Wealth over work

[Arkady]

Krugman has a recent column nicely summarizing a point I've tried to make here repeatedly, about how the GOP privileges unearned income over earned income:

http://www.nytimes.com/2014/03/24/opinion/krugman-wealth-over-work.html?_r=0

I agree with Krugman that most people don't really realize this is what the GOP is doing. The party is rightly generally understood to favor the wealthy over the poor and middle class. But many don't realize that even among the wealthy, they favor those whose income doesn't come from their own labors. If you earn half a million dollars of income by being a world-class surgeon, you pay fairly high taxes on that (nearly 50% in federal taxes, on the top dollar, after counting income and payroll taxes). If you "earn" the exact same income from interest, dividends, and capital gains, you pay far less (as little as 15%). And if you "earn" it by drawing it from an estate, it's possible it won't be taxed at all.

The GOP is becoming the party that serves people who look like Bush or Romney: rich boys from rich families whose incomes are primarily investment gains, rather than salaries. Even among the wealthy, those who get their income in exchange for productive labor are seen as second-class citizens. It's actually similar to government in earlier, feudal eras, when rich shopkeepers and tradesmen were taxed heavily, while the aristocracy with their grand estates were protected by special privileges.

 

[as seen on tv]

thats because income tax has ALREADY been paid (twice) on that money -

first - when the taxpayer saved part of his (after tax) income, and bought shares of Apple, google, etc.

second - when apple, google, etc earn a profit (which is used to pay dividends, capital distributions, bond interest, etc) its paid income on those profits as well. taxing dividend income before dividends are declared/paid, and again when they are received by shareholders is double taxation

you are forgiven for your confusion on this point, as it is common among those who never took an actual economics courses, and are completely ignorant on this topic.

 

[GordonGecko]

They're the Party of Paris Hilton....

while claiming to be the party of the "middle class"...or "small business"....or even the party of "self-made men/women".

Even when there are exemptions for even the largest "family farm"....they still want the estate tax eliminated....a tax supported by REPUBLICAN President Teddy Roosevelt.

 

[PhilFish]

What if you are a surgeon who earned into his 70's at 15 - 18 hours a day... paid your taxes....and invested wisely...all at a steep cost and sacrifice over a life... (in labor, education, saving, etc...)

now, in twilight...he chooses to reap those saviongs and interest earnings..

some would cast that as a bad thing.

 

[IndependentinWis]

thats because income tax has ALREADY been paid (twice) on that money -

first - when the taxpayer saved part of his (after tax) income, and bought shares of Apple, google, etc.

second - when apple, google, etc earn a profit (which is used to pay dividends, capital distributions, bond interest, etc) its paid income on those profits as well. taxing dividend income before dividends are declared/paid, and again when they are received by shareholders is double taxation

you are forgiven for your confusion on this point, as it is common among those who never took an actual economics courses, and are completely ignorant on this topic.

If that is true, why do we pay taxes on our interest income? And what about the many corporations that don't pay any tax on their income, in fact, many actually get money from the Government?

 

[worldlymrb]

While the GOP may want the rich to to keep more of their money from savings, crony progressives gives the rich BAILOUTS/SUBSIDIES/WAIVERS and then call it a fancy name like "Quantitative Easing" or "ObamaCare".

 

[worldlymrb]

If that is true, why do we pay taxes on our interest income? And what about the many corporations that don't pay any tax on their income, in fact, many actually get money from the Government?

Has it ever occurred to you that the more corps pay in taxes, the less that corp is going to have for wage increases, capital equipment, new employees, not to mention HIGHER PRICES for the consumer?

 

[connieb]

Krugman has a recent column nicely summarizing a point I've tried to make here repeatedly, about how the GOP privileges unearned income over earned income:

http://www.nytimes.com/2014/03/24/opinion/krugman-wealth-over-work.html?_r=0

I agree with Krugman that most people don't really realize this is what the GOP is doing. The party is rightly generally understood to favor the wealthy over the poor and middle class. But many don't realize that even among the wealthy, they favor those whose income doesn't come from their own labors. If you earn half a million dollars of income by being a world-class surgeon, you pay fairly high taxes on that (nearly 50% in federal taxes, on the top dollar, after counting income and payroll taxes). If you "earn" the exact same income from interest, dividends, and capital gains, you pay far less (as little as 15%). And if you "earn" it by drawing it from an estate, it's possible it won't be taxed at all.

The GOP is becoming the party that serves people who look like Bush or Romney: rich boys from rich families whose incomes are primarily investment gains, rather than salaries. Even among the wealthy, those who get their income in exchange for productive labor are seen as second-class citizens. It's actually similar to government in earlier, feudal eras, when rich shopkeepers and tradesmen were taxed heavily, while the aristocracy with their grand estates were protected by special privileges.

yes, they say once you have earned money and been taxed on that - the subsequent investment earnings on that money - shouldn't be taxed again at the same rate. It is designed to promote the accumulation of wealth... when people focus on accumulating wealth - they have more of their own resources to fall back on when hard times come, thus not requiring as much support and assistance from the government. The idea is to induce people to save and invest rather than to spend every penny they receive.

Yes, the Romney's of the world benefit mightily. As do headgefund managers. And, I would whole heartedly support any adjustments to that tax code that make the capital gains earned by those who make their living off of investing - taxable at ordinary income rates - or even some of it as self employment.

connie

 

[worldlymrb]

yes, they say once you have earned money and been taxed on that - the subsequent investment earnings on that money - shouldn't be taxed again at the same rate. It is designed to promote the accumulation of wealth... when people focus on accumulating wealth - they have more of their own resources to fall back on when hard times come, thus not requiring as much support and assistance from the government. The idea is to induce people to save and invest rather than to spend every penny they receive.

Yes, the Romney's of the world benefit mightily. As do headgefund managers. And, I would whole heartedly support any adjustments to that tax code that make the capital gains earned by those who make their living off of investing - taxable at ordinary income rates - or even some of it as self employment.

connie

+1

You are spot on...

PRODUCTION X SAVINGS = WEALTH!

What should be taxed is DEBT x CONSUMPTION which equals bankruptcy.

 

[Arkady]

thats because income tax has ALREADY been paid (twice) on that money -
first - when the taxpayer saved part of his (after tax) income, and bought shares of Apple, google, etc.
second - when apple, google, etc earn a profit (which is used to pay dividends, capital distributions, bond interest, etc) its paid income on those profits as well. taxing dividend income before dividends are declared/paid, and again when they are received by shareholders is double taxation
you are forgiven for your confusion on this point, as it is common among those who never took an actual economics courses, and are completely ignorant on this topic.

There are two problems with your point.
First, in some cases, taxes have not been paid on the wealth. For example, say my father bought land for $20,000, which ended up being in an area that had a development boom, until it was worth $2 million. Now he dies and leaves it to me. 99% of that value will never have had any taxes paid on it.

Second, even if it were double taxation, that’s already the general rule when it comes to EARNED income. If I earn money working as a lawyer, I pay taxes on it. If I then hand you some of that money to act as my financial advisor, you pay taxes on it. If you then hand some of that money to someone else to clean your house, he pays taxes on it. When people are working for the money, we accept that the same dollar can be taxed again and again. Yet, for some weird reason, the Republicans and their enablers think there should be a special rule for UNEARNED wealth that says it isn’t taxed, or is only taxed at low levels, on the basis of the fact it MAY have previously been taxed when it was earned by someone else. Why the double-standard?

 

[Arkady]

They're the Party of Paris Hilton....

while claiming to be the party of the "middle class"...or "small business"....or even the party of "self-made men/women".

Even when there are exemptions for even the largest "family farm"....they still want the estate tax eliminated....a tax supported by REPUBLICAN President Teddy Roosevelt.

It’s surprising how few wealthy people who actually work for a living have woken up to this fact – that they’re basically being penalized, relative to people with the exact same income, simply because they “polluted” their income by actually doing productive work to deserve it. It’s essentially a labor penalty. If you sit lazily on your ass, contributing nothing to society, you get a lower effective tax rate than if you work diligently for the exact same sum.

 

[Arkady]

What if you are a surgeon who earned into his 70's at 15 - 18 hours a day... paid your taxes....and invested wisely...all at a steep cost and sacrifice over a life... (in labor, education, saving, etc...)

now, in twilight...he chooses to reap those saviongs and interest earnings..

some would cast that as a bad thing.

There are NO taxes on savings. Not a dime. And that's as it should be. If I’ve paid taxes on $X of income, and 20 years later I pull the after-tax balance of that out of a savings account, I don’t have a tax bill for that withdrawal. However, if I pull MORE out of the account than I put in, that extra should be treated as income, and taxed at least the way it would be taxed if I’d actually worked for it.
I’d be open to reforms that account for inflation. For example, if I buy something for $100 and sell it in 10 years for $200, but $200 in ten years is only worth what $130 was worth today, I should only have $70 of the $100 gain treated as new income. That kind of indexing for inflation would be easy to do and makes sense. And I’d say the same for dividends and interest, if a practical method for accounting for inflation was proposed. If I earn 3% interest in an account, and inflation was 2.5%, then only 0.5% should be treated as real income, since the rest is just recapturing the decline in the value of the principal. But for the amount of a capital gain, interest, or dividend that is a real gain, after accounting for inflation, it should be treated as ordinary income.

 

[Arkady]

Has it ever occurred to you that the more corps pay in taxes, the less that corp is going to have for wage increases, capital equipment, new employees, not to mention HIGHER PRICES for the consumer?

Lowering taxes doesn’t lower prices or raise wages or encourage more capital investment. Prices, wages, and capital investments are already netted out before taxes are assessed.

 

[Arkady]

yes, they say once you have earned money and been taxed on that - the subsequent investment earnings on that money - shouldn't be taxed again at the same rate. It is designed to promote the accumulation of wealth... when people focus on accumulating wealth - they have more of their own resources to fall back on when hard times come, thus not requiring as much support and assistance from the government. The idea is to induce people to save and invest rather than to spend every penny they receive.

Yes, the Romney's of the world benefit mightily. As do headgefund managers. And, I would whole heartedly support any adjustments to that tax code that make the capital gains earned by those who make their living off of investing - taxable at ordinary income rates - or even some of it as self employment.

connie

Weren't savings rates higher when those things were treated as ordinary income?

 

[Arkady]

+1

You are spot on...

PRODUCTION X SAVINGS = WEALTH!

What should be taxed is DEBT x CONSUMPTION which equals bankruptcy.

You keep providing that formula, but haven’t we repeatedly established that it’s patently nonsensical? Again, to remind you:
If I produce $1000 of value, and save $1000, then, by your formula, I should now have $1 million of wealth, since production times savings equals wealth.

 

[Drumcollie]

They're the Party of Paris Hilton....

while claiming to be the party of the "middle class"...or "small business"....or even the party of "self-made men/women".

Even when there are exemptions for even the largest "family farm"....they still want the estate tax eliminated....a tax supported by REPUBLICAN President Teddy Roosevelt.

Unwelcome language removed here here doesnt even know which party Hilton belongs to:

Join Paris Hilton's New Political Party "The Big Party", We Will Solve The World's Problems With "One Big Party" For World Peace

opolicestatecoalition.blogspot.com/2009/08/rally-to-demand-un-recognize-paris.html

 

[fairsheet]

I'm not one who's convinced necessarily, that income and capital should be taxed at the same rate. I think it better that both be taxed at their most efficient rates, even if that leads to different rates.

But...at least in terms of our current economic reality, capital is being taxed way below its most efficient rate. We may wonder how capital gets away with that, since logic suggests that capital should be represented by considerably fewer voters than labor.

But...this thread highlights the "problem". All too many laborers have convinced themselves that they're capitalists.

*Yes...we're ALL labor and capital, but it's a matter of balance.

 

[Arkady]

thats because income tax has ALREADY been paid (twice) on that money -

first - when the taxpayer saved part of his (after tax) income, and bought shares of Apple, google, etc.

second - when apple, google, etc earn a profit (which is used to pay dividends, capital distributions, bond interest, etc) its paid income on those profits as well. taxing dividend income before dividends are declared/paid, and again when they are received by shareholders is double taxation

you are forgiven for your confusion on this point, as it is common among those who never took an actual economics courses, and are completely ignorant on this topic.

Just as a side note, your gratuitous personal insult is funny -- the implication that I'm confused because of a lack of knowledge about economics -- given the fact my post is citing and echoing a position taken by a Nobel Prize-winning economist, who is probably the most famous and widely-read living economist in the world. Krugman is both extremely well-known, highly decorated, and well-regarded among his colleagues. In fact, in a poll of 299 US economics professors about who their favorite economists were, Krugman finished first by a large margin:

http://www.theglobeandmail.com/repo...of-favourite-living-economists/article614479/

But, I suppose he's someone who "never took an actual economics courses, and is completely ignorant on this topic."

 

[marvin martian]

This discussion is a perfect example of why conservatives and progressives can never agree on economic issues. Conservatives believe in equal opportunities for all, while progressives believe in equal outcomes for all (at the point of a gun, if necessary).

 

[connieb]

Weren't savings rates higher when those things were treated as ordinary income?

Correlation does't equal causation.