France to introduce 75% income tax rate on earnings above 1 million euros

[Oltz]

I think both sides of this discussion are coming at it backwards. On the right, we have Russ arguing "everyone gets what they deserve", on the left, we have Ryan arguing "there's no way anyone deserves to make that much money" (I'm paraphrasing and exaggerating here, as the specifics aren't very relevant to my point, so don't get bent out of shape if you feel I've slightly misrepresented one side or the other).

In my opinion, it is better to start from the question: "What is the minimum standard of living our society should accept for it's members?" I think we can all agree (maybe not?) that basic police protection, rule of law, emergency medical services, etc. are a minimum standard, but disagree on other things (other health care services, minimum housing standards, fire protection, etc.). Once a society decides on some minimum threshold below which we consider living to be "inhumane" (and different societies could well decide on different standards), then we can figure out how much it will cost. Add in the cost of things that the society considers valuable, but that the market is less well suited to provide (anyone here in favor of fundamental physics research at the LHC?), and then we can start talking about what a reasonable tax rate is.

If we start with the question of: "What is the purpose of the taxes in the first place?" We can come up with a tax rate designed to address that.

Additionally: To address the argument that high tax rates discourage: innovation, individual productivity, etc.; when applied to the super-wealthy (we can argue about where to draw the line of super-wealthy later, if you insist), this argument is absurd. After some point¹ people stop deriving any additional satisfaction from increased income anyway. Beyond this point people are working strictly because they want to work, not because additional income helps them out. Think of it this way, is Bill Gates really motivated to work by the thought of being worth $62 billion, rather than his current $61 billion? Would he be discouraged from doing anything if his next billion was taxed at 99%? Alternatively, would he be motivated to do anything if his next billion was completely tax free? I think the answer to all three of these questions is a clear "no". Bill Gates will continue to do whatever the heck Bill Gates feels like doing. To sum: Anyone making more than, say, $1 million/year is not motivated by the next million, rather they are motivated by what they are accomplishing. Thus, taking away some large portion of that next million will not have a significant impact on their desire to continue producing.

1 Link "Emotional well-being" plateaus at ~75,000 USD, while "life evaluation" rises with the log of income (which means diminishing returns).

I see what you are trying to say (I think) but you have a major flaw in your example. Income is not wealth Bill Gates does not make 61 Billion a year in fact is just under 1 million dollars according to what I can google with bonus's. He would not even be affected by this Tax.

Second when somebody earns a salary the point is it gets spent. Either they directly use it for good/services or they invest it or they put it in a bank who then buy bonds or loans it out to another party.

Third CEO's tend to get the compensation they get for several reasons 1 few people can handle the job that needs to be done and do it well 2 most do not last long and it is highly unlikely to ever get a position like that again once released by a company Average tenure is 6.6 years down form 8 in the 90's and is only 4 years for outside company highers.
http://www.businessinsider.com/shortest-tenure-ceo-2011-5
Would you take a job knowing that it will likely only last for a few years and that you would never be able to get a job after it regardless of your performance for less then a butt ton of money and a nice severance package? I would negotiate the best possible compensation wouldn't you ?

You get what you pay for... when you have somebody making billion dollar choices you need to trust them with every ones money and jobs on the line.

Most people making over a million dollars a year have a short earning window and no guarantee of returning to that level (athletes, executives,actors,musicians). Some consultants, lawyers and doctors can reach this level of income and thse are the ones who will simply choose to stop taking projects and only work part of the year if they are taxed to heavily.

If offered a 1 million dollar 3 month consulting job or court case after just completing one knowing you would only make 25% of that would you bother or would you take the rest of the year off?

How about the third quarter? or the 4th?
If you could work half a year and take home 1 million (~25% effective rate on the first million) would you work the second half of the year for another $500,000 or would you stay home with your family?

 

[russ_watters]

I think you made the distinction with "means" / "end". i.e intent

I guess you and I weigh the importance of the states intent differently.

In any case Russ, I do agree with your take on this topic (wealthy/poor/who "earns it"), I'm just a little more left than what's said in your posts.

I've said it before, capitalism is a game with winners and losers. Standard of living is not (health/education/ect).

Fair enough, though that last part implies that you think wealth is a zero sum game - that if one person increases their wealth, another must inevitably lose some. That's clearly not the case, otherwise the average wealth and standard of living would not be increasing.

[edit: Oops - as kiwikid pointed out already...]

 

[russ_watters]

In my opinion, it is better to start from the question: "What is the minimum standard of living our society should accept for it's members?" I think we can all agree (maybe not?) that basic police protection, rule of law, emergency medical services, etc. are a minimum standard, but disagree on other things (other health care services, minimum housing standards, fire protection, etc.).

Sorry, I still disagree with your framing. Police forces and rule of law are structural components of government that do not directly translate into standard of living except perhaps in their limited domains. Having a police force will not prevent you from starving to death or take care of you if you lose your job or are sick.

So while pretty much all westerners agree on those core functions of government, the disagreement starts with whether the government is responsible for your standard of living at all. This question is typically bypassed or assumed that the answer is yes (as you did), but historically, the answer has been no. It is only the past 100 years or so that people have started to assume the answer to be yes.

Once a society decides on some minimum threshold below which we consider living to be "inhumane" (and different societies could well decide on different standards), then we can figure out how much it will cost.

Now I still think that this is an oversimplification. For the record, I'm not against social safety nets. But a safety net is not the same thing as a government provided minimum standard of living. A safety net covers you in case of actual need - a government provided standard of living means the government provides it whether you need it or not -- and in some cases removes your freedom to provide for it yourself (see: healthcare in some formulations of nationalized healthcare, social security). Why do I think this is important? Two reasons:

1. I like freedom and this idea is a violation of the historical concept of individual rights.
2. I think it is a bad idea bordering on immoral for a government to force-ably lower peoples' standard of living.

Additionally: To address the argument that high tax rates discourage: innovation, individual productivity, etc.; when applied to the super-wealthy (we can argue about where to draw the line of super-wealthy later, if you insist), this argument is absurd. After some point¹ people stop deriving any additional satisfaction from increased income anyway. Beyond this point people are working strictly because they want to work, not because additional income helps them out. Think of it this way, is Bill Gates really motivated to work by the thought of being worth $62 billion, rather than his current $61 billion?

This isn't just about those tiny handful who make that much money. It can't be since that tax doesn't put a dent into a country's budget. There is a big difference in lifestyle between $50,000 and $100,000 in income and so the choices you make there can be heavily influenced by tax policy. In the US, our tax system is so progressive that few people under $50k pay any federal income tax while those who make $100k pay near the highest. There are a lot of people in these income ranges - a lot of payers and non-payers.

As is often the case, people who think in that fashion completely ignore at least that 47% of this issue: Yes, we can focus on what a high tax rate does to the 1%, but we also need to discuss what nonexistent tax rate does to the 47%. It may not be nice to think that taxing a large fraction of the population nothing to run the basic functions of their government might encourage sub-par performance, but the incentives and disincentives are real on both sides of the issue.

In any case, I am not comfortable morally with telling someone else, "I think you've had enough." Who am I to judge that?

 

[russ_watters]

Quick caveat to this:

For the record, I'm not against social safety nets. But a safety net is not the same thing as a government provided minimum standard of living. A safety net covers you in case of actual need - a government provided standard of living means the government provides it whether you need it or not -- and in some cases removes your freedom to provide for it yourself (see: healthcare in some formulations of nationalized healthcare, social security).

I'm also not, per se, against the government forcing you to be responsible. Plenty of people have proven that they are incapable of being responsible and if they had been responsible, they wouldn't need the government safety net (uh oh, did I just say...?). The problem is that governments are also irresponsible. So now we have a social Social Security system that is a legalized version of what Bernie Madoff is now in jail for; a ticking time-bomb on a slower fuse, since the government has a larger pool of suckers to siphon money from than Madoff did.

The government said to my grandfather -- you'll spend your money instead of saving it for your retirement, so give it to me and I'll save it for your retirement. Then immediately after getting the money, the government spent it, making exactly the mistake SS was created to fix -- but now on a national level, effecting hundreds of millions of people. This is why I would have favored a privatized version much like an IRA or 401k, with strong contribution incentives or even mandatory contributions, just without the government having the ability to Madoff away with the money. We're in it now, though and we can't just pull the plug and privatize it, so I'm seriously worried that it could sink us.

 

[Pythagorean]

The government said to my grandfather -- you'll spend your money instead of saving it for your retirement, so give it to me and I'll save it for your retirement. Then immediately after getting the money, the government spent it

I thought the baby-boomers were the ones spending it? The problem being that social security gets paid by me now, and received by old people now, but if the populations don't match... like say, there's more old people than young people... because of a baby boom... then there's more taking than giving going on.

 

[russ_watters]

I thought the baby-boomers were the ones spending it? The problem being that social security gets paid by me now, and received by old people now, but if the populations don't match... like say, there's more old people than young people... because of a baby boom... then there's more taking than giving going on.

Yes, that's what a pyramid scheme is. I gave the starting point as a punctuated example, but yes, the government is continuously getting and spending the money that it doesn't immediately need to pay out (the money it is supposed to be saving). Back when the contributions were vastly more than the payouts it may have been easier to ignore, but the government has been spending surpluses instead of saving since the beginning I think.

The only way for a pyramid scheme to be successful forever is for the pyramid to be pyramid shaped forever -- which means exponentially increasing population growth, forever. As population growth slows, the pyramid narrows into a tower. So don't make the mistake of thinking the baby boomers are an unfortunate and temporary bubble after-which the shape of the pyramid will reassert itself. It won't. And don't make the mistake of thinking people assumed 75 years ago that SS would be viable under the pyramid scheme model forever: they knew it ultimately had to collapse.

This is also part of the reason Europe is having a worse time than the US: Their pyramid is already a vertical tower, while ours isn't quite vertical yet.

 

[NeoDevin]

Sorry, I still disagree with your framing. Police forces and rule of law are structural components of government that do not directly translate into standard of living except perhaps in their limited domains.

Police forces and the rule of law strongly contribute to standard of living in virtually every domain they act in. They're to prevent others from taking what you earned through your hard work, they're to prevent you from getting assaulted/murdered because someone disagrees with you, and they're (supposed) to prevent corruption and illegal finance schemes from bringing down the economy. All of these things (and many more) contribute directly to your standard of living (see Somalia for a counterexample). While the police force and the rule of law doesn't directly affect every aspect of your standard of living, it does have a strong impact on many aspects of it.

Having a police force will not prevent you from starving to death or take care of you if you lose your job or are sick.

And a health care system won't prevent you from being shot in the street... What's your point?

So while pretty much all westerners agree on those core functions of government, the disagreement starts with whether the government is responsible for your standard of living at all. This question is typically bypassed or assumed that the answer is yes (as you did), but historically, the answer has been no. It is only the past 100 years or so that people have started to assume the answer to be yes.

Having established already that we agree certain aspects of your standard of living should be ensured by the government/society (after all, there's no fundamental reason that the government should provide a police force, you could hire your own security if you have the money), we're back to my original point of arguing extent. If you want to argue that they shouldn't provide anything beyond the rule of law, that's a valid argument to make. What's not a reasonable argument is that the rule of law is somehow not a factor in standard of living.

Now I still think that this is an oversimplification.

It's not an oversimplification at all. As a society, we should first decide which services ought to be provided by the government, and then set the tax rate to be sufficient to provide them.

This isn't just about those tiny handful who make that much money.

Funny, I thought this thread was about a tax on those making more than $1 million/year...

 

[Ryan_m_b]

I find that very hard to believe, but I'll try to clarify

I find it best not to assume what someone means when they say "left" or "right" these days as there are so many understandings of the term (especially when you cross the atlantic) that most discussions become bogged down in arguments that are the result of different definitions. An excellent example of the latter is this discussion in which it is clear that you and I have very different ideas of what socialism actually is.

On the far right side of the typical economic spectrum is unfettered capitalism. On the far left side is pure government ownership (socialism). The middle can be tough to define (by country, internationally, attempted statistical measurement) but at the very least we can say for certain that someone who favors a policy that would move the laws of a country to the left is left of that country's center on that particular issue. Someone who doesn't favor that policy could be right leaning, centrist or slightly left (less left than the policy) -- but my statement wasn't about them.

I'll accept that this is how you intend them though I do not recognise this as a definition that everyone uses, mainly because this doesn't take into account social/civil ideologies and focuses on economics.

Yes, and the basic difference between a capitalist and a socialist (yes, again I know it is simplistic to cut the spectrum in half -- that doesn't make it inaccurate or non-instructive) is that a socialist doesn't think that just giving a person all those things just because they are alive will have any effect on their productivity while a capitalist does.

No I don't think that's true. Obviously providing someone with something at no cost to them will affect their productivity, the idea is to increase their productivity by giving them a good base to work on and even if they don't it's largely tangental as the efforts are morally rooted rather than economically.

Also (and I can't stress this enough) socialism does not necessarily preclude capitalism. Unless of course your definition of socialism is a centrally planned economy in a society that does not recognise private property (which would be a strange and narrow yet not uncommon definition).

CAC didn't call it fair. The word I would use is "functional". Perhaps even "proven". In the 20th century, a large number of countries emerged from industrialization and saw spectacular gains in standard of living. The ones that did the best (most of the western countries) started with a high degree of economic freedom and all have gradually reduced that freedom. The ones that did the worst started with central planning (your "fair"). Some with central planning that didn't reduce the central planning and institute freedom, like the USSR and North Korea, did terribly while others that have become more free, like China, are improving.
The danger I see is in taking an idea that was working and changing it because you don't think it was "fair" enough. What if it becomes more "fair" but falls apart? IMO, that's a significant risk, particularly in light of what we're seeing in Europe right now.

Perhaps you think we've advanced enough and it is acceptable now to slow or stop that advancement in favor of government provided equality of outcome, but I don't -- and I think that you and others who hold similar opinions underplay the risk that this experiment with increased socialism could lead to economic and social collapse.

I disagree with your framing here, as I've said above socialism does not equate to centrally planned economies with no private property. Yes capitalism has been a strong force in our recent history and no one can deny that but there has never been a totally laissez faire economy, rather all countries practice some form of socialist policies (though they may not define them as such).

The more I think about this, the more disgusted and insulted I get. If someone ever implies the poor are lazy or have made their own bed, they get lambasted, but this is just as bad, if not worse (there is quite a bit of evidence of the effect of personal choices on outcome). This is straight out of the Marxist propaganda handbook and it is a twisted way of looking at the issues because

I'm sorry you are upset but I wasn't suggesting that rich people only get rich by being "leeches" as you referred to earlier. In reality some people work damn hard and get rich, others work damn hard and get poor. Conversely some people don't work at all and get rich, some people don't work at all and get poor. A lot of people would say that this is unfair.

I wasn't even arguing any of these point particularly, just bringing them up for discussion.

 

[2AlphaMales?!]

I think capitalism can be adequately described as "there are winners and losers, but as time goes by, both groups enjoy higher standards of living. Wealth is not a zero-sum game."

1. Due to the marginal utility of money (AKA - you don't need that 16th Gold Plated Lama) the difference in the wealth related "standard of living" becomes less apparent over time, if not negligible.

2. If all the unnecessary economic activity (eg. the military industrial complex/double glazing and insurance salespeople/chuggers etc etc etc) were cut out, and the remaining necessary work fairly evenly distributed amongst the population, people would doubtless have a vastly improved work/life/hobbis(education) balance. Not to mention the fact there wouldn't be any more unemployment, and the likely positive social impact of a reduction in wealth inequality.

3. If the polar ice caps do melt due to all the unnecessary economic activity everybody will be much worse off. Contrary to what some people think nations aren't growing - sea levels are rising.

 

[KiwiKid]

3. If the polar ice caps do melt due to all the unnecessary economic activity everybody will be much worse off. Contrary to what some people think nations aren't growing - sea levels are rising.

Sigh.

Let me put this as simple as possible: capitalism works on the presumption that people CARE about these things, and are willing to spend money to deal with them. If they don't, then yes, the polar ice caps melt and all other sorts of funny stuff do happen. This is no different in a socialistic society. Basically, you have two options: let 'the people' decide what happens (which leads to the situation we have now), or create a dictatorship with a leader who knows better.

You can't have a democracy AND a list of things you decide they *must* want to achieve.

 

[2AlphaMales?!]

Lots of people are incredibly selfish and or stupid and or short sighted. Some are even psychopathic. Such people are often inordinately rich and powerful in capitalism. You must know this??

You seem to be confusing free market capitalism and democracy. In case you hadn't noticed, in the USA the socialists ARE the democrats. The libertarians are the GOP.

 

[russ_watters]

Police forces and the rule of law strongly contribute to standard of living in virtually every domain they act in...

Having established already that we agree certain aspects of your standard of living should be ensured by the government/society (after all, there's no fundamental reason that the government should provide a police force, you could hire your own security if you have the money), we're back to my original point of arguing extent. If you want to argue that they shouldn't provide anything beyond the rule of law, that's a valid argument to make.

Keeping you from getting shot on the street is a negative protection of rights: it's the government stopping people from doing things to you. Giving you food is a positive action: giving you something. That's the difference.

Fine - crime is a standard of living issue, but it is not something that citizens have held primary responsibility over pretty much since the concept of government was created: do you at least recognize that your "extent" is a massive and fundamental shift from what the role of government was prior to 1930? You framing everything as standard of living issues glosses over this fundamental shift.

 

[Ryan_m_b]

Keeping you from getting shot on the street is a negative protection of rights: it's the government stopping people from doing things to you. Giving you food is a positive action: giving you something. That's the difference.

Surely it depends on what the populus want in a government? If the majority of people just want a government that enshrines certain rights and acts purely to prevent other people (or possibly natural phenomenon) from violating them then fine. But many people want more from their government and see positive action as you call it as a necessary part of that.

 

[russ_watters]

No I don't think that's true. Obviously providing someone with something at no cost to them will affect their productivity, the idea is to increase their productivity by giving them a good base to work on and even if they don't it's largely tangental as the efforts are morally rooted rather than economically.

I meant negatively and I'm not sure you acknowledged that. Just to be clear: you're saying/acknowledging that the hope is that the decrease in productivity caused by not having to work as hard to get what you need/want would be balanced-out by an increase in productivity due to better health of the population (for example), right? The problem I see with that is that many aspects of these policies don't have any means I can see for providing a positive impact on productivity. Unemployment compensation and welfare programs the biggest examples: they directly incentivize not working. I don't see how an incentive for not working can be an incentive to work/work harder. Could you explain?

Furthermore, and more importantly, this contradicts or at least has nothing to do with the (your) guiding principle for implementing socialistic policies: fairness/equality/providing a minimum standard of living. If someone is has a right to a minimum standard of living just by being born, their productivity is completely irrelevant to whether or not they should receive social help.

Following that a little further and assuming you have considered that problem, am I right in concluding that the right to a standard of living is the dominant consideration: that even if it reduces productivity, you still want it? The problem with that logic is that while you believe that this will increase productivity, if you're wrong, you'll still ride the plane all the way into the ground. This is precisely why I urge caution in going down that road and more to the point, I think it is what we're seeing happening today. Our countries have huge debts largely due to underfunded social programs. We've been borrowing money to boost our standard of living. In other words: we don't have the productivity required to maintain the standard of living being demanded via socialistic policies...

...or perhaps, that's the point of this law? There's enough money if we take more from the rich? Well this one isn't enough. You'll have to reach much further down the ladder to find that money. How far are you willing to go?

Also (and I can't stress this enough) socialism does not necessarily preclude capitalism. Unless of course your definition of socialism is a centrally planned economy in a society that does not recognise private property (which would be a strange and narrow yet not uncommon definition).

I disagree with your framing here, as I've said above socialism does not equate to centrally planned economies with no private property.

It is a spectrum (hence the left/right thing). Again, the center would be tough to draw but someone who is near the center would accept aspects of both socialism and capitalism. Someone a little to the right would be primarily (but only by a little) capitalistic while someone a little to the left would be primarily (but only by a little) socialistic. The point is that some policies move us to the left on the spectrum, some to the right.

So for clarity: yes, complete socialism would preclude capitalism completely (and vice versa). Yes, it would be complete government (or some other collective) control/ownership. It is right there in the first line of the definition: http://en.wikipedia.org/wiki/Socialism
"Socialism /ˈsoʊʃəlɪzəm/ is an economic system characterised by social ownership and/or control of the means of production and cooperative management of the economy..."

Yes capitalism has been a strong force in our recent history and no one can deny that but there has never been a totally laissez faire economy, rather all countries practice some form of socialist policies (though they may not define them as such).

Clearly. The point is that 200 years ago they were much closer to that side of the spectrum -- so much so that people discussed/attempted to achieve true laissez faire. Today, no one does, but people do discuss/attempt to achieve true socialism. We are quite clearly moving from right to left on that spectrum. Even if you didn't grasp what I was getting at before, do you at least agree with this historical fact now that you understand what the measuring stick looks like?

I'm sorry you are upset but I wasn't suggesting that rich people only get rich by being "leeches" as you referred to earlier.

I was sure that you didn't, but nevertheless, that's a pretty unfortunate oversimplification you made. Such a statement shouldn't even be a significant part of modern economic thought: exploitation was the subject of reforms in the late 1800s to early 1900s and there's really not much left to be done on that front. Most of the things Marx was complaining about when he wrote what you were paraphrasing (I'm pretty sure that was Marx) simply don't exist in the West today in any meaningful amount.

 

[NeoDevin]

Fine - crime is a standard of living issue, but it is not something that citizens have held primary responsibility over pretty much since the concept of government was created: do you at least recognize that your "extent" is a massive and fundamental shift from what the role of government was prior to 1930? You framing everything as standard of living issues glosses over this fundamental shift.

Wikipedia disagrees with you. Socialized medicine was first implemented in the 1880s. And that was in response to public sentiments that had probably been building for decades before that. That's also neglecting tribal societies where everyone in the tribe would contribute to support the local 'doctor', which is also a form of socialized medicine (nobody denied care, doctors payed by the public). So the idea of socialized medicine in some form or another alone dates back at least 150 years, probably much more (my understanding is that Native American tribal structure was fairly consistent for a few thousand years before Europeans showed up). Other standard of living issues have been provided by the government for thousands of years: Building codes ensuring that people have safe houses date back at least as far as 229 C.E. Communal road building enabling easier transportation (which also affects standard of living, though perhaps less directly) goes even farther back, to 4000 or 5000 B.C.E.

My point here is not to argue whether or not the government should be providing any particular service. After all, you could let the market decide whether or not to buy buildings that may collapse, let private companies set up toll roads, let private doctors/hospitals provide health services, and even let private companies sell security services. Arguments can be made for or against any of these. My point here is that this whole discussion about what is or is not a fair tax rate is backwards. The tax rate should be a result, not a premise. We should not be asking: "This is an appropriate tax rate, now what services can we afford to provide?" We should instead be asking: "These are the services we think everyone should have access to, now what is the tax rate we require?"

 

[Oltz]

Wikipedia disagrees with you. Socialized medicine was first implemented in the 1880s. And that was in response to public sentiments that had probably been building for decades before that. That's also neglecting tribal societies where everyone in the tribe would contribute to support the local 'doctor', which is also a form of socialized medicine (nobody denied care, doctors payed by the public). So the idea of socialized medicine in some form or another alone dates back at least 150 years, probably much more (my understanding is that Native American tribal structure was fairly consistent for a few thousand years before Europeans showed up). Other standard of living issues have been provided by the government for thousands of years: Building codes ensuring that people have safe houses date back at least as far as 229 C.E. Communal road building enabling easier transportation (which also affects standard of living, though perhaps less directly) goes even farther back, to 4000 or 5000 B.C.E.

My point here is not to argue whether or not the government should be providing any particular service. After all, you could let the market decide whether or not to buy buildings that may collapse, let private companies set up toll roads, let private doctors/hospitals provide health services, and even let private companies sell security services. Arguments can be made for or against any of these. My point here is that this whole discussion about what is or is not a fair tax rate is backwards. The tax rate should be a result, not a premise. We should not be asking: "This is an appropriate tax rate, now what services can we afford to provide?" We should instead be asking: "These are the services we think everyone should have access to, now what is the tax rate we require?"

I like this line of thinking...it is essentially what the constitution put in place a small list of services to be provided by the federal government with each state electing any other services they chose to provide at the state level.

Until the 16th amendment the federal government sent a bill to each state based on its population for the collective limited services they provided. Each state government and population decided what they wanted to provide and market forces determined which states grew or shrank based on level of services provided per tax burden versus economic and social opportunity.

Remarkably people do not know that the 16th amendment was only passed as a trade off to pass prohibition (approximately half the states wanted prohibition and another third of states wanted federal progressive income tax they joined together to pass both) of course we all know that prohibition got repealed and we still have federal income tax something only a third of the country supported. Thus began the federal expansion of powers and the erosion of states and individual rights.

By keeping things at the smallest possible level (state/local) it gave the voters a greater voice in what actually happened to them and more recourse for removing policies that end up being poorly designed. Plus states could watch each other and learn from mistakes so only 1 state is tied to an unproven social experiment and others can see the results before committing the entire nation to a policy.

If you have a few minutes this blog post is very interesting if you like you can skip down to the "things done to undo" section.

http://chiefio.wordpress.com/2012/06/28/fixing-americas-budget-mess/

 

[CAC1001]

Wikipedia disagrees with you. Socialized medicine was first implemented in the 1880s. And that was in response to public sentiments that had probably been building for decades before that.

I think Russ means by historical American standards regarding the size and scope of government.

My point here is that this whole discussion about what is or is not a fair tax rate is backwards. The tax rate should be a result, not a premise. We should not be asking: "This is an appropriate tax rate, now what services can we afford to provide?" We should instead be asking: "These are the services we think everyone should have access to, now what is the tax rate we require?"

IMO, one should consider both ways, and has to be careful with the latter. It is fine for the top 10% and the lower 80% to vote to pay taxes to provide safety nets for the poorest 10%. It is wrong for the bottom 10% and the 80% to vote to tax the top 10% for all sorts of freebies, which is what will happen if you just hold a vote about what services to provide, and then try to figure out what taxes are needed.

 

[mheslep]

...Think of it this way, is Bill Gates really motivated to work by the thought of being worth $62 billion, rather than his current $61 billion? Would he be discouraged from doing anything if his next billion was taxed at 99%? Alternatively, would he be motivated to do anything if his next billion was completely tax free? I think the answer to all three of these questions is a clear "no"...

In that example, Gates, I would have said clearly "yes." Look at what Gates does with most of his time now: his foundation. It appears to me he and his wife are energetically engaged and focused on having as much impact with that foundation as possible, just as Gates has with most everything else in his life. Take away his billions, leaving him millions, and not only is the value of the Gates Foundation replaced with (IMO) inferior government action (and inaction), but then I suspect Gates is more likely to fall into a pattern of the self-satisfied rich you suggest.*

*And the loss of the ~1000 jobs created directly by the foundation, never mind jobs created by foundation investments.

 

[NeoDevin]

In that example, Gates, I would have said clearly "yes." Look at what Gates does with most of his time now: his foundation. It appears to me he and his wife are energetically engaged and focused on having as much impact with that foundation as possible, just as Gates has with most everything else in his life. Take away his billions, leaving him millions, and not only is the value of the Gates Foundation replaced with (IMO) inferior government action (and inaction), but then I suspect Gates is more likely to fall into a pattern of the self-satisfied rich you suggest.*

*And the loss of the ~1000 jobs created directly by the foundation, never mind jobs created by foundation investments.

I suppose Gates was probably a poor example for me to use in the first place since this thread is discussing income tax, while Gates's income is mostly capital gains at this point. Even neglecting that, taxing his personal income (including capital gains) would seem to encourage him to take less as personal income and put more into his foundation (which, being a charity, is mostly tax free and/or deductible).

 

[OmCheeto]

Threads approaching the speed of light...

Sorry. I can't keep up.

Did run some numbers though.

Top 20 non-failed states vs. their tax burden ranking:

zen = nirvana
b = bad
rb = really bad
vg = very good

Conclusion? None.

I'm officially on vacation and cannot think properly. But the rankings to me, look like: "You got a car. To keep it running, you have to do maintenance. Maintenance costs money. You can drive around in an

, or you can drive around in an

Your choice."

I'll be back next week to listen to all the; "Yah, but that dead beat uncle Louise in the back seat. What about him? Do you keep giving him money for nothing?"

References:
List of countries by tax revenue as percentage of GDP
Failed States Index
zen scores are mine
and you can just gosh darn google the Edsel images yourself.

ps. I've been told that I use too many metaphor. Actually, that's a lie. What I've been told, is that I don't know the difference between 'metaphor' and 'comparison'. But then again, what do Armenians know... ;)

 

[CAC1001]

I suppose Gates was probably a poor example for me to use in the first place since this thread is discussing income tax, while Gates's income is mostly capital gains at this point. Even neglecting that, taxing his personal income (including capital gains) would seem to encourage him to take less as personal income and put more into his foundation (which, being a charity, is mostly tax free and/or deductible).

Yes it could, but IMO at that point it's really nobody's business what he does with his money. The politicians will always dream up an unlimited number of new government programs that they claim "should" be funded versus what is actually needed. Once the government has adequate funding, then let people do with their money as they please, regardless of how much they make. Tax them, sure, but not at any super-high rate on the basis that a small amount of money for them is still a large amount to someone else. And if the government is ending up with fiscal problems, before tax increases are proposed, it should first be looked into whether the fiscal problem is a result of a true lack of tax revenue or excessive spending on the part of the government.

 

[NeoDevin]

Yes it could, but IMO at that point it's really nobody's business what he does with his money.

I agree with this part completely.

Once the government has adequate funding, then let people do with their money as they please, regardless of how much they make.

You can only define "adequate funding" after you've decided what services you expect of the government.

 

[CAC1001]

I agree with this part completely.

You can only define "adequate funding" after you've decided what services you expect of the government.

Yep, I was over-simplifying there, I know the society would have to figure out what constitutes adequate services.

 

[mege]

One thing that I think is being glossed over: this 75% top tax rate in France has very little to no meaningful budget impact. It's going to effect 3000 people and I'd imagine that many of those are only marginally over the threshold.

These type of taxes are often political ploys by leftists (anti-capitalists) to show that they are eating the rich of the country. The same thing is happening in the US where the leftists want to eliminate the 'Bush Tax Cuts' for those making >250k, when really, there is almost zero impact to the national budget. Raising the taxes on the rich is NOT solving a budget crisis in a country where they are clearly overspending, it's just that raising taxes on everyone is grossly undesireable, and raising taxes on the rich (exclusively) gives the appearance that they are doing something without making their major voting bloc mad.

(one of the problems of democracy: no one seems to want to pay for what they're getting if they don't have too...)

 

[nitsuj]

One thing that I think is being glossed over: this 75% top tax rate in France has very little to no meaningful budget impact. It's going to effect 3000 people and I'd imagine that many of those are only marginally over the threshold.

These type of taxes are often political ploys by leftists (anti-capitalists) to show that they are eating the rich of the country. The same thing is happening in the US where the leftists want to eliminate the 'Bush Tax Cuts' for those making >250k, when really, there is almost zero impact to the national budget. Raising the taxes on the rich is NOT solving a budget crisis in a country where they are clearly overspending, it's just that raising taxes on everyone is grossly undesireable, and raising taxes on the rich (exclusively) gives the appearance that they are doing something without making their major voting bloc mad.

(one of the problems of democracy: no one seems to want to pay for what they're getting if they don't have too...)

That's a good point, and I'd suspect some/many of the "rich" don't have multimillion incomes to tax (oh those poor pro athletes). More so capital gains / interest income / dividend income.

That's where the tax legislation "guides" them.

Said differently the rich generate their cash flow from "balance sheet" activity. Not so much from "income statement" activity.

You don't get "rich" getting paid "hourly".

The last comment you made, that's not a problem. I think even Adam Smith was "aware" of this behavior . Capital gains are taxed comparatively low for a very good reason.

My micro/macro econ class covered this in detail. I remember that part of the textbook clearly, with a cartoon caption of "There is no such thing as a free lunch".

I guess also glossed over is that 3,000 would be taxed at 75% figure is before the rate is applied. That figure would probably drop significantly post tax, as the tax legislation is "guiding" them away even more "sternly" from earning such income.

 

[OmCheeto]

...the leftists want to eliminate the 'Bush Tax Cuts' ...

Ha!
Some of us would like to eliminate the 'Reagan Tax Cuts':
1988 38.5% --> 28% @ $32,000* (+ some bubble tax?)
1987 50% --> 38.5% @ $100,000*
1981 70% --> 50% @ $250,000*

And the 1964 'Johnson Tax Cut': 77% --> 70% @ $1,400,000*
And the 1963 'Kennedy Tax Cut': 91% --> 77% @ $1,400,000*

Ok. Maybe not the Kennedy tax cut. Wow! 91%

But that just amazes me that the top marginal rate was 70% all the way from 1965 through 1981. 16 years.
And it's been 31 years since 1981!

hmmm... I wonder why monkeys always pop into my head when I research such things. Hear no deficit, see no deficit, speak no deficit. Until of course... shhhhhhh...

hmmm... And I wonder if this is where France gets their 75% rate. We survived 16 years with a 70% top marginal rate, and they are much more French than we, so tack on an extra 5%.

:tongue2:


*Adjusted for inflation to 2010 levels.
references:
some inflation calculator
"www.irs.gov" , I think. I downloaded the spreadsheet years ago. It looks official.

 

[Oltz]

Ha!
Some of us would like to eliminate the 'Reagan Tax Cuts':
1988 38.5% --> 28% @ $32,000* (+ some bubble tax?)
1987 50% --> 38.5% @ $100,000*
1981 70% --> 50% @ $250,000*

And the 1964 'Johnson Tax Cut': 77% --> 70% @ $1,400,000*
And the 1963 'Kennedy Tax Cut': 91% --> 77% @ $1,400,000*

Ok. Maybe not the Kennedy tax cut. Wow! 91%

But that just amazes me that the top marginal rate was 70% all the way from 1965 through 1981. 16 years.
And it's been 31 years since 1981!

hmmm... I wonder why monkeys always pop into my head when I research such things. Hear no deficit, see no deficit, speak no deficit. Until of course... shhhhhhh...

hmmm... And I wonder if this is where France gets their 75% rate. We survived 16 years with a 70% top marginal rate, and they are much more French than we, so tack on an extra 5%.

:tongue2:


*Adjusted for inflation to 2010 levels.
references:
some inflation calculator
"www.irs.gov" , I think. I downloaded the spreadsheet years ago. It looks official.

From what I remember those were the rates but literally nobody paid them as there were many more "tax dodgers" and hidden funds. Think about how hard it would be for the federal government to track what you earned before everyone pay roll was on computer before automatically generated W-2's. I seem to remember that income tax revenue went up when they lowered the rates and people did not go to as much effort to avoid taxes and lie about income.

Before plastic and electronic transactions think about how much business was done in cash and how "under the table" income could be. Again we are talking income not capital gains.

This line of argument is silly and does not take into account how the government can see nearly all non cash transactions now and tax appropriately on them.

I will look for sources if I have time after work.

 

[Oltz]

I do not know what happened to the post I wrote in response to Om but the gist was

Those rates are meaningless as nobody actually paid them tax evasion was much more rampant and simple in the days before electronic transactions and automatically generated W-2's entire industries ran on cash and were "under the table". Tax income went up when they lowered the rates and people did no bother dodging the IRS.

Edit: Chart shows 2005 dollars per capita income tax revenue over time you can clearly see that the rate cuts in the 60's and the 81 reduction in the top rate had no effect on revenue. The economic downturn in the early/mid 80's is clearly obvious.
As well as 9/11/01 the recovery and subsequent housing collapse.

The higher tax rates are the more people just find ways to not pay at all.

http://www.usgovernmentrevenue.com/revenue_chart_1960_2011USd_13s1li0181086_723cs_10f

 

[mege]

Ha!
Some of us would like to eliminate the 'Reagan Tax Cuts':
1988 38.5% --> 28% @ $32,000* (+ some bubble tax?)
1987 50% --> 38.5% @ $100,000*
1981 70% --> 50% @ $250,000*

And the 1964 'Johnson Tax Cut': 77% --> 70% @ $1,400,000*
And the 1963 'Kennedy Tax Cut': 91% --> 77% @ $1,400,000*

Ok. Maybe not the Kennedy tax cut. Wow! 91%

But that just amazes me that the top marginal rate was 70% all the way from 1965 through 1981. 16 years.
And it's been 31 years since 1981!

hmmm... I wonder why monkeys always pop into my head when I research such things. Hear no deficit, see no deficit, speak no deficit. Until of course... shhhhhhh...

hmmm... And I wonder if this is where France gets their 75% rate. We survived 16 years with a 70% top marginal rate, and they are much more French than we, so tack on an extra 5%.

:tongue2:


*Adjusted for inflation to 2010 levels.
references:
some inflation calculator
"www.irs.gov" , I think. I downloaded the spreadsheet years ago. It looks official.

One thing that I always attribute, at least in part, to the decrease of American tax rates: increased working base. I haven't found any consolodated numbers for this, but women are much more prevelent in the workforce (and in higher paying jobs) than before. We're in a much more urbanized society as well, which means less people are 'working for themselves' out in the country. The amount contributed via taxes per household hasn't really changed all that much (relatively speaking) it's just that American households are now making much more (with 2 incomes, generally) than they did in 40s and 50s.

So for those that want the 70%+ top tax rates (or higher taxes in general) - why do we need higher taxes with more people working? With higher through put wouldn't we need less taxes by percentage? (since we have higher absolute earnings) This is something that I think is forgotten/lost in may tax-rate debates.

Finally, again, how many people were affected by these top tax rates? I'd imagine that very very few actually hit those high marginal rates (and thus very little revenue was actually gained - it was more of a punitive activity than anything substantive for the government coffers).

 

[JonDE]

From what I remember those were the rates but literally nobody paid them as there were many more "tax dodgers" and hidden funds. Think about how hard it would be for the federal government to track what you earned before everyone pay roll was on computer before automatically generated W-2's. I seem to remember that income tax revenue went up when they lowered the rates and people did not go to as much effort to avoid taxes and lie about income.

Before plastic and electronic transactions think about how much business was done in cash and how "under the table" income could be. Again we are talking income not capital gains.

This line of argument is silly and does not take into account how the government can see nearly all non cash transactions now and tax appropriately on them.

I will look for sources if I have time after work.

Your going to need to post some kind of evidence to support that. For the most part you can still get around the government by paying in cash, that doesn't mean they everyone is/was a tax cheat. I think you would be hard pressed to show that even 20% cheated let alone everyone.

The much simpler truth, which was the point I was trying to make in my previous post, is that no one pays these rates ever. Its not because they are cheating, its because that is the way the tax system is set up. In the US at least the highest rate is just a number, it is there to make people feel better, its not what anyone is actually paying, and this cannot be accounted for by the tax being progressive either, where people pay smaller percentages at lower amounts. In reality, you see people making 20-30M a year and only paying 30% or less, despite the rate being 45%. These are done through deductions, which are set up on purpose. I'm not sure if these carry over to France or not, but I do know that France has separate rates for dividends and capital gains, which leads me to believe that they are doing the same thing over there that they are here.

 

[mheslep]

I suspect back then the high rates were avoided largely by legally sheltering income, not so much by cheating. In any case the actual http://www.heritage.org/federalbudget/charts/2012/current-tax-receipts-680.jpg[ has not varied much than +/- 5% since WWII, regardless of tax rate.

 

[nitsuj]

Fair enough, though that last part implies that you think wealth is a zero sum game - that if one person increases their wealth, another must inevitably lose some. That's clearly not the case, otherwise the average wealth and standard of living would not be increasing.

[edit: Oops - as kiwikid pointed out already...]

Zero sum, no as you pointed out...clearly not. Poor people aren't just handing over their money to rich people. We are clearly talking "margins" of winning/losing.

Perhaps poor people need to spend more money on gold or oil futures. Maybe too much of their total income goes to the "consumed" goods and services of "basic" standard of living needs.

Consumers consume their assets , rich people "grow" their assets.

the vast majority of my income is "consumed" (rent/food/utilities/ect said different my money mostly goes to services).

I need to put more monies into the "game" & less on my basic standard of living needs in the form of "services". Oh a house! that's a start! Ah shoot most of my money goes to...do I need to carry on with this subtle point??

 

[Oltz]

Zero sum, no as you pointed out...clearly not. Poor people aren't just handing over their money to rich people. We are clearly talking "margins" of winning/losing.

Perhaps poor people need to spend more money on gold or oil futures. Maybe too much of their total income goes to the "consumed" goods and services of "basic" standard of living needs.

Consumers consume their assets , rich people "grow" their assets.

the vast majority of my income is "consumed" (rent/food/utilities/ect said different my money mostly goes to services).

I need to put more monies into the "game" & less on my basic standard of living needs in the form of "services". Oh a house! that's a start! Ah shoot most of my money goes to...do I need to carry on with this subtle point??

I think you may be missing the subtle point the rich still do not get rich off the poor. Money is not the only asset in play you can grow your assets by gaining skills/knowledge/experience and making wise choices that is how you earn more to better leverage yourself.

The poor are not the losers in the market. The losers are those who make poor choices like investing in long shot schemes and loose everything. Anyone who is simply working every day and spends every dollar they make is not a looser they are simply not taking any risk to win they are playing the safe route. Some would call them winners if they manage to live a happy and comfortable life.

If you choose to do drugs and not work that is a choice. Not a looser in capitalism.

if you choose to invest all of your money in a get rich quick IPO and loose it all another choice. Lost but can always work hard and try again.

if you choose to work for a moderate wage and never try to gain skills that would get you promoted or put into a different salary class that is still a choice.

Only the one who took a risk is a looser in capitalism the others chose not to take advantage of the opportunity present in our society.

Blaming the rich for our consumerism is a fallacy sure we would all be rich if there was nothing nice to have that we all wanted to spend our money on.

Making the tax rate 75% on high earners will have no good effects at all in France other then making the miserable feel better about themselves for a few minutes.

 

[Oltz]

One thing that I always attribute, at least in part, to the decrease of American tax rates: increased working base. I haven't found any consolodated numbers for this, but women are much more prevelent in the workforce (and in higher paying jobs) than before. We're in a much more urbanized society as well, which means less people are 'working for themselves' out in the country. The amount contributed via taxes per household hasn't really changed all that much (relatively speaking) it's just that American households are now making much more (with 2 incomes, generally) than they did in 40s and 50s.

So for those that want the 70%+ top tax rates (or higher taxes in general) - why do we need higher taxes with more people working? With higher through put wouldn't we need less taxes by percentage? (since we have higher absolute earnings) This is something that I think is forgotten/lost in may tax-rate debates.

Finally, again, how many people were affected by these top tax rates? I'd imagine that very very few actually hit those high marginal rates (and thus very little revenue was actually gained - it was more of a punitive activity than anything substantive for the government coffers).

I think the evidence of major avoidance of taxes is the fact that when tax rates were dramatically reduced tax revenue grew. As per the chart I posted earlier and will re post now. Keep in mind this is Per Capita 2005 dollars so normalized for population growth and inflation. Focus on the mid 60's

http://www.usgovernmentrevenue.com/revenue_chart_1950_2011USd_13s1li0181068_629cs_10f

 

[nitsuj]

I think you may be missing the subtle point the rich still do not get rich off the poor. Money is not the only asset in play you can grow your assets by gaining skills/knowledge/experience and making wise choices that is how you earn more to better leverage yourself.

The poor are not the losers in the market. The losers are those who make poor choices like investing in long shot schemes and loose everything. Anyone who is simply working every day and spends every dollar they make is not a looser they are simply not taking any risk to win they are playing the safe route. Some would call them winners if they manage to live a happy and comfortable life.

If you choose to do drugs and not work that is a choice. Not a looser in capitalism.

if you choose to invest all of your money in a get rich quick IPO and loose it all another choice. Lost but can always work hard and try again.

if you choose to work for a moderate wage and never try to gain skills that would get you promoted or put into a different salary class that is still a choice.

Only the one who took a risk is a looser in capitalism the others chose not to take advantage of the opportunity present in our society.

Blaming the rich for our consumerism is a fallacy sure we would all be rich if there was nothing nice to have that we all wanted to spend our money on.

Making the tax rate 75% on high earners will have no good effects at all in France other then making the miserable feel better about themselves for a few minutes.

What?

Oh and
if you choose to work for a moderate wage and never try to gain skills that would get you promoted or put into a different salary class that is still a choice. is a bunch of nonsense. It's not even remotely so simple. Kinda like, rich getting rich off of poor people/

Let me put in a way that leaves "people" out of the comment. Having more money & time than daily living expenses requires leaves resources for earning more money. Seems exponential in some way no? Having little to nothing grows into little or nothing, certainly not the path to becoming rich.