Why the Wealthy are Paying Less of America's Taxes (capitalism, sell, companies)

[maschuette]

Originally Posted by djmilf

And I'd say you completely missed my point that a hedge fund manager losing his hundreds of millions is not the same as the secretary losing her tens of thousands.



I honestly believe that we each have a different idea about "fairness". Can you spot the satire in this quote?

"The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread." (from The Red Lily, 1894)



I would first ask you to not put words in my mouth. I never said that the manager and the secretary should pay the same rate. In fact I favor a progressive tax rate - but I hesitate to defend my stance. It's not that I don't believe that I can't defend it as much as I believe that you cannot be dissuaded from your flat tax position. At best, we must agree to disagree.

I would then make note that 13% is even less than the 15% long term capital tax rate currently being paid by the hedge fund managers.

I'd also point out that 13% is less than the 19% effective tax rate that Warren Buffet paid on his 2006 income and much less than the 33% effective tax rate Mr. Buffet estimated that his employees paid on their 2006 income.

Even the Fair Tax Act co-authored by Georgia congressman John Linder, while a sales tax and not an income tax, still sets an effective tax rate of 30%.

In 2009, the median house-hold income was just about $50K and there were roughly 115 million house-holds. A flat tax rate of 13% would yield about $750 billion dollars. In 2009, the cost of the Department of Defense was $515 billion and the interest paid on the Federal debt was $260 billion - for a total of $775 billion. Even without paying social security, medicare and all of the other entitlement programs, even without funding the day-to-day functioning of the federal government (including law enforcement), even without funding the Global War on Terror, a 13% flat tax rate still leaves a federal deficit of about $25 billion.



What do I say to your 13% flat tax rate? I'd say that you either conjured the number out of the air without any prior thought or that you actually believe that 13% is a fair rate. In the former, you're not being serious about the discussion and in the latter I would say you're not dealing with reality.

I'll only consider further discussion with you if you can convince me that you are neither a foolish troll nor an anti-tax, starve-the-beast reactionary.

I said 13% because studies have shown that it is the highest tax the goverment can set without hurting the economy and taking in less revenue. It is the most efficient number if instituted as a flat tax. But we would have to cut spending to make it work, but even you would agree that cutting spending is neccessary? By the way you said you were for progressive tax rates? The progressive movement was started in the US in the early 19th century when fabian socialism was brought over and renamed. Are you that kind of progressive?

[djmilf]

Originally Posted by maschuette

I said 13% because studies have shown that it is the highest tax the goverment can set without hurting the economy and taking in less revenue. It is the most efficient number if instituted as a flat tax.

Interesting!

Does that 13% rate apply only to an income tax, or is it a total rate for all forms of tax, i.e. payroll taxes, land taxes, property taxes, sales taxes, consumption taxes, etc. And what about taxes levied at the state and local level - are those included in the maximum 13% flat tax rate?

As far as I know, the highest income tax rate in United States have never been that low since 1916. Sincerely, I've a little confused when I try to consider that the United States for roughly the past 100 years had been encumbered by an inefficient tax rate.

Maschuette, I'd very much appreciate if you could provide a source for the studies that you reference concerning the 13% tax rate being the optimal rate.

Originally Posted by maschuette

But we would have to cut spending to make it work, but even you would agree that cutting spending is neccessary?

Actually, I believe that I've already shown that the 13% flat rate proposal would currently generate only about $750 billion in revenue to the Federal Government and would not even completely fund the Department of Defense, the current wars and paying the interest on the current national debt. Of course, I might have made a mistake in my calculations...and would appreciate if someone would point any mistake that I might have made in that calculation.

If it were up to me, I'd start cutting federal spending by winding down the wars, slashing defense spending, eliminating agricultural and corporate subsidies, figuring out how to best minimize social spending, and most definitely paying off the national debt. I'd still keep some form of Social Security and possibly move to a national single-payer Medical plan (for reasons that might be beyond this discussion). But I don't think that I could cut all the way down to $750 billion and still keep the nation from becoming disfunctional.

Maschuette, how would you cut the federal budget to meet the $750 billion limit?

Originally Posted by maschuette

By the way you said you were for progressive tax rates?

As I stated earlier, I subscribe to the concept of discretionary income - specifically that those who make less money tend to spend all of it just making ends meet while those who make much more money aren't required to spend all of it just to live comfortably. The better off have discretionary income.

The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion. - Adam Smith, Wealth of Nations.

I also hold with the marginality of money - the more of it that one has, the less important a single coin is to that person.

And he looked up, and saw the rich men casting their gifts into the treasury. And he saw also a certain poor widow casting in thither two mites. And he said, of a truth I say unto you, that this poor widow hath cast in more than they all: For all these have of their abundance cast in unto the offerings of God: but she of her penury hath cast in all she had. - The Gospel of Luke, Chapter 21, verses 1-4 (King James Version)

I interpret this to mean that even though the rich men gave far much more than the poor widow, in truth the widow actually sacrificed more. I extend this to mean that the $5000 in taxes paid by the theoretical secretary mean more to her than the $25 million in taxes paid by the hypothetical hedge fund manager mean to him. It seems on the surface to be paradoxical, but I believe that a convincing argument can be made about the marginality of money.

Originally Posted by maschuette

The progressive movement was started in the US in the early 19th century when fabian socialism was brought over and renamed. Are you that kind of progressive?

It's quite a leap from a progressive tax rate to the American Progressive Movement to the British Fabian Society. I suppose the next leap is to Marxist Socialism . Aside from a little word association, there's not that much more to it than I can see.

If Adam Smith was speaking of non-porportional taxation in 1776, I don't think that the fatherhood of progressive taxation could be pinned on Karl Marx, although it would appear he adopted it as a foundling.

I'd like to consider myself more of a political hybrid, somewhere between classic liberalism and American progressivism. What I am definitely not is a socialist or a libertarian.

[Ariadne22]

djmilf, discretionary income and the marginality of money is plain, unvarnished common sense and simple human decency, if some would but admit it. Or, would we have the multitudes of formerly working and middle class in tents and under bridges - as they soon will be as more and more fall off unemployment or work for $8-$10 an hour - since our manufacturing is now in China.

From a just borderline hanging on to what I have now place, I am opposed to a federal flat tax. Income taxes, state and federal, for me amount to not more than 5% of my gross income, soon to be zero since I no longer work. I buy very little so local sales taxes do not cost me much. Property taxes, however, are 18% of my gross income. Should a 13% flat tax come into being, there is no way I could keep my house unless property taxes were substantially reduced, social security and pension income excluded from the tax, and municipal services paid for by the federal govt.

In other words, my standard of living while working and for this year at least is pretty much supported by the US Tax Code.

As for the rest of your post - also -

[maschuette]

djmilf - I believe Newt Gingrich and his think tank came up with the income tax of 13%. I dont remember for sure because i saw it on John Stossel and i forgot his source. A tax rate that low would cause our economy to flourish and raise revenue's higher then what you figured ( which i dont put much stock in) I agree with your spending cuts, i believe we should slow our role around the world and cut social security down to disabled people (including disabled vets) and the VERY poor (smaller incentive). You said you were half liberal and half progressive, my point was that the progressive movement was created shortly after the fabian society took hold in England and is basically the american version. If your not a fabian socialist, why? What dont you like about them? I believe (speculative) that you, in your heart, are a socialist. But your too smart to say it out loud.

[shaker281]

Hmmm, so Russia has it right?

Is Russia going to raise its 13% flat income tax rate? « Antal Russia News

[shaker281]

A lot of "labeling" going on in this thread. Socialist, liberal, progressive... all being used to subtly denigrate. IMO, it turns an exchange of ideas into a combative environment. I guess it is not possible to have an opinion on a particular subject without being lumped into some theoretical political ideology?

[djmilf]

Originally Posted by maschuette

djmilf - I believe Newt Gingrich and his think tank came up with the income tax of 13%. I dont remember for sure because i saw it on John Stossel and i forgot his source. A tax rate that low would cause our economy to flourish and raise revenue's higher then what you figured ( which i dont put much stock in)

Maschuette, I wish that you could properly source your 13% rate claim. Simply saying that you saw John Stossel say it doesn't make it true - there's got to be something tangible to back it up (a study, a white paper, a book, something) or it's just rumor. I'm looking for verifiable facts here, mostly because I might learn something from the source.

And I really don't trust John Stossel's reporting, I've seen him more than once distort information to push his point of view in his reporting.

The only thing that I can find about a 13% flat tax (oops, didn't see Shaker's post until I wrote this) is that Vladmir Putin in 2001 put a 13% flat income tax in place in Russia and that government revenue increased 50% (somehow/sometime). However, I would hope that you would agree that Russia in 2001 isn't the United States in any time period. In 2001, Russia was emerging from a severe economic hardships caused by its transistion to a market-based economy and was also just beginning to become a major exporter of oil, natural gas and raw materials. Russian GDP doubled between 2000 and 2008 - it's not supprising to me that government revenues rose 50%, in fact, it's supprising that it didn't rise more. And Russia still maintains high income tax rates of 25% on domestic corporations and 35% on foreign corporations.

Originally Posted by maschuette

I agree with your spending cuts, i believe we should slow our role around the world and cut social security down to disabled people (including disabled vets) and the VERY poor (smaller incentive).

Then you would go farther than me. I support the safety net of entitlement programs like Social Security, Medicare, unemployment insurance, labor laws and the like. While they may not be perfect and may not make the economy 100% efficient and could do with some adjustment, they do keep the common American safe from living the life of an 1890's inner city tennement dweller.

And no, that doesn't make me a socialist, Fabian or otherwise .

Originally Posted by maschuette

You said you were half liberal and half progressive, my point was that the progressive movement was created shortly after the fabian society took hold in England and is basically the american version. If your not a fabian socialist, why? What dont you like about them? I believe (speculative) that you, in your heart, are a socialist. But your too smart to say it out loud.

Actually, I said that I thought of myself as half classical liberal (http://en.wikipedia.org/wiki/Classical_liberalism) and half progressive (Progressivism in the United States - Wikipedia, the free encyclopedia); although that may just be my sense of ego and not my id.

I believe that you are incorrect when you attempt to link the British Fabian Society to American Progressivism.

The Fabian Society evolved into the British Labor Party, ownership of industries by the national government and the near economic disintegration of Great Britain in the 1970's.

American Progressivism led to Theodore Roosevelt, corporate regulation, trust-busting, conservationism, child labor laws, elimination of government corruption, education reform, a move towards more democratic forms of government, suffragism, the social programs of Franklin Roosevelt and the Civil Rights acts. On the other hand, American Progressivism also led to Prohibition and I have heard that some American Progressives also were proponents of Eugenics. Do I need to state my stance on those last two?

Simply because the Fabian Society and American Progressivism began in the 1890's doesn't mean that one necessarily spawned the other. In fact, many different forms of social reform arose in response to the problems created by the Gilded Age, which was the last time that the United States truly practiced laissez faire economics, these were just two such reactions.

And while we're on the topic Maschuette, why is it so important for you to label me as a socialist?

And also, Maschuette, what political label(s) do you hang on yourself, and why?

[maschuette]

djmilf - I dont want to label you a socialist just for the sake of it. Socialism, communism...= too much government. My coworker spent the first half of his life in Cuba. When talking with him i asked him what was wrong with Cuba, since i cant even imagine. He said the biggest problem is that the government owns 90% of businesses and that the people have no say in anything. "When the people are scared of the government, you have tyranny, when the government is scared of the people, you have liberty" Thomas Jefferson. That is why i am a conservative. I want to limit the government not expand it. There is no completely capitalist country in the world. Some socialism is neccessary, but i believe we need to move back from the brink. The reason i keep bringing up fabian socialism is because of their law of inevitable grudualism. Slowly but surely we are becoming more government dependent. Once we are completely dependent then we have no say and no freedom. In Cuba, a doctor makes only a little more than a bus driver; there is no incentive to succeed because of the structure of the country (complete control by the government). Liberals are quick to mock me anytime i use the word socialism or compare the US to Cuba, but i do it because that is the direction this country is headed. We may never get to that point but why move in that direction at all.
As for my 13% flat tax rate, i still can't find the study but i Steve Forbes ran on it for is bid of president in 2004. He ran on a flat tax of 17%, the extra 4% was to pay off the deficit. In 2008, the US government took in 2.5 trillion dollars in taxes, 1 trillion of that was from income tax. If we enacted a flat tax of 13% and reduced our revenue to 750 billion (your number) plus 1.5 trillion then we could still easily manage with spending cuts put in place. But i still believe that revenue would go up with the flat tax in place.
In 1942, Stuart Chase, in his book "The Road We Are Traveling" spelled out the system of planning the Fabians had in mind; the interesting thing is to look at that plan in comparison to 2010 America.
1. Strong, centralized government.
2. Powerful Executive at the expense of Congress and the Judicial.
3. Government controlled banking, credit and securities exchange.
4. Government control over employment.
5. Unemployment insurance, old age pensions.
6. Universal medical care, food and housing programs.
7. Access to unlimited government borrowing.
8. A managed monetary system.
9. Government control over foreign trade.
10. Government control over natural energy sources, transportation and agricultural production.
11. Government regulation of labor.
12. Youth camps devoted to health discipline, community service and ideological teaching consistent with those of the authorities.
13. Heavy progressive taxation.

[JazzyTallGuy]

Originally Posted by maschuette

In a 2008 debate Obama admitted that capital gains tax doesnt increase the tax revenue for the US, but he still endorsed it because "it was fair." In other words, wealth redistribution and class warfare. Would you like it if your total taxes were 50%? No? Then why is it right to do it to anyone else? Fair treatment means treating everyone EQUALLY!!!!

Corporations pay their executives six to eight figure salaries with stock options bonuses car allowance etc. and then turn around and give their non-executive salary and hourly employees wage increaes of 2% to 3% a year IF THEY ARE LUCKY. This is "Wealth Distribution" also. Yet I don't here conservatives even commenting on this.

Why?

Conservative adage #1: If you’re not rich, **** you!

[maschuette]

The bosses make more...wow thats a shocker. Your right, in fact, i think they should make less. Are you happy now?