Why is taxing the rich so terrible?

[Uncommon_Sense]

@2sense

Good roads help America prosper. The publicly-educated workforce helps America prosper. The social stablity bought by the social safety net helps America prosper. This is how they are the same. They all promote the financial well being of our society. Who benefits more? Obviously those who have more. Rich people.

Everyone has the same access to the public systems (schools, roads, parks, etc.). You were doing OK until you stated that the wealthy benefit more. Not if you figure it proportionately, they pay WAY more in taxes, so if they happen to use the roads a little more, so be it. I’d wager that they use the public education system much less than the poorer (private schools being the norm), and find alternatives to spending the afternoon at the local county or state parks like the poorer of us tend to do. The average wealthy person does not use the roads anymore than the rest of us. If you’re referring to road useage in the sense of business use then that benefits everyone, not just the business owner that must transport the goods, but also the folks like us that work for these businesses.

I am all for opportunity, creativity, and wealth. I’m all for a larger economy. ( So long as the growth is sustainable. ) What I thought we were discussing here is not a larger or smaller pie but how to divide it. I have said nothing about taxing those who create wealth. Rather my point is that we should tax those who have wealth, however they gained it. We should look there because that’s where the money is. It seems to me that the more money you have the more extra money you have. “Extra” as in “not needed for survival”. It seems we agree we shouldn’t tax anyone so that it takes food out of their mouths or puts them out on the street.

I sort of agree with you. If you have to tax the wealthy more (insert your reason here) then increase the luxury tax, don’t tax the crap out of their long term investments, you’ll end up hurting the elderly inadvertantly.
The part I strongly disagree with is the ‘Extra’ part. Whose to determine what is extra for me? Or for you? And why should the fact that I was frugal with my money be of any concern to anyone else. And why should I have to turn some of that money over to someone who was/is careless with theirs?

[jfortun]

@Blalron

Because money is not created by any one person operating in a vacuum without the aid of others to help him get all that money. What about the worker in the widget factory who works his ass off to make widgets for you to sell at a tremendous profit?

True, but…

The worker who assembles the widget has provided a relatively small value. They have assembled X widgets. How many widgets would he have assembled without the production line? How many would he have assembled without the inventor? How many would he have assembled without the management to make a large scale operation possible? How many would he have assembled without the capital to compensate every person who has provided all of the above?

The answer is ZERO, or if he is very clever, maybe 1. What makes it possible for a manual worker to do nothing but assemble widgets and have a living wage is the power of ideas that have gone before him and not of the physical movement of his hands. Relative to the value they provide, the people are the top are compensated less than the person on the assembly line. Why? because what they provide is the means, ideas and capital that makes everything else- including the livelyhood of thousands of workers- possible. What is the value of keeping 1000 workers employed vs manufacturing a 1000 widgets? Who should be compensated more?

And at the end of the day, the person at the top could, if need be, work on the assembly line. How often do you suppose that could be reversed?

We all stand on the shoulders of giants.

[jshore]

@TheRight

Property rights are the bedrock foundation of capitalism, and capitalism is the single most productive and dynamic system ever seen on earth. Our current system of property rights and capitalism has evolved over millenia. It is the highest order of hubris that has caused philosophers of “social justice” to believe that they can, from whole cloth, create an economic system that will work better than the one that hundreds of generations have combined to produce.

Basically, Blalron, what you are proposing is not “social justice” or redistribution. It is mob rule in which (to quote Kipling) we are “robbing selective Peter to pay for collective Paul.” This is a childish and naive approach, and would destroy the very fabric that allows our civilization to thrive.

Those who misunderstand history are condemned to repeat it. The fact is that, much to their chagrin, there is no libertarian-type laissez-faire capitalist society around today and in fact most of them have evolved to a sort of regulated capitalist society with a social safety net. And, this is for good reason. When we reached the peak of such a laisseza-faire capitalist property-rights-trump-all society, it pretty much sucked in lots of ways which is why we evolved beyond it.

Of course, I guess you only think evolution only works up to the point that you like and then you think the bad guys came in and ruined your eutopia?

[Uncommon_Sense]

@jshore

There is actually a strong correlation between income and wealth because when you have wealth, you earn income on that wealth. But, yes, the correlation isn’t perfect so if you and the Republicans want to propose a wealth tax, I’ll endorse it in a nanosecond. I think it is a wonderful idea…And, yet the silence on this from the Republicans has been deafening. (Admittedly, I haven’t heard many Democrats endorse it either but at least they haven’t been trying to cut or eliminate the taxes that hit the most on those with wealth, such as the estate tax and the taxes on dividend and capital gains income.)

If this was the Republicans real objection to taxes on high income earners, the solution is very simple, is it not?

Problem with that is how do you protect the elderly whose retirement investments get caught up in this, whether it be property, stocks, or the sale of the family home/business?

[Maeglin]

Relative to the value they provide, the people are the top are compensated less than the person on the assembly line.

Uh, no. Both the capitalist and the laborer are both comepensated equal to their marginal product. Wages are (mostly) efficient.

[TheRight]

@Maeglin

Welcome to the SDMB, TheRight. I do hope you decide to pony up and stay. But in the mean time, many of your arguments demand response.

Thanks for the welcome, Maeglin. Glad to be here, despite the fact that I’m quite certain mine will be minority views. Also as fair warning I do have a tendency to play devil’s advocate on occasion. You make some good points, so let me clarify my stance…

@Maeglin

The implicit assumption here is that a democratic society that loses all respect for our current scheme of property rights is a step away from anarchy. This is analytically and dare I say historically false. For example, consider the Coase Theorem. Suppose, for sake of argument, the transaction costs are zero. Coase was interested in controlling externalities by assigning property rights. He demonstrated than under any scheme of property rights assignment, the Pareto-efficient outcome can be reached.

There is nothing sacred about our current configuration of property rights. As long as they are consistently enforced, the Pareto-efficient outcome is just around the corner. We as a democracy can reassign them at our leisure with respect to taxation and still expect efficient bargaining outcomes.

Of course, efficiency says nothing about distribution. This inevitably leads to issues of social justice, to which you have only to say:

I agree that there is nothing sacred about the current configuration of property rights. Nor is ours a perfect capitalist economy. I do not believe (nor, I think does any sensible person) that a “pure” capitalist society is either possible or desirable in the real world. Similarly, I doubt there are any reasonable advocates of “pure” socialism extant. The debate in our current context is not, then, whether we’ll have a mixed economy, but where the boundaries between individual rights and collective rights (as expressed by the scope of governemnt power) will be drawn,

My point, and again I’ll say I’m a disciple of Hayek in this arena, is that without a stable definition of property rights you discourage individual iniative, saving, and investment. The current system has evolved over many years, particularly under English Common Law, and frankly works better (if we are to accept the emprical results of the English and American economies over the past few centuries) as well as or better than any artificially devised system.

@Maeglin

This is typical conservative intellectual laziness. Hundreds of generations combined to produce such great ideas and magnificent social institutions as slavery and astrology. Furthermore, our current economic “system” is hardly the product of the consistent effort of individuals over time; rather, our economic history is punctuated by accidents, discontinuities, wrong turns, and violent revolutions. “Philosophers of social justice” like, say, John Rawls, care very deeply about the consent of everyone living in the democratic state, not merely those to whom hundreds of generations fortuitously bequeathed their market power. Our economy is fabricated of the same whole cloth that philosophers and economists spin with, save that their products are much more theoretically consistent. The underpinnings of our economy are not the finely polished brass banisters at the Metropolitan Museum, worn and shiny from the grease of thousands of hands, but the worms under an old, infrequently examined rock.

Moving right along.

I am not saying the current system is sacrosanct, nor am I saying it’s perfect. I’m saying it’s the best system yet devised, and that rather than overhaul it radically we should approach any changes incrementally and with great care.

Winston Churchill once said that “democracy is the worst form of government ever invented, with the sole exception of every other form of government ever invented.” I believe the same applies to capitalism. You can come up with a better system on paper, but none of these grand theories, when applied, have shown much success.

I also believe (and I think history backs me up here) that governments are by nature better suited to confiscation of property than creation, better suited to revocation of liberty than its promulgation, and better suited to bureaucratization of institutions than streamlining. I firmly believe that a great deal of America’s economic success is dued to the absence of government from much of the economic sector, and my default tendency, barring solid evidence that change is needed, is to keep the government out.

@Maeglin

This reasoning is very weak. Whether money is a prerequisite for civilization or the reverse is semantic and irrelevant. Furthermore, if this were actually the case, why was there in fact so much barter in the world’s greatest post-Mesopotamian civilizations?

If money is in fact more than an artificial social construct, then what exactly is it?

I am not saying that money is not a social construct, but then again I do not want to get into a huge epistemological discussion. The persistence of barter notwithstanding (and you will notice that it flourishes most in the least efficient economies), money is the single greatest facilitator of economic exchange ever developed. It alone can eliminate the need for “double coincidence of wants” in securing any transaction, and therefore it is money that we use for the vast majority of transactions.

As far as historical development, the Mesopotamian economies floundered for a lot of reasons (I recommend Guns, Germs, and Steel by Jared White for an interesting explication of some of these reasons). The locus of Western thought moved from Greece (a resource-poor country that was forced to thrive on trade) to Rome and onward. I think it’s safe to say none of these economies would have flourished without a money-based exchange system.

But for purposes of the point I was rebutting, the “social construct” argument is moot. Money represents accumulated labor or property, and to deprive a person or group of it is to confiscate their labor or property. Saying that you are only robbing them of a “social construct” may salve one’s conscience but does not change the nature of the transaction.

@Maeglin

Civilizations have thrived under all sorts of wacky circumstances. What exactly is so special about ours? Why should our dynamic civilization be so much more sensitive to change, when others changed drastically yet endured for centuries or milennia?

Again, following Hayek’s reasoning, there has been a sort of social Darwinism going on over the centuries. Cultures with “all sorts of wacky circumstances” have thrived, indeed, but have eventually been subjugated or assimilated into a version of the dominant Western system - a money- and property-based economic system existing under the aegis of nation-states. This system has changed and evolved, often assimilating better aspects of the “conquered” cultures, but basically the Western culture we trace back to Greco-Roman days is now the most ubiquitous and powerful culture in the history of mankind. We can debate whether this is a desirable outcome, but the empirical facts speak for themselves.

In summary, please do not mistake my intent. I am not saying that we should maintain the status quo at all costs. I am merely asserting that the status quo, warts and all, is a large, complex, system that has evolved over centuries, and works reasonably well. I think we should tinker around the edges of the system as needed (in fact I do support a progressive income tax, a social safety net, etc.). But I also believe that the burden of proof should fall on the shoulders of those seeking to change the system, rather than on those seeking to preserve it. Change should be made carefully, and deliberately. This is a major reason that the Founding Fathers designed our government to be such a cumbersome and fractious machine.

Reasoning like Blalron’s scares me. We should think very carefully before we start talking about gutting the system and starting from scratch based on a set of academic theories.

Sorry for the long post - I’m trying to be clear and concise, but apparently if brevity is the soul of wit then I am a drooling idiot.

[jfortun]

@jshore

When we reached the peak of such a laisseza-faire capitalist property-rights-trump-all society, it pretty much sucked in lots of ways which is why we evolved beyond it.

When was that again?

[jfortun]

@Maeglin

Uh, no. Both the capitalist and the laborer are both comepensated equal to their marginal product. Wages are (mostly) efficient.

I would argue that the wage becomes less efficient the further up the pay scale you go, but point taken.

[Maeglin]

Good points, all. It has gotten a little too tedious to do a line-by-line, so I will reply a little more holistically.

But first…

I would argue that the wage becomes less efficient the further up the pay scale you go, but point taken.

I must say, that has never occurred to me. Do you have any analysis and evidence? I would be interested in seeing this point argued.

TheRight, your views are not necessarily in the minority. Consider that GD tends to engender more controversy and disagreement than compulsive yes-manning.

At the expense of doing just that, I completely agree that some stable definition of property rights is necessary for the functioning of civil society. There are lots of decent proofs of this assertion in economic literature. Enough that I am willing to take it at face value. The real question is what happens when we endogenize our current system, that is, when we roll back the clock and ask how strategic decisions by rational actors resulted in our current system. My contention is that it has little or nothing at all to do with nineteenth century notions of progress.

With respect to America’s success due to the absence of government, well, I think that is grist for another mill. I would be happy to discuss this at length if you are interested. As is the argument from social darwinism, which I disagree with completely and entirely.

To stay OT, we agree that stable property rights are necessary. Very controversial, I know. However, I also believe that long term economic growth is sustainable with justice-minded redistribution in order to ameliorate market failures. I believe that this redistribution should be paid for from the highest marginal wealth in the United States.

I am not entirely sure where we really disagree.

[pervert]

@Maeglin

To stay OT, we agree that stable property rights are necessary. Very controversial, I know. However, I also believe that long term economic growth is sustainable with justice-minded redistribution in order to ameliorate market failures. I believe that this redistribution should be paid for from the highest marginal wealth in the United States.

I am not entirely sure where we really disagree.

If I may intercede, the sticking point arrives in the form of “amount”. You think some redistribution is necessary. I may as well. How much are you advocating? 10% of GDP, 20, 40? If you had to guess where it crosses the line from a little adjustment against rampant capitalism and confiscatory taxation, where would you draw it?

[Evil_Captor]

@pervert

If I may intercede, the sticking point arrives in the form of “amount”. You think some redistribution is necessary. I may as well. How much are you advocating? 10% of GDP, 20, 40? If you had to guess where it crosses the line from a little adjustment against rampant capitalism and confiscatory taxation, where would you draw it?

Well, if 2 or 3 percent of the population controls 80 percent of the wealth in this country, why not aim at that 2 or 3 percent (I forget the exact numbers, something along those lines)? Surely THEY can afford to help out the poor, without feeling it in any personal sort of way.

[TheRight]

@Maeglin

To stay OT, we agree that stable property rights are necessary. Very controversial, I know. However, I also believe that long term economic growth is sustainable with justice-minded redistribution in order to ameliorate market failures. I believe that this redistribution should be paid for from the highest marginal wealth in the United States.

I am not entirely sure where we really disagree.

I’m not sure we really do disagree on fundamental points here. If anything we may disagree about the burden of proof. Let me run through my reasoning here:

1. A certain degree of inequity will always result from capitalism. Trying to guarantee equality of results is basically a quick road to the excesses of socialism. More than that, it is fundamentally unfair. When people work harder and produce more, they are entitled to share in the results of their work.

2. On the other hand, market failures can and do result in irrationally large pools of wealth being amassed by undeserving individuals or groups (e.g. the Ken Lay’s of the world).

3. At times redistribution of wealth, particularly unearned or unproductive wealth can be of great benefit to society.

My issue is that the mere existence of wealth should not by itself justify the confiscation of said wealth for redistributive purposes.

Further, I do not necessarily think the redistributive programs our government has attempted have been very efficient. In fact, I believe some of the Great Society reforms have been directly inimical to the interests of the “underclass” they attempted to help.

Finally, I agree that wealth is a better target if we are after truly redistributive effects than income.

Evilcaptor, I would argue that the persistence of poverty in the U.S. is not the result of inadequate funding for programs to assist the poor. I believe we have proven conclusively in the past 40 years that you cannot eliminate poverty by throwing money at it. That is, to quote Maeglin, grist for a different mill but I’d stipulate that the best tool to defeat poverty would be improvement in the nation’s primary and secondary educational systems (another area in which we have amply demonstrated we can’t solve a problem simply by increasing funding).

[suristany]

OK, strictly a personal experience here. I think I am in a pretty good position to give a good view of both sides of the spectrum - I’ve been both poor and rich (and I’ll take rich any day - but anyway…

When I was growing up, my family was dirt poor. I have three brothers and sisters, single mom working two jobs, I started working after school when I was in junior high, etc. What we were able to grow in the summer in our garden was what we ate in the winter. I got new shoes - and they were handed down to my brothers and sister, etc.

My mom probably never paid taxes those years. But when the topic came up, my mom was, interestingly enough, always of the opinion that it was not fair to have people who make more pay more in taxes than people who made less. People often tend to use the extremes – people making $15,000 a year vs people making $15 million a year. In my mom’s eyes, it didn’t seem right that someone making $30,000 paid more in taxes than someone making $20,000. As she said, it wasn’t like the person making $30,000 was working any less harder than the person making $20,000.

After my brothers and sisters gradually left the nest, my mom changed jobs to a full-term sales (100% commissions) job. She was scared to death at first, but my mom was a born salesman (both my mom and I hate PC crap like having to say ‘sales person’). What does she like now about her job? The harder she works, the more she makes. She makes a decent salary now, enough to buy a nice townhouse outside of the Twin Cities; she’s doing OK. What does she resent? Having a higher percentage of her money taken out in taxes the harder she works.

How about myself? I worked my way through college, when to Japan for a year on an exchange program, ended up going to uni over there as well, and when I was done I had degrees in intl finance from both a US and Japanese university, and was native-fluent in a very difficult language for most Westerners. I run global production/translation teams for investment banks, and have worked for some of the largest financial institutions in the world. My salary is in the high six figures. And you better believe I hate seeing more and more of my money taken out in taxes as I have gone up the tax brackets. I work my ass off. The people I work for and with – some of them making some multiple of what I make – work their asses off. They are working no harder, and no less, than the guy working at McDonald’s; why should more of our paycheck disappear than the guy at McDonald’s? I worked my tail off to get where I am now; over 10 years learning a language and a business – and my reward for ‘success’ is less of my paycheck? Screw that.

I believe that salaries are ultimately a function of supply/demand, and value added. No matter what the company pays me, they still make money off me. A ballplayer making millions a year? He helps put fans in seats, helps creates jobs for concession stand attendants, for ticket takers, marketing staff, TV and radio broadcasts, newspapers, scouts, umpires, vendors, etc.

My assistant works very hard, but makes probably only a tenth of what I make. I love her immensely (strictly in work relationship terms, of course), and in fact she has followed me three times when I’ve changed jobs. Am I as valuable to the company without her? No. But are there other people who could fill her role? Yep – in spades. Are their others who could fill my shoes? Sure – but not near as many. The company pays more to rent my skill set because to the company it is more valuable.

Another pet peeve – ‘tax loops for the rich’. Um, no. Show me one line of tax code that offers a tax break or incentive only for people in higher tax brackets. What you do have are financial products that would be too expensive/too inefficient to offer except in large sums. No, people in low-income brackets probably can’t take advantage of the tax breaks – but high-income earnings can’t use food stamps, food handouts, free school lunches, college subsidies, etc. Secondly, it’s not like money put in these tax-free shelters are simply magically taken out some day free of taxes - everything will eventually be taxed; they are simply deferring the day those taxes are taken out. And income on wealth is also taxable – you guys have heard of capital gains taxes, right?

I guess I resent the suggestion that I work less for my money, that I deserve to be taxed at a higher rate than anybody else. Do I think that a flat tax rate is fairer? Absolutely – ideally, I’d like to see the lowest tax bracket bumped up – more people pay no taxes, and then a flat rate.

Am I resigned to the idea of progressive taxes, because ‘that’s where the money is’? Yes. But don’t expect me or anyone else to like it. And I see no reason why we should not try to limit or tax burden just like anybody else, regardless of tax bracket.

Actually, I see my family as a model example of what should happen – family in poverty uses benefits offered to the poor (food stamps, free school lunches, etc), takes advantage a generally solid education system, and thanks to hard work, pulls itself out of poverty. Everyone in my family is solidly middle class. I am certainly in a much higher tax bracket – but I live in Manhattan, which means I’m barely scraping by (I’m only half-joking: next time I’ll post my paycheck figures to show what I pay in taxes, etc).

[jshore]

@pervert

If I may intercede, the sticking point arrives in the form of “amount”. You think some redistribution is necessary. I may as well. How much are you advocating? 10% of GDP, 20, 40? If you had to guess where it crosses the line from a little adjustment against rampant capitalism and confiscatory taxation, where would you draw it?

You always seem to want to define an amount, don’t you? I don’t think that is not very easy to do and definitely too theoretical. I think we have to look at where our society is today and figure out what direction we should go in…It is often easier to figure out what direction to head relative to where you are now than it is to map out precisely where you want to end up. This is a more experimental and incremental approach.

And, I would say that today, after 20+ years of rapidly growing inequality (from a society that had plenty of inequality to begin with), we want to head in the direction of lessening that inequality (or, at the very least, not accelerate its continued growth!!!). How we do that is an interesting question and should be the subject of a great political discussion in this country…a discussion that is completely absent at the moment. I would prefer that it be done by doing things that work to equalize opportunity (access to good education and a good environment to grow up in, etc.) but I think some of it has to be done by “redistribution”. This is true for no other reason than that I don’t know how you can equalize opportunity without lessening the inequalities in the environments to some degree. I just haven’t seen evidence that the people growing up in high poverty environments (neighborhoods, schools, etc.) are able to having anything even remotely resembling equal opportunity to those growing up in better environments.

This is all pretty vague, but what I can say with complete confidence is my belief that the current Administration is heading in exactly the wrong direction by lowering the taxes mainly on the well-off and creating huge deficits that will eventually cause economic problems and/or cause us to starve government programs. And, my guess is it won’t be the Halliburton contracts that are the first on the chopping block.

By the way, the reason I put “redistribution” in quotes is that, as I have argued before, I think it is an ill-defined concept. Besides the fact that our society is much too interactive to figure out who gets what from that society and thus who should contribute what in order for there to be no “redistribution”, there is the further complication that the government sets the “rules of the game” in our capitalist society. These rules certainly have a certain amount of arbitraryness to them. For example, patent law and corporate law and anti-trust are not set from on-high but are decided from the society. (We also decide what sort of external costs incurred, such as pollution, we are going to allow to go unchecked and how we are going to mitigate these costs or try to put them back into the marketplace.) I think that, in order to facilitate “wealth-creation” (in some cases, with very little argument that they are actually doing this), we have set the laws so that they allow for and in fact encourage the accumulation of vast amounts of wealth into a small number of hands. This is something that we as a society might agree to do but we can also agree at the same time to do things to mitigate these instabilities toward vast inequality. In fact, I would fight tooth-and-nail against a society set up according to such rules unless that society also included mechanisms to mitigate the inequalities.

What the libertarian side of the argument often seems to be saying sometimes (and, yes, I simplify slightly) is that we are going to take the corporate and patent and anti-trust laws the way we have set them up and whatever distribution of wealth results (which in fact I believe we’ve engineered to be very unequal), that is the one we will accept as willed by The Holy Market and none shall mess with it because this is theft. I think that argument is silly.

[jshore]

@TheRight

I’m not sure we really do disagree on fundamental points here. If anything we may disagree about the burden of proof. Let me run through my reasoning here:

…

Indeed, at this level, I can’t really find anything that you say that I disagree with, except perhaps that I think you probably overstate the case for anti-poverty programs not being effective. (I believe that there is good evidence, for example, that social security has reduced poverty amongst the elderly.) I would also emphasize the counterpoint…which is just as we know it is hard to cure poverty magically with government programs, we also know it is hard to cure poverty magically by simply saying that the market will take care of it and that the best way to deal with it is just to try to maximize wealth creation. (At least part of this is due to some questionable assumptions about how to maximize wealth creation, but I am willing to believe that even if we did pursue those policies that did this, it still might not help with the issue of poverty very much.)

Also, I think your statement about education and the fact that increased funding isn’t necessarily the answer begs the question of what can be done. And, from what I understand, the best evidence is that it is damn hard to nearly impossible…or at least we haven’t figured out a way…to have good schools in which the students come from areas of concentrated poverty. So, I am not sure you can separate the issues of education and poverty in a way where good education cures the problem of poverty because I think the problem of poverty (or at least concentrated poverty) works to undermine people getting a good education.

[pervert]

@Evil Captor

Well, if 2 or 3 percent of the population controls 80 percent of the wealth in this country, why not aim at that 2 or 3 percent (I forget the exact numbers, something along those lines)? Surely THEY can afford to help out the poor, without feeling it in any personal sort of way.

Well, CBO numbers for 2001 suggest that the top 1% earned 15%of the income while the top 5% earned 28% and the top 10% earned 38%. For 80% you have to go to the top 60% or income earners. Which is pretty close to where we get our federal taxes now. I understand that income is not wealth and that we do in fact tax the lowest 40%.

[Voyager]

@suristany

OK, strictly a personal experience here. I think I am in a pretty good position to give a good view of both sides of the spectrum - I’ve been both poor and rich (and I’ll take rich any day - but anyway…

How heartwarming. :rolleyes:

My mom probably never paid taxes those years. But when the topic came up, my mom was, interestingly enough, always of the opinion that it was not fair to have people who make more pay more in taxes than people who made less. People often tend to use the extremes – people making $15,000 a year vs people making $15 million a year. In my mom’s eyes, it didn’t seem right that someone making $30,000 paid more in taxes than someone making $20,000. As she said, it wasn’t like the person making $30,000 was working any less harder than the person making $20,000.

I fail to see how “working hard” has anything to do with anything. First, I don’t know how to measure it. I have a nice high tech job that I love, which keeps me in air conditioning all day. Am I working harder or less hard than the guy doing construction outside, who is making much less than me? Beats me. I do know that the amount of tax I pay has nothing to do with the answer, nor should it. I assume your mom objected to the person making $30K getting a higher percentage taken out (if that person would, because of the small number of brackets) rather than getting more money taken out, right?

What does she resent? Having a higher percentage of her money taken out in taxes the harder she works.

You fail to mention that she is taking home a lot more money also (as she should). It’s not like she’s not getting rewarded for working harder. When you were small there obviously wasn’t a lot of money left over, now there is. Does she really begrudge giving a bit more of the money she now has left over after necessities so the family who has nearly nothing left over can have a bit more? I know you favor an exemption up to a certain point, but the problem with that is that with a true flat tax you get a cliff, over which your income actually drops. So, you need to ease the tax in, which leads to the very thing you’re against. Now if the cliff is at $200K, it’s okay with me.

They are working no harder, and no less, than the guy working at McDonald’s; why should more of our paycheck disappear than the guy at McDonald’s? I worked my tail off to get where I am now; over 10 years learning a language and a business – and my reward for ‘success’ is less of my paycheck? Screw that.

Less of a paycheck? I doubt it. Maybe slightly less than if there were no higher brackets, but still a lot more than it was before. Right?

Now say you and the McDonalds guy each won $5K in a contest. Whose life would it affect more? I suspect the answer is obvious, right? You’d probably hardly notice it, but it might let her buy some decent clothes for her baby. The value to you of $5K is much less than the value to her. Doubt me? Consider the last time you had an unexpected expense, like a car problem. You could write the check to get it fixed, without worrying how you’d eat that month, right? That’s what non-confiscatory progressive taxation is all about.

Another pet peeve – ‘tax loops for the rich’. Um, no. Show me one line of tax code that offers a tax break or incentive only for people in higher tax brackets. What you do have are financial products that would be too expensive/too inefficient to offer except in large sums. No, people in low-income brackets probably can’t take advantage of the tax breaks – but high-income earnings can’t use food stamps, food handouts, free school lunches, college subsidies, etc. Secondly, it’s not like money put in these tax-free shelters are simply magically taken out some day free of taxes - everything will eventually be taxed; they are simply deferring the day those taxes are taken out. And income on wealth is also taxable – you guys have heard of capital gains taxes, right?

Um, the capital gains tax is not a wealth tax, it is a tax on income (incremental wealth) by investment. If you’ve got a million bucks in your mattress over the course of the year, what are your taxes on it? Zippo. A wealth tax would cause you to donate some of that to the gummint.

You’ve already contradicted yourself on loopholes. Your passage reminds me that both the poor and the rich have the right to sleep under bridges. I’m sure that you’re aware that those with money get better service from financial planners than those without, and thus can learn of these opportunities available to all (minimum investment - $10K). Yeah, it’s a bummer not being eligible for the financial aid packages for my kids, but a lot less of a bummer than telling them they had to go to community colleges because of money.

I guess I resent the suggestion that I work less for my money, that I deserve to be taxed at a higher rate than anybody else. Do I think that a flat tax rate is fairer? Absolutely – ideally, I’d like to see the lowest tax bracket bumped up – more people pay no taxes, and then a flat rate.

I gave the problem with the cliff already. And the working harder business is a strawman. Given that the government has a requirement for a certain amount of money (and what that amount should be is irrelevant to this argument) progressive taxation says that people with lots of money left over after the basics are taken care of can afford to pay a bit more percentagewise than those with hardly anything left over.

Am I resigned to the idea of progressive taxes, because ‘that’s where the money is’? Yes. But don’t expect me or anyone else to like it. And I see no reason why we should not try to limit or tax burden just like anybody else, regardless of tax bracket.

Well I like it. And I think it is fair. When I got an even bigger pot of money one year thanks to options, (back when there were higher tax rates for the rich and no one was willing to take risks or invest - the '90s, remember?) I didn’t mind one bit being in a higher bracket. It was kind of cool to pay more in taxes than I had made a few years before. And yeah, I realize that to you a couple of extra bucks is more important than getting armor plating for our boys and girls in Iraq - or that the McDonalds guy should pay more than she does now instead of you.

Actually, I see my family as a model example of what should happen – family in poverty uses benefits offered to the poor (food stamps, free school lunches, etc), takes advantage a generally solid education system, and thanks to hard work, pulls itself out of poverty. Everyone in my family is solidly middle class. I am certainly in a much higher tax bracket – but I live in Manhattan, which means I’m barely scraping by (I’m only half-joking: next time I’ll post my paycheck figures to show what I pay in taxes, etc).

You forgot the part about getting out of poverty and then saying to those making less - pay more so I can pay less for the very programs that pulled me out. Got it.

[jshore]

@pervert

Well, CBO numbers for 2001 suggest that the top 1% earned 15%of the income while the top 5% earned 28% and the top 10% earned 38%. For 80% you have to go to the top 60% or income earners. Which is pretty close to where we get our federal taxes now. I understand that income is not wealth and that we do in fact tax the lowest 40%.

Well, since you understand that wealth is not equal to income, then why exactly are you arguing the point on the basis of income?

Having said that, I think the 80% number is almost surely too high for the top 2 or 3%. As I noted, the number I have seen is the top 1% have 40% of the wealth and it is also noted that this is a larger share of the wealth than the bottom 95% of the population has. My assumption would be that it is not a lot larger (or else the people who note this would cite some other statistic), so I think we can safely guess that bottom 95% have 30-35% of the wealth and thus the top 5% have about 65-70% of the wealth. Wealth is even more concentrated than income.

[quibble]
The top 60% of income earners actually pull down ~86.6% of the pre-tax and ~84.6% of the post-tax income according to the CBO. So no wonder we get almost all (~94%) of our federal taxes from them.

Then state taxes hit more regressively (in fact, regressively period) in most states.
[/quibble]

Note added in preview: Here is a paper that discusses wealth distribution in the U.S. (see table 2). In terms of “net worth”, the 1998 numbers there are:

Top 1%: 38%
Top 5%: 59.4%
Top 10% 71%
Bottom 60%: 4.7%

In terms of “financial wealth”, the 1998 numbers there are:

Top 1%: 47.3%
Top 5%: 68.3%
Top 10% 79.7%
Bottom 60%: 0.8%

In terms of “income”, the 1997 numbers there are:

Top 1%: 16.6%
Top 5%: 31%
Top 10% 41.2%
Bottom 60%: 23.3%

[jshore]

@Voyager

Um, the capital gains tax is not a wealth tax, it is a tax on income (incremental wealth) by investment. If you’ve got a million bucks in your mattress over the course of the year, what are your taxes on it? Zippo. A wealth tax would cause you to donate some of that to the gummint.

Technically true. Although, as I was arguing with TheRight, taxable capital gains and dividend income is probably correlated pretty strongly with wealth. (It would be interesting to see how strong exactly that correlation is.) So, lowering taxes on this sort of income is probably a particularly strong windfall to people with a large amount of wealth.

I think it is safe to say that the estate taxes and the tax on capital gains and dividends is, while not wealth taxes, the closest thing we’ve got to wealth taxes. And, these are also the taxes that the Republicans seem to most want to get rid of. Coincidence? You decide!

[Voyager]

@jshore

Technically true. Although, as I was arguing with TheRight, taxable capital gains and dividend income is probably correlated pretty strongly with wealth. (It would be interesting to see how strong exactly that correlation is.) So, lowering taxes on this sort of income is probably a particularly strong windfall to people with a large amount of wealth.

I certainly agree that they are correlated to wealth. In fact I had to use a lame example of storing money in a mattress to get around the dividend problem.

Many people with lots of money make big incomes too, but the income tax is not a wealth tax - so I’d disagree that the capital gains tax is all that close. (Lots of rich people had negative gains four years ago, but were still wealthy.) Estate taxes, however, seem to be exactly wealth taxes.

Property taxes (except in California) seem more correlated to wealth, since they are assessed on a portion of one’s wealth without concern for income. Some states, like Virginia, have personal property taxes that are somewhat correlated with wealth I’d think.