# Why Raising Taxes on the Wealthy Will Not Work **URL:** \ **Category:** Great Debates\ **Created:** [January 22, 2012, 1:50am UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265 "2012-01-22T01:50:45Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 22, 2012, 5:56am UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/21 "2012-01-22T05:56:26Z")
> [@Martin\_Hyde](#): > > I’ve also never understand why people talk about “loopholes.” Loopholes imply you’ve gamed the system some how. The most material “loophole” is ultra-wealthy people tend to earn most of their money through dividends and ordinary capital gains (selling stocks at a profit typically.) These are now taxed at 15%. In addition, those thinking they can get more revenue by closing “loopholes” are quite naive. Each so-called loophole got voted in, and today has a segment of the population saving real money from it. There is not a lot of political will behind closing any particular loophole. If someone designs a deficit reduction plan around getting the elimination of loopholes passed, we’ll wind up with a bigger deficit. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [January 22, 2012, 6:25am UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/22 "2012-01-22T06:25:43Z")
> [@Martin\_Hyde](#): > > Try again, next time, bring relevant polling. Both of those say Americans think the wealthy should pay their fair share of _taxes_. They aren’t saying “the wealthy should pay taxes so their money can be given to me.” > > There is a big difference between advocating the wealthy pay more to maintain the roads, the military, schools and etc than it is to advocate the wealthy pay more so the government can give out income balancing payments to the less wealthy. What is the difference? Taxes from wealthy people fund the roads I drive on, the medicare I will eventually use, the schools I went to, etc. I support making the wealthy pay more to fund education and keep medicare and social security solvent. How is that different from redistribution? In the US we have a very convenient definition of welfare and redistribution. Welfare is generally code for ‘government programs that I do not currently need’. Your poll says most people oppose welfare (whatever that means, I can’t get anything but an abstract), but most people also support medicare, medicaid and social security. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [January 22, 2012, 6:28am UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/23 "2012-01-22T06:28:23Z")
> [@Snarky\_Kong](#): > > Unless you consider everything other than a flat tax to be income distribution I don’t think you’re effectively arguing that Americans support income redistribution. Do people want the government to force Bill Gates to write $500 checks to everyone in the country? No. Do they want Bill Gates to pay more in taxes so they can have medicare, medicaid, social security, police, fire departments, public education, etc. Yes. I don’t see a difference. It is just semantics like when people who rail against welfare and government programs go and apply for medicare. ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [January 22, 2012, 6:52am UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/24 "2012-01-22T06:52:59Z")
> [@Wesley\_Clark](#): > > Do people want the government to force Bill Gates to write $500 checks to everyone in the country? No. Do they want Bill Gates to pay more in taxes so they can have medicare, medicaid, social security, police, fire departments, public education, etc. Yes. I don’t see a difference. It is just semantics like when people who rail against welfare and government programs go and apply for medicare. Usually, redistribution paints a picture of robbing peter to pay paul, not establishing a broad social standard of living and promoting the general welfare. But I guess I can see how someone might think a stable society of healthy people would be horribly redistributive. ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [January 22, 2012, 6:55am UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/25 "2012-01-22T06:55:57Z")
> [@erislover](#): > > But I guess I can see how someone might think a stable society of healthy people would be horribly redistributive. Certainly; just listen to some Randian type complaining about having to pay anything at all for the upkeep of society, and how everyone should just sink-or-swim. ---
**Author:** ![The\_Niply\_Elder](https://avatars.discourse-cdn.com/v4/letter/t/8e8cbc/32.png) [@The\_Niply\_Elder](https://boards.straightdope.com/u/The_Niply_Elder)\ **Post date:** [January 22, 2012, 7:40am UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/26 "2012-01-22T07:40:11Z")
> [@Martin\_Hyde](#): > > What I would propose is for all income under the $380k you tax at the regular tax rate for the appropriate brackets. Dividends for money earned under the top bracket should be totally untaxed, as should all forms of capital gains. Interest payments should all be untaxed, not just for tax exempt municipal bonds and etc. This actually shouldn’t cost the U.S. too much, most people who earn less $380k a year aren’t earning a significant portion of income from bonds, dividends, or capital appreciation. I have to ask. When people put forth this type of tax policy, is it based on any kind of sound methamatical forecast? Have you done your homework to evaluate what the impact will be? I mean, how much money will be raised by the government? What will the impact be on the economy? How will investors react? Is any of this considered? Inquiring minds want to know. Seriously. ---
**Author:** ![2sense](https://avatars.discourse-cdn.com/v4/letter/2/e47774/32.png) [@2sense](https://boards.straightdope.com/u/2sense)\ **Post date:** [January 22, 2012, 8:32am UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/27 "2012-01-22T08:32:18Z")
> [@Qin\_Shi\_Huangdi](#): > > Do you think hypothetically raising the taxes on the wealthy will generate any meaningful amount of revenue and do you think that deficit reduction should come from spending cuts mostly ( **including** military spending) or from tax increases and/or elimination of loopholes. According to Paul Krugman we could raise and extra 1.1 trillion dollars a year over the next decade if we returned to the tax structure we had before the 1981 tax cuts. [http://krugman.blogs.nytimes.com/2011/11/26/money-at-the-top/](http://krugman.blogs.nytimes.com/2011/11/26/money-at-the-top/) I’d call that meaningful. ---
**Author:** ![Airman\_Doors\_USAF](https://avatars.discourse-cdn.com/v4/letter/a/e36b37/32.png) [@Airman\_Doors\_USAF](https://boards.straightdope.com/u/Airman_Doors_USAF)\ **Post date:** [January 22, 2012, 8:45am UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/28 "2012-01-22T08:45:10Z")
> [@Qin\_Shi\_Huangdi](#): > > [http://www.economist.com/node/21543165](http://www.economist.com/node/21543165) > > According to this article 1) most deficit reduction should come from spending cuts and 2) to get more tax revenue one should get rid of loopholes and deductions not raise taxes? > > I generally agree with the gist of the article and ending crony capitalism by flattening and lowering rates while eliminating loopholes (as outlined by Governor Huntsman) is a good start. > > Do you think hypothetically raising the taxes on the wealthy will generate any meaningful amount of revenue and do you think that deficit reduction should come from spending cuts mostly ( **including** military spending) or from tax increases and/or elimination of loopholes. Everybody has their reasons why their particular idea will work and why nobody should mess with their particular rice bowl. Taken individually they’re absolutely correct. But the tax code is not taken individually, it takes into account everything one can think of. And since a million here and a billion there add up, there should be nothing sacred. Cut the military spending? Sure, go ahead. But don’t do that so that you don’t have to cut into Medicare or other programs, do both. It’s not an either/or thing. In that sense we should raise the taxes on the highest earners. We should also raise taxes on middle-class earners and cut spending across the board. If we’re going to “fix” this, we have to go all the way, we can’t just pick and choose who we’re going to give the shaft to at someone else’s expense. The bottom line is this: if we are to fund government operations and simultaneously reduce the national debt, everybody has to pay, either through higher taxes, living a more austere lifestyle, or some other economic consequence. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [January 22, 2012, 12:15pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/29 "2012-01-22T12:15:33Z")
> [@sh1bu1](#): > > is there still “long term capital gains”? I thought that went away and all capital gains is treated the same. There are still short term and long term capital gains. It is only long term capital gains that are taxed at 15%; short term capital gains (gains from things held \< 1 year) are taxed at your marginal rate. There is also a different rate for collectibles (including gold) of 28% > [@](#): > > In terms of corporate rates, I believe that in Europe companies pay a salary tax that is used to fund social welfare programs like UHC. Simply looking at corporate income tax rates and ignoring other taxes does not give the whole picture. I don’t know how other countries do it, but in the UK employers pay “National Insurance” on an employees salary, which is just the same as US employers paying FICA + Medicare. National Insurance is more than US Social Security, being about 13% rather than 7.65% ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [January 22, 2012, 1:56pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/30 "2012-01-22T13:56:29Z")
> [@Qin\_Shi\_Huangdi](#): > > Well how much is enough? 40%? 50%? And as the article points out for example America has a very high corporate tax. We should raise taxes until the job creators stop creating jobs, then back off a little. That would be the sweet spot, which produces the most revenue with the least impact on jobs creation. To tax any less would be irresponsible. I don’t know what the most efficient top tax rate is, but it is much higher than it is now. We have had very high growth and economic prosperity with top marginal rates as high as 90%. ---
**Author:** ![Kobal2](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kobal2/32/20_2.png) [@Kobal2](https://boards.straightdope.com/u/Kobal2)\ **Post date:** [January 22, 2012, 2:20pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/31 "2012-01-22T14:20:52Z")
> [@Qin\_Shi\_Huangdi](#): > > Well how much is enough? 40%? 50%? And as the article points out for example America has a very high corporate tax. However much is enough to solve the current equation. Taxation is not, and have never been, in the business of being fair. It’s meant to pay the bills, punkt. If the bills are high, the taxes must be too, there’s not really much discussion to be had there. You can’t fudge accountancy maths, it’s very inelegant and also illegal. You can disagree with what’s in the bills if you want to but when they’re there, as they are right now and it doesn’t look like they’re realistically going away any time soon, somebody’s gonna have to pay 'em. Maybe the electoral gods will smile on your pet theories in the future and those oh so wasteful dollars spend on welfare stamps or whatever will stop being spent, at which time the taxation scheme can be reviewed anew. But in the meantime I don’t think it’s a big secret that America has \*already \*racked up a ton of debt that it must get around to paying at some point, the sooner the better because that crap adds up on its own, not entirely unlike cancer. If the superwealthy aren’t going to feel the sting, who will ? ---
**Author:** ![Bryan\_Ekers](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bryan_ekers/32/183_2.png) [@Bryan\_Ekers](https://boards.straightdope.com/u/Bryan_Ekers)\ **Post date:** [January 22, 2012, 2:55pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/32 "2012-01-22T14:55:28Z")
In case the OP’s opinion is being influenced by the works of Ayn Rand, can someone look up how much the _Atlas Shrugged_ character of Midas Mulligan was supposed to be worth? I think a figure of “two hundred million dollars” was mentioned, and I think he was ostensibly the richest man in the U.S. (my own copy of the novel has long since disintegrated, else I’d check these myself). My point being that the wealth disparity in Rand’s time was minor compared to today, so using Rand as a moral and economic guide needs a degree of modification. ---
**Author:** ![Frank](https://avatars.discourse-cdn.com/v4/letter/f/3d9bf3/32.png) [@Frank](https://boards.straightdope.com/u/Frank)\ **Post date:** [January 22, 2012, 3:32pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/33 "2012-01-22T15:32:40Z")
> [@Bryan\_Ekers](#): > > My point being that the wealth disparity in Rand’s time was minor compared to today, so using Rand as a moral and economic guide needs a degree of modification. Assuming you recall $200,000,000 correctly, that would be $1.6 billion in today’s money. He’s still be well off. Yes, the spread between a factory worker and the CEO of the factory was not as large in those days, but Rand’s character was an outlier both then and now. ---
**Author:** ![Bryan\_Ekers](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bryan_ekers/32/183_2.png) [@Bryan\_Ekers](https://boards.straightdope.com/u/Bryan_Ekers)\ **Post date:** [January 22, 2012, 3:43pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/34 "2012-01-22T15:43:15Z")
> [@Frank](#): > > Assuming you recall $200,000,000 correctly, that would be $1.6 billion in today’s money. He’s still be well off. Yeah, but there’d be about 300 Americans richer than him, many of them a LOT richer. ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [January 22, 2012, 4:12pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/35 "2012-01-22T16:12:01Z")
> [@Wesley\_Clark](#): > > What is the difference? Taxes from wealthy people fund the roads I drive on, the medicare I will eventually use, the schools I went to, etc. I support making the wealthy pay more to fund education and keep medicare and social security solvent. How is that different from redistribution? > > In the US we have a very convenient definition of welfare and redistribution. Welfare is generally code for ‘government programs that I do not currently need’. Your poll says most people oppose welfare (whatever that means, I can’t get anything but an abstract), but most people also support medicare, medicaid and social security. Every first world country has some degree of income redistribution. Just because of thing like the freerider effect and etc. However there are material differences between what I would deem a “indirect incidental” income redistribution and “direct, intentional” income redistribution. Most funding for schools comes from local property taxes. The guy who lives in a $10m mansion pays far more in property taxes, but he receives the exact same public schools and exact same access to public schools as his neighbors. He may send his kid to private schools, obviously, but he still receives back the same public school system as his less wealthy neighbors. Some portion of funding for schools also comes from both State and Federal governments, and the guy living in that $10m mansion almost certainly pays more State and Federal taxes than poorer people as well. (Even if he pays at the 15% effective rate, he probably pays more in State and Federal taxes than a middle class person _earns_ in a whole year, when speaking in real dollar amounts.) So that is vaguely a form of “indirect income redistribution.” Because obviously even persons who don’t pay into the tax system get to send their kids to school, and thus they are receiving benefits paid for by the wealthy. Americans are mostly okay with those sort of things. There are other types of more intentional and deliberate redistribution of income. People who receive entitlement benefits from the government, be it welfare checks, food stamps, Medicaid, public housing or even the Earned Income Tax Credit (which many poor people receive and will be larger than Federal taxes they paid in throughout the year, meaning the money for it came from wealthier tax payers) that are more politically questionable. Most Americans don’t want to abolish all of the programs I just named, but most Americans look down on people who benefit from those programs. Most Americans think too many people receive these benefits, and that the benefits are too generous. Further, most Americans believe many of the people on these programs are gaming the system, are lazy, and basically are getting paid to sit at home doing nothing. America isn’t a place where there is widespread support for programs you might find in some European countries in which lower income people basically all get to live in free housing and get supplemental income payments . ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [January 22, 2012, 4:17pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/36 "2012-01-22T16:17:35Z")
> [@The\_Niply\_Elder](#): > > I have to ask. When people put forth this type of tax policy, is it based on any kind of sound methamatical forecast? Have you done your homework to evaluate what the impact will be? I mean, how much money will be raised by the government? What will the impact be on the economy? How will investors react? Is any of this considered? Inquiring minds want to know. Seriously. I don’t work at the Congressional Budget Office and am not an economist, but just in this thread we’ve seen links to cites about how closing various loopholes could essentially end the deficit. If you followed much of the news during the debt ceiling debate you may have been aware that various news outlets even published reports showing various schemes that could close the budget deficit. One that has been repeated many, many times in many different places, is that if the wealthiest Americans _actually paid the top marginal rate_ on the bulk of their income in the top tax bracket, we would not have a budget deficit any longer. This would obviously have an impact on the economy. It would mean less money in the hands of the people and more money in the hands of the government. Anyone who knows anything about economics knows that will have an impact on things, it will cause deadweight loss among other things. However, anyone who knows anything about economics knows that in the long term a bankrupted country with unmanageable debt burdens faces large scale economic ruin that impacts more than just the government but all of the country’s business. I want less money in the hands of the government and more money in the hands of the people. That’s my _long term view_ and always has been. But I think we’re at a point now where it’s more important we try to repair our government finances right now, because it gets harder and harder the longer you wait. In the unlikely scenario my plan resulted in a budget surplus, it’s self-adjustable. You can always move where the top marginal rate begins. If my plan created excess revenue you could raise the top marginal bracket to start at $500k or $600k. You could change the phase-out level for special tax rates from $1m to $2m or $5m and etc. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [January 22, 2012, 4:49pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/37 "2012-01-22T16:49:57Z")
> [@Martin\_Hyde](#): > > … Stupid, unaccomplished, and unskilled persons do not deserve to hold even a small portion of the wealth of men like Bill Gates and Warren Buffet… That one word, “deserve”. How, exactly, does one “deserve” a hundred million dollars a year? Some of those guys who went batshit with other people’s pension funds, ruined thousands upon thousands of people…they “deserve” their money? And, of course, “stupid”. The stupid are the natural prey of the smart? The smart “deserve” to take the money of the stupid? In the same way that the strong deserve to fuck over the weak? Is this an example of poor word choice, or are you truly proposing a system of amoral savagery? ---
**Author:** ![Left\_Hand\_of\_Dorkness](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/left_hand_of_dorkness/32/7156_2.png) [@Left\_Hand\_of\_Dorkness](https://boards.straightdope.com/u/Left_Hand_of_Dorkness)\ **Post date:** [January 22, 2012, 5:02pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/38 "2012-01-22T17:02:43Z")
> [@Martin\_Hyde](#): > > Most funding for schools comes from local property taxes. The guy who lives in a $10m mansion pays far more in property taxes, but he receives the exact same public schools and exact same access to public schools as his neighbors. He may send his kid to private schools, obviously, but he still receives back the same public school system as his less wealthy neighbors. In some sense yes, but in a broader sense, I disagree with this idea. In a state of nature, property is much more fluid. You own what you can personally defend (or defend with the help of allies), and as soon as an ally successfully turns on you, or a big enough mob gets jealous of what you claim, you lose your property and possibly your life. Private property defense is a social institution, not part of natural law, and it’s a major function of the state. Most obviously it takes the form of police ready to arrest thieves–but a great deal of the rest of the government works to reduce theft/mob rule. Education gives people enticing options for making a living other than stealing from them as already have stuff. Welfare, earned income credit, libraries, military-as-jobs-program, etc.–these all give folks alternatives to rioting in the streets due to wealth inequality. And obviously the wealthy benefit from all these indirect effects of government more than the poor do, since they have more property that the state is defending. (The poor, just as obviously, benefit more from the direct effects of these programs). Someone is bound to point out that the poor suffer more theft than the wealthy do. This is, I believe, due to a reverse-Willie-Sutton effect. Sutton stole from banks because that’s where the money was; other folks steal from the poor because that’s where the cops aren’t. If there were not such a huge government structure dedicated to protecting the wealth of the wealthy, of course thieves would target them, in the same way that rats go to the grain silo before they go to the almost-empty cupboard. Even wealth-redistribution programs, therefore, benefit the wealthy to a large degree. They reinforce the underlying social systems that enable the wealthy to maintain their claim on their wealth. ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [January 22, 2012, 5:08pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/39 "2012-01-22T17:08:35Z")
I agree with that 100% **LHoD** , that’s the reason Otto von Bismarck, a wealthy member of the hereditary nobility, supported and implemented a social welfare system in the late 19th century German Empire. He saw that the best way to cut legs out from under rising socialist power and unrest was to just give the moderate socialists what they wanted which would marginalize the more extremists socialists and hurt their efforts at recruiting more people to their cause. Bismarck wasn’t doing it out of _noblesse oblige_ so much as he was doing it to maintain the current power structure, he saw that the people needed some real support from the government or they might go down a dangerous path. But on another level I think it’s still correct when **Wesley Clark** infers that things like public schools and roads, which are paid for disproportionately by the wealthy but used by everyone, are a “form” of income redistribution (albeit indirect and unintentionally.) ---
**Author:** ![WillFarnaby](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/willfarnaby/32/514_2.png) [@WillFarnaby](https://boards.straightdope.com/u/WillFarnaby)\ **Post date:** [January 22, 2012, 6:24pm UTC](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265/40 "2012-01-22T18:24:44Z")
> [@Der\_Trihs](#): > > You get money from _exploiting_ people who are smart, skilled and accomplished. Exploiting resources is a skill. [Previous page](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265.md?page=1) [Next page](https://boards.straightdope.com/t/why-raising-taxes-on-the-wealthy-will-not-work/610265.md?page=3)