Screwing the rich to serve the super rich.

[Arkady]

A while back I posted here the theory that the Republican focus on tax deduction caps, rather than rate hikes, to enhance revenues, might be aimed at sparing the extremely rich any significant increase in their effective tax rates, by hitting the "working wealthy" with a large effective tax hike. Basically, so people like Mitt Romney can continue to pay very low rates, everyday doctors, lawyers, low-level execs, and owners of genuinely small businesses will pay a lot more. Apparently I'm not the only one who considers this a real possibility. The math appears to show that as the likely outcome of the Republican approach:

http://krugman.blogs.nytimes.com/2012/11/27/the-stiffs-and-the-players/

I won't pretend to be dispassionate on this one. I have a vested interest. My wife and I will make something between $250k and $300k this year, nearly all in the form of salaries. We're the working rich. I'm happy to pay higher taxes in the interest of the nation, but I want those richer than me to take an even steeper hike, and for the ultra rich above them to get hit harder still. Getting hit with more progressive taxes is only fair and I can bear it, but I don't want the budget balanced on my back if the oligarchs and plutocrats aren't tightening their belts even more.

Aside from my personal situation, it's just sickening the way the modern GOP rewards wealth over work (by way of high effective tax rates for those who earn big incomes as salaries for actual productive labor, versus low effective tax rates for those who inherit wealth, or live off investment income streams). If you buy the Republican rhetoric about low taxes preserving the incentive for hard work, it should be the working rich who get their strongest defense -- those who are putting in 60 hour work weeks for low-to-mid six-figure incomes, after years of deferring gratification by getting advanced educations then fighting their way up the ladder -- not the economic aristocracy that flies around in private jets and owns so many houses the forget about some of them. They should be fighting to keep the effective tax rates from rising too much on those in the "realistically achievable success" category, that others can sensibly aspire to, even if that means letting effective rate srise a lot for the multi-millionaires and billionaires.

That's why I don't buy their rhetoric. They aren't trying to keep taxes low to enhance the incentive for hard work, for the sake of the economy. They're doing it because they're effectively owned by mega-wealthy families like the Coors, Walton, Olin, Bradley, Mellon, etc. dynasties, for whom low rates on the top bracket, low capital gains rates, and low estate taxes matter vastly more than pocket change like mortgage interest deductions, child tax credits, etc.

 

[connieb]

I have to agree Arkady that I saw that as an effect of Romney's tax plan. We are not quite to the same income bracket you guys are in, but on our two salary income, we do pretty well, and I hope to be in your brackets in the not so distant future. But, I draw completely different conclusions.

I agree with lower rates on investment income. I do not like the idea that I work so hard, sock money away and then when that money manages to earn a little bit of money - I pay the same large rate on that income again. Assuming we are still in the high bracket. I also see business owners. Small business owners - according to the sizes the SBA determines "small" but not what I seem to see here bandied about as "small". In my world - small is almost anything short of a multi-national publically traded or at least limitedly traded company. My "small" business clients gross up to 40 - 50 mil a year in sales. Some much much MUCH less. But, for those business owners who have poored their blood sweat and tears into growing a business, having kept their capital in their business responsibly so that they can grow and maintain a stable enterprise, and then are in my opinion penalized when they want to draw some of that money out in the form of additional taxation. I think that does provide a great disincentive to operating a business responsibly or even the choices to operate your own business. And since about half our workforce is employed by small businesses - what keeps small business owners invested in their business and growing their companies is good for our economy.

I also think when we have these discussions we only think about investing in terms of publically traded stocks. And, yes, I think that primarily the only people who benefit from lower rates on those types of investment income are the uber-rich. But, capital assets come in all shapes and sizes. It could be fixed assets you own in your business. It could be real estate ventures. It could be art and antiques. And, when you look at the advantages of the lower tax rate on those kind of assets, it is the working rich and the upper middle class who can benefit from the income on the sale of those things being taxed at a lower rate. These are the people who could maybe have afforded a second home, or maybe they had some extra cash and invest in a very modest rental property, or maybe they have had some money and can purchase a nice piece of art, or valuable antique here and there. So, yes, I do see keeping the lower rate, as something that will positively affect my tax situation in the future, even if it is not particularly helpful at this point in time. I also think that keeping the rate low is something that does encourage me to put as much away as a can. Without that... why save? Why invest? I want the opportunity to grow my money, to find things that will appreciate and sell them. If i get no benefit from that - and end up paying 40 to 45% of that in taxes.. then why don't I just spend what I have now and live it up?


My other primary disagreement with your reasoning is quite frankly, is that I do think everyone should have some skin in the game. Yes, I don't want to shoulder the bulk of the burden. BUT - I also think that guy making 50K a a year who looks at me and you like some big rich fat cats, shouldn't be in a position to decide what the government needs to spend more of my hard earned money on... unless he is up for having a little more taken out of his check.

I understand the arguments against that in that the gain may not be worth the loss in economic spending capacity. But, the issue is entirely mental perspective. It is one thing to spend another person's money.... it is entirely different to spend your own. I see it every day in my line of work. I do a lot of work with companies preparing to close or go into bankruptcy. And, part of what I do is try to figure out where we can stop the bleeding in order to be able to limp along through the completion of some projects or the meeting of a milestone, etc. And, one thing we do is take away gas cards to employees. We institute a direct reimbursement policy for documentated business miles. It is AMAZING how suddenly, people who were racking up $500 or $600 a month in gas card spending... suddenly only get $100 or $200 in reimbursements. And, the difference, when the gas card was being used - everything every fill up was being expensed. The best is when we cut off things like company purchases coffee and soda and water. Suddenly offices who previously went through 6 cases of water a week, are down to less than one, or none when the employees have to chip in. Suddenly there isn't coffee in the pot all day long, being thrown out whenever someone else wants a "fresh" pot, etc. Even something so simple as that becomes something employees don't want to pay for themselves, or they don't want to chip into so that others can have it. I have literally watched employees fight over contributing $5.00 a week to the "drink" fund because so and so drinks more soda than they get, or they don't like the brand of coffee that they can afford on the group fund. It is an interesting exercise in human interactions. And, if nothing else it has proven to me that there are plenty of people out there willing to take from those who they perceive to have more. They are willing to take from those to allow others to have the "lifestyle' they want. Sally's 5 soda a day habit wasn't an issue for John until John was asked to contribute to the drink fund. It was all fine and good to let Sally have her vices on someone else's dime.


We see the same thing when we talk about raising property taxes. In my locale property taxes go to fund schools and local services, fire, police, etc. Personally I would rather pay higher property taxes and keep my money in my community... rather than pay a higher state income tax or higher state sales taxes. And, when they talk about raising property taxes... you would think they were talking about coming to take your first born. Almost always there is a major outcry and the localities back off. Why? Because it is the one of the few kinds of taxes that is up for a direct vote by the populace, and it affects everyone from the working poor home owner, to the person who just owns real estate as an investment in the area. And, when it gets put to a vote by people where they are asking them... do you directly want to increase your taxes to improve the specifice community you live in... people resoudingly say, no. Look at Proposition 13 in CA. When people have a chance to vote to raise their own taxes - they generally do not do so.

Sure, there are those of you out there Arkady, guys who feel like they have enough, and the Warren Buffets who feel they are not taxed enough. But, I think we can't change human nature and for most people... they are happy to tell everyone.. sure have this service, put money into this enterprise, buy these tanks and plans... as long as they are doing it with someone else's money. Start taking it out of their hide... even just a little bit... and its amazing how suddenly those programs, those "extra's" aren't worth it anymore.



connie

 

[888888]

I have to agree Arkady that I saw that as an effect of Romney's tax plan. We are not quite to the same income bracket you guys are in, but on our two salary income, we do pretty well, and I hope to be in your brackets in the not so distant future. But, I draw completely different conclusions.

I agree with lower rates on investment income. I do not like the idea that I work so hard, sock money away and then when that money manages to earn a little bit of money - I pay the same large rate on that income again. Assuming we are still in the high bracket. I also see business owners. Small business owners - according to the sizes the SBA determines "small" but not what I seem to see here bandied about as "small". In my world - small is almost anything short of a multi-national publically traded or at least limitedly traded company. My "small" business clients gross up to 40 - 50 mil a year in sales. Some much much MUCH less. But, for those business owners who have poored their blood sweat and tears into growing a business, having kept their capital in their business responsibly so that they can grow and maintain a stable enterprise, and then are in my opinion penalized when they want to draw some of that money out in the form of additional taxation. I think that does provide a great disincentive to operating a business responsibly or even the choices to operate your own business. And since about half our workforce is employed by small businesses - what keeps small business owners invested in their business and growing their companies is good for our economy.

I also think when we have these discussions we only think about investing in terms of publically traded stocks. And, yes, I think that primarily the only people who benefit from lower rates on those types of investment income are the uber-rich. But, capital assets come in all shapes and sizes. It could be fixed assets you own in your business. It could be real estate ventures. It could be art and antiques. And, when you look at the advantages of the lower tax rate on those kind of assets, it is the working rich and the upper middle class who can benefit from the income on the sale of those things being taxed at a lower rate. These are the people who could maybe have afforded a second home, or maybe they had some extra cash and invest in a very modest rental property, or maybe they have had some money and can purchase a nice piece of art, or valuable antique here and there. So, yes, I do see keeping the lower rate, as something that will positively affect my tax situation in the future, even if it is not particularly helpful at this point in time. I also think that keeping the rate low is something that does encourage me to put as much away as a can. Without that... why save? Why invest? I want the opportunity to grow my money, to find things that will appreciate and sell them. If i get no benefit from that - and end up paying 40 to 45% of that in taxes.. then why don't I just spend what I have now and live it up?


My other primary disagreement with your reasoning is quite frankly, is that I do think everyone should have some skin in the game. Yes, I don't want to shoulder the bulk of the burden. BUT - I also think that guy making 50K a a year who looks at me and you like some big rich fat cats, shouldn't be in a position to decide what the government needs to spend more of my hard earned money on... unless he is up for having a little more taken out of his check.

I understand the arguments against that in that the gain may not be worth the loss in economic spending capacity. But, the issue is entirely mental perspective. It is one thing to spend another person's money.... it is entirely different to spend your own. I see it every day in my line of work. I do a lot of work with companies preparing to close or go into bankruptcy. And, part of what I do is try to figure out where we can stop the bleeding in order to be able to limp along through the completion of some projects or the meeting of a milestone, etc. And, one thing we do is take away gas cards to employees. We institute a direct reimbursement policy for documentated business miles. It is AMAZING how suddenly, people who were racking up $500 or $600 a month in gas card spending... suddenly only get $100 or $200 in reimbursements. And, the difference, when the gas card was being used - everything every fill up was being expensed. The best is when we cut off things like company purchases coffee and soda and water. Suddenly offices who previously went through 6 cases of water a week, are down to less than one, or none when the employees have to chip in. Suddenly there isn't coffee in the pot all day long, being thrown out whenever someone else wants a "fresh" pot, etc. Even something so simple as that becomes something employees don't want to pay for themselves, or they don't want to chip into so that others can have it. I have literally watched employees fight over contributing $5.00 a week to the "drink" fund because so and so drinks more soda than they get, or they don't like the brand of coffee that they can afford on the group fund. It is an interesting exercise in human interactions. And, if nothing else it has proven to me that there are plenty of people out there willing to take from those who they perceive to have more. They are willing to take from those to allow others to have the "lifestyle' they want. Sally's 5 soda a day habit wasn't an issue for John until John was asked to contribute to the drink fund. It was all fine and good to let Sally have her vices on someone else's dime.


We see the same thing when we talk about raising property taxes. In my locale property taxes go to fund schools and local services, fire, police, etc. Personally I would rather pay higher property taxes and keep my money in my community... rather than pay a higher state income tax or higher state sales taxes. And, when they talk about raising property taxes... you would think they were talking about coming to take your first born. Almost always there is a major outcry and the localities back off. Why? Because it is the one of the few kinds of taxes that is up for a direct vote by the populace, and it affects everyone from the working poor home owner, to the person who just owns real estate as an investment in the area. And, when it gets put to a vote by people where they are asking them... do you directly want to increase your taxes to improve the specifice community you live in... people resoudingly say, no. Look at Proposition 13 in CA. When people have a chance to vote to raise their own taxes - they generally do not do so.

Sure, there are those of you out there Arkady, guys who feel like they have enough, and the Warren Buffets who feel they are not taxed enough. But, I think we can't change human nature and for most people... they are happy to tell everyone.. sure have this service, put money into this enterprise, buy these tanks and plans... as long as they are doing it with someone else's money. Start taking it out of their hide... even just a little bit... and its amazing how suddenly those programs, those "extra's" aren't worth it anymore.



connie

Connie, you just don't get it do you. You are treated the same on your first 50,000 as that other guy, so are you saying you want to pay more also. And just because you make 250,000 doesn't mean you would be paying a lot more. The higher rate starts at 250,000, and only income over this amount would be taxed at the higher rate. You don't get taxed back to dollar one once you hit a new rate.

But trying to tell me that because you make so much and have to pay more means that someone who doesn't make nearly what you do needs to pay money in taxes so you can feel good. And anyone who makes 50,000 and doesn't pay any fed tax is rare. It's real hard to come up with 50,000 in deductions unless you have a large family.

 

[Arkady]

Thanks for your responses. I always appreciate when someone takes the time to make some articulate and substantive comments about the subject.

I do not like the idea that I work so hard, sock money away and then when that money manages to earn a little bit of money - I pay the same large rate on that income again.

Why? I mean, obviously we all wince a bit when we see Uncle Sam taking a cut of money we earned. But I wince a whole lot more when I see him taking a cut of the money I earned by giving up 60 hours per week I could have spent with my family to slave away in an office than when I see him taking a cut of money I "earned" by doing nothing other than allowing an investment to grow. That's especially true since much of my investment income is not due to value I'm creating, but rather about value others have created that I simply hold title to. For example, the vast majority of one's house's long-term appreciation is simply due to the growing wealth of the neighborhood around the house (and things others pay for, like improving school quality, better parks and streets, mass transit, crime reduction, etc.) Similarly, the increase in the value of my stock portfolio is due to the value created by all those workers at the companies I partly own. I understand why there's social value in rewarding me for owning that stock, but I sure mind a lot less when the government is taking a cut of value that was only mine due to a government-enforced legal fiction than when it's taking value that I created through the sweat of my own brow.

I think that does provide a great disincentive to operating a business responsibly or even the choices to operate your own business. And since about half our workforce is employed by small businesses - what keeps small business owners invested in their business and growing their companies is good for our economy.

Raising taxes on capital gains and dividends, to regular income rates, would arguably keep more money invested in business. You're more likely to indulge yourself by cashing out, if the government's only taking a 15% cut, than if the government is taking a 35% cut. So, what's the advantage of those ultra-low tax rates, from the perspective of enhancing small businesses?

It could be art and antiques.

Again, that's a perfect example of benefiting from something due to the labor of others. Assuming you didn't make the art, yourself, the initial value was created by some artist, and then the capital gain is essentially created by the society as a whole (which gradually drives up the price of those valuables as the society itself gets richer, allowing demand to rise for such luxuries). I understand the value of letting people profit on that with their investments in such things, but it's exactly the kind of thing I feel most comfortable with government taking a big cut of -- society, as a whole, created that extra value, so society, as a whole, should get a decent cut of it. Society need to leave some sort of a substantial cut for the investor or the investment won't happen... but a much smaller cut than today isn't going to cause a mass exodus from such investments. If anything, I'd like to put taxes on such things HIGHER than taxes on actual productive labor. But, for the sake of simplicity, I'd just make them the same.

Without that... why save? Why invest? I want the opportunity to grow my money, to find things that will appreciate and sell them. If i get no benefit from that - and end up paying 40 to 45% of that in taxes.. then why don't I just spend what I have now and live it up?

Quite obviously, many people have found ways to answer those questions, since people do save, and do invest, even when capital gains and dividends taxes are much higher than today. Consider two of the most spectacular investments in the modern era: the investments Steve Jobs and Bill Gates made into Apple and Microsoft, respectively, starting in 1976 and 1975. At the time, the maximum rate on long-term capital gains was 39.875%. Obviously, this didn't make them think "hey, why bother?" Many of the other great investment stories of our time (like Warren Buffett's Berkshire Hathaway) were similarly going along just fine when rates on investments were very high. There's simply no real-world sign in our country's history that high investment tax rates cause people to think "why bother?".

In fact, I could argue that we should expect the exact opposite effect. Like most people investing for retirement, I have a "magic number" in mind -- a portfolio value I need to get to in order to finance the retirement I desire. If taxes slow my portfolio's effective rate of expansion, this would not reduce my rate of investment. It would, obviously, increase it. The less of an after-tax return I get, the more I need to contribute to get to where I want to go. If ultra-low taxes allow me to invest relatively little to reach my goal, I can indulge myself with more trivial extravagances, like fine wines and luxurious vacations. If higher taxes require me to tighten my belt and invest more to reach my goal, then that's what I'll do.

I think international data bears that out, too. The US has an unusually low capital gains tax rate, but also a legendarily low savings rate. In France, capital gains are taxed 31.3%, in Germany 25%, yet both have much higher savings rates than the US:

http://www.gfmag.com/tools/global-d...065-household-saving-rates.html#axzz2DXCSvcLA

I just don't see any pattern to suggest that somehow keeping our investment tax rates so low has helped spur more savings or investment. Sure, a 100% tax, or anything close to that, would kill the incentive. But all evidence suggests investment tax rates set at the current regular income rates wouldn't be a problem, and might actually encourage more investment. Just consider that some countries currently have over 40% capital gains rates, and yet continue to have investing and wealth accumulation. You don't need 15% rates to run an economy well.

My other primary disagreement with your reasoning is quite frankly, is that I do think everyone should have some skin in the game.

Well, in a sense, everyone has skin in the game. Even the roughly half of Americans who aren't paying federal income taxes this year are paying other taxes, including payroll and state taxes. They're also generally indirectly paying taxes by way of their other contributions (the $50,000/year laborer creates value for his employer, who, in turn, pays taxes on that). And, long-term, few stay in that no-federal-income-tax category.... it's generally just a stop along the way (while a student, or a retiree, or while serving as a soldier in combat, or early in a career, or during a period of unemployment). The number of people with "no skin in the game," viewed across a career, is trivial. So, if what you're concerned about is the mindset that not paying federal income taxes might create, I think that's probably not as much of an issue as you imagine, since most of those not paying either paid until fairly recently and/or are expecting to pay again before too long. That said, I'd support a nominal income tax for everyone, just as a symbolic thing.

Anyway, I agree that most people don't want to pay taxes, but at the same time most people want the benefits taxes bring them. It's human nature. I think it's particularly hard to get people to sign up for extra taxes for things where the spending goes to programs where the benefits are indirect and uncertain. For example, people want to live in safe communities and so they're willing to spend money on a police state, but policing levels are probably less important to the violent crime rate than income inequality and other problems that can be addressed indirectly with social spending. Western Europe, for example, doesn't have lower violent crime rates because they have more cops and prisons (they have a lot less), but rather because they have a more well-maintained social safety net and a more equitable economic system. Similarly, people want to be safe from foreign aggression, so they're happy to spend hundreds of billions of dollars on wasteful military programs and homeland security. Yet, they're hostile to spending on foreign humanitarian aid, even though, in the big picture, that might do far more to prevent the next 9/11 than all the stealth bombers in the world.

 

[Genedio]

Charles Hugh Smith has an interesting take on class and taxes:

http://charleshughsmith.blogspot.co...d&utm_campaign=Feed:+google/RzFQ+(oftwominds)

He maintains there are 3.5 classes: the top 1/2% elite which pretty much runs things, and which pays 15% max on its dividends and capitals gains; the remaining 19.5% of the top quintile (let's call it the professional upper class); the remaining 30% of the upper half (let's call it the middle class); and the bottom half--which pays only about 3% of federal income tax, though it does pay considerably more in payroll, sales, and various indirect taxes, as you point out.

Smith says that the upper 1/2% has allied itself with the bottom half by promising the latter welfare goodies (though lately these seem somewhat endangered). There has been a tacit understanding amongst the classes:


The Grand Bargain was this: we at the top will pay significant taxes as long as we get to control the levers of financial and political power. We in the top 19% will pay much of the taxes as long as we and our children can continue to live well and accumulate wealth. We in the "middle class" will continue to work hard as long as we have hope of bettering our lifestyle and the lives of our children. We in the bottom 50% and retirees agree not to threaten the top .5%'s power and the wealth of the top 19% as long as we can get by on our government transfers.

Unlike most American liberals, Smith takes a pessimistic view of our finances:

This Grand Bargain is now fraying as the promises made to everyone cannot possibly be met. Claims on welfare and disability programs are skyrocketing at the same time that the demographics of an aging populace are causing 10,000 people a day to enter Social Security and Medicare, the two costliest government programs. The triple-whammy is the upper-middle class that pays most of the taxes has been slammed with lower income and a devastating drop in their net worth.


Smith notes the different tax treatment of earned vs. unearned income, and thinks the upper 0.5% (which lives on the latter) has purposely angled for special treatment. He notes that the elite buys the acquiescence of the bottom half through tax-free welfare bennies (it is notable that George W. Bush instituted both lower taxes on unearned income--those infamous 15% maximum tax rates--AND a lowered bottom tax bracket (from 15% under Clinton to 10%). The elites become particularly dangerous when they align themselves with the masses.

Smith thinks this 'Grand Bargain' is breaking down. The 19 1/2% is getting tired of the arrangement.

 

[Arkady]

That is an interesting take. I think historically that second category has functioned as a vital ally to the true holders of power -- we get relatively secure and comfortable lifestyles in exchange for defending the social and economic order that's really there for the benefit of the super wealthy. We defend it for them legally (as judges and lawyers), politically (as a critical voting bloc against communism), and as shapers of opinion (as journalists, op ed writers, academics, and influential people in our communities). But we've now largely lost the security that was part of the bargain, and we're in the process of losing the comfort. I think that if the ultra rich imagine they can replace our support with support from the lower class, they've got another thing coming. It's a pyramid, and if they let the professional class crumble, the structure will collapse.

 

[NightSwimmer]

connie,

You failed to explain why your income earned via investment should be taxed at a different rate than the income you earn from performing professional services. All that you said is that you "don't like it".

Here's a clue: Nobody likes to pay taxes. Minimum wage laborers don't like it any more than do trust fund babies. If we are going to make tax policy based upon what people "like", then we should simply eliminate taxes altogether.

 

[Colorforms]

Why are you complaining, Arkady? You don't own that money anyway. The government is entitled to whatever part of it they need to do their job. Quit being so greedy. Think of all of the poor people who are going to benefit from your generosity.

 

[Mytzlplk]

Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.
Abraham Lincoln

Read more at http://www.brainyquote.com/quotes/quotes/a/abrahamlin395631.html#d35SLgI6Ym0VtWhr.99

 

[Arkady]

connie,

You failed to explain why your income earned via investment should be taxed at a different rate than the income you earn from performing professional services. All that you said is that you "don't like it".

Here's a clue: Nobody likes to pay taxes. Minimum wage laborers don't like it any more than do trust fund babies. If we are going to make tax policy based upon what people "like", then we should simply eliminate taxes altogether.

I'm curious to hear that explanation, too. Like I said, I wince a bit any time ANY money is taken by government, as, I assume, anyone does. But I'm a lot more sensitive to money being taken out that I "earned" in the real moral sense of having dedicated my time and effort to create the value through productive labor, than in money being taken out that is, effectively, a windfall for me, largely created by the society at large, and which I only claim by way of a legal title (which describes capital gains pretty well). Even in those cases where my capital gain can be attributed to my cleverness (more often it's luck), it's still less annoying to see that kind of low-effort earning going partly to the government than to see part of my salary, which I earn by countless hours of unpleasant drudgery, going that way. I'm curious why connie appears to feel the opposite way.

 

[Arkady]

Why are you complaining, Arkady? You don't own that money anyway. The government is entitled to whatever part of it they need to do their job. Quit being so greedy. Think of all of the poor people who are going to benefit from your generosity.

I'm not complaining about paying taxes. I complain about paying at a higher rate than those much richer than me. I believe in progressive taxation. With an income of $250,000, I should pay a significantly higher effective tax rate than someone earning $25,000. But, in the same sense, someone earning $2.5 million should pay a significantly higher effective tax rate than me, and someone earning $25 million should pay significantly more than him, and so on. Right now, that's not really how it works. I pay a much higher effective tax rate than those who earn a tenth as much as me (e.g., they pay around 3%, I pay around 22%), and yet those who earn ten times as much as me pay at almost the exact same rate as me (around 23%), and those who earn ten times as much as them gradually pay less and less, as more of that income is shifted to low-rate long-term capital gains, until you wind up with people like Mitt Romney paying just 14%.

That's what I want fixed. I want the same rule to be applied fairly right to the top, with every income level paying significantly higher effective tax rates than those who are at the next significantly lower tax level. I'm annoyed that our system's progressiveness essentially peters out and then eventually reverses after nailing the professional class.

Not only do I find that fundamentally unfair, I think it's probably counter-productive socially. The argument for keeping taxes low at higher levels is to provide an incentive for people to work hard to move up the ladder. But, that should apply much more strongly to the professional class, which represents an achievable aspiration for most Americans. You don't need to be unusually brilliant, lucky, or well-connected to be as rich as me, by way of the route I took. You need to be somewhat smart and somewhat lucky, but without connections or a lot of starting money, you can get realistically expect to get there through hard work and deferred gratification, for at least some meaningful portion of people.

So, if your reason for keeping income taxes low on the rich is to encourage people to work hard to get there themselves, it's the professional class where you should expect to get the most bang for your buck with that method. People can't, by comparison, reasonably expect to become the next Mitt Romney or Bill Gates. That takes a level of brilliance, luck, connections, and/or starting money that just isn't going to come together for all but an infinitesimal number of individuals. So, keeping taxes low on them shouldn't be expected to have much "aspirational impact" in encouraging others to make their way down that path, too.

 

[LeRoy_Was_Here]

That is interesting stuff, Genedio! I hope you start posting here a little more frequently, now that Ten Minute Cup is dead.....

 

[LeRoy_Was_Here]

Not only do I find that fundamentally unfair, I think it's probably counter-productive socially. The argument for keeping taxes low at higher levels is to provide an incentive for people to work hard to move up the ladder. But, that should apply much more strongly to the professional class, which represents an achievable aspiration for most Americans. You don't need to be unusually brilliant, lucky, or well-connected to be as rich as me, by way of the route I took. You need to be somewhat smart and somewhat lucky, but without connections or a lot of starting money, you can get realistically expect to get there through hard work and deferred gratification, for at least some meaningful portion of people.

I agree with virtually everything you have written in this thread, Arkady. But I have become skeptical that reaching the upper-middle-income professional class is an achievable aspiration for most Americans. I did everything right in my life, but never got there. Hard work and deferred gratification were my entire lifestyle. I had a perfect 4.0 GPA from second grade through high school (valedictorian of my class). Except for my first year in college, I had a very high GPA, above 3.8, when I got my bachelor's degree. I worked for Hewlett-Packard for thirteen years, and was hoping to climb the corporate ladder, but ended up in the wrong division, where virtually all the managers just happened to be Mormons, and I evidently ticked them off, by writing letters to the editor of the local newspapers, which were vigorously defending the teaching of evolutionary science in the public schools. So I went back to school to get a graduate degree. I had a GPA of 4.0 in getting my Master's degree and in doing all the work on my doctorate, except for completing my dissertation. At that point, around the age of 44, I was told that I had virtually no chance of getting a tenure-track position as a professor, because I had three strikes against me. I was male, I was middle-aged, and I was Caucasian. Not what colleges are looking for these days. I understand that, and so that's not really my complaint. But when I then began looking for a job in the private sector, I was uniformly told that I was "over-qualified". When I looked into teaching in a public school, I was told that I had "too much education to be a good teacher". So I ended up teaching at a charter school, at a starting salary of $25,000 a year. I will make close to $50,000 this year, but I doubt I will EVER get above $65,000 a year, for all my work and dedication.

The sad truth is that America simply has much less upward income mobility than we used to have. The upper class seems determined to pull up the ladder of success behind themselves, so that others cannot climb it. This is an old pattern in history, by the way, and often occurs in societies that have achieved great success, but then go into sharp decline. Not a good omen for America.

 

[Colorforms]

I understand what you're saying, however, you have to look at it in context. If you have investments in the market, on that you're paying the same as Romney. Romney forgoes a wage income precisely because of what you're complaining about. If the capital gains were increased, you would still be paying more of an effective rate because your capital gains would go up as well.

 

[Drumcollie]

I think ARkady just found out that he was getting effed over by the tax code...just another spoiled wealthy liberal brat now complaining...I am wealthy...but I am the wealthy the Obama administration should help but arent helping...give us a fricking brak you spoiled liberal brat.....

Although I must admit I amone of the top 20 percent of the wealthy...I qualify because I am an american citizen and make nearer to what Americans call the poverty level ...not that I never had income...its just that I invested so that to day if I dont go to work...I wont be broke I wil get up tommorow and have an income...let us say this for you at 18 ...25.00usd per week every week till 65 and you will have enough to retire on without govt assistance...dont be an Arkady

 

[Drumcollie]

Four years later and some fiscal cliffs and wealthy ..uber rich arkady Democrats realize they got effed and want their money back...Ya had four years of Obama...8 years of Clinton...now soon you will wish you had Bush(secretly) because ya cant go around telling everybody that, because you will know what everybody else knows...that your words were fake allalong...when it came down too it...you though Obama would cover you so you voted for him and he let you get screwed...he was in charge.

note we cannot go back to Bush...he over spent...cant really afford Obama either he doubled down on Bush spending.

 

[Arkady]

I think ARkady just found out that he was getting effed over by the tax code...just another spoiled wealthy liberal brat now complaining...I am wealthy...but I am the wealthy the Obama administration should help but arent helping...give us a fricking brak you spoiled liberal brat.....

Although I must admit I amone of the top 20 percent of the wealthy...I qualify because I am an american citizen and make nearer to what Americans call the poverty level ...not that I never had income...its just that I invested so that to day if I dont go to work...I wont be broke I wil get up tommorow and have an income...let us say this for you at 18 ...25.00usd per week every week till 65 and you will have enough to retire on without govt assistance...dont be an Arkady

See my response to Colorforms. I support progressive taxation and actually believe I pay too little. I just don't like the idea of the progressive structure effectively being phased out above me. Just as I pay a much higher rate than those well below me, I want those well above me to pay a much higher rate than me. What's wrong with that?

 

[Arkady]

Four years later and some fiscal cliffs and wealthy ..uber rich arkady Democrats realize they got effed and want their money back...Ya had four years of Obama...8 years of Clinton...now soon you will wish you had Bush(secretly) because ya cant go around telling everybody that, because you will know what everybody else knows...that your words were fake allalong...when it came down too it...you though Obama would cover you so you voted for him and he let you get screwed...he was in charge.

note we cannot go back to Bush...he over spent...cant really afford Obama either he doubled down on Bush spending.

I'm fairly happy with Obama so far. I favor progressive taxation and he's made taxes a bit more progressive. I'm just hoping he works to make them much more progressive in the future, right up to the wealthiest people, rather than letting progressiveness continue to effectively phase out once you get into the mid six figures.

 

[Drumcollie]

See my response to Colorforms. I support progressive taxation and actually believe I pay too little. I just don't like the idea of the progressive structure effectively being phased out above me. Just as I pay a much higher rate than those well below me, I want those well above me to pay a much higher rate than me. What's wrong with that?

Yes I saw the response... and now your complaining that after 4 years of Obama you as wealthy have not taken advantage of all your options...but yet Obamais the reason for this issue...and when the Obama tax cuts expire...you will pay even more. just thank yourlucky stars you are not living under FDR as president...you wouldpay 90 percent on all income over 25,000...then watch you cry...

How is it that Four years of Obama havent fixed this?

 

[GordonGecko]

Although I must admit I amone of the top 20 percent of the wealthy...

Oh, boy...are YOU in trouble then.

"And again I say unto you, It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God."----Matthew 19:24

ROFL