Not All Money Is Created Equal - taxes of the poor, middle, and rich

http://www.politicalmathblog.com/?cat=50

by limist • 16 years ago

29 45 16 years ago

hga8• 16 years ago

"If the top 1% of income earners make 27% of all the money, it would be perfectly reasonable for them to pay 27% of all the taxes."

Actually, no. What are they getting in return for that?

Past a certain amount, it doesn't in aggregate cost any more for the government to support the needs of any one person. When you tax people beyond that point, you're explicitly engaging in redistribution and that is a debatable point, not something that is "perfectly reasonable".

To take a real world example, a foreigner can go to a canton in Switzerland and do a private tax treaty with it, where he e.g. pays a fixed amount of tax each year. The cantons that do this are stating that it doesn't cost them any more than that sum to cover his costs to them.

nazgulnarsil• 16 years ago

I'm pretty libertarian, but...all economic systems are at their core ethical statements about how limited resources should be distributed. free markets don't escpae from this.

rauljara• 16 years ago

They are paying for national defense and the social spending that allows the state to exist in a stable fashion. The wealth of a society can only exist with the aid of rule of law and relatively social stability. Someone has to pay for that stability. Why not tax people based on how much they benefit from it?

hga8• 16 years ago

As I said, it's a debatable point; my argument is with those who accept redistribution without question.

Although you're still not entirely arguing the point. Beyond a certain amount, how much does a rich person benefit from a stable state vs. their own efforts?

To recast it, in an unstable state the rich have vastly more options than the less well off. I'd argue that the less well off benefit the most from the rule of law and social stability.

anamax• 16 years ago

> The wealth of a society can only exist with the aid of rule of law and relatively social stability.

Do you really think that rich people benefit more than the poor from rule of law and social stability? If so, you're wrong.

indiejade4• 16 years ago

Actually, no. What are they getting in return for that?

Actually, yes, I think it is reasonable. The top 1% earners typically are CEOs of large corporations, celebrities, or professional athletes. In any event, their brands put more strain on the overall infrastructure than a little janitor who is in the bottom one percent of income earners.

The CEO of Wal-Mart has, at any given time, thousands of delivery trucks on the roads, trucks that contribute to traffic congestion, increase the risk of accidents, cause potholes, and spit out harmful emissions into the atmosphere. The negative externalities born by society can be assigned a cost, and (even though it's by far from a perfect system), it does make sense for those who use/abuse the system for personal profit to be taxed more.

hga8• 16 years ago

I'm sorry, but your concrete argument doesn't work unless you're suggesting that the CEO of Wal-Mart gains the entire benefit of its actions, with none benefiting its shareholders, customers, or low rank employees.

To take your even more specific example of delivery trucks, someone has got to deliver the food that everyone eats. You can't arbitrarily assign the total resultant negative externalities to whichever companies own and operate them.

viraptor3• 16 years ago

I don't see your point tbh. Emission is dealt with by using congestion taxes. Accidents risk by insurance and we can expect it to be ~ to the number of cars. Not sure how the car owner -> pothole connection is solved in US, but some other countries add the "road tax" to fuel prices.

Those are all (cause -> problem -> money for solution) dependencies. I don't see why you want to get money from a company owner to solve any of them....

w00pla• 16 years ago

> The CEO of Wal-Mart has, at any given time, thousands of delivery trucks on the roads, trucks that contribute to traffic congestion, increase the risk of accidents, cause potholes, and spit out harmful emissions into the atmosphere.

Doesn't the USA have corporate tax? Shouldn't corporate tax (and things such as fuel levies and business levies) pay for the cost of roads?

gyardley2• 16 years ago

The top 1% of all earners and the top 1% of people putting a strain on the national infrastructure aren't the same thing. (Nor is 1% of the American population, which is more than 3MM people, all 'CEOs of large corporations, celebrities, or professional athletes'.)

If you're arguing for taxing people at differential rates based on something besides income, fine. But don't confuse 'income' with 'strain on the national infrastructure' or anything else.

dantheman2• 16 years ago

The majority of taxes don't actually go to anything a top 1% of income earners need. Take a look at the budget, the majority of the spending is SS, Medicare & Medicaid.

brazzy• 16 years ago

...which spare the rich the expense of having to hire a private army to prevent the rabble from taking their riches from them.

viraptor3• 16 years ago

I could find one good reason for the top 1% making 18% of money to pay 27% of taxes - military and government contracts.

Many of the top earning CEOs and top companies will get a lot of their money from contracts paid via taxes (selling articles to the army, military training, other government projects with debatable gain for the community). Those taxes are paid by everyone. If the top companies' owners get money for those services, they basically get paid using the tax from all other groups. Since more money from taxes == more contracts possible, we might want them to get taxed more - otherwise it's like they're getting a natural tax return via a closed loop in money flow.

hga8• 16 years ago

However, unless you get the tax rate(s) correct so that the return is negative, the more they get in this loop the more they retain.

The traditional response to this problem is to limit the scope of government. The fewer government contracts, the less this is a problem.

A lot of people noted the incongruity of Ross Perot's populism, given that so much of his income was from IT contracts with various governments.

gyardley2• 16 years ago

That's not a good reason for taxing the top 1% more, that's a good reason for taxing those benefiting from military and government contracts more. The two groups don't perfectly overlap.

jfoutz2• 16 years ago

mostly they have more stuff that needs protecting.

I have a modest house, the fire department only protects a modest amount of value.

I've got a nice computer, and some art on the wall, but nothing worth millions.

Does the owner of an NFL team derive more benefit from a tax subsidized stadium than the people who go to watch the game? If you take all the fans together, no. If you compare the owner to any single fan, probably yes (the fan could be the opposing team owner ;)

Cheap gas benifits everyone because food gets cheaper, and the distance you can drive to work farther. Expensive gas is tough on me, but it's 100x tougher on someone that employs a hundred people, the cost to employ those same people either goes up, or the pool of talent you choose from goes down.

So, does 10 trillion for wars benefit me? ... sure. Does it benefit someone wealth more? sure.

hga8• 16 years ago

"they have more stuff that needs protecting"

Yes, but only up to a certain point, especially in a nation where 70% or so of the assets are financial instruments (ones tied to quasi-tangible stuff, plus government bonds which are tied to their power to tax). Beyond that point you're redistributing wealth, not protecting the taxpayer who's so generously providing it.

sorbits• 16 years ago

“you're explicitly engaging in redistribution”

Even a flat tax is redistribution of wealth as it would need to take into account that most people don’t start to earn money before they reach a certain age (and will likely stop earning money several years before they die).

vaksel• 16 years ago

when have "taxes" become a dirty word. Hell we had 90% taxes in the 50s and supposedly that was the most glorious time in United States history.

In fact if you compare the tax rate for the top earners with the overall American economy, you can see that the lower the taxes for the top brackets, the crappier the economy tends to be. And sure correlation does not mean causation but still.

Honestly I don't think most people would mind getting taxed at a higher rate, as long as the money actually went somewhere positive. To lower the national debt, to fix this country's infrastructure, to do the whole single payer health care(not the abortion that they are currently trying to implement). The shittier the economy, the more necessary it is to have a social net that'll help people get back on their feet.

I mean, seriously, the country is 11 trillion in debt, and because of this taxes = political suicide meme, that number just keeps getting bigger and bigger.

And I'm not proposing raising taxes on everyone...but if you make more than 1 million a year, anything above that can be taxed at 60-70%(with the exception of funding startups...which gets you a tax write off)

Edit: if you are going to downvote, at least have the balls to make a reply.

dantheman2• 16 years ago

I think you are mistaken, income taxes are horrid and make you a serf to the state.

The income tax was started in 1913 (not counting the civil war) and was high till the late 80s. Now during that time most of the industrialized world was destroyed by wars and America was able to prosper significantly -- as global competition picked up we were no longer competitive. It has nothing to do with high income taxes.

The country is in 11 trillion dollars in debt because it spends money it doesn't have on things it shouldn't be spending money on. 90% of what people need from government is handled at the local level -- @ the federal level we have national defense, immigration, and the federal judicial system. After that there really shouldn't be too much (SS, Medicare, and Medicaid should be at the state level if at all).

zacharypinter• 16 years ago

"Honestly I don't think most people would mind getting taxed at a higher rate, as long as the money actually went somewhere positive."

I think I would feel better about it if there was a way to address the corruption and wastefulness that comes with how our tax dollars are spent.

I used to work civil service (part-time job while in college) and we had a lady named Peggy (sweet lady, great person) who spent every day on the phone resetting passwords for people who called in. Finally, I spoke with the supervisor and offered to add a forgot password link to the application and his response was: "what would Peggy do then?"

Furthermore, I have little faith in the government's ability to hire the smart people who can actually address some of this stuff. What bright kid out of college wants to work at a job that blocks youtube, gmail, blogs, and any other popular-but-useful service that arises.

pauljonas2• 16 years ago

A deceptive and disingenuous presentation of tax burden on Americans.

Doesn't take into account state and local taxes (sales taxes, auto registration, etc.) that are regressive in nature.

Also, it can be argued that those well endowed should incur greater tax fees — after all, it is they that have more stuff to protect and defend. What about costs that all pay (subsidies for stadiums, roads, public works, etc.) that overwhelmingly benefit the affluent.

skushch• 16 years ago

How do subsidies for stadiums, roads and public works 'overwhelmingly' benefit the affluent. A poor person with no car benefits from roads, unless they never leave the house and somehow grow all their food and produce all their goods.

pauljonas2• 16 years ago

Because they are less likely to use them. They tend to be more likely clustered in urban areas, less likely to own vehicles (and less vehicles on average) and served by public transportation (trains & subways supported by fares and charged with being self-sufficient) that receives far less in subsidies than roads which are built on the federal dime.

On food delivery and utilities, more externalities imposed by exurban users (more affluent) than urban users. New York City residents are much "greener" and use far less energy than country/exurban dwellers, despite paying for the same Kw at a much more exorbitant price.

Stadiums and public recreation areas are frequented by the affluent, not those living paycheck to paycheck (on average).

Also, I did not even get into all the upside down craziness that tilts tax favoredness to the affluent, but you can check out writings of David Cay Johnston (http://en.wikipedia.org/wiki/David_Cay_Johnston) who details extensively how the wealthiest Americans enrich themselves at government expense (http://www.democracynow.org/2008/1/18/free_lunch_how_the_wea...).

I will cite one that he begins one of his books with — the burglar alarm subsidy — each time police respond to an alarm (95% being false alarms), it costs the public $50 or more ($2-3B per year), in essence a subsidy, and a diverting of police resources away from other areas (that either go unmet or result in additional costs and increased crime).

Note: edited because for some reason, keep thinking this forum supports Markup…

madair• 16 years ago

Some obvious and high-impact taxes that this chart misses:

- Property taxes - Sales tax - Tax-free executive perks

And of course, the discussion about fairness isn't taking into account the large percentage of industries that trade in or are based on commercialization of natural resources, nor a whole lot of other things like the large amount of current wealth, as well as industrial and military power still held that was originally bootstrapped or massively grown by colonization, slavery, and wars of aggression.

Fairness discussions like these are worse than useless, they purport and perhaps even intend to be amoral, but fall quite short and instead mislead.

[Edit:] Actually it isn't that they purport to be amoral, they can't be. Fairness is intrinsically moral, and thus if you're gonna talk about it you have to try a lot harder to bring in the real meat of the fairness discussion, like for instance, where is all that wealth coming from. People are quite worried about the lazy dude playing video games but getting a free ride from "socialism" (an abused word if there ever was one), reminds me of the mote and the beam.

milfot• 16 years ago

I just wanted to point out, two sentences in your edit actually cut directly to the heart of this issue.

Is the base starting point for society moral fairness or at least its amoral approximation of stability? The question of who benefits most (previously discussed at length in the comments) obviously.. by definition.. is more or less everyone.

Where does the wealth come from? the chicken or the egg? the farmer or the chickens? I think it fair to say with the experience of the past few years that wealth flows from the poor to the rich in boom times and from the poor to the rich in bust times.

Who benefits from stability more taking this into account? Do I even need to answer this question?

MaysonL• 16 years ago

The thing is, of course, that most of the income of the wealthy is never taxes. How much income tax has Bill Gates ever paid? I'd be surprised if it's anywhere near 10% of his wealth.

danteembermage• 16 years ago

Important to consider here is the earned income and child tax credits. While it's a slippery slope to start subtracting "benefits" in some fashion, these seem appropriate as they are a direct cash transfer. With that in mind, the highest 60% of wage earners pay more than 100% of the tax burden of the federal government.

Not All Money Is Created Equal - taxes of the poor, middle, and rich

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