News Tax on Income/Wealth and Fairness

[Astronuc]

The IRS certainly could quantify the income revenue, then perhaps also quantify aggregate wealth.

The Roman empire taxed on the basis of land and grain production. There were other taxes as well. Of course, the emperor could make grants of land, particularly from land acquired via conquest, which of course is how the US grew.

If one looks at history, one can see where certain individuals obtained significant land grants through political or business connections (often the two were the same).

I'm all for reduced capital gains, but with a catch. I think short term capital gains, particularly those obtained on speculation (or insider trading) should be taxed at a higher rate, whereas the longer the capital is held, taxes are reduced (e.g. 1% per annum). This discourages gambling in the equities/capital markets and enourages long term investment.

I think corporate taxes should be adjusted by a multiplier proportional to the ratio of compensations of the highest paid (e.g. CEO compensation) to the lowest paid (secretary or janitor). If a company pays its CEOs 100, 200, 300 times the lowest paid, then it can darn well pay taxes. Health care and retirement benefits (retirement) could also be used to adjust taxes.

Taxes are an inherent burden in civilizations, and they should be made as fair as possible.

 

[D H]

Taxes are an inherent burden in civilizations ...

I suspect all of us at PF agree with that statement. Even the most vehement Libertarians agree that some taxes are necessary.

... and they should be made as fair as possible.

Doing so is very problematic because the fairness of a taxation scheme is inherently unquantifiable. Because fairness is unquantifiable, any discussion of fairness devolves into an emotional argument. What exactly fairness means is strongly correlated with one's political leanings. What is completely fair to someone on the far left of the political spectrum is very unfair to a person on the far right of the spectrum, and vice versa.

 

[WheelsRCool]

The only problem with corporate taxes is that corporations oftentimes pass them, or a portion of them, onto the consumers. So IMO one should raise them too high.

Yes, taxes are a necessary part of civilization. They're like government. A necessary evil.

The wealthier a person is, the more money they will always have. Wealth is not something for government to tax to "re-distribute" to the populace. Doing so kills all incentive to produce wealth in the first place. Our society is based on equality of opportunity, not equality of outcome.

 

[D H]

The only problem with corporate taxes is that corporations oftentimes pass them, or a portion of them, onto the consumers.

Corporations that do not make a profit soon cease to be corporations. Oftentimes is a gross understatement. It is more like "always". This, to me, represents a huge problem with corporate taxes. The corporations don't really pay them. Consumers do. Corporate taxes are a hidden tax and regressive tax on the citizenry. The one big advantage of a national sales tax is that I would know with each and every purchase exactly how mad I should be at the federal budget. Hidden taxes are nasty. Taxation should be very visible.

Regressive taxes are also nasty. Corporate taxes are essential disguised sales taxes. Only those on the fringe end of the right think a national sales tax is "fair". They do a terrible job at spreading the pain (my preferred metric).

So IMO one should raise them too high.

There must be a typo here somewhere.

 

[Astronuc]

Our society is based on equality of opportunity, not equality of outcome.

Equality of opportunity does not exist - there is too much inequity. The US economy is based on inequity and has been from the beginning - e.g. indentured servitude, slavery and appropriation of lands which the native peoples inhabited. There are interesting history books which detail many developments, e.g. turnpikes, toll roads, and railroads, in which certain lawyers and businessmen got preferential and exclusive benefits for state and federal governments that were certainly not available to the average citizen.

In short, 'equal opportunity' is the carrot at the end of the stick that many will never experience.

 

[WheelsRCool]

There must be a typo here somewhere.

Yes, I meant, "So one should NOT raise them too high."

Equality of opportunity does not exist - there is too much inequity. The US economy is based on inequity and has been from the beginning - e.g. indentured servitude, slavery and appropriation of lands which the native peoples inhabited. There are interesting history books which detail many developments, e.g. turnpikes, toll roads, and railroads, in which certain lawyers and businessmen got preferential and exclusive benefits for state and federal governments that were certainly not available to the average citizen.

In short, 'equal opportunity' is the carrot at the end of the stick that many will never experience.

Yes, pure equality of opportunity can't exist unless we have a perfect world, but we can strive for it. However, trying to make things more equal by focusing on equality of outcome only makes things even more un-equal.

America has had a lot of faults throughout its history, I agree, from the treatment of the Native Americans, slavery, and so forth. But overall, the country still has a lot of equality of opportunity, which is why it generates so much wealth.

There will always be corruption, because of Big Business, politicians, unions, etc...the most one can do is to make the economy where these things are undermined as much as possible, for example the Wall Street revolution in the 1980s that ended the monopoly of power that the priviledged elite had or Margaret Thatcher's helping kill the power the coal unions had over the United Kingdom. Wall Street still has a "good 'ole boys" way to it and corruption, but a good deal less so than what it used to. A lot of the wealthy hedge-fund managers, for example, come from middle-class backgrounds and worked their way up.

 

[Astronuc]

With respect to Wall Street - this is a relevant story - Only the Men Survive
The crash of Zoe Cruz.
http://nymag.com/news/business/46476/

Certainly some people rise from poverty or limited means to the pinnacle of wealth - e.g. Carnegie and Edison and others.
http://en.wikipedia.org/wiki/Andrew_Carnegie#1850.E2.80.931860:_A_.27self_made_man.27

http://en.wikipedia.org/wiki/Thomas_Edison#Early_life

 

[wildman]

Taxes should be cut on the poor and lower middle class. We can do this easily by eliminating the payroll taxes on income below $60,000 and simply running the payroll taxes on up to no limit. I believe that would be revenue neutral. This would do the following:

1) Make it cheaper to hire low wage people and increase job opportunity.
2) Lower spending by lowering the need for welfare.
3) Make it possible for people to earn a living and therefore improve their situation (increasing revenue for the government).

Notice, I have said nothing about being fair. By the way, you have to be a fool at this point to think lowering the taxes on the rich has done any good. Look at our economy. Might as well try it on the poor instead.

 

[D H]

Taxes should be cut on the poor and lower middle class. We can do this easily by eliminating the payroll taxes on income below $60,000 and simply running the payroll taxes on up to no limit. I believe that would be revenue neutral. This would do the following:

As income taxes and Medicare taxes already have no upper limit, I am assuming here that you are talking about the Social Security taxes. This proposal is dead on the water for the simple reason that it would kill Social Security.

 

[TheStatutoryApe]

Notice, I have said nothing about being fair. By the way, you have to be a fool at this point to think lowering the taxes on the rich has done any good. Look at our economy. Might as well try it on the poor instead.

The hole our economy has become is due for the most part to people in the poor to lower middle class range spending money they don't have(subprime mortgages and the like). This is due in part to these 'rich' large corporations needing to make more money to cover costs and make sure their investors get a return(which, by the way, they have a legal obligation to do).

 

[DrClapeyron]

The hole our economy has become is due for the most part to people in the poor to lower middle class range spending money they don't have(subprime mortgages and the like). This is due in part to these 'rich' large corporations needing to make more money to cover costs and make sure their investors get a return(which, by the way, they have a legal obligation to do).

This is similar to what John Keynes proposed in the 1930's. Having seen the lack of production at US factories he wondered why they were barren adn supply non existant. Aggregate demand had been neglected as having a large role in economy. Without consumption and investment, income goes down. Hard to produce and supply when there is no demand or money for consumption.

 

[quadraphonics]

Assuming that whatever changes made to the tax system are revenue-neutral, a flat tax will hurt that average person even more. The wealthy currently pay a disproportionate share of their income because we do have a mildly progressive income tax. The wealthy will benefit immensely from a flat tax. A flat tax is an immense transfer of the tax burden from the wealthy to the upper middle and middle classes disguised under the guise of fairness. The marginal tax rate for a middle class person working two jobs will be much larger under a flat tax than under a progressive tax.

I think we also need to also keep the payroll taxes in mind here, and not talk only about income taxes. While the income tax is progressive, the payroll tax is wildly regressive due to the cap. The result is that the total tax burden seen by society is roughly flat. So, making the income tax flat, without any changes to the payroll tax, would leave us with a strongly regressive tax system. Within a generation it would eliminate the middle class entirely, leaving us with a mass of impoverished subsistence laborers dominated by a wealthy elite. That is, of course, if the government didn't collapse by that time.

I would be interested to hear whether any flat-taxers would also support flattening the payroll tax.

 

[D H]

The only payroll tax with a cap is Social Security. Removing the cap would entail

• Paying the wealthy an exorbitant retirement, which (a) would result in a huge outcry of unfairness from those less well-off, and (b) it won't be able to afford to do, so it's a moot point; or
• Establishing a cap on pay-outs, which would expose Social Security for the complete sham that it is.

Pick one, or come up with another option that I haven't foreseen.

 

[quadraphonics]

The only payroll tax with a cap is Social Security. Removing the cap would entail

• Paying the wealthy an exorbitant retirement, which (a) would result in a huge outcry of unfairness from those less well-off, and (b) it won't be able to afford to do, so it's a moot point; or
• Establishing a cap on pay-outs, which would expose Social Security for the complete sham that it is.

Pick one, or come up with another option that I haven't foreseen.

I'm not really in favor of changing the SS payroll cap, and we can certainly see that any significant changes to entitlement programs are going to be controversial. My point in bringing up the payroll taxes was to remind everyone that the total tax burden is already fairly close to flat, and so by calling for a flat income tax, without any compensatory change to entitlements, amounts to calling for a strongly regressive taxation regime. So, again, we see that the rhetoric about "punishing accomplishment" is covering an agenda that goes well beyond any reasonable definition of fairness and into outright oppression of the middle and lower classes. I'm sure the more Libertarian-minded people will give the easy response of also eliminating entitlements (for which a principled case can be made), but at that point we'll be well into fantasy-land. Not that a flat income tax has a snowball's chance in hell of becoming a reality, but you get the idea...

 

[quadraphonics]

Well the line of discussion above is keeping very close company with 'from each according to their means, to each according to their needs'.

Reasonable people can disagree about the level of control that exists in society, but if you can't tell the difference between progressivism and Marxism, it's not my problem.

 

[wildman]

As income taxes and Medicare taxes already have no upper limit, I am assuming here that you are talking about the Social Security taxes. This proposal is dead on the water for the simple reason that it would kill Social Security.

You are probably right. SS lives on the lie that it is not welfare. Oh well...

 

[wildman]

The hole our economy has become is due for the most part to people in the poor to lower middle class range spending money they don't have(subprime mortgages and the like). This is due in part to these 'rich' large corporations needing to make more money to cover costs and make sure their investors get a return(which, by the way, they have a legal obligation to do).

Poor and lower middle class range are not very sophisticated people. They need to be told what they can afford. It seems mean to say that they can't have this loan or that because they don't make enough money, but that is what the rich corporations have a moral obligation to do.

By the way, the rich corporations HAVE NOT met their legal obligation to their investors. They have LOST HUGE sums of money by manipulating the market. There is a whole class of investor (mostly overseas) that will not touch ANYTHING that American banks tries to sell them because they have lost so much money.

What they have basically done is rob their investors. Are you saying that to commit highway robbery from their investors is a "moral obligation" of American corportions? If so, we are all in trouble.

 

[TheStatutoryApe]

What they have basically done is rob their investors. Are you saying that to commit highway robbery from their investors is a "moral obligation" of American corportions? If so, we are all in trouble.

I don't believe I did say that no.

 

[wildman]

I don't believe I did say that no.

You probably didn't mean to say that. I was a bit harsh, but I am peeved at people using the excuse that the borrowers should have known better than to take the subprime loans. It is the bank’s job to ascertain that a person or corporation is capable of paying back a loan. Mistakes are made, but what happened with the subprime mess wasn’t a mistake. It was wholesale fraud. The banks were making bad loans and then dumping them on unsuspecting investors. Yes the banks are supposed to make a return on their investments, but not by committing fraud.