Interesting insight for taxing millionaires

[IBCoupe]

Yes, of course, it shows Federal income tax ... clearly, any other taxes (like the property taxes I pay for my house - go to the state though) are additional tax burdens we put on everybody. The fact is that we all pay far more money to "government" (I am including Fed and State together here) in taxation than we really should - things like property taxes, driver's license fees, sales taxes, car registration fee's, fishing licenses, etc., etc., etc., add up. The total amounts actually collected by "government" is a surprisingly high percentage of everyone's "income".

You haven't really responded to srellim's criticism.

That was a pretty hand-wave, though.

[szh]

And, since you failed to include srellim's comment in this last post, you thus failed to note that I was agreeing with him. It was only Federal income tax that I was describing. Isn't that what is on the table for a rate increase - to tax the "millionaires" more? Or is there some other miracle source that they have that is ripe for additional taxes?

Z

[IBCoupe]

Not to my knowledge.

But that the Federal income tax is the only thing in discussion doesn't mean it's the only thing that goes into consideration when discussing changes to it. That, I think, was Srellim's point, and it doesn't look like you addressed it. Maybe I'm wrong, and you can correct me.

[srellim234]

By the time you factor all those other "hidden" taxes and fees the wealthy are not being gouged nearly as much more as you argued, z. It is necessary to look at the big picture to see the impact of government's hand in everyone's pockets. You attempted to drum up sympathy for the rich based on only part of the equation.

Those other hidden taxes and fees are something that both the flat income tax supporters (like me) and Fair Tax supporters (like stebo) are going to have to figure out how to stop as part of their plans. Otherwise the lower classes will always pay a higher percentage of their income to government and the wealth discrepancy in this country will continue to grow.

[szh]

Most of the "hidden" taxes I mentioned go to the state (and I also said that too, no?), so they don't count towards the Federal income revenue or tax collections.

Since I thought we were talking about additional Federal income tax on millionaires, my data (admittedly dated) is quite relevant - it shows the actual Federal tax collected from the people in that year.

Now, if the article in the OP was referring to asking for new state taxes, then that is a different "another fine mess we are in, Ollie".

BTW, I hope you all are not contending that there is other income collected and other tax paid - by people, not corporations, of course - that is not shown in that data! If so, that is not correct - this is the actual income and actual tax collections from people that is reported.

Z

[szh]

Not to my knowledge.

Nor mine.

But that the Federal income tax is the only thing in discussion doesn't mean it's the only thing that goes into consideration when discussing changes to it. That, I think, was Srellim's point, and it doesn't look like you addressed it. Maybe I'm wrong, and you can correct me.

As mentioned in an above post, I used the facts of the Federal income and Federal tax collected as the basis for my arguments, since I assumed that the proposed changes were to Federal income tax being increased on the millionaires. If that is not what is being asked to be done, then I am confused.

BTW, remember that I am in favor of a flat tax system (percentage, not absolute dollars like the "fair tax" people propose) and also in favor of removing deductions and loopholes.

So, Srellim, if you (or the article) are referring to closing deductions or loopholes that people use to avoid adding to their taxable income, then I am generally in favor of doing that. As long as there is compensating fairness in implementing a flat percentage taxation system - right now, the "increasing tax rate with income" (and AMT too) is designed to "correct" for those deductions and loopholes.

Z

[srellim234]

The lines are so blurred any more between state and federal with federal subsidies and the federal redistribution of wealth between states that I think we have to take everything into account.

The uber-rich actually do have the opportunity (and many take advantage of it) to bury some of their wealth and income in off-shore accounts and investments. So yes, they do hide some of it.Those accounts are not readily accessible to many beyond that top tier. I don't believe that it's a huge percentage that they hide but they'd be foolish if they DIDN'T do that to protect their wealth from a financial default here.

[szh]

The lines are so blurred any more between state and federal with federal subsidies and the federal redistribution of wealth between states that I think we have to take everything into account.

Hmmm ... what did you have in mind here specifically?

The uber-rich actually do have the opportunity (and many take advantage of it) to bury some of their wealth and income in off-shore accounts and investments. So yes, they do hide some of it.Those accounts are not readily accessible to many beyond that top tier. I don't believe that it's a huge percentage that they hide but they'd be foolish if they DIDN'T do that to protect their wealth from a financial default here.

As long as they don't do it illegally, then this is not an issue per the current tax rules, right?

Again (and I don't want to repeat this too much, sorry), if we remove such currently legal deductions and loopholes, then we should do them along with implementing a flat tax system - any other way is an unfair approach. FWIW, the AMT only corrected for a bit of that "excessive deductions and loopholes" problem, and it has not kept up with inflation enough.

My final point: I want to make sure that we all don't, somehow, still think that rich people don't pay their way enough - the facts are that they pay a large percentage of the actual tax revenue collected by the US (obviously, I mean from people, not corporations).

Z

[srellim234]

The current system is broken and the AMT hurts a lot more than it helps since it isn't indexed. People that were never supposed to be subjected to the AMT are now getting sucked up into it.

As for the legalities of overseas accounts, we'll never know how much or how legally that money was transferred. Can you say, "Swiss bank account?" I'm sure some other countries are glad to take the money into their banks without telling us. I can see picking up some Krugerrands in South Africa and not reporting it if you can afford to buy them there and put them in a safe deposit box outside of this country.

[IBCoupe]

Let me help with the confusion: imagine that there are two levers of taxation for each person. If we assume that the federal income tax lever is pulled equally for everybody, but the state tax lever is not, then when we start to wonder about whether it would be fairer if we started playing with the federal lever, we might want to look at the state levers, too.

Nobody is saying that tax rates at the federal level and their corresponding revenues aren't relevant. Nobody is telling you that the CBO statistics aren't pertinent. We're telling you that it's not the end of the story. That the money taken out of your pocket goes to multiple governments doesn't really matter when the topic of the discussion is the fairness of contributions on the whole.

And note: I'm not going to demonize rich people. I'm not going to say that they don't carry a heavier tax burden. But I'm not going to argue that it couldn't be heavier, either.

True to form, here's a West Wing quote:

Henry, last fall, every time your boss got on the stump and said, "It's time for the rich to pay their fair share," I hid under a couch and changed my name. I left Gage Whitney making $400,000 a year, which means I paid twenty-seven times the national average in income tax. I paid my fair share, and the fair share of twenty-six other people. And I'm happy to because that's the only way it's gonna work, and it's in my best interest that everybody be able to go to schools and drive on roads, but I don't get twenty-seven votes on Election Day. The fire department doesn't come to my house twenty-seven times faster and the water doesn't come out of my faucet twenty-seven times hotter. The top one percent of wage earners in this country pay for twenty-two percent of this country. Let's not call them names while they're doing it, is all I'm saying.

I do think we should raise taxes across the board, but I'm not convinced that we should raise everybody's taxes equally.

[szh]

Interesting quote indeed ... I wrote something surprisingly similar some years ago in a thread here (bumped it recently). Not a personal thing, I was responding to a cry for "let the rich pay their fair share" thread.

Z

[IBCoupe]

I hope to someday be in that category, and if my wife successfully passes her CPA exams, we surely will. I'll happily pay my share. And if I complain about it, feel free to throw this comment back in my face.

[szh]

Nobody is saying that tax rates at the federal level and their corresponding revenues aren't relevant. Nobody is telling you that the CBO statistics aren't pertinent. We're telling you that it's not the end of the story. That the money taken out of your pocket goes to multiple governments doesn't really matter when the topic of the discussion is the fairness of contributions on the whole.

But that is my point - the system is already unfair. Why should the politicians ask to change it to make it even further unfair to the people who make more income and thus, actually already pay more taxes - both in terms of percentage and absolute dollars?

And note: I'm not going to demonize rich people. I'm not going to say that they don't carry a heavier tax burden. But I'm not going to argue that it couldn't be heavier, either.

There are plenty of Dem politicians who are pretty much saying exactly that! To set the stage and make it palatable and "acceptable" to increase their taxes further ... with crap like "because they can afford it", "not paying their fair share", etc. Classic!

BS! Let's start by first properly acknowledging that the rich people are already paying more than their fair share.

I do think we should raise taxes across the board, but I'm not convinced that we should raise everybody's taxes equally.

Given our current tax rate structure, this is likely how it will come to pass anyway. However, I fundamentally disagree with it - it is unfair enough already.

Z

[IBCoupe]

And obviously, there are competing definitions of "fair," and we've established that your measure doesn't look at the whole of mandated expenditures - you want to put Federal Income Tax put in a bubble.

[stebo0728]

How about this, no one seems to address the fact that our government dictates what level it will operate at and THEN tries to decide what taxation is fair, when in reality theres no fair way to pay the bills because our bills are too high for our afforability. Why dont we figure out how much revenue we CAN fairly acquire, and then decide what we can afford to buy or pay for or fund. Dont we operate our households that way? Why should our government operate any differently?

[szh]

And obviously, there are competing definitions of "fair," and we've established that your measure doesn't look at the whole of mandated expenditures - you want to put Federal Income Tax put in a bubble.

Ah! Now I think I get the source of the disagreement here ... correct me if I am wrong! BTW, we have not "established" anything of the sort you describe.

I think (but not sure) you are assuming that by using the word "income", I mean "salary". No, the CBO article is talking about "income" as it relates to taxation applied to personal income during the year. I am using it in exactly the same way.

"Federal income tax" is charged to individuals on the total monies they make during the year. This "income" includes all sources (salary, interest, dividends, capital gains, etc.) although the tax rate for a given item may be different, of course - for example, long-term capital gains.

Rich people use the same tax forms we do - there isn't any special category of "income" that they use to calculate taxes any differently.

Thus, in this regard, the CBO information which reports "income" and "tax collected" and my analysis, is totally valid and a legit way to point out what I believe is fair and unfair! You may, of course, choose to disagree on the fairness or unfairness, but you cannot question the method.

My point being that "Federal income tax" is the only source of revenue that the Feds do tax from individuals - there is no other special source that could be taxed otherwise. When anyone says "tax the rich more", it has to mean "change the tax rate for them.

Now, if you [also] meant that the rich have access to special loopholes and tax shelters, then I am, by the way, in agreement with you. Close those legal loopholes if so desired - till then, nobody should moan about the legal taxation laws in the country. And, as always, illegal tax shelters should be dealt with severely - the IRS has been doing this better and better for years!

Finally, if you (and others posting here) meant that the rich have "net worths" that are higher than the poor (this is true), and that taxation should now/also be based on "net worth" rather than the income that that net worth generates, then WOW! That is a change to Western tax structures, as far as I know, that are highly unlikely to bear fruit here.

Heck, the Islamaphobes in the US and Europe would rise in revolt if asked to implement the equivalent of the Zakaat in Muslim countries - where people are asked to pay 1/40th of their net worth each year!

Z

[szh]

How about this, no one seems to address the fact that our government dictates what level it will operate at and THEN tries to decide what taxation is fair, when in reality theres no fair way to pay the bills because our bills are too high for our afforability. Why dont we figure out how much revenue we CAN fairly acquire, and then decide what we can afford to buy or pay for or fund. Dont we operate our households that way? Why should our government operate any differently?

Exactly the point I made about what happens to companies (like mine and others - not just households) when revenue drops below expenses ...

We can't print money (certain not legally) to get away with it.

Z

[IBCoupe]

No, Z, you're not getting it.

Here's a list of things that people have to pay:
State Taxes
Other Local Taxes
Federal Income Taxes
Food
Shelter
Clothing

You're trying to tell us that the Federal Income Tax is fair (or, unfair to the rich) based solely upon the numbers related to that one part of the list. That's what I meant when I said that you want to put it in a bubble. You're still trying to say that the CBO numbers on tax collection are the be-all end-all of datapoints in this argument, and you're still not even acknowledging that people are calling into question that assertion. There's more to the equation than what the CBO says about Federal Income Tax.

When looking at the "fairness" of the federal income tax structure, it is necessary to look beyond the federal income tax structure, because it does not exist in a vacuum.

[szh]

Your post is confusing as hell to me, because that was also one of my points with regard to other taxation. Where did I disagree with you? And where have I said that the Federal Income Tax is the only thing that is important?

My point is that it is the only thing that appears to be on the table when people talk about raising taxes on millionaires. So, that is what I focus on for the purposes of refuting this current thinking!

Finally, since state and local taxes differ from state to state, trying to introduce that into the discussion for consideration for tax increases on millionaires is quite ridiculous and unlikely to work.

So, are you trying to distract from the actual single possibility that exists (the Federal income tax rate on high earners)? If so, good! Because then the picture will be totally murky and nothing will get done!

Z

[IBCoupe]

My point is that it is the only thing that appears to be on the table when people talk about raising taxes on millionaires. So, that is what I focus on for the purposes of refuting this current thinking!

And my point is that, just because it's the only thing on the table for changes doesn't mean that it's the only thing we look at when deciding what changes to make. Is it complicated to take into consideration things like State Taxes? Sure, but that doesn't mean they're not part of the picture.

[szh]

My point is that it is the only thing that appears to be on the table when people talk about raising taxes on millionaires. So, that is what I focus on for the purposes of refuting this current thinking!

And my point is that, just because it's the only thing on the table for changes doesn't mean that it's the only thing we look at when deciding what changes to make. Is it complicated to take into consideration things like State Taxes? Sure, but that doesn't mean they're not part of the picture.

Meaningless when they are not likely to be included in the picture.

Remember your "pretty hand-wave" comment?

Z

EDIT: Quoted the post - right above this one - to show what I referring to ... due to the whine about the missing context.

[srellim234]

z- Let me ask you this:

How do you propose we restore a balance to the inequality of wealth that is destroying this country? Somehow a certain amount of wealth must be reverted back. Especially the wealth plundered by the top tier at the expense of all others that has gone on in the last 25 or 30 years. Before you say, "No, it doesn't," read the article at this link.

http://georgewashington2.blogspot.com/2 ... -that.html

No less than John Kenneth Galbraith studied the Great Depression and determined that a better balance needs to be achieved. That line of research and thinking is supported by many other renowned economists. Do we become proactive in addressing the problem or do we do nothing and wait for another full blown depression coupled with a revolution?

[donandal]

First, I think Z can offer his own better response, but in the interim
The research article lists five factors , yet this one only choses to address one
how convenient
Also , I think there may be a question of degree as too how MUCH wealth to steal from the rich,
and more importantly, why believe the government would be best choice to force the investment
by the rich. If your arguement is true, I prefer to trust the rich to see where to spend their
money, more than I trust the government. BTW, where did that plundered wealth go?

[srellim234]

You are right in that the degree of the balance adjustment must be worked out.

As for where the wealth went, the wealthiest group has now structured the wealtt management in this country to go in ever greater and greater amounts into their own pockets. Wall Street is about to announce overall record profits among companies. All that profit is being diverted back to that top tier, either in stock value or pay. When people are struggling to keep jobs and homes, they're not the ones buying stocks; the rich are. With record corporate profits, the middle class has watched it's wealth AND pay erode while those at the top tier have watched their pay and wealth grow handsomely at the middle's expense. With productivity up per person but pay down per person, the middle class is being systematically eliminated.

This 2007 report to Congress by Cornell University does a pretty good job of looking at the entire picture. It actually does address the wealth issue and not always in a negative light. I think, though,that it makes the proper conclusion that a progressive income tax does not solve the problem and doesn't particularly target the right people in the right way.

http://digitalcommons.ilr.cornell.edu/c ... 0+years%22

"...
If the underlying concern with executive pay is equity, not efficiency, then the policy goal may be
to reduce inequality in the least economically costly way. A more progressive tax system is
widely considered to be the least costly way to redistribute income, in terms of lost economic
efficiency. Of course, the tax code cannot target executives specifically without also affecting
other high income individuals. Thus, while progressive taxation can be viewed as an effective
way to promote equity goals, it is not well targeted toward reducing potential efficiency losses
that result from the principal-agent problem that affects executive compensation.
Given the importance of stocks and stock options in executive pay, policymakers attempting to
increase the tax code’s progressivity could consider reducing the tax preference currently given to
capital income compared to labor income. For example, capital gains and dividends are taxed at a
lower marginal rate than labor income and a sizeable portion of capital income tax can be
deferred through tax-preferred savings vehicles. Stock options are taxed at regular income rates
but receive favorable treatment because tax liability is deferred until gains are realized.
Economists are divided over whether taxing labor and capital at the same rate would be economically
efficient,95 but given the unequal distribution of financial assets in the United
States, it would undoubtedly increase the tax code’s progressivity."

The paper is a long read but definitely worth it.

[szh]

This topic is no longer worth arguing anymore for a few reasons:

• We seem to have gone into fantasy-land solutions, which are neither simple nor likely to even be in consideration for any changes.
• We have a fundamental difference of opinion. Some of us believe that the rich are already taxed more than they should be. Others think it is perfectly okay to penalize them further and find whatever necessary means to do so.

My final point is that if we would properly acknowledge that we are taxing the rich more and thank them for their higher contributions, rather than use "they can afford it" kind of unfair and unjust justifications, it might be acceptable more easily to folks like me.

Z

[JTR]

taxing millionares won't fix this...cutting spending will

Z

I completely agree with this, and lets start with Defense, Medicare and S.S., three of our largest holes.

[srellim234]

This topic is no longer worth arguing anymore for a few reasons:

• We seem to have gone into fantasy-land solutions, which are neither simple nor likely to even be in consideration for any changes.
• We have a fundamental difference of opinion. Some of us believe that the rich are already taxed more than they should be. Others think it is perfectly okay to penalize them further and find whatever necessary means to do so.

My final point is that if we would properly acknowledge that we are taxing the rich more and thank them for their higher contributions, rather than use "they can afford it" kind of unfair and unjust justifications, it might be acceptable more easily to folks like me.

Z

I guess it is fantasy land to suggest a flat rate income tax that takes nothing off the table. Include pay, bonuses, stock options, capital gains, anything that would be considered as income. No deductions, no deferments from one year to another. I guess that must be too complicated for you.

I'm not going to thank the rich for their contribution when it is their accumulation of wealth without investing back into the society that has caused this mess. We wouldn't even be having this discussion if they were reinvesting back into society in a manner that ensured that all classes would have a reasonable chance at success. There is reasonable and unreasonable. What the rich are doing to this country is unreasonable and is ruining the country. Every economic measuring stick indicates that.

I have never used the "they can afford it" argument. Only the argument that a return to a healthy balance of wealth is necessary for this country to survive.

[szh]

I guess it is fantasy land to suggest a flat rate income tax that takes nothing off the table. Include pay, bonuses, stock options, capital gains, anything that would be considered as income. No deductions, no deferments from one year to another. I guess that must be too complicated for you.

Actually, if you look at my posts, I am a big proponent of a flat tax (percentage) system. Because I think that this is possible to do. My fantasy land point was with regard to trying to determine all sources of income and taxation as well (how does state tax, property tax, license fees, sales tax, etc. get counted?)

If such a flat tax is implemented without deductions, then I am fine with that too ... with some simple exceptions: if we insist on including capital gains as income, then we must also allow for capital losses as deductions. Personally, I prefer no tax on capital gains (whether it is for stock or the sale of a house) and no deductions for capital losses (whether it is for stock sales, gamb|ing in Vegas, or whatever).

And, I am willing to agree (reluctantly) to a poverty threshold below which no tax is assessed at all - as a single deduction applied to all for a well-defined threshold (that could be adjusted for inflation).

Z

[szh]

I'm not going to thank the rich for their contribution when it is their accumulation of wealth without investing back into the society that has caused this mess. We wouldn't even be having this discussion if they were reinvesting back into society in a manner that ensured that all classes would have a reasonable chance at success. There is reasonable and unreasonable. What the rich are doing to this country is unreasonable and is ruining the country. Every economic measuring stick indicates that.

And, finally, this is complete BS. The rich don't park cash into their mattresses or dig a hole in the backyard for their millions. All their capital is usually part of the economy - in the form of bank accounts (banks get capital to loan and invest), stock market (investments in the companies), money market funds, etc., etc., etc. If you don't get that, then I don't know how to explain basic economics.

Besides, just what would you like the rich to do? Hand out fistfuls of dollars to everybody?

Z

[szh]

How do you propose we restore a balance to the inequality of wealth that is destroying this country?

Sorry, I do not agree with this silly assumption. The article link you point out is only one viewpoint - read articles by Milton Freedman to see another Econonomics Nobel laureate expound quite the opposite!

Somehow a certain amount of wealth must be reverted back.

Even if I accepted your assumption of a problem (which I don't!), how do you propose that the above be done? That is where I think the fantasy-land solutions creep in.

That line of research and thinking is supported by many other renowned economists. Do we become proactive in addressing the problem or do we do nothing and wait for another full blown depression coupled with a revolution?

Proactive, how? There are no simple answers.

You assume we have a problem - I don't. Is your answer then a Marxist/Lenin-like revolution? Really?

Z