Tax the rich, feed the poor, 'til there are no rich no more

[JoeWeber 2,299]

1 hour ago, kallend said:

Something I came to appreciate in 39 years of teaching American college freshpersons in science and engineering is that once you go much past 1,000 most people simply don't have any concept of the magnitude of numbers.  A $billion, , a $trillion, $22 trillion, Avogadro's constant, all much the same to most of them.

Scale. Things are either too big or too small or happen too slowly or too fast for the overwhelming majority of observers to perceive. Hence, our circumstance.

Edited November 22, 2019 by JoeWeber
Vinos mas

[airdvr 197]

On 11/21/2019 at 5:25 PM, jakee said:

How can you push the concept if you don't know the number?

 

That is not a flippant one liner, by the way. It's a very, very serious question.

I'm not an economist.  Based on the examples here maybe we need to tax the crap out of the "rich".

[mbohu 77]

1 hour ago, airdvr said:

maybe we need to tax the crap out of the "rich"

Maybe you are right with your earlier comment that "rich" is too subjective. It makes a huge difference, if by "rich" we mean our neighbor in his 5 bedroom house driving his 5 series BMW (or Hummer as the case may be) or if we are talking about wealth on the order of small countries.
If we don't keep in mind what we mean by "rich" it's easy to get the impression we want to take from those who are just a bit better off than ourselves. Personally, I am all for differences in wealth--I'm even of the opinion that some people should be able to have silly-money without being "penalized" by taxes or in other ways--as long as they do contribute proportionally (If we all can't have it, at least SOME on this earth should be able to have the experiences that such wealth enables them to have) But there is definitely a point where it becomes so crazy out of whack that this inequality threatens the stability of the entire system as well as the concept of democracy. 

[JoeWeber 2,299]

1 hour ago, airdvr said:

I'm not an economist.  Based on the examples here maybe we need to tax the crap out of the "rich".

When you titled your original post did you not have some notional definition of "rich" in mind? This isn't a poetry competition; the idea here is to inspire others engage in a dialogue on the posted topic. Please forgive me if I'm unwilling to sign on to taxing the crap out of the rich until I'm informed who is on the list. So what sort of rich were you thinking?

Edited November 23, 2019 by JoeWeber

[airdvr 197]

On 11/23/2019 at 12:16 PM, JoeWeber said:

When you titled your original post did you not have some notional definition of "rich" in mind? This isn't a poetry competition; the idea here is to inspire others engage in a dialogue on the posted topic. Please forgive me if I'm unwilling to sign on to taxing the crap out of the rich until I'm informed who is on the list. So what sort of rich were you thinking?

The title is from the lyrics of this song.  I didn't make it up.

And again rich is subjective.  That's why I think a flat tax is the most fair.

[gowlerk 1,911]

38 minutes ago, airdvr said:

The title is from the lyrics of this song.  I didn't make it up.

And again rich is subjective.  That's why I think a flat tax is the most fair.

Yes, the words of Alvin Lee in a pop song. It also says,

"Everywhere is freaks and hairies
Dykes and fairies, tell me where is sanity"

 

Alvin Lee was a great guitarist, not a great philosopher, economist, or humanist.

 

And fair? Rich people did not become rich by being fair. Life is not fair and tax policy is not fair.

Edited November 25, 2019 by gowlerk

[mistercwood 287]

4 hours ago, airdvr said:

The title is from the lyrics of this song.  I didn't make it up.And again rich is subjective.  That's why I think a flat tax is the most fair.

A flat tax can only be fair if everyone starts with a baseline (untaxed) income that is able to cover all essentials plus a little leftover. Without that, a flat-tax will always disadvantage the lowest income earners and is inherently UN-fair.

[DJL 232]

17 hours ago, mistercwood said:

A flat tax can only be fair if everyone starts with a baseline (untaxed) income that is able to cover all essentials plus a little leftover. Without that, a flat-tax will always disadvantage the lowest income earners and is inherently UN-fair.

The phrase should be clarified to a "flat percentage tax" and the further description is to exempt for low income and senior citizens, etc etc etc.

[JoeWeber 2,299]

1 hour ago, DJL said:

The phrase should be clarified to a "flat percentage tax" and the further description is to exempt for low income and senior citizens, etc etc etc.

No, the terms "flat tax" and "rich" should be defined by the OP. Just 4 posts ago airdvr again claimed that the term rich was subjective which made a flat tax is the "most fair". That makes zero sense.

mistercwood is most right in saying that unless there is a reasonable untaxed baseline a flat tax is inherently unfair.

But, what is that amount? Is it the same number in San Diego as Outer East Nowhere? Somewhere on the way to happily taxed over someone needs to say a number that is fairly derived.

In the same vein, if someone is going to lament the taxing out of existence the rich they ought to be able to put some number to it. 

[airdvr 197]

Let's use 10% as a number just because it's easy for me to wrap my Boomer brain around.  If I make $50,000 I pay $5K in tax.  $500K?  $50K in taxes.  Explain how this is unfair to the poor and seniors.

[airdvr 197]

23 hours ago, gowlerk said:

And fair? Rich people did not become rich by being fair. Life is not fair and tax policy is not fair.

Didn't you just make my point?  A flat tax doesn't allow the wealthy to use loopholes and avoid paying.

[wmw999 2,121]

Don't worry, they'll avoid paying in the long run. Rich people (who are bigger investors in corporations) own more congresscritters than poor people. Better, more expensive lawyers.

They'll invest in overseas properties and not sell them, thereby not getting money, and when they do get it, it'll be hidden. No commerce, no earnings. No commerce, less money changing hands, weaker economy.

And don't forget in-kind payments.

Wendy P.

[JoeWeber 2,299]

16 minutes ago, airdvr said:

Let's use 10% as a number just because it's easy for me to wrap my Boomer brain around.  If I make $50,000 I pay $5K in tax.  $500K?  $50K in taxes.  Explain how this is unfair to the poor and seniors.

What if the numbers are $15,000 and $15,000,000? But before you even get there you need to know how much money you need to run the government. Maybe your 10% is really 25%. Maybe someone is mixing bread pieces into the eggs for dinner and the other still doesn't notice. Maybe while someone can't afford gas to use the roads they are paying for in equal proportion the other is racing around in their new S Class getting tickets and crashing and using the police and medical services the other poor bastards are helping finance.

In the meantime the tax system all but guarantee's the most of us get poorer and poorer while a few get richer and richer. 

I'm not at all against the accumulation of wealth. I also probably think the number that makes you "rich" is bigger than many would agree is, well, rich. But unless we're all going to live in the woods a fair system of taxation that doesn't upset the apple cart is a basic requirement.

[billvon 2,396]

32 minutes ago, airdvr said:

Let's use 10% as a number just because it's easy for me to wrap my Boomer brain around.  If I make $50,000 I pay $5K in tax.  $500K?  $50K in taxes.  Explain how this is unfair to the poor and seniors.

Sure.  Let's do the math!

Currently we have 138M taxpayers (i.e. all working people) and we get $1.5T from them.  Divide that by taxpayers - that's 11K per person or around 18% of the average US salary.  So someone who is the head of a household who makes $25,000 a year (i.e. someone below the poverty line) reports $14,600 in taxable income.  That is taxed in the 10% and 12% tax brackets now.  That means a $1512 total tax bill.  Under your scenario (18% flat tax) he pays $4500 a year.  You have taken someone below the poverty line and taken away another $2988 from them.

Meanwhile, someone who make $2M a year sees his taxes drop by ~$340,000.

In my world, taking thousands from a poor family to give millionaires a third of a million dollars in tax breaks is unfair.

 

 

[mbohu 77]

1 hour ago, airdvr said:

A flat tax doesn't allow the wealthy to use loopholes and avoid paying.

There are also other issues to take into account. When you say "10%", I assume you mean 10% of income, right?
But what is defined as income? For most poor and middle-class people this is pretty simple: They generally have all or most of their income from a "job" and it is easy to base taxes on their paycheck. However, most wealthy people have almost none of their wealth come from a "job". Now you could say, it doesn't matter and you will just tax all investment income and everything else the same way. But how do you do this? How do you even calculate this?
Let's say the rich person owns billions of dollars in real estate. The real estate appreciates in value and that essentially means he just made hundreds of millions. So: He should pay taxes on those, right? If he does not have the liquidity to pay those taxes, he can always sell off SOME of that real estate to cover his tax bill.
But, if you just make that a general rule that applies to everyone then what about the middle-class guy who just bought his first home and is paying 50% of his salary on the mortgage? His home just appreciated in value (on paper!) and now he owes more taxes than he has cash available, and has to sell the home his family lives in, just to cover the tax bill. Is that fair?

So you say: No one should owe taxes, when something appreciates in value but isn't cashed out? Well: MOST of the wealth for rich people gets created that way, and then they pay NO taxes, but reap the benefits anyway (their assets appreciate, which they can leverage in countless ways, without showing any actual cash income.)
So in their case their net worth can increase from 100 million to one billion, without ever showing a penny of "income"--so they'll simply owe no taxes at all? Is THAT fair?
 

[mbohu 77]

1 hour ago, airdvr said:

A flat tax doesn't allow the wealthy to use loopholes and avoid paying.

In all fairness though, I agree with at least one thing that is probably behind your suggestion for a "flat tax": We should find a way to radically simplify the tax code. I don't know HOW this can be done, without allowing loopholes and taking advantage by some (usually rich) people, but making the tax code more and more complex to supposedly close the loopholes (while lobbying at the same time creates even more loopholes and complexity) hasn't worked--so simplifying may be something we need to give a try.

[SkyDekker 1,122]

Just now, mbohu said:

In all fairness though, I agree with at least one thing that is probably behind your suggestion for a "flat tax": We should find a way to radically simplify the tax code. I don't know HOW this can be done, without allowing loopholes and taking advantage by some (usually rich) people, but making the tax code more and more complex to supposedly close the loopholes (while lobbying at the same time creates even more loopholes and complexity) hasn't worked--so simplifying may be something we need to give a try.

I am all for this. But people forget that generally taxes are also used to try and shape behaviour within society.

[mbohu 77]

1 minute ago, SkyDekker said:

But people forget that generally taxes are also used to try and shape behaviour within society.

I wonder, if this is an accepted thing in the US. I know that in most European countries this is accepted and the discussion usually centers around which WAY you want to shape behavior.
I don't find that, in the US, most politicians would even admit to wanting to do this, would they? (you know: "nanny state" and such!)
...even though, of course it is done! ("Let's just throw another tax on cigarettes so we can afford to keep our schools open, because we all hate smokers and they aren't a large enough voting block anyway")

[SkyDekker 1,122]

1 minute ago, mbohu said:

I wonder, if this is an accepted thing in the US. I know that in most European countries this is accepted and the discussion usually centers around which WAY you want to shape behavior

I think it is very well accepted. 401K is used to entice saving for retirement. Child care tax credits help with enticing population growth. Property tax exemptions are made to help facilitate economic growth. I mean the list goes on and on and on.

[mbohu 77]

7 minutes ago, SkyDekker said:

I think it is very well accepted. 401K is used to entice saving for retirement. Child care tax credits help with enticing population growth. Property tax exemptions are made to help facilitate economic growth. I mean the list goes on and on and on.

Do you think this is something that government SHOULD be doing? I am usually a very passionate critic of the "libertarian" arguments, but in this case, I'm not sure if tax policy should be used to achieve moral/behavioral goals like this.
I think there is a difference between using a tax to pay for costs that something directly creates (taxes on fuel to pay for the costs of the environmental impact, taxes on cigarettes to pay for government expenses on healthcare, etc.) and using taxes to steer behavior in certain directions.
My mind isn't completely made up on this, and maybe it's not a complete yes-or-no thing; but generally I think I'd be ok if we weren't doing that at all. What do you think?

[SkyDekker 1,122]

3 minutes ago, mbohu said:

Do you think this is something that government SHOULD be doing?

Yes, cause the other ways are significantly more authoritarian. See China's policies around babies.

Yes, cause in many cases it is cheaper. Imagine people saved even less for retirement. What do you think the future cost of that will be?

etc.

This whole libertarian mindset of 'do nothing and everything will be fine" is IMHO complete hogwash. There is a reason there is not a single country in the world that operates under that system.

[mbohu 77]

4 minutes ago, SkyDekker said:

This whole libertarian mindset of 'do nothing and everything will be fine" is IMHO complete hogwash. There is a reason there is not a single country in the world that operates under that system.

100% agreed. 
I think there are better options than using taxes. I prefer implementing solutions directly instead.
For example, instead of 401k I preferred the "old" way of actual pensions, not putting the onus on regular people to either become investment experts, or rely on (and pay for) others to manage their retirement savings and risk (and then loosing it all just because the economy goes down or you didn't notice that your company invested all your money into its own stocks, etc.) just to have a proper retirement (the fact they gave their best years to a company or government agency should be enough to guarantee them the right to live out their old age.)

[SkyDekker 1,122]

1 hour ago, mbohu said:

For example, instead of 401k I preferred the "old" way of actual pensions,

Sure, except when the big private pensions started to fail, the government had to step in and provide tax payer dollars to try and soften that blow. The result: try and incentivize people to be responsible for their own retirement to reduce future tax payer risk.

Pensions like that also tend to restrict the movement of labour.

Edited November 26, 2019 by SkyDekker

[rifleman 61]

The current UK system is based on progressive taxation.

No-one pays any tax on the first £12,500 of income.

Between £12,501 and £40,000 tax rate is 20% but only on the portion of income over £12,500.

Over £40,001 the tax rate is currently 40% but only on the portion of income over £40,000.

There are plans to introduce two new tax bands that come into play at £80,001 and £125,001 (45% applying to that portion of income over £80,00 and 50% applying to that portion of income over £125,000).

As an example, someone earning £81,000 under the new 45% band would pay approximately £500 a year in extra tax.

[mbohu 77]

9 hours ago, rifleman said:

The current UK system is based on progressive taxation.

No-one pays any tax on the first £12,500 of income.

Between £12,501 and £40,000 tax rate is 20% but only on the portion of income over £12,500.

Over £40,001 the tax rate is currently 40% but only on the portion of income over £40,000.

There are plans to introduce two new tax bands that come into play at £80,001 and £125,001 (45% applying to that portion of income over £80,00 and 50% applying to that portion of income over £125,000).

As an example, someone earning £81,000 under the new 45% band would pay approximately £500 a year in extra tax.

What counts as "income" in the UK? Does it include investment income? (only when the assets are turned into cash or at the moment they appreciate on paper?) How about inheritance? Generally speaking, the US also has a progressive taxation system.