People who make $250,000 or more a year can afford a tax hike.(slate.com)
slate.com
People who make $250,000 or more a year can afford a tax hike.
http://www.slate.com/id/2243529/
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This is one thing that never fails to irritate me: the stigma against the wealthy. It's almost as if all the energy, effort, time, sacrifice, and risk usually taken by many who are now wealthy are completely overlooked, making them look undeserving of their money as if they were born with golden spoons in their mouths. My father immigrated to America from Egypt in the mid-80s shortly after he graduated medical school in Cairo to find a better living. When he got here, he went to school, took a graveyard shift as a security guard and worked at a gas station to make ends meet. He moved to four or so different states to join various medical programs, etc, and finally settled here in southern California as a fairly successful physician who makes $250,000+ a year. Knowing all the work that he's put into creating this life, my blood boils when I read headlines like these as if someone like my father doesn't/didn't work as hard as others to make a living. He is one example, and there are myriad of foreigners who have done the same, not to mention startuppers who literally put EVERYTHING on the line to increase their chances at success. To say that these types of people can just afford it as if it were some obligation is idiotic and infuriating.
Of course they can "afford" it. But so what? Every single billionaire can "afford" to be taxed at a 99% rate.
The bigger question: is it in any way fair, just, or moral to tax society's most successful more heavily just for being more successful?
EDIT: The other salient question that I forgot to mention is: "why do we need more taxes?" Our government already can't manage what they have with any sort of reasonable efficiency. Are we really supposed to believe that they'll do better if we give them more money?
The bigger question: is it in any way fair, just, or moral to tax society's most successful more heavily just for being more successful?
EDIT: The other salient question that I forgot to mention is: "why do we need more taxes?" Our government already can't manage what they have with any sort of reasonable efficiency. Are we really supposed to believe that they'll do better if we give them more money?
It is because of tournament theory that people are requesting billionaires to be taxed more.
http://ingrimayne.com/econ/resouceProblems/Tournament.html
The differences between individuals (say top 10,000) in certain skills becomes negligible due to the sheer amount of people in the world. However, due to winner take all systems, it is possible for someone that works 0.01% harder or luckier to take 100% of the reward. This is why it is possible for wage disparities to increase beyond ratios of 1000 to 1 without someone having to work 1000 times harder.
The reasoning behind increasing the tax rate on the super wealthy is for several reasons
1) It is easier to accumulate money the wealthier you are. This creates a negative incentive for the super rich to work as hard since it becomes easier to simply buy out competition and form monopoly status. Or crush everyone else due to economies of scale rather than true innovation.
2) This conundrum is well known in many companies where they try to pay their employees as much as they can, but not too much, or else they retire early. If you believe in the mantra that the richest people are the most productive, then it is obviously in society's best interest to keep them productive.
3) The more percentage of total wealth you have, the more US infrastructure you use and rely on. For example: Exxon heavily relies on the US military and government sponsored roads. Tech companies like Google and Microsoft heavily relies on the nationalized electric grid, subsidized education, the invention of the Internet, and subsidized telecoms that allowed people to use it. The average Joe does not have as much to lose if these tax subsidized services were to disappear tomorrow.
4) The tournament theory I mentioned above. The vast differences in wealth are due to situation or luck, and not because someone truly works 1000 times harder than you.
http://ingrimayne.com/econ/resouceProblems/Tournament.html
The differences between individuals (say top 10,000) in certain skills becomes negligible due to the sheer amount of people in the world. However, due to winner take all systems, it is possible for someone that works 0.01% harder or luckier to take 100% of the reward. This is why it is possible for wage disparities to increase beyond ratios of 1000 to 1 without someone having to work 1000 times harder.
The reasoning behind increasing the tax rate on the super wealthy is for several reasons
1) It is easier to accumulate money the wealthier you are. This creates a negative incentive for the super rich to work as hard since it becomes easier to simply buy out competition and form monopoly status. Or crush everyone else due to economies of scale rather than true innovation.
2) This conundrum is well known in many companies where they try to pay their employees as much as they can, but not too much, or else they retire early. If you believe in the mantra that the richest people are the most productive, then it is obviously in society's best interest to keep them productive.
3) The more percentage of total wealth you have, the more US infrastructure you use and rely on. For example: Exxon heavily relies on the US military and government sponsored roads. Tech companies like Google and Microsoft heavily relies on the nationalized electric grid, subsidized education, the invention of the Internet, and subsidized telecoms that allowed people to use it. The average Joe does not have as much to lose if these tax subsidized services were to disappear tomorrow.
4) The tournament theory I mentioned above. The vast differences in wealth are due to situation or luck, and not because someone truly works 1000 times harder than you.
In reality humans are not so different from each other in terms of production and skill...
Perhaps you simply don't have experience, but this is certainly not true. There are clear deviations from the norm. Once you start your own business or start to manage groups this becomes quite clear.
Perhaps you simply don't have experience, but this is certainly not true. There are clear deviations from the norm. Once you start your own business or start to manage groups this becomes quite clear.
Not when there are billions of people in the world in you are looking at the top 100,000 or so. The differences are quite small. This number is far larger and uncorrelated with the number of billionaires in the world.
And even when you cite coding studies, the magnitude is somewhere between 25:1 not 1000:1.
http://www.codinghorror.com/blog/archives/000072.html
And even when you cite coding studies, the magnitude is somewhere between 25:1 not 1000:1.
http://www.codinghorror.com/blog/archives/000072.html
Thank you for that link, but it goes to prove the point.
The article mentions that in debugging time, the difference is 25:1. In terms of hours, that is a bug getting identified in one hour versus 3 working days. The difference is staggering. Consider the difference in coding time from the article, 5:1. The higher end of the curve completes in one quarter what it takes an average programmer over a year. In terms of development lifecycle, a project will be cut due to reorganized priorities before a group of average programmers even begin to think about a beta while a group of the strongest will have been working on version 4.
Looking for a 1000:1, 100:1, etc is a meaningless standard. If you meet a man twice your size, wouldn't that difference seem staggering? But it is only 2:1.
The article mentions that in debugging time, the difference is 25:1. In terms of hours, that is a bug getting identified in one hour versus 3 working days. The difference is staggering. Consider the difference in coding time from the article, 5:1. The higher end of the curve completes in one quarter what it takes an average programmer over a year. In terms of development lifecycle, a project will be cut due to reorganized priorities before a group of average programmers even begin to think about a beta while a group of the strongest will have been working on version 4.
Looking for a 1000:1, 100:1, etc is a meaningless standard. If you meet a man twice your size, wouldn't that difference seem staggering? But it is only 2:1.
1000:1 is a meaningful standard.
There is a point where it becomes unbelievable to say someone is 1000 times better than the top 100,000 people out of however many billion are on the planet right now. A look at any competitive sport or Olympics will show that top athletes are winning by a razor's edge in the milliseconds.
Would you believe it if someone claimed to be a million times better at a certain skill than the top people in the world? The magnitude of difference definitely matters, and let's not delude ourselves into inflating these ratios higher than they actually are.
There is a point where it becomes unbelievable to say someone is 1000 times better than the top 100,000 people out of however many billion are on the planet right now. A look at any competitive sport or Olympics will show that top athletes are winning by a razor's edge in the milliseconds.
Would you believe it if someone claimed to be a million times better at a certain skill than the top people in the world? The magnitude of difference definitely matters, and let's not delude ourselves into inflating these ratios higher than they actually are.
I would say that the society's most successful are often the ones benefiting the most from the law and order provided by government. If the highway, mail, law enforcement, and judicial systems, for example, didn't work as well, it would be much harder to create a successful business.
> I would say that the society's most successful are often the ones benefiting the most from the law and order provided by government.
Even if that were so, (any citations there? The assertion is almost laughable.), it's not what the argument being made is saying. The argument is being made that these institutions are somehow providing MORE value to the successful, so the more successful owe more for their use.
Which is simply not true. If a clever, successful person is somehow making more or better use of these tax-funded services, that's the side effect of him being clever or successful, not that the service has provided him some sort of hidden value that the less successful cannot take part of, and for which the successful person "owes" more because of.
Even if that were so, (any citations there? The assertion is almost laughable.), it's not what the argument being made is saying. The argument is being made that these institutions are somehow providing MORE value to the successful, so the more successful owe more for their use.
Which is simply not true. If a clever, successful person is somehow making more or better use of these tax-funded services, that's the side effect of him being clever or successful, not that the service has provided him some sort of hidden value that the less successful cannot take part of, and for which the successful person "owes" more because of.
Yes, and they're already paying much, much more than the less successful by virtue of the fact that they make more. But by taxing at a higher rate because they have more money, you're effectively punishing them for success. It'd be a like a VC demanding that if you exit at $10m, you owe them $3m, but if you exit at $1b, you owe them $500m.
You aren't punishing them for success. For a whole lot of reasons, the fact of the matter is, the value of individual units of money (one dollar) DECREASES non-linearly as your personal supply increases. When you were making $50k/yr, you'd probably be quite careful with how you allocated $500, because it represented a sizable chunk of your time. Now that you make $5m/yr, $500 is literally worth to you what $5 was when you were making $50k/yr. Throw away money.
And a non progressive tax rate does exactly that.
> You aren't punishing them for success.
Simply saying that doesn't make it so. If you make more and are more successful you are taxed at a higher rate. This is the very definition of being punished for being successful.
> For a whole lot of reasons, the fact of the matter is, the value of individual units of money (one dollar) DECREASES non-linearly as your personal supply increases.
Can you list some? How is the $10 I pay in taxes that gets allocated to some department of the government any more or less than the $10 that someone else has paid, at a different tax rate? It might be non-linear to the PAYER, but that's irrelevant; it's exactly the same to the PAYEE.
Whether or not someone can /afford/ a higher tax rate based on income is irrelevant and stems from an emotional argument, not a fiscal or economic one. <snark>And a sour grapes, juvenile "IT'S NOT FAIR!", wealth-redistribution based one at that. My 9 year old has these sorts of ideas.</snark>
> You aren't punishing them for success.
Simply saying that doesn't make it so. If you make more and are more successful you are taxed at a higher rate. This is the very definition of being punished for being successful.
> For a whole lot of reasons, the fact of the matter is, the value of individual units of money (one dollar) DECREASES non-linearly as your personal supply increases.
Can you list some? How is the $10 I pay in taxes that gets allocated to some department of the government any more or less than the $10 that someone else has paid, at a different tax rate? It might be non-linear to the PAYER, but that's irrelevant; it's exactly the same to the PAYEE.
Whether or not someone can /afford/ a higher tax rate based on income is irrelevant and stems from an emotional argument, not a fiscal or economic one. <snark>And a sour grapes, juvenile "IT'S NOT FAIR!", wealth-redistribution based one at that. My 9 year old has these sorts of ideas.</snark>
Except that example assumes perfect fungibility. There's no guarantee PayPal would be a huge company if it were founded in England, Ireland, et al.
Exactly. "If you wish to make an apple pie from scratch, you must first invent the universe." It's not as if wealth can be generated from the void. The top 1% often give so graciously to the universities that made it possible, but complain heartily about the governmental institutions that have, as well.
Why shouldn't the people who benefit the most from how society is structured be expected to pay the most for its maintenance?
Aside from the larger question of why the government has the right to take people's income by force to begin with, I can think of four practical reasons off the top of my head:
1) It is a disincentive to others who might try to reach that level
2) It's hardly clear that the success of the wealthy is due to how society is structured, and not their own effort. Undoubtably some is, but is it 90/10 or 10/90?
3) It encourages relocation of talent, business, and capital to states or countries where the tax situation is more favorable.
4) It's not clear to me that more tax revenue results in a net benefit to society. My opinion is that the rich are better at investing their money for optimum yield than the government, and the end result is more benefit for society.
1) It is a disincentive to others who might try to reach that level
2) It's hardly clear that the success of the wealthy is due to how society is structured, and not their own effort. Undoubtably some is, but is it 90/10 or 10/90?
3) It encourages relocation of talent, business, and capital to states or countries where the tax situation is more favorable.
4) It's not clear to me that more tax revenue results in a net benefit to society. My opinion is that the rich are better at investing their money for optimum yield than the government, and the end result is more benefit for society.
Well, the United States government has it because it ratified an amendment to the Constitution saying it does, via the Constitutionally defined process to do so.
1.) Right, I'm going to give up on my dream to get rich because I'm paying a 4% higher marginal tax rate. Nevermind that I can afford an accountant to figure out how to minimize my tax burden and will effectively end up paying a smaller percentage of my wealth.
2.) 'Wealth', as a concept, does not exist except within the structure of the society that recognizes it. Ours happens to be structured so that to some degree you can earn your wealth. It's a Randian fairytale that anyone is wealthy from solely their own effort, though.
3.) That's true. But the U.S. actually has a pretty average tax rate compared to a lot of other places, is more or less stable, and has the largest paying market in the world by far. It's not the only consideration.
4.) That's also true (or at least debatable - a lot of wealthy people invest super conservatively so as to maintain their current wealth, oftentimes right back into the government itself, and are hardly engines of innovation), but you were asking for a basic moral justification, not a full exposition on the effectiveness of the current tax code and budget.
1.) Right, I'm going to give up on my dream to get rich because I'm paying a 4% higher marginal tax rate. Nevermind that I can afford an accountant to figure out how to minimize my tax burden and will effectively end up paying a smaller percentage of my wealth.
2.) 'Wealth', as a concept, does not exist except within the structure of the society that recognizes it. Ours happens to be structured so that to some degree you can earn your wealth. It's a Randian fairytale that anyone is wealthy from solely their own effort, though.
3.) That's true. But the U.S. actually has a pretty average tax rate compared to a lot of other places, is more or less stable, and has the largest paying market in the world by far. It's not the only consideration.
4.) That's also true (or at least debatable - a lot of wealthy people invest super conservatively so as to maintain their current wealth, oftentimes right back into the government itself, and are hardly engines of innovation), but you were asking for a basic moral justification, not a full exposition on the effectiveness of the current tax code and budget.
Originally to provide a justice and defense system, both of which are generally regarded as places where market forces would not provide a solution that would adequate protect the rights not ceded by the people to the gov't.
Of course, after retaining this right the gov't expanded it for all manner of other purposes.
You also have to remember that in most non-US countries rights flow from the crown/gov't to the people, not from the people to the gov't, so the legal justification would be much different and along the lines of "because we didn't cede that to the people"
Of course, after retaining this right the gov't expanded it for all manner of other purposes.
You also have to remember that in most non-US countries rights flow from the crown/gov't to the people, not from the people to the gov't, so the legal justification would be much different and along the lines of "because we didn't cede that to the people"
Do you truly believe there's anybody out there who wouldn't work to attain wealth merely because the gov't takes a higher percentage of it? I mean, seriously?
The issue isn't "wealth" as much as it's "more wealth". There's a classic example of a secretary who did her job really well so she got a raise only to find it bumped her into a higher tax bracket and she actually made less money. So from that point on Secretaries didn't bother to excel.
This applies equally to the engineer who makes $225,000 and who might be willing to put in extra effort but won't if the reward isn't worth it.
So the issue is shifting the cost/benefit equation over to where there isn't enough benefit for people to put in the effort
This applies equally to the engineer who makes $225,000 and who might be willing to put in extra effort but won't if the reward isn't worth it.
So the issue is shifting the cost/benefit equation over to where there isn't enough benefit for people to put in the effort
That story about the secretary? That is completely contrary to the way a marginal income tax actually works.
There is no way, in the American progressive tax system, to get a raise, be moved into a higher tax bracket, and end up taking home less money. It's just not possible.
@ryanwaggoner - correct, ty.
There is no way, in the American progressive tax system, to get a raise, be moved into a higher tax bracket, and end up taking home less money. It's just not possible.
@ryanwaggoner - correct, ty.
Actually, it's contrary to the way a marginal income tax works.
It can if you combine a marginal Federal Tax with a State Flat Tax. Not all tax systems are progressive
Ok, I'll bite... How?
A state flat tax will tax this new raise at the same flat rate as all the existing pay.
The marginal federal tax will tax the new raise, in your scenario, at the new, higher tax bracket.
But your scenario would have the gov't taxing this new cash into the red, reducing her take home pay. That's not gonna happen. Period.
A state flat tax will tax this new raise at the same flat rate as all the existing pay.
The marginal federal tax will tax the new raise, in your scenario, at the new, higher tax bracket.
But your scenario would have the gov't taxing this new cash into the red, reducing her take home pay. That's not gonna happen. Period.
This is asinine. Not only will the secretary make more money, but this money will likely be purely discretionary. Her post-tax $80 per week increase isn't immediately going to her rent, utilities, bills, etc, it's going to be extra spending money.
Your rather extreme libertarian views have really well thought out rebuttals and it makes me think you haven't actually read much to challenge these ideas of yours. I have major libertarian tendencies and I find your arguments extremely wanting. This is like level 1 libertarianism, where all the arguments, if taken to their natural conclusion, result in a tax rate of 0%.
Aside from the larger question of why the government has the right to take people's income by force to begin with
Because the government provides services that you cannot "opt-out" of. You benefit from services (ie, defense), no matter how much you try not to, by merely living within the borders. This is our "social contract". The free-rider problem makes this an essentially necessary part of any modern society.
It is a disincentive to others who might try to reach that level
And your argument ignores the incentives to reach that level (ie, being rich). They are two forces that MUST be balanced. Ignoring the incentives, I can see how you'd view all taxes as ONLY disincentive. This ignores the reality of the situation, however.
It's hardly clear that the success of the wealthy is due to how society is structured, and not their own effort. Undoubtably some is, but is it 90/10 or 10/90?
It's actually quite clear on issues that take very much for granted. Like binding contract law, law and order, due process, and so on. Even still, no matter what the split, the rich -do- benefit from these more than the poor. This is a rather poor argument, though, because even if the rich didn't benefit more than the poor, the progressive tax system is moral for other reasons (decreasing marginal utility of a dollar, most importantly).
It encourages relocation of talent, business, and capital to states or countries where the tax situation is more favorable.
Yes, an economic factor that MUST be considered. Again, pretending that all tax raises are bad for a reason like this implies that the optimal tax rate is 0%.
It's not clear to me that more tax revenue results in a net benefit to society. My opinion is that the rich are better at investing their money for optimum yield than the government, and the end result is more benefit for society.
Is -any- tax revenue a net benefit to society? Or is the optimum zero? If you believe that the optimum is above zero, then you MUST acknowledge that taxes can be too low, and must raised.
Any (libertarian) argument that tends to natural conclusion in an optimal tax rate of zero can be discarded as poorly thought-out. On the flip-side, any (socialist) argument that tends to the natural conclusion of an optimal tax rate of 100% can be equally discarded.
Aside from the larger question of why the government has the right to take people's income by force to begin with
Because the government provides services that you cannot "opt-out" of. You benefit from services (ie, defense), no matter how much you try not to, by merely living within the borders. This is our "social contract". The free-rider problem makes this an essentially necessary part of any modern society.
It is a disincentive to others who might try to reach that level
And your argument ignores the incentives to reach that level (ie, being rich). They are two forces that MUST be balanced. Ignoring the incentives, I can see how you'd view all taxes as ONLY disincentive. This ignores the reality of the situation, however.
It's hardly clear that the success of the wealthy is due to how society is structured, and not their own effort. Undoubtably some is, but is it 90/10 or 10/90?
It's actually quite clear on issues that take very much for granted. Like binding contract law, law and order, due process, and so on. Even still, no matter what the split, the rich -do- benefit from these more than the poor. This is a rather poor argument, though, because even if the rich didn't benefit more than the poor, the progressive tax system is moral for other reasons (decreasing marginal utility of a dollar, most importantly).
It encourages relocation of talent, business, and capital to states or countries where the tax situation is more favorable.
Yes, an economic factor that MUST be considered. Again, pretending that all tax raises are bad for a reason like this implies that the optimal tax rate is 0%.
It's not clear to me that more tax revenue results in a net benefit to society. My opinion is that the rich are better at investing their money for optimum yield than the government, and the end result is more benefit for society.
Is -any- tax revenue a net benefit to society? Or is the optimum zero? If you believe that the optimum is above zero, then you MUST acknowledge that taxes can be too low, and must raised.
Any (libertarian) argument that tends to natural conclusion in an optimal tax rate of zero can be discarded as poorly thought-out. On the flip-side, any (socialist) argument that tends to the natural conclusion of an optimal tax rate of 100% can be equally discarded.
Your rather extreme libertarian views have really well thought out rebuttals and it makes me think you haven't actually read much to challenge these ideas of yours. I have major libertarian tendencies and I find your arguments extremely wanting.
Please provide some resources, as I'd love to expand my knowledge in this area. I'm serious.
Perhaps I worded a few things incorrectly here. I think a flat tax is a much more workable solution, perhaps with credits at for the lowest income levels.
This is a rather poor argument, though, because even if the rich didn't benefit more than the poor, the progressive tax system is moral for other reasons (decreasing marginal utility of a dollar, most importantly).
Can you explain more about this?
Please provide some resources, as I'd love to expand my knowledge in this area. I'm serious.
Perhaps I worded a few things incorrectly here. I think a flat tax is a much more workable solution, perhaps with credits at for the lowest income levels.
This is a rather poor argument, though, because even if the rich didn't benefit more than the poor, the progressive tax system is moral for other reasons (decreasing marginal utility of a dollar, most importantly).
Can you explain more about this?
Ok so let's say I have a billion dollars.
I can live anywhere in the world I want to -- and with all kinds of luxuries.
Seems to me like the "people who benefit most from how society is structured" would be those poor folks who through no fault of their own, perhaps mental retardation, chronic illness, or birth defect, cannot make a living and yet are provided for by the rest of us. These are the people who would die under a differently structured system, right?
After all, rich folks got it good under all kinds of systems.
I can live anywhere in the world I want to -- and with all kinds of luxuries.
Seems to me like the "people who benefit most from how society is structured" would be those poor folks who through no fault of their own, perhaps mental retardation, chronic illness, or birth defect, cannot make a living and yet are provided for by the rest of us. These are the people who would die under a differently structured system, right?
After all, rich folks got it good under all kinds of systems.
There might be an ethical argument, but the "rich people have lots of options, and might leave" argument isn't really convincing to me. Recall that to avoid U.S. income tax, you must move abroad and permanently renounce your citizenship. How many wealthy Americans do you think would really do that solely due to a tax hike? Especially one that was in the range that would actually likely be passed (i.e. not 99%)?
I'm not saying they might leave. I'm saying that rich people have a good life in any kind of system. This includes being mobile.
Your point was we should take money from those who got the greatest benefit from our society. By that reasoning, people who are alive now and would have died otherwise have it the best, right? Or does that extra boat or summer house so important that it's a better benefit than living?
Listen very closely: whatever system you set up, there will be rich people. If you tighten the tax laws, the rich will be criminals and politically-connected people. But there will always be rich people. It's true in any societal construct. They will always have a better lifestyle than the average person. Given the criteria you have presented, you will never end your quest to find rich people and tax them.
Your point was we should take money from those who got the greatest benefit from our society. By that reasoning, people who are alive now and would have died otherwise have it the best, right? Or does that extra boat or summer house so important that it's a better benefit than living?
Listen very closely: whatever system you set up, there will be rich people. If you tighten the tax laws, the rich will be criminals and politically-connected people. But there will always be rich people. It's true in any societal construct. They will always have a better lifestyle than the average person. Given the criteria you have presented, you will never end your quest to find rich people and tax them.
Is it really true that higher taxes will lead to the rich being criminals and politically connected? My impression is that Sweden, for example, isn't considered more corrupt than the United States, despite having much higher taxes.
Rich folks are only as rich as the society they inhabit recognize them to be. Ask white Zimbabwean farm owners how wealthy they are now (only one recent example). The wealthy benefit the most - by far - from how society is structured, if for no other reason than that societal structure is what's holding them up as "rich" in the first place.
@_delerium, please read again. That is NOT what Daniel said.
Who benefits the most from the society IN RAPORT TO HIS CONTRIBUTION: the one making 30k or the one making 300k?
Edit: just having the money in the bank is not benefiting. Using service, health care, infrastructure, education, free time, etc. That is benefiting.
Edit2: Furthermore, they are ALREADY paying the most.
Edit: just having the money in the bank is not benefiting. Using service, health care, infrastructure, education, free time, etc. That is benefiting.
Edit2: Furthermore, they are ALREADY paying the most.
Your claim is that John Paulson is contributing 5 orders of magnitude more to society than teachers, social workers, police officers, firefighters, construction workers, engineers, nurses, and soldiers?
It seems a bit intellectually unfair to pit one specific person against a bunch of vague groups of people that we generally hold favorable views towards.
In the aggregate, I think one can make the case that the wealthy contribute more to society than the poor, in the form of jobs, capital, etc. How do you determine value to a society other than through what the society is willing to pay? And if those other jobs were worth more to society, presumably we'd pay people more to do them.
In the aggregate, I think one can make the case that the wealthy contribute more to society than the poor, in the form of jobs, capital, etc. How do you determine value to a society other than through what the society is willing to pay? And if those other jobs were worth more to society, presumably we'd pay people more to do them.
A man was paid $6b for winning a bet against homeowners and the entire financial industry. It is relevant to point that out, because it directly contradicts the idea that a person's wealth is proportional to what they've contributed. And it's not like similar situations are hard to find (though his is a much more dramatic example than most).
What's intellectually dishonest is pretending that money is the only way to measure value.
What's intellectually dishonest is pretending that money is the only way to measure value.
Are you seriously arguing that millions of people should be taxed more on the basis of what one person may have done?
Are you seriously suggesting only one person has gotten wealthy without contributing to society?
No, but you seem to be arguing for a broader trend or application of the principle on an anecdote related to one person (and a pretty flimsy anecdote at that). Show me some data.
I believe you are conflating society and government, and I'd actually be very much in favor of the gov't providing bills for it's services so that I could cancel the "services" I don't want, and/or find alternate providers.
It's not clear how some of the services would work if there were opt-in though. If I opt out of the government-provided property-rights system, for example, but someone else doesn't, what happens? If we have a dispute over who owns a particular piece of land, usually a court resolves that. But I've opted out of the government court system, so how do we resolve this dispute? By force of arms?
Your edit is the best part. I wouldn't necessarily mind paying higher taxes if the government were a capable solutions provider. Alas, if you've ever actually worked for the government, you know they are not.
I was in the Navy and the month before the end of every fiscal year was "see what kind of expensive shit we can find to buy because I need to use up my budget so I don't lose it next year" time. After that experience, it's hard for me to have faith in the institution of government as an agent of efficient allocation of capital.
You are quite delusional if you don't thnk this happens in the business world as well. It is an artifact of any large and centralized budgeting process. If your group goes over budget you are penalized, and if you are under budget you are not rewarded and are sometimes even penalized (for not delivering an accurate budget projection and tying up capital that could have been better used elsewhere, like those over-budget idiots two floors below... :) Using all of your allocated funds is the most rational decision to make in these situations, so you spend it on whatever you can.
I'm sure it does, but the difference is that companies have to deal with competition, while governments are effective monopolies. If I, as a customer, dislike the value I get for a product or service, I can switch. If as an investor, I don't like the returns, I can sell. But if I don't like the way the Navy is investing my tax dollars, what can I do? Yes, it can be changed, but I can't really do much about it as an individual. Over time, this situation conspires to create government waste because there's no accountability. There might be oversight, but the consequences of mismanagement and inefficiency isn't organizational death, the way it is (or should be) in the private sector.
"The bigger question: is it in any way fair, just, or moral to tax society's most successful more heavily just for being more successful?"
No, it's not. However, it is fair to tax the people who have the most. Determining your income for the year is just a heuristic, and an inaccurate one at that. However, if you can come up with a 100% fair way to determine whether a person deserves their income based on a tax form, I'd suggest running for Congress or the Presidency.
But until that happens, we're just going to have to settle for an imperfect system. Personally, I like the idea that if anyone is treated unfairly by our tax system, it's the top 3%. I think our tax system is fair to the other 97%. And that's quite an accomplishment.
No, it's not. However, it is fair to tax the people who have the most. Determining your income for the year is just a heuristic, and an inaccurate one at that. However, if you can come up with a 100% fair way to determine whether a person deserves their income based on a tax form, I'd suggest running for Congress or the Presidency.
But until that happens, we're just going to have to settle for an imperfect system. Personally, I like the idea that if anyone is treated unfairly by our tax system, it's the top 3%. I think our tax system is fair to the other 97%. And that's quite an accomplishment.
Our government already can't manage what they have with any sort of reasonable efficiency.
An assertion in axiomatic clothing, I think.
As for your opening question, more successful at what? Certainly, success in one's career or investment is one answer, but so is 'successful at minimizing one's tax liability'. We're talking about going back to the marginal tax rates of the 1990s, which strangely I don't remember as being a time of great fiscal suffering. If we had not cut those taxes to begin with, perhaps we wouldn't have such large deficits as we presently do.
An assertion in axiomatic clothing, I think.
As for your opening question, more successful at what? Certainly, success in one's career or investment is one answer, but so is 'successful at minimizing one's tax liability'. We're talking about going back to the marginal tax rates of the 1990s, which strangely I don't remember as being a time of great fiscal suffering. If we had not cut those taxes to begin with, perhaps we wouldn't have such large deficits as we presently do.
You know what... I'd almost feel sorry for these top 1%'ers... Almost, if it wasn't these very people who OWN our gov't through their lobbyists and cash contributions.
These are the people who have orchestrated public policy in this country directly and indirectly for at least 30 years.
Now the suggestion comes up that the gov't that they bankrupted might actually expect them to pay for it, and a slew of people, none of whom are actually part of this top 1% group, start whining about what's fair and unfair.
These are the people who have orchestrated public policy in this country directly and indirectly for at least 30 years.
Now the suggestion comes up that the gov't that they bankrupted might actually expect them to pay for it, and a slew of people, none of whom are actually part of this top 1% group, start whining about what's fair and unfair.
America's population is over 300M. Do you really think 3MM+ people all 'own the government' as a collective? Do you really think 3MM+ people are responsible for bankrupting the government?
I had a good year last year thanks to the business I founded, so I'm in this top 1% of taxpayers, but I have exactly the same political influence as everybody else. Less, since I can't even vote in this country. And instead of 'bankrupting the government', my cofounder and I worked hard and created some jobs in the middle of a recession.
I had a good year last year thanks to the business I founded, so I'm in this top 1% of taxpayers, but I have exactly the same political influence as everybody else. Less, since I can't even vote in this country. And instead of 'bankrupting the government', my cofounder and I worked hard and created some jobs in the middle of a recession.
Yes, absolutely. In this country your political influence is directly proportionate to the money you invest in attaining political influence.
The fact that you chose not to spend your money and use your connections for political gain doesn't make your ability to do so any less noteworthy.
The fact that you chose not to spend your money and use your connections for political gain doesn't make your ability to do so any less noteworthy.
Oh? The fact that you chose not to do [X] doesn't make your ability to do [X] any less noteworthy?
There's a knife in a knife rack in my kitchen. By your logic I should be jailed for stabbing someone, since I clearly have the ability to do it.
For the sake of argument, let's accept your premise - that in America, the government is subverted by well-funded lobbyists and cash contributions to politicians. Instead of getting angry at the top 1% of taxpayers, some of whom have nothing to do with this subversion, why don't you focus your anger a little more, and restrict it to the people who actually back the lobbyists and contribute the cash?
I'm a little uncomfortable being on the receiving end of such anger, just because my startup did alright. I'm sure there's plenty of others in that top 1% of taxpayers who similarly have nothing to do with what you're actually angry at.
There's a knife in a knife rack in my kitchen. By your logic I should be jailed for stabbing someone, since I clearly have the ability to do it.
For the sake of argument, let's accept your premise - that in America, the government is subverted by well-funded lobbyists and cash contributions to politicians. Instead of getting angry at the top 1% of taxpayers, some of whom have nothing to do with this subversion, why don't you focus your anger a little more, and restrict it to the people who actually back the lobbyists and contribute the cash?
I'm a little uncomfortable being on the receiving end of such anger, just because my startup did alright. I'm sure there's plenty of others in that top 1% of taxpayers who similarly have nothing to do with what you're actually angry at.
I think the real question is will this tax increase make a significant dent in the budget deficit?
People who make $250,000 or more a year can afford to pay more for a lot of things. But if you tried to charge one person more for an identical candy bar or television or movie ticket just because they make more money, everyone would instantly see this as unjust. Why should government services be any different?
I'd be a lot more content with differential tax rates if the money I'm saving to start my next business - and create jobs for Americans - was exempt. Every dollar I give the government is a dollar they're going to spent a whole lot less efficiently than I will.
I'd be a lot more content with differential tax rates if the money I'm saving to start my next business - and create jobs for Americans - was exempt. Every dollar I give the government is a dollar they're going to spent a whole lot less efficiently than I will.
That's called a consumption tax, which has a lot of intellectual advantages over the current regime.
Income = Consumption + Savings. Right now we tax income, but it's possible to tax consumption instead. That would encourage more saving and less consumption, which is probably a good thing for the country (but probably won't happen any time soon because in the short run businesses wouldn't stand for it).
Income = Consumption + Savings. Right now we tax income, but it's possible to tax consumption instead. That would encourage more saving and less consumption, which is probably a good thing for the country (but probably won't happen any time soon because in the short run businesses wouldn't stand for it).
Would more saving and less consumption be good for the country? I'm not saying it's a bad idea for individuals--it's what we do personally--but it seems like the economy as a whole would stagnate based on my completely unqualified armchair economist opinion.
You are correct. Consumption taxes are, in effect, tariffs on commerce. Theoretically, you should try to push these down as much as possible, so that money flows between economic actors with as little burden as possible. A "solution" to the economic burden of income taxes that increases the overhead cost of transactions and encourages hoarding of money is not a solution at all.
There would be stagnation if the economy is a closed system. But in a world with multiple economies, the ones that channel income into accumulating more income-producing assets will grow their income faster than the ones that don't.
Your example is bad because people making over $250,000 generally don't use most Government services. A better example would be if the person came in to buy a TV and you forced him to buy a TV, DVR and surround sound system for the guy standing behind him in line.
This assumes that the only way in which you benefit from Government services is by directly using rarely-used entitlement programs (welfare, etc). The rich certainly benefit from an educated workforce that the government bankrolls, roads to drive their cars on, police & fire protection (which is often significantly better in more affluent areas), homeland security, etc.
I make what I consider a middle class salary (around double the household income in my area), and I'm pretty sure I can afford a tax hike. While I would not be terribly happy about it, it's not going to hurt me. I'd say for most of the real middle class, who haven't mortgaged themselves to the hilt, a tax hike of a few percent will cut into their discretionary income, not anything truly needed. I'll have to wait another two weeks to get my 52" big screen television. Oh no.
is affordability really the unit-of-analysis that you want to use to design (or make tweaks to) a tax system?
lets assume that $50k per year gives a comfortable lifestyle to a person. anyone earning less than 50k per year cant afford to pay taxes and therefore doesnt have to. anyone earning more than 50k can certainly afford it, so they pay the amount needed to get there income to 50k. so a guy who makes 60k pays 10k per year, and a guy who earns 1MM pays 950k.
do you think entrepreneurs would start businesses in this environment? sure, some would because they are doing what they love... but what about all those boring businesses. do you think the dry cleaner LOVES to wash other people's clothes? do you think the guy who started 1-800-GOT-JUNK loves other people's trash?
among other things, you need to think about incentives (and the killing of those incentives) when you devise a tax system.
lets assume that $50k per year gives a comfortable lifestyle to a person. anyone earning less than 50k per year cant afford to pay taxes and therefore doesnt have to. anyone earning more than 50k can certainly afford it, so they pay the amount needed to get there income to 50k. so a guy who makes 60k pays 10k per year, and a guy who earns 1MM pays 950k.
do you think entrepreneurs would start businesses in this environment? sure, some would because they are doing what they love... but what about all those boring businesses. do you think the dry cleaner LOVES to wash other people's clothes? do you think the guy who started 1-800-GOT-JUNK loves other people's trash?
among other things, you need to think about incentives (and the killing of those incentives) when you devise a tax system.
Most people in the US pay no taxes at all. The $250K threshold hits lots of hard working professionals and entrepreneurs who are by no means "rich" and who work extremely hard.
I'd argue that people earning $250K who are paying off loans and working 60+ hour weeks cannot afford it... and that taxing them is a horrible policy idea, no matter how well it resonates with voters who themselves pay no taxes (or people like the author who live in Westport CT).
I'd argue that people earning $250K who are paying off loans and working 60+ hour weeks cannot afford it... and that taxing them is a horrible policy idea, no matter how well it resonates with voters who themselves pay no taxes (or people like the author who live in Westport CT).
"Most people in the US pay no taxes at all. The $250K threshold hits lots of hard working professionals and entrepreneurs who are by no means "rich" and who work extremely hard."
Let's see now... when the median family income in the US is $40,000 per year, an individual making $250,000 per year is undoubtedly rich.
They might not be super rich, or even very rich. But they're rich.
Let's see now... when the median family income in the US is $40,000 per year, an individual making $250,000 per year is undoubtedly rich.
They might not be super rich, or even very rich. But they're rich.
Also, a family (two adults, 2 children) earning $40K per year will pay next to nothing in taxes. This is why such people tend to support our oil wars, they are costless to them. Both political parties like to keep it this way.
What about differences in cost of living? Is a maid in San Fran who earns $80K per year rich?
"Soak the rich" doesn't work. I recall seeing an interview with Ronald Reagan when he was a movie star. He stopped working after a certain point each year because he was taxed so high that he would rather have the free time than more income. Whenever they create luxury taxes, such as on yachts, the rich just put off getting a new yacht. Who really suffers? The working stiffs who build boats. They get laid off.
I don't know what the answer is. But, as I understand it, punishing people who have the most leeway to make other choices pretty consistently fails to get the desired result.
I don't know what the answer is. But, as I understand it, punishing people who have the most leeway to make other choices pretty consistently fails to get the desired result.
Better to just take their money away rather than tax them on their income or even their consumption.
Back-of-the-envelope-calculation.
Given:
- USA population: 300 million
- percentage of households that make 250k+ in a year (according to the article): 2.1%
If we assume that we have 2 people per household, that's 150 million * 0.021 = 3.15 million "households" making US$250k+.
Assuming that the average income of the US$ 250k+ group is much larger than the bottom, something close to US$ 1 million, and assuming that there is a tax increase will take 5% of your income from your pocket. In practice, we are saying that we are taking 50 thousand dollars of each household that makes more than US$250k.
Using these values, the government would get 3.15 million times US$ 50 thousand = 157.5 billion dollars from this tax increase.
According to wikipedia (http://en.wikipedia.org/wiki/2009_United_States_federal_budg... : the net deficit for the 2009 budget was 407 billion dollars.
I know that are tons of other things in a serious model: flow of money and such. But even so, I wonder if there is any kind of tax increase that would actually be able to fix the deficit.
Given:
- USA population: 300 million
- percentage of households that make 250k+ in a year (according to the article): 2.1%
If we assume that we have 2 people per household, that's 150 million * 0.021 = 3.15 million "households" making US$250k+.
Assuming that the average income of the US$ 250k+ group is much larger than the bottom, something close to US$ 1 million, and assuming that there is a tax increase will take 5% of your income from your pocket. In practice, we are saying that we are taking 50 thousand dollars of each household that makes more than US$250k.
Using these values, the government would get 3.15 million times US$ 50 thousand = 157.5 billion dollars from this tax increase.
According to wikipedia (http://en.wikipedia.org/wiki/2009_United_States_federal_budg... : the net deficit for the 2009 budget was 407 billion dollars.
I know that are tons of other things in a serious model: flow of money and such. But even so, I wonder if there is any kind of tax increase that would actually be able to fix the deficit.
The 2009 deficit is an outlier, because it's being sampled immediately after a sharp fall in revenue. In fact the budget was (briefly, before tax cuts and two wars threw it out of whack again) balanced as recently as 2001. There's no reason to expect that it's an impossibility.
But no, you can't enact a sudden tax increase (or spending cut) in a down year and expect it to close the gap. Budget planning is done over decade-scale timeframes.
Also note that the deficit is bad not because its immediate cost is unbearable but because its current scale is unsustainable. The marginal cost of any extra borrowing is actually quite low; the US Federal Government pays very low interest rates on its debt (check the federal bond rates for current numbers), and no one is suggesting an inability to pay this year's debt -- it's a drop in the bucket. So the goal is a steady reduction of deficit spending to a sustainable level.
But no, you can't enact a sudden tax increase (or spending cut) in a down year and expect it to close the gap. Budget planning is done over decade-scale timeframes.
Also note that the deficit is bad not because its immediate cost is unbearable but because its current scale is unsustainable. The marginal cost of any extra borrowing is actually quite low; the US Federal Government pays very low interest rates on its debt (check the federal bond rates for current numbers), and no one is suggesting an inability to pay this year's debt -- it's a drop in the bucket. So the goal is a steady reduction of deficit spending to a sustainable level.
This reminds me of the article a few years ago that indicated that Warren Buffett had a lower effective tax rate than his secretary, even though he made heaps more. http://www.timesonline.co.uk/tol/money/tax/article1996735.ec...
That was because he's counting capital gains. Capital gains are the tax you pay based on the price of a stock, which is based on the net present value of the company's dividends (taxed at 15%), which are paid out of its profits after taxes (35%). So it looks like the taxes he's paying on the extra earnings of Coca-Cola are about 53%.
At least he doesn't pay FICA taxes on that. On the other hand, the capital he invests does allow companies to hire more people, who do pay taxes.
The utility-maximizing way to tax Mr. Buffett is at 0%. He'll invest it effectively, it will grow the economy, more jobs will be created, and we'll end up with more wealth to squander through silly redistributive schemes.
At least he doesn't pay FICA taxes on that. On the other hand, the capital he invests does allow companies to hire more people, who do pay taxes.
The utility-maximizing way to tax Mr. Buffett is at 0%. He'll invest it effectively, it will grow the economy, more jobs will be created, and we'll end up with more wealth to squander through silly redistributive schemes.
Nice try Ronnie, but I highly doubt Mr. Buffet is ignorant enough to take profits he intends to re-invest as income. These likely stay within a holding corporation that re-invests this money and does not pay taxes on the gains. This is the way the system exists now and the way it should work.
Here is what this author doesn't understand. People who make much more than $250,000 a year rarely let that money touch income taxes. The tax game is all about creating trusts, funneling through shelter companies, long-term capital gains, expensing the heck out of everything, etc.
The US federal income tax exists to raise revenue for the federal government. It does not exist to level the playing field, make things fair, or to hinder high-producers.
This whole debate is framed wrong, on both sides.
This whole debate is framed wrong, on both sides.
Why does a married couple still have the same 250k threshold? Does marriage immediately cancel out all the expenses one person in a relationship might encounter?
Doctors, lawyers, and other paycheck people making $250k pay around the 35% rate. They get hit hard. Meanwhile, professional investors earning the same amount pay the capital gains rate of 15%, which is less than a paycheck family earning $80k. I don't want paycheck people to pay more taxes, I want the capital gains rate to go up.
Somewhat counterintuitively, raising the capital gains rate actually tends to decrease overall capital gains receipts. This is mostly due to the fact that capital gains realizations are some of the easiest to time, and if advantageous, defer.
This is a natural consequence of a convoluted system with complicated rules that encourage schemes. Another sad consequence of this system is that, as with our managed health care system, it creates a massive amount of regulatory and managerial overhead.
The engineer in me would love to see a flat tax, and the resultant elimination of layers of bureaucracy, like the chopping out of so many lines of unnecessary code. Dare to dream...
This is a natural consequence of a convoluted system with complicated rules that encourage schemes. Another sad consequence of this system is that, as with our managed health care system, it creates a massive amount of regulatory and managerial overhead.
The engineer in me would love to see a flat tax, and the resultant elimination of layers of bureaucracy, like the chopping out of so many lines of unnecessary code. Dare to dream...
Yeah, let's disincentive the wealthy to invest in new companies that create jobs during a recession. Excellent.
I much prefer the idea floated to ditch capital gains altogether for small companies.
I much prefer the idea floated to ditch capital gains altogether for small companies.
So you should be in favor of dropping capital gains to 0% then for everyone, right? Probably income tax too for that matter, because that discourages people from working, and unemployment is the last thing we want to have.
Actually, yes. I prefer a flat tax on consumption.
Fair enough. I also prefer a consumption tax, not flat though. But if we're going to have an income-based tax, I'd rather have all types of income treated/taxed equally.
In the words of Betty Draper, Daniel Gross should stop counting other people's money.
The question is not "Can they afford a tax hike?" The question is, "Will they continue to gross $250,000 and take home less of it, or will they find a lower-stressed job and make less?"
The answer is probably the latter, for a lot of folks.
The answer is probably the latter, for a lot of folks.
Uh. No. The answer is the former, for the absolutely overwhelming and unspeakably vast majority of them. And for the rest, there are a dozen equally qualified people ready to do that job for them.
So you're saying that a person intelligent enough to make $250k per year wouldn't sit down and re-evaluate their job choice when they get an (effective) pay cut?
Really? That doesn't make any sense to me. "Oh my, I'm making marginally less take-home money. I should completely change my career and get even less money!"
Remember it's a marginal tax system. They would only get taxed more on the amount they are making over 250k.
No matter what the tax rate goes to, you'll still be bringing home more money by having a higher paying job.
Remember it's a marginal tax system. They would only get taxed more on the amount they are making over 250k.
No matter what the tax rate goes to, you'll still be bringing home more money by having a higher paying job.
> Will people create wealth if they can't get paid for it? Only if it's fun. People will write operating systems for free. But they won't install them, or take support calls, or train customers to use them. And at least 90% of the work that even the highest tech companies do is of this second, unedifying kind.
http://paulgraham.com/gap.html
http://paulgraham.com/gap.html
This would make sense if income level actually truly scaled with job difficulty or discomfort. Even if they doubled my taxes, I wouldn't quit my job to go work some minimum-wage drudgery. Higher salary ends up also meaning your job is actually more comfortable. The kind of bullshit people have to put up with in their $7/hr jobs is amazing to me sometimes.
Or they might mask their income, or elect to receive it in other forms like stock options. I think capital gains get taxed at 15%, soon to be reverted to 20% (still less than 39%).
I'm right there on that line. Honestly I pay a TON of taxes already. Very high rate, lots of taxable income. Cutting back to be under 250k would probably make more sense than making 255k and paying a lot more in taxes.
I don't mind taxes and social programs. I do mind paying for unending wars in the Middle East (not making a political statement, just a budgetary one). Cut some of the crazy expenses, and I'll be happier paying my taxes, and you probably won't even have to jack them up.
I don't mind taxes and social programs. I do mind paying for unending wars in the Middle East (not making a political statement, just a budgetary one). Cut some of the crazy expenses, and I'll be happier paying my taxes, and you probably won't even have to jack them up.
> Cutting back to be under 250k would probably make more sense than making 255k and paying a lot more
What kind of job do you have that makes >$250K and doesn't require you to understand how income taxes work? I'm skeptical.
What kind of job do you have that makes >$250K and doesn't require you to understand how income taxes work? I'm skeptical.
My bad. I was confused. Actually I have my companies accountants handle all the taxes, so I don't have to keep much awareness of how income taxes work. I probably should, but I don't need to, since I pay them to do it:)
If you make $255K, you only get a higher tax rate on the extra $5K. You'll still have more money than someone making $249K. No matter how you slice it, more money = more money. The gov't just will tax you a bit extra on the 5K.
That makes sense, sorry, I wasn't keeping in mind the progressive bracket system:(
Seriously man, that's not how taxes work at all. You can't take home more by making less. 255k will have more take home than 250k even if the marginal tax rate was 99%.
If you make nearly $250k and do not understand even the basic progressive income tax system in this country, then I just don't know where to begin...
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Why is Politics such a predominant topic on HN?