus we see that we should tax the wealthy much more strenuously and reduce taxes on the middle class much more sharply if we want everyone to assume an equitable tax burden.
You could double the percentage of their income that the rich pay and it wouldn’t really effect their lifestyle in an appreciable way (ooh, one less house in the Hamptons). However, many middle and lower income Americans are literally crushed under the unduly high taxes on the working classes.
If we’re going to do anything to the tax system, we need to remove the payroll tax ceilings. Make the rich pay 7.6% on all their income, just like those making less than $87,000 have to.
Just So I understand. We should tax the rich more than everyone else because everyone else “FEELS” different about it? Is that right?
No, I think you’re missing the point.
Let’s say you have a dollar, and I have ten dollars. We both have to pay ten percent tax. You lose a dime, and I lose a dollar. You will feel the results of that loss more than I will. After all, I still have nine dollars. I may not even * miss* that money, but for you, it takes away a substantial part of your buying power.
The poor “feel” their tax burden more than the rich do. For them, every dollar counts. For someone like Bill Gates, paying fifty percent of their income in taxes still wouldn’t make much of a dent in their lifestyle. After the fist five hundred million, the rest is just gravy.
Plus, the rich have more tax breaks than the poor. They can shovel money into tax shelters. Hell, with a clever accountant, they may end up paying hardly any tax at all. The poor don’t have that option. Often, they don’t even have bank accounts, let alone deferred comp.
We need to stop harping on the myth that the rich don’t pay taxes. I agree that tax shelters exist. I agree that abuses exist. But to imply that rich people don’t or don’t have to pay taxes is simply disengenuous. It is simply not born out by the facts.
Unless you mean something else by the phrase, it seems to me that 10% reduction in buying power is still 10% reduction in buying power.
Also, I’d like to try and disabuse you of the notion that “the rest is just gravy”. Amassed wealth is the engine that drives our economy. The difference between 500 million in the bank and 1 billion in the bank is 500 million worth of investment capital. Its the difference between 500 million worth of new businesses. And, invested wisely, it is the difference between the future value of 500 million dollars. That is, all the wealth that could have been created by those businesses.
But leaving those points aside, the issue is that we need to defend the idea that rich people should pay more than poor people. Do the rich use the police more? Do they use the army more? How about social programs.
If the only reason that rich people pay more is that they have more, then why don’t we apply that logic to more things. Why don’t criminal penalties work that way? Why don’t rich convicts pay much larger fines? Why don’t young convicts serve much longer sentences?
Yes. The flood happened because the dam at the South Fork Hunting and Fishing Club was not properly maintained by the owners-people like Andrew Carnegie and Henry Clay Frick. For years, they were told, fix the dam, someday there’s going to be a huge catastrophy. They refused, because it would cost them money.
On the day of the flood, the employees at the club were told not to mess with the flood gates, because they didn’t want to lose the fish population, or something. (It’s been a while since I studied it).
The Triangle Shirtwaist Fire was a horrible tragedy that could have been PREVENTED by adequate fire exits and safety regs. The unions were fighting for this, among other things, and the company was cracking down on the unions.
Hey Lissa-don’t forget the worst one of all-the Potato Famine in Ireland.
pervert, my cite for THAT is The Great Hunger by Cecil Woodham-Smith.
Well, we are not claiming that the rich as a whole do not pay taxes. What we are claiming is that they don’t pay that much in taxes relative to what we think would be equitable, which admittedly is a subject for debate depending on your point of view of what is equitable.
What “facts” do you have anyway? I think I am the one who has presented most of the facts here about what the rich pay. These facts are limited though because there are ways for the wealthy to hide income…If you want to learn about them, you could presumably read Johnston’s book (or at least listen to the interview). But, even if this hiding of income is negligible (and I honestly don’t know how much of an issue it is), I would still argue that the super-richest 400 paying only 17.5 cents on a dollar of income in federal income taxes while the average taxpayer pays 15.3 is simply too low, especially when the rich will pay a negligible percentage of income in payroll taxes and will pay a lower percentage than everyone else in state and local taxes in most places.
pervert, have you ever taken an economics course and heard the term “marginal utility”? If not, I suggest you look it up. Here is a good article that talks about different justifications for progressive taxation. I don’t know if I completely agree with the conclusions but it does state the issues very well and explains the concept of marginal utility for you. See also this paper.
You have failed to demonstrate that all this wealth in one person’s hands drives the economy any better than if it is spread around a little more evenly.
In a word, yes. If you mean more in dollar terms, the answer is obvious. If I paid an insurance company to insure my $100 million diamond, don’t you think I’d have to pay them more than if they just had to insure a few thousand bucks in possessions.
If you mean more in fractional terms, I would argue that the answer is also probably yes. And, for this, I bring back in Exhibit A…Bill Gates. That man would be nothing without the trappings of our society. What, you think he’s going to earn $10s of billions in some state-of-nature. That is one man who is extremely indebted to society for probably 99.9% of what he has. (And, to his credit, he … or at least his father … seems to have some reasonable understanding of that.)
Admittedly, determining each person’s gain from society is not easy…In fact, it is impossible. However, I think it is somewhat perverse to imagine that those who have made out fabulously have little debt to society for that they have managed to achieve within it whereas those who haven’t done so well are greatly indebted for the little that they have gotten.
A tax is not a fine you pay. What we are doing is trying to figure out the fairest way to pay for the collective investments in our society. [That said, I think in some cases fines should take into account the amount one can pay…certainly corporate fines have to in order to create the proper disincentive for the company to violate the law.]
Right. But whne Lissa staes blithely that “Hell, with a clever accountant, they may end up paying hardly any tax at all.” She is clearly intimating that rich people do not have to pay taxes.
Exactly. That is what should be debated.
The facts that you and I went over on the first page of this thread. From the link you provided earlier. If the top 1% of wage earners pay 30% of the collected taxes then it is simply disingenuous to say that they aren’t or don’t have to pay taxes. We can readily argue if they are paying enough, but that is a different argument.
That was not my point. We can argue whether demand or supply drives the economy more. My only poin in the quote you responded to is that rich people do not simply put their “gravy” money in a mattress. I was responding to the assertion that heavily taxing the rich will not affect their lifestyle. True as far as it goes. But it fails to recognize that much of that other money will be invested. Since we are convinced that “percentage of income” is a good measurement tool, how about discovering the savings rate as a percentage of income for rich and poor.
Well, the analogy with insurance is somewhat flawed. Insurance promises to pay you a certain amount in a certain event. The more liekly the event and the more the amount, the more the cost. Does it cost more to police a street with 1 million dollar houses than it does to police a street with 100 thousand dollar houses? Does the army take more risks when defending a nation of millionares than it does when defending a nation of paupers?
Having said that, I do accept the “benifits” analysis proposed in your linked article. That is, I can see reason in the argument that rich people have more property and therefore more of an interest in the operation of the state. You have to be careful with this logic too, however. If you take it too far you may see reason to give rich people more votes.
Well, nothing as compared to a caveman perhaps. But nothing as compared to another citizen of the United States in the late 20th century? Obviously not. So, if you want to tax Bill Gates more than the caveman, sure go ahead. If you are comparing the poor in this country to cavemen, however, I might want to object. Otherwise, you might need to point out which “societal trappings” were available to Bill Gates that were unavailable to the vast majority of us. If we cannot, then we might need to admit that his wealth is do to his actions more than societies.
Let me put it another way. If you and I invest in a small business with equal shares, and the company does well at first. We should see a profit on our investment. If I put mine into savings and you blow yours on fast booze and loose women what should we do when our company suddenly needs new money? Should I suddenly pay more because I can? Or should my increased investment result in an increased ownership?
But that is not the question. Of course rich people must pay taxes. I might even accept that they should pay higher taxes. The question is how do we justify that. And in the context of this thread, how do we justify it without apealing to wealth redistribution.
I agree with this entirely.
I enjoy all your cites, BTW jshore. I hope you don’t spend all your time looking things like that up.
The point, of course being that under what level of taxation would these things not occur? Or is the point that government regulators do not make such mistakes? Ooh, ooh, I know, the point is that if the workers controlled the means of production directly, then things like this would be logical impossibilities! Yea, that’s it! 
OK, that was a bit snarky. I’m jsut having a bit of fun. I agree that all 4 of the things you brought up were terrible tragedies. What exactly does it have to do with the discussion at hand? Expecially, what does it have to do with the assertion that liberalism saved capitalism from its excesses? How exactly do you propose that these tragedies were excesses of capitalism? Is it because they happened at properties owned by capitalists?
On the three justifications of progressive taxation in the article jshore cited:
The first is that tax should be proportional to benefit. As the author of the paper admits, there’s no compelling reason to assume that benefit is more than proportional to material wealth; I’d even go so far as to say that it’s less. While it’s true that some people have a better chance to succeed than others because of their birth or station, that’s not the sole, or perhaps even the main factor in a person’s wealth (Bill Gates isn’t rich because he was born that way; most people have access to most of his opportunities. Should we perhaps tax people proportional to their parents’ wealth as they grew up?
The second argument is that money is less useful as you gather more of it; while true, this doesn’t prove what needs to be proven. As the author concedes quoting Seligman, "To
ascertain the exact relations between something psychical
and something material is impossible. No calculus of pain
and pleasure can suffice, for no attempt to reduce the
heterogeneous to the homogeneous can ever succeed. " It’s impossible to compare my pleasure with your pain, because pleasure and pain are totally subjective factors. Thus I can say that my millionth dollar is less important to me than my thousandth: this is clear because I’ll buy things I want more earlier–I’ll buy what I want most with the first money I get, and the more I get the less important stuff I buy. But there’s no way to make the same sort of comparison between two different people; we can only say what each one prefers, there’s no way of quantifying how many ‘utils’ anybody gets from anything. The attempt to quantify pleasure is ultimately fruitless.
The third justification is mere fiat; he says ‘let’s assume equality is good, and if you disagree the burden is on you to prove why.’ Now, this might have had some validity if wealth came out from nowhere, if the question were how to distribute money the government already has. Thus, this has some input in how to spend government money. But goods are created already owned; thus the question isn’t “why should Bill Gates have more than other people,” but “Why can we take money from Bill Gates?” The burden of proof would then be on the person who wishes to change the already extant distribution of goods. This isn’t to say there aren’t valid arguments to be made; only that “it just should” isn’t one of them.
That was a bit of sarcasm, but, actually, a few of the rich pay nothing at all.
Right but the next paragraph sort of parrots my second objection to this theme:
“cut their tax bills by investing in tax exempt state and municipal bonds. Other common deductions among the group were for small business losses, medical and dental expenses, and theft losses”
They invested in state bonds. These bonds are spcifically tax exempt to attract more money. Seriously, we can’t take money from people and then complain that they are not giving anything.
As I said, I understand that some people will use dodges and shelters to get out of paying taxes. I don’t like most of the exemptions in the tax code either. I think they could be drastically simplified. But seriously. Investing in state bonds is hardly a tax dodge.
I’m not saying that there were things available to him that were not available to others (although, in his case, I do believe he came from a quite well-too-do, or at least very well-off, family). But, I am saying that the things available to him, along with his own talents, allowed him to become fabulously wealthy. I am willing to admit that he could not have become nearly so fabulously wealthy without his talents but I also believe that he could not have become nearly so fabulously wealthy without the society. Also, as Warren Buffett says, he himself has talents that just turn out to lead to fabulous awards in terms of wealth. Buffett doesn’t see this as completely reflecting on his own wonderfulness but also what society rewards.
I tend to look at life as sort of a big game where there is a combination of skill, and luck, and cunning, and whatever needed to succeed. I think as a society we have necessarily pooled our resources because we can all in general do much better that way. Thus, when one person, through whatever combination of skill and luck and cunning does better than the rest of us, I tend to think he owes something back to the common pool.
But, I really think this example is taking things to an extreme. The fact is that those who succeed now are being fabulously rewarded. I don’t think asking them to give more than 17.5 cents on a dollar back to the federal government is anything approaching some horrible redistribution from the industrious to the lazy.
The fact is that our society is drifting toward an incredible gap in wealth between the haves and have-nots. We are talking about a top 1% who have multiplied their after-tax incomes by a factor of 2.5 in less than 20 years while most people have barely increased theirs at all (about 10%). That to me just makes our society look bizarre…I mean why do we care so much about economic growth if almost all of it is going to go into the hands of just a few “winners”. There is a book called “Winner Take All Society” that documents some of this and argues that even from the point of view of efficiency it might not be a good thing. That is, there is usually an assumption that there is a trade-off between equality and efficiency because too much equality lowers incentives. But, these authors argue, and I think they may well be right, that inequality has grown to a point where it is wasteful because people expend a lot of energy in unproductive ways trying to “hit the jackpot” in a sense…almost like a nuclear arms race.
Thanks. I enjoy discussing these things with you, and it is a good challenge to try to clarify why I think the way I do. I admit that these are hard questions to wrestle with and, unlike in science, one can’t really prove one answer as being more correct than another.
Well, I probably do spend too much time on this! Although google is a wonderful thing.
Well, I admit that you can go around in circles on the benefit thing. But, where I end up, as I said, is that I think our society creates great instabilities that allow for way-vaster accumulations of wealth than could be obtained in its absence. Personally, my feeling is that in order to agree to live in such a capitalist society, i.e., as part of the social contract, I would expect these people who reap these huge rewards to have more proportional burden than the rest of us to give some back to the society.
As for your last sentence, watching my nephews grow up and comparing them to how I imagine kids growing up in less fortunate circumstances, I can’t help but be impressed with the extent to which these things are likely to matter. This is another strong reason for progressive taxation (and good social services, public schools, etc.) I think it is ludicrous to think that our society is anything close to giving everyone an equal chance.
Well, I admit that this can’t be done to the point of actually determining the correct taxation distribution. But, the law of decreasing marginal utility is quite general…and I think it is quite obvious here. In fact, I would argue that while I don’t know what amount of progressive taxation would be mandated by maximizing utility, I am quite confident that it would be way-more progressive than what we have. In the end, I think you have to balance things against other considerations like having incentives.
I think all of this about not being able to compare people’s pleasure and pain is pretty much of a red herring. Sure, we will never be able to compute it like a formula but to claim that we can’t determine some general things like that $10 to me is worth more than $10 to Bill Gates (and less to me than $10 for a homeless person) is just silly in my opinion. Sure, we may not be able to prove it in a mathematical sense, but very few things can be proven deductively even in the hard sciences, let alone in the social sciences.
This is where we have a very fundamental point of disagreement. As I have tried to argue in this and other threads, the idea that this “extant distribution” is some sort of fixed reality is, to my mind, silly. This money has accrued to the various people in a highly interactive society with a set of rules that is not laid down from On High. I’ve often used an analogy here to physics…In physics, in some systems, one sometimes has to abandon the idea that the particles (electrons in particular) can be treated as independent particles that interact. Rather, the system is so highly interactive that they lose their individual nature and one cannot assign phenomena to them independently but rather just to their collective effects.
I think our economic society is to the point where this is sort of true. We have come up with a way in which we allocate money and property and all to people but people should not be fooled into believing that it is really “theirs” and the government is taking it away from them when they are taxed. In fact, that leads to a logical contradiction because if everybody is entitled to keep everything they earn then there is no money left to pay for the government services that we all used to make that money. So, we have to figure out how much each person contributes to this collective society…I admit that the method of doing this is messy and we are still struggling with how to do it well. But, I think it has to be done through the political process and there is no a priori reason to believe it should necessarily be done by adopting some simple arbitrary rule like “everyone pays the same percentage of their income”. I think this is indeed one possible rule but to decide that this is the correct thing and that anything else constitutes “redistribution” (or, among more extreme libertarian-types “theft”) is in my view just nonsense.
Just a couple quick points.
No, I agree that you were not claiming this. I may have implied that I thought so. I didn’t mean to.
However,
Unless there is something which was available to him which was not available to others, you are left with his talent. That he ows something back to society I agree with. Certainly all of us benifit (greatly in fact) from living in the modern world. The question is why did Bill Gates benifit more, or why should he owe more than you or I. If the main difference is luck and talent, then I’m not sure you can justify a progressive tax.
But we have not pooled our resources. Unless you mean this in some sort of restricted way, like we have pooled our resources for certain functions like government.
Well my example was not meant to accuse you of holding this sort of confiscatory philosophy. I think I may have forgotten to include my joke. I meant to say that while I saved the money, I envied your use of it.
I’m not sure I disagree that a proportional or even slightly progressive tax is desireable. I’m just not sure that it should be so high. Personally I would happy with a very progressive tax if we could also cut the federal budget by half or more.
Except that we are not. We are approaching a gap between the have a lots and the have not so muches. Just because my income is X times smaller than Bill Gates, does not mean that I am a have not.
Yes. But where did most of the increase in wealth go to. If the top 1% of the 100 million workers (or tax reporters since that’s probably where this stat comes from)recieved 2.5 times as much wealth over the last 20 years and the other 99% increased their wealth by 10%, which group got richer. If Iam reading the AGI table from your taxfoundation link correctly, it says that while the difference certainly increased, (the top 1% earned 1/6th of the money) the rest of us definately increased as well (the top 50% increased about 5 times). The point being that while we may not have each increased as much as the top 1%, we definately did increase our wealth. See, the increasing gap is irrelevant except as a tool of class envy.
From your next post:
OK, but you have to severely warp the meanings of several of these words to make this true. Just because people interact does not reduce the effect of individuals. It certainly doesn’t imply that uninvolved third parties were suddenly part of the equation.
You can certainly make a case that government provides services which every citizen uses. And that we should all pay for them. I think this argument can even be stretched to justify a progressive tax. But we have to be very careful when suggesting that wealth created by individuals is not theirs at all. That “we allocate money and property”. This simply is not true. Given the tone of this thread, it is especially important to avoid this sort of communistic generalization.
My point is, that laissez faire capitalism with no checks-no safety regs, no unions, no worker’s rights-was a really shitty thing.
Well, I’m not sure that your list of incidents is proof of that either. Can you say that those incidents took place under such a system? Were there NO regulations in the city that applied to the shirt factory fire? I also remember reading that no one sued the owners of that dam. I did not see any good reasons for this, but it suggests that laws which existed were not utilized.
But, I don’t think anyone in here has suggested that removing all regulation is a good idea. I simply think that examples from 100 years ago are not very good reason to increase the regulations of today.
Regulations to promote safety and fair labor standards make sense.
Regulations that control competition are extremely harmful. Or regulations that impose price controls. Most “deregulation” is really only repealing those regulations that create government-mandates monopolies, price controls, or limit competition to a few huge companies.
Plus, even with safety regulations, the cost of implementing them should be compared with the likely benefit. For example, if installing a safety device on a car will save 10 lives but adds $5000 to the price of the car, I don’t think many people would consider that a sensible thing to force on car makers and consumers.