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StreetScooby

Why Not Soak the Rich?

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Very interesting article:

Why Not Soak the Rich?

It's not short, but I found it well worth the read. Here's the last paragraph for those interested in a summary:

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Throughout history, soaking the rich has proven a quick fix to temporary emergencies and crises, like the one we are facing today. But it is inevitably a fix that comes with a high cost. By undermining the taboo against expropriating wealth, it makes all private property less secure, including the property of the middle class. Let liberal intellectuals poke holes in the myth of the sanctity of private property, but respect the power for good that this myth has conferred on those societies that are, for the most part, strongly under its spell. The superstitious awe and visceral reverence that ordinary people feel toward “a set of words upon parchment” has proven indispensable to securing economic prosperity and political stability over the course of centuries. The ordinary man’s reluctance to speculate philosophically about property, and its origins and rights, might make him appear dense or incurious to the sophisticated intellectual, who relishes such abstruse discussions, but this indefatigably hard-headed approach to such questions has had the altogether salubrious effect of steadying the boat and keeping it on an even keel, despite the winds of revolution that have tossed and wrecked those ships that lacked their ballast of common sense.


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We shouldn't be "soaking" anyone, rich or poor. Revenge/class warfare is a poor substitute for rational decisionmaking when it comes to raising money to run government. The criteria should be getting enough money to run the government without unduly damaging the economy.

Fortunately, given how much we have reduced taxes on the rich over the past 100 years, we have mostly given up on "soaking the rich." The massive increase in taxes on the poor during the same period might be worrisome, but given that it is still only 10% (up from ~5%) and given that it's much lower than the top tax rate, not really an issue.

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We shouldn't be "soaking" anyone, rich or poor. Revenge/class warfare is a poor substitute for rational decisionmaking when it comes to raising money to run government. The criteria should be getting enough money to run the government without unduly damaging the economy.



+1

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Fortunately, given how much we have reduced taxes on the rich over the past 100 years, we have given up on "soaking the rich." The massive increase in taxes on the poor during the same period is troublesome, but given that it is still only 10% (up from ~5%) it's not a huge deal.



This begs the question - what is a reasonable tax rate on "the rich"? I know some here think Laffer curve optimizations showing 60% marginal rate is the "right answer". In looking at that, I did not see any discussion of the optimization's objective function used to derive that value of 60%. Personally, that seems high to me, but then again, I would really like to see the objective function used by those doing that optimization.
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given how much we have reduced taxes on the rich over the past 100 years, we have mostly given up on "soaking the rich."



Considering that the 16th Amendment (which provided for income tax) is exactly 100 years and 37 days old, the "100 year" timeframe ain't exactly accurate.

What the people don't know is that the more money you make, those deductions that everybody likes so much go away. Student loans? Nope. No deduction for interest. Mortgage interest deduction? SEE YA!

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when it comes to raising money to run government



That's the problem - just running the government would be cheap. It's the 90% of the rest of the stuff that is so expensive.


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How is taxing a multi-millionaire hedge fund manager at 15% "soaking"?



When taking 15% of a person's income for no other reason that "we need it more that you do" is not considered "soaking" then it's an indication of where we stand as a society.


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How is taxing a multi-millionaire hedge fund manager at 15% "soaking"?



When taking 15% of a person's income for no other reason that "we need it more that you do" is not considered "soaking" then it's an indication of where we stand as a society.



You're familiar with the idea of marginal rates, right? I think Kallend is referring to "how is taxing multimillionaire hedge fund manager at 15% top marginal rate - as opposed to the 39.6% on ordinary income that folks pay in the top marginal rate for wages, etc. - soaking the rich?"
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when it comes to raising money to run government



That's the problem - just running the government would be cheap. It's the 90% of the rest of the stuff that is so expensive.



Like defense.

SocSec is actually solvent, and Medicare has its own tax.

Did you know that the average federal tax rate of the richest 400 people in the USA is below that of the average of the top 0.1%, which in turn is less than that of the top 1%

So the super duper rich aren't being "soaked" at all compared with the merely rich.
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Like defense.



Yep.

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SocSec is actually solvent



For now. But not for much longer.

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and Medicare has its own tax.



Yep. Another one to add to the growing list. And it ISN'T solvent. And it's getting worse and everyone knows it but won't do anything about it.


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How is taxing a multi-millionaire hedge fund manager at 15% "soaking"?



When taking 15% of a person's income for no other reason that "we need it more that you do" is not considered "soaking" then it's an indication of where we stand as a society.



How is that worse than taking 21% of a hard working plumber's income?
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How is taxing a multi-millionaire hedge fund manager at 15% "soaking"?



When taking 15% of a person's income for no other reason that "we need it more that you do" is not considered "soaking" then it's an indication of where we stand as a society.



How is that worse than taking 21% of a hard working plumber's income?



It isn't. It's soaking the plumber.

You're advocating a policy of making the hedge fund manager as miserable as the plumber. How about making the plumber more comfortable by lowering his burden to the hedge fund manager?

I'm seriously blown away by this. "It's not fair that plumber 21% of his hard earned income taken from him. Let's make the hedge fund manager do it, too. That'll take away the sting from the plumber."

This is called "progressive government."


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>When taking 15% of a person's income for no other reason that "we need it more that
> you do" is not considered "soaking" then it's an indication of where we stand as a
>society.

It means we're rational?

Using emotional terms to describe taxation leads nowhere useful. It's like saying "sure, let's cut taxes, and rip food out of the mouths of hungry children." ooohh, no one wants to do that, right?

Taxes should be apportioned to support the government that the people have voted they want. They should be apportioned to cause minimal economic impact, since the economy is what provides taxes to begin with. If you think that's "soaking" or "ripping food from children's mouths" then you're trying to substitute emotion for rational decision making.

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Taxes should be apportioned to support the government that the people have voted they want. They should be apportioned to cause minimal economic impact, since the economy is what provides taxes to begin with. If you think that's "soaking" or "ripping food from children's mouths" then you're trying to substitute emotion for rational decision making.



In practice, the highlighted sentence is proving to be a less than stable principle. If the government keeps promising free stuff to "unproductive citizens", then the government takes more from productive citizens and eventually they're no longer any productive citizens. Where's the checks and balances here?
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Using emotional terms to describe taxation leads nowhere useful.



This is titled "soak the rich."

I was responding to a comment about a "hard working" plumber. The emotion is injected. Therefore, an equal and opposite emotional response is warranted.


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> Howw is this a separate issue?

How to apportion taxes is separate from how to reduce government expenditures. You can have an effective method of apportioning taxes whether total expenditures are very high or very low. Likewise, you can have a very ineffective method of apportioning taxes whether total expenditures are very high or very low.

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