Tax debate

[up2date]

Originally posted by NetxMan
Why?

If me and you went somewhere to eat, and we split the bill exactly down the middle. Would I pay some of your tax on the bill or would I just pay mine? It is so simple. This quote came from this thread (http://whistlestopper.com/showthread.php?s=&threadid=21), but since that had drifted off the original topic, I decided to create a new thread on this topic.

You and I sharing a meal is a different comparison. The real economy is not so simple. Having the top 1% paying a share of the tax burden equal to their income leads to accumulated wealth. Accumulated wealth does nothing for you & me. Money piled up in bank accounts cannot be used to create more jobs, it does not help me spend more money at Home Depot, which then helps them hire more people, which then creates even more jobs, etc, etc. It's far more complicated that that, of course. And if I ever find this damn book (or find the charts online) I will point to some data that shows how destructive it can be to the economy.

[NetxMan]

I guess another comparison would be the same "out to eat" situation. But this time, we factor in that I am rich, and you are broke. Now we split the bill, but the restaurant, makes me pay 70% of the bill because I am rich, and you %30 of the bill because you are poor.

Is that fair? Because I did well in life, I have to carry you? I am punished?

And a "Accumulated wealth", again you are punishing the rich. Another interesting fact is, you are considered in the top %50 if you make more than $26,800.

Also, that "Accumulated wealth" doesn't just site in a bank somewhere. The vast majority of it, sits in stocks and bonds. Which do create jobs.

[James]

Especially if the wealthy have worked EXTREMELY hard their whole life, spending their own money for their own education and deserve all they have! You dont want that money going to a high school drop-out who pushes shopping carts at Wall-Mart do you?

[up2date]

Is that fair? Because I did well in life, I have to carry you? I am punished?This is a complicated issue, and it's not just about who did better in life. You also have to account for where everyone started. I know you can give examples of very poor people who worked their butts off to make something of themselves. But it is much harder to start out that way. But that's another debate.

Also, for the most part we are not talking about people who simply do well in life. We are not talking about a person who starts a business, has a nice career, or places him/her self a few tax brackets above where they started. That is of course not what I am suggesting.

The accumulated wealth "syndrome" is true. Is I started with 4 billion dollars and gave 2 billion to one person, and split the other 2 billion among 20,000 people (giving them $100,00 each), who would spend more money? The 20,000 people would put much more back into the economy and cause a far greater positive impact.

[up2date]

Originally posted by James
Especially if the wealthy have worked EXTREMELY hard their whole life, spending their own money for their own education and deserve all they have! You dont want that money going to a high school drop-out who pushes shopping carts at Wall-Mart do you? That is not what this debate is about. I am 100% against anything that would create a welfare state. I don't want taxes to support lazy people! We need taxes to develop infrastructure, to fund self defense, etc. I am not talking about a person working themselves through grad school to get a great job and be saddled by taxes. I would never want that. But the tax laws do need to be restructured, IMO.

[NetxMan]

The accumulated wealth "syndrome" is true. Is I started with 4 billion dollars and gave 2 billion to one person, and split the other 2 billion among 20,000 people (giving them $100,00 each), who would spend more money? The 20,000 people would put much more back into the economy and cause a far greater positive impact.

So take from the rich give to the poor. Again you are punishing people for being wealthy. And taxing them more doesn't do what you want it to do. Taxing doesn't create jobs, or anything of the like.

[JD3]

I am sorry, the rich are not suffering in this country. It just isn't so. I don't know one poor person who wouldn't accept that burden to trade places.

We have a progressive tax system. It works better than the alternatives. If you want to reduce taxes, reduce spending. But then you have to decide what to cut. The 1% for social programs won't help you much.

[NetxMan]

I didn't say the rich are suffering, I am simple argueing that, Bush's tax's cuts were justified.

[JD3]

increased spending. I can see the claim of cutting taxes. And I can see the debate over what to cut in spending to pay for it. I cannot see increasing spending while cutting taxes. Seems like he is trying to have it both ways. That is poor leadership and bad policy.

That and I do think a progressive tax is best.

[NetxMan]

increased spending. I can see the claim of cutting taxes. And I can see the debate over what to cut in spending to pay for it. I cannot see increasing spending while cutting taxes. Seems like he is trying to have it both ways. That is poor leadership and bad policy.


I agree.

[ScummyD]

Tax cuts are a dynamic force in a market economy.When taxes are cut revenue to the federal treasury will increase.
Calvin Coolidge, J.F.K., and Reagan all slashed taxes by large amounts and revenue exploded. Look at the historic record it is all there for those who care to take the time. You don't "pay" for a tax cut.

[up2date]

The downside is Coolidge's and Reagan's tax cuts helped consolidate wealth in the upper class. Coolidge's economic policies and the boom they created were a major factor in setting the stage for the Great Depression.

[NetxMan]

yeah, ummm this great depression we are having right?

[up2date]

I never said we were in a great depression, only that Coolidge's economic policies were a major cause of that depression. The safeties put in by FDR's administration largely insulate us from another depression of that depth, and we are nowhere near that now. But I am worried that Bush's tax cuts could widen the divide between the classes, giving the middle class less buying power than in recent years.

[lawman]

Originally posted by scummyd
Tax cuts are a dynamic force in a market economy.When taxes are cut revenue to the federal treasury will increase.
Calvin Coolidge, J.F.K., and Reagan all slashed taxes by large amounts and revenue exploded. Look at the historic record it is all there for those who care to take the time. You don't "pay" for a tax cut.

Scummyd is pushing the old familiar supply-side line here, but it just doesn't hold water. The numbers don't back it up, and serious economists (that is to say, those whose careers don't depend on their political allegiance) don't take it seriously; Arthur Laffer is a laughingstock.

Reagan, please note, had to institute tax *increases* in the aftermath of his initial round of cuts in order to keep the government solvent... and even then, contrary to the oft-repeated assertion that "revenue increased," the net was actually consistently *lower* than the long-term projections from the Carter years (based on average growth rates during his term).

What Reagan *did* accomplish were two things -- he made the tax code less progressive (see below), and he created deficits that were used to bolster arguments for cutting domestic programs the GOP didn't like anyway. GWB has been doing much the same thing, except in even more extreme form.

As for tax rates in general... contrary to NetxMan's indignant charge of "punishing the rich," any tax system in a world where wealth is unequally distributed *must* be structured progressively in order to be be fair. That is to say, it must tax the "top dollar" of any given pile of wealth at a lower rate than the bottom dollar (with some sort of graduated scale in between). There's nothing radical about this; it's the logical consequence of a well-established principle of classical economics called "marginal utility," which states (to oversimplify) that a dollar (or other good) "at the margin" of a given pile has less "utility" (i.e., ability to give satisfaction) than a dollar nearer the base. (You enjoy that first slice of pie a whole lot more than the fifth slice, you know?) Accordingly, if taxation is to impact different people equally, *without* "punishing" anyone, it must be assesed at higher rates on the higher margins.

Furthermore, quite aside from utility to the individual, as Up2date pointed out, dollars distributed more equally also have more stimulative effect on the economy, as they're recirculated more quickly and in more directly productive ways.

[lawman]

One final point (as I was running up against the length limit just there) -- it's disingenuous for NetxMan to assert that taxes don't "create jobs" or otherwise help the economy. Public money winds up being recirculated just like private money, after all; the government doesn't just hide it in a safe. And as any good Keynesian can tell you, there are plenty of ways to use public money that are *more* directly stimulative than most private market forces. The fact that our government isn't doing that right now is another subject of discussion... but suffice it to say, no, Bush's tax cuts certainly weren't "justified."

[ScummyD]

But when all is said and done, the government can not create wealth, it can only shift it around.

And the most bang for the buck as far as economic stimulus is concerned, comes from the upper classes, the producers, the job creators, the wealth builders.

Bill Gates has built more wealth for more people than any Keynesian policy ever could.

You say "The numbers don't back it up" Huh?? What numbers might these be.

You know what would be fair? If people would actually get off their arses and take care of themselves for once and quit demanding "the rich pay their fair share."

The "rich" carry our society as far as the economy is concerned.

Look around the world at how prosperous we are in relation to other nations. What sets us apart? Freedom. Freedom in liberty and freedom in market.

A nation can not tax itself into prosperity or punish success or lessen incentive and hope to be prosperous.

[ScummyD]

Originally posted by up2date
But I am worried that Bush's tax cuts could widen the divide between the classes, giving the middle class less buying power than in recent years.
Tell me how cutting taxes can lessen buying power. How can having more money in your pocket lessen your buying power. Bush's tax cuts are across the board and your assertion is disputed by the latest data to be released.

[NetxMan]

Let me tell you what divides the "classes" as you put it. Taxing the rich so the Government can spend more on welfare programs that don't work, thus increasing the dependency on the government. And in turn not helping the so called "poor" at all. Doing nothing but widening the classes even further, because in the long run, you aren't helping them, your hurting them.

[JD3]

Welfare doesn't amount to piddle. 1% of the budget top. Get rid of it and no one will notice except those in need.

And it don't match the sweat deals cooporations get from the government. I think I talked about that before.

Complain about being taxed, but them poor people on welfare don't have a lobby. No one to give them good press. :mad:

[up2date]

Originally posted by scummyd
Tell me how cutting taxes can lessen buying power. How can having more money in your pocket lessen your buying power. Bush's tax cuts are across the board and your assertion is disputed by the latest data to be released. I have only a little more money in my pocket because of the tax cuts. The wealthy stand to gain so much more. Most middle class people are fooled by having a little more money. But if we have less compared to the wealthy, our buying power decreases. The middle class in this country were wealthiest during the 50's when taxes were much higher.

scummyd, you keep preaching supply side economics. But the rich do not put more money into the economy, create more jobs, etc. You mentioned Bill Gates, so let's take him. His company certainly employs a good deal of people. (They also practice unfair tactics that hurt the economy, but that's for another thread.) But he as a person does not. His worth is somewhere around $46 billion. I am not going to look up figures, but let's for the moment assume only $2 billion is cash. Compare his $2 billion with $2 billion shared by 20,000 people ($100,000 each). Who is going to spend more? Obviously the 20,000 people will. Plain and simple.Originally posted by NetxMan
Let me tell you what divides the "classes" as you put it. Taxing the rich so the Government can spend more on welfare programs that don't work...The divide I am talking about is the divide in wealth. The rich will increase their wealth at a far greater pace than the middle class.

[NetxMan]

So steal it from them? You are basically telling the middle class not to even work, and mean why would you if the government is going to take more.

[up2date]

Originally posted by NetxMan
So steal it from them? You are basically telling the middle class not to even work, and mean why would you if the government is going to take more. When did I ever suggest that? I as a member of the middle class I work my tail off and that won't change regardless of how much taxes I or the wealthy pay. If making more money means going into a higher tax bracket, so be it. I will still take home much more money by increasing my income even after taxes, so there's no loss in motivation. I have never suggested we tax people's incomes on such a progressive scale that we end up all making the same thing.

[NetxMan]

Here are some facts:

Earning just $71,800 annually puts you among the wealthiest 20 percent of all Americans. (this is the figure many liberals use as "rich") Yet married couples who file joint returns make up 85 percent of this group.

Two out of three taxpayers in the highest tax bracket (500,000 out of 750,000) are actually small businesses — the mom-and-pop firms who comprise the engine of job growth in this country — and would realize 80 percent of the $13 billion in tax relief due to the bush tax cuts.

These Americans make our economy grow. And they're poised to do even more.

[NetxMan]

Recently, the owner of a small business in Paducah, Ky., told Commerce Secretary Donald Evans that he already had calculated the savings he would realize from an immediate drop in the top tax rate from 38 to 35 percent. Should the cut materialize, he said, he would plough the savings back into his company to buy new equipment and hire 30 additional employees.

Not buy a Lexus. Not install gold fixtures in his master bathroom. Purchase new equipment. And employ another 30 Americans.

There are thousands of small businesses just like this one, all across the country, ready to hire — provided Congress removes some of the unnecessary impediments. In fact, research from my colleagues at the Heritage Foundation shows the legislation under review in the House of Representatives would allow these job-generators to create more than 1.2 million new jobs this year and next.

Should we shrug off a chance to spark real economic growth like that, just so tax-cut critics can score political points deriding the "rich"? Considering that the people they're talking about are likely to be you or someone you know.

[up2date]

Now where getting somewhere :)

The people and businesses you mentioned are not rich. I think it was in another thread where I stated how there was a recent tax in NYC that only effected people or families earning $100,000. They grouped the $100,000 families with the $1,000,000 families and the $10,000,000 families, etc. Now, anyone living in NY can tell you $100,000 is not a lot of money to raise a family. It certainly isn't rich here. And certainly there is a world of difference between the $100,000 families and the $10,000,000 families. I am not saying they are taxed the same across the board, just on this one particular tax.

Getting back to your point, those Americans you mentioned are exactly the ones who should not be penalized. I agree with you 100% on this. It is those above them who's money generally does less good for the economy. I am not saying we penalize them for it, but we shouldn't reward them either.

[ScummyD]

Originally posted by up2date
. But if we have less compared to the wealthy, our buying power decreases. The middle class in this country were wealthiest during the 50's when taxes were much higher.
The rich will increase their wealth at a far greater pace than the middle class.
Listen how whiny you sound, "The wealthy stand to gain so much more." Yes because they pay so much more in taxes to begin with.
Your buying power has nothing to due with how wealthy another person may or may not be.
If we can be so wealthy with higher taxes just like they did in the 50's, how much of my check do you want? How can you think you would be wealthier if the government would just take more of your money?
The so called "rich" carry this nation as far as income taxes are concerned. The upper 10% pay well over 50% of all income taxes, and the top 50% of wage earners well over 85% of all income taxes.
You shouldn't concern yourself with how much money Bill Gates has earned.

[up2date]

You misinterpret me, I am simply stating fact. Do some research on this. Bush's tax cuts placate the middle class by putting a little more money into our pockets, but it's only a little. The rich do stand to gain quite a bit more, and since it is at our expense, I have every right to be concerned. I guarantee your buying power will decrease as a result of this. Simple economics.

I am not trying to be condescending, but do yourself a favor and pick up Wealth and Democracy by Kevin Phillips. If that isn't to your liking I'm sure you can find several other excellent books on the topic.

[lawman]

Originally posted by scummyd
You know what would be fair? If people would actually get off their arses and take care of themselves for once and quit demanding "the rich pay their fair share."

To which I can only respond, What color is the sky in your world? In the world I live in, almost everyone works hard to take care of themselves (including a great many people who remain poor nevertheless -- in fact, they often work hardest); and whenever a social critic insists that the rich aren't paying their fair share to support the society that supports their wealth (however true it may be!), he's shouted down by right-wingers charging "class warfare!"

A nation can not tax itself into prosperity or punish success or lessen incentive and hope to be prosperous.

True enough as absolute statements, I suppose, but neither can a nation maintain a coherent, just, well-maintained, free, and democratic body politic without collecting and disbursing taxes. Those are all worthy goals; prosperity isn't everything. Thus real-world policymaking becomes a matter of balance and shifting degrees, not of absolutes.

Furthermore, it's worth noting that at the generally agreed high point of American prosperity (c. 1960), we had top marginal tax rates of 90% (vs. less than 40% today), yet people still seemed to find incentives to succeed.

Anyway, how does anything you wrote actually rebut anything I wrote about the reasons for a progressive tax structure?

Oh, and while we're at it...
Tell me how cutting taxes can lessen buying power. How can having more money in your pocket lessen your buying power.

Hmm. Let's suppose, for example, that your household saved $250 in income taxes last year (a not atypical figure)... but at the same time your state taxes went up (because federal funds to states were cut back), your property taxes went up (because your local schools need the money), the bill for your kid in college went up (because Uncle Sam cut student aid), and you're worried you might lose your job to boot, thanks to the overall economy (which is stagnant because, among other reasons, corporate honchos understand the side effects of mushrooming federal deficits). Think your buying power has improved?

[JD3]

Again, well said. If you aren't careful you will reduce me to just saying ditto every where.:D

Now we can't have that!;)

[NetxMan]

I don't mind progressive, but you have to stop somewhere lawman, the answer to everything isn't TAX THE RICH< TAX THE RICH!!!!!!

Nor is it taxes, And guess what, in my state, we don't have a state tax, although our democrats tried hard, we fought it day and night for weeks. umm, the people speaking up, what a novel idea.

And I don't know what country you live in, but our economy doing is great.

[NetxMan]

Some Basic Economic principles:

First, wealth is created. It does not exist in a limited, finite amount like oil or copper or some other natural resource. The free market is not a zero-sum game. When two people meet in the market place and each desires the other's goods more than his own, both will gain from trade. Both become wealthier. When the rich get richer, they make the middle class and poor richer as well, if not in dollars, then in values the public wants such as innovative medical technologies and new drugs.

Second, jobs, like wealth, are also created and unfortunately, as many newly unemployed are discovering, can be lost. Jobs are created through savings and investment, not taxes and government spending. This is why tax increases on the rich will in the long run do more harm to the poor than to the rich. Wealthy investors put money into new grocery stores, new Wal-Marts and new manufacturing plants, producing goods people desire and jobs for those who need them. Taxes on the wealthy and on corporations take away money that otherwise would be risked in new business investments that create jobs. Sure, the money might be used in government programs for health care and aid to the poor, but at the expense of potential jobs and wealth for those very same poor.

Third, today's rich are not tomorrow's rich and today's poor are not tomorrow's poor. For this reason, talking about "the rich" and "the poor" doesn't make a whole lot of sense. Wealth stratification is simply not a useful measure for social equity, because people move up and down the line. What is more useful is income mobility. If we look at these numbers we will find that income mobility in the United States is relatively high. Even the two richest men in America are self-made -- not Rockefeller family members. Gates made his billions in the past 25 years. Buffet's billions came after he graduated college. He started out as paper boy and grocery store employee.

Establishing the causes of the wealth gap is important and merits more than face value conclusions about what policy decisions are best. In fact, rather than ask why the rich are getting richer, we might instead ask why the middle class and poor are getting poorer. What government programs are constraining the wealth-creating ability of the middle class and poor? Considering affairs this way, we might discuss lowering middle class taxes, as well as those of the rich, to help encourage middle class savings and investment. We might discuss removing the minimum wage, which artificially raises the costs of employment, decreasing the jobs available for the poor. Why not let the poor opt out of Social Security and invest their money? Social Security takes big portion of their paycheck each month and loses them money in the long term.

[NetxMan]

The economy is not a tool for social engineering. It isn't simply a big pile of money. It's a complex network that has rules for optimal performance that exist outside of our emotional sentiment. If we burden its operation, we can expect an equal and opposite reaction from its performance.

[lawman]

JD3 wrote:
Again, well said. If you aren't careful you will reduce me to just saying ditto every where... Now we can't have that!

Indeed not! People might mistake you for a Limbaugh listener! ;)

Now, to respond to NetxMan...
I don't mind progressive, but you have to stop somewhere lawman, the answer to everything isn't TAX THE RICH!!!!!!

Fine, then we agree -- since I never suggested any such thing as an "answer to everything" (nor did anyone else). If you acknowledge the need for a progressive tax structure, then the rest of the discussion should be about working out the details -- differences of degree, not of kind.

And guess what, in my state, we don't have a state tax... the people speaking up, what a novel idea.

Well, that's certainly the right of any state. However, you're probably looking at things a bit narrowly... while Tennessee doesn't have an income tax, it does have a state sales tax rate of 7% (tying the highest in the nation), with local-option surtaxes that average an extra 2.41%. Plus, of course, you have property taxes. As you're probably aware, sales and property taxes are typically regressive in structure... thus, the burden of providing public revenue in your state falls hardest on those least able to afford it.

And I don't know what country you live in, but our economy doing is great.

Well, if you looked at the "location" tag to the left of my posts, you'd know where I live. And locally and nationally, while a few indicators are mixed, I think in the aggregate it's safe to say that our economy "doing is great" not.

[lawman]

Now, moving along...

Originally posted by NetxMan
Some Basic Economic principles:

...which seem to be written with grammar and syntax rather different from your other posts. I hope you won't mind me asking if you're quoting this from some other source?

First, wealth is created...

Yes, but...

When the rich get richer, they make the middle class and poor richer as well, if not in dollars, then in values the public wants...

...ideally, but not necessarily. In fact (as noted in Kevin Phillips' terrific historical/political overview, Wealth and Democracy, which someone else has already recommended), periods when the working class and middle class do best actually tend to alternate with the periods that most increase top wealth.

Second, jobs, like wealth, are also created... through savings and investment, not taxes and government spending...

Again, not necessarily. To cite the obvious example: remember the New Deal? FDR saved capitalism precisely by not waiting around for the capitalists to reinvest in real productivity.

Wealthy investors put money into new grocery stores, new Wal-Marts and new manufacturing plants...

I'd certainly debate whether anybody needs new Wal-Marts (never mind whether they create jobs anyone actually wants). As for the manufcturing sector, that's conspicuously where the U.S. investor class has not been putting its money for several years, even during the "boom." (And the more our economy becomes dependent instead on speculative finance, the more precarious it becomes... but that's another discussion.)

Taxes on the wealthy and on corporations take away money that otherwise would be risked in new business investments that create jobs.

Once again: not necessarily. (Remember marginal utility!) Those "top dollars" are just as likely to be hidden in a tax shelter (e.g., real estate), or invested in unproductive financial-market speculation, or perhaps overseas (say, in one of the third-world countries that produces the discount goods sold at Wal-Mart). Or donated to compliant politicians... which should remind us that "risked" is itself a generous term to use in an era where big investors can so often rely on (taxpayer-funded!) government bailouts.

Third... Wealth stratification is simply not a useful measure for social equity, because people move up and down the line. What is more useful is income mobility. If we look at these numbers we will find that income mobility in the United States is relatively high.

Nonsense and utter nonsense. Compared to what?

[lawman]

Part 2 (continued due to length limits)...

Despite the above, you agree that "establishing the causes of the wealth gap is important" for the sake of pondering --

we might instead ask... What government programs are constraining the wealth-creating ability of the middle class and poor?
But if we did, of course, we'd be engaging in a circular exercise where the question predetermines the conclusions...

We might discuss removing the minimum wage, which artificially raises the costs of employment, decreasing the jobs available for the poor.
Oh, please. This is a popular shibboleth among right-wing market utopians, but it's never been borne out by actual employment figures.

And, finally, just for the sake of closure...

Why not let the poor opt out of Social Security and invest their money?
Assuming generously that you're open to answers and aren't just asking this rhetorically... there are several reasons. First, of course, SS is an insurance program, not an individualized investment program... and like any insurance, it (A) works best when the risk pool is largest, and (B) is about providing a guaranteed benefit, not maximizing wealth. Second, there are plenty of programs already that encourage the poor (and everyone else) to invest privately for retirement; there's no reason to duplicate that with SS money, when obviously (A) it would increase the risk of winding up with nothing at all, and (B) the poor, even if they escaped that risk, would benefit less than others because they had less to invest at the start.

To offer a reciprocal question: why not instead remove the regressive cap on income that's susceptible to SS taxes (as was done years ago with Medicare)?

In closing -- while I certainly agree that the economy is complex, it's not burdening this analysis with "emotional sentiment" to keep in mind that the economy is something that exists to serve the needs of human beings, not the other way around. When it produces results inconsistent with basic notions of justice, we need to retool it, not merely accept it as inevitable.

[NetxMan]

there's no reason to duplicate that with SS money, when obviously (A) it would increase the risk of winding up with nothing at all, and (B) the poor, even if they escaped that risk, would benefit less than others because they had less to invest at the start.

And, what may I ask will we when the program will begin running deficits in 15 years and will be more than $22 trillion in debt over the next 75 years. Unless payroll taxes are raised, benefits will have to be slashed by a third. Now that is risk.

Well of course the poor would have less to start out with, they make less. Why wouldn't they benefit less? Put in more get more, put in less get less.

But if we did, of course, we'd be engaging in a circular exercise where the question predetermines the conclusions...

And your point is?

Oh, please. This is a popular shibboleth among right-wing market utopians, but it's never been borne out by actual employment figures.

Explain exactly why we do need a minimum wage?

[lawman]

Originally posted by NetxMan
And, what may I ask will we when the program will begin running deficits in 15 years and will be more than $22 trillion in debt over the next 75 years.
There are several excellent books and articles out there discussing how to reform and stabilize SS instead of privatizing it. I'd recommend Baker and Weisbrodt's Social Security: The Phony Crisis as a good starting point.

Well of course the poor would have less to start out with, they make less. Why wouldn't they benefit less? Put in more get more, put in less get less.
Or, depending on market risk, perhaps nothing at all? One of the basic ideological underpinnings of SS is that no one who's spent a lifetime working should have to suffer poverty in their senior years. If you can't agree with that basic idea, then you're just missing the point of the program.

And your point [re: my circular argument] is?
That you weren't proving anything, of course.

Explain exactly why we do need a minimum wage?

To keep employers from ruthlessly exploiting workers over whom they otherwise have an insurmountable advantage in bargaining power. Again, this is rooted in fundamental notions of social justice... the idea is that nobody who works full time should remain stuck in poverty. Given that, the only problem with the minimum wage is that it's too low; all of us who enjoy discount goods and services are thereby benefitting at the expense of the working poor.

A just and rational economy wouldn't allow this. Market forces don't correct for the inequities in economic bargaining power or the discrepancies between supply and demand of labor at different times and places, so public policy needs to step in and level the playing field.

But again... if you don't get basic notions of economic justice, if you disagree that it's wrong for one set of people to benefit from the suffering of another group, then you'll have a hard time understanding thus.

[NetxMan]

I do agree that it is wrong for one set of people to benefit from the suffereing of another group, but I don't think it would be suffereing if it weren't deserved.

We would also have to define "suffering" in a social manner, and define why it would be suffering, and in what situation it would be proper to call it suffering.

But since you make this statement I would love to hear your thoughts on some other social policies, which by your political tone I would venture to say that you agree with.

[booboohead]

Originally posted by up2date

Originally posted by NetxMan
Why?

If me and you went somewhere to eat, and we split the bill exactly down the middle. Would I pay some of your tax on the bill or would I just pay mine? It is so simple.


Hmmm. Lets use this 'simple' story to calculate the value of this man's time.

Given:

Both men spent 3 hours of their life having dinner.

Both men spent $100 for the dinner.

Random Salary Assumptions for Comparison:

Man 1 spent 5 hours of his life making the $100 ($40K/year).

Man 2 spent 2 hours of his life making the $100 ($100K/year).

Total spent:
Man 1: 8 hours of his life + $100
Man 2: 5 hours of his life + $100

Lets include taxes to make it more 'realistic'.

Man 1 paid 10% taxes, so he really worked 5.5 hours for the $100.

Man 2 paid 40% taxes, so he really worked 2.8 hous for the $100.

Total spent:
Man 1: 8.5 hours of his life + $100
Man 2: 5.8 hours of his life + $100

We can now determine the value of this man's time, 'X':

8.5X+100 = DINNER
5.8X+100 = DINNER

Since this man believes each gets the same 'dinner'... we know that:

8.5X + 100 = 5.8X + 100

8.5X = 5.8X

8.5X - 5.8X = 0

2.7X = 0

X = 0

Apparently, this man thinks his time is worthless.

And yet, he'd probably SAY his time is precious.

Hmmm. Isn't that a symptom of 'depression'?

Ironically, the only way to make sense of this mans logic is to assume the rich man's time is worth LESS than the average joe's time.

I guess this guy must be pretty darn condescending to rich folk.

[ScummyD]

I fought the law and the law won.

[lawman]

Originally posted by NetxMan
I do agree that it is wrong for one set of people to benefit from the suffereing of another group, but I don't think it would be suffereing if it weren't deserved.

We would also have to define "suffering" in a social manner, and define why it would be suffering, and in what situation it would be proper to call it suffering.

But since you make this statement I would love to hear your thoughts on some other social policies, which by your political tone I would venture to say that you agree with.

I don't know what you mean about suffering being "deserved."

As for definitions... sure, if you have any that illuminate the discussion, by all means offer them.

As for other areas of policy... well, that's what the other threads here are for, after all. My politics are pretty iconoclastic, really, but if there are any particular topics you think would be worth some discussion, feel free to point them out.

Meanwhile... since this thread has digressed, am I safe in assuming the case for progressive taxation has been accepted by everyone present? If not, now's the time for counter-arguments.

[NetxMan]

Lawman Like I said, I agree on a progressive tax. I don't agree on TAX THE RICH, TAX THE RICH, TAX THE RICH. Which is the common answer of most democrats. With nothing to back it up.

I also suggest that cutting the taxes of any group helps the economy.

[Tuscat]

But, if taxes distributed more equally also have more stimulative effect on the economy, it stands to reason that taxes should be distributed more and more equally.

Why not raise the top rate on everyone making over $100,000 to 50%?

They don't need that much and it would have a more stimualtive effect on the economy.

The only problem is that the people who make over $100,000 a year are usually the ones who make our economy go. They are usually the small business people who create most of the jobs in our country.

If they are taxed at what they consider confiscatory rates which make it difficult for them to profit from their efforts, they won't make great efforts. Why open another store when the government takes 50% of the profits?

[up2date]

$100,000 is way too low to be considered "rich." Not even close. I'm not going to pretend to have the answer, but the progressive tax needs to be more progressive than this. It can't just make a leap at $100,000.

[booboohead]

am I safe in assuming the case for progressive taxation has been accepted by everyone present? If not, now's the time for counter-arguments.

lawman, I agree with everything you've said; except the general conclusion that progressive taxes are a way to mitigate social injustice.

I do agree that progressive or regressive taxes are a powerful way to control certain types of behavior, and am intrigued by the arguments that progressive taxes can have a positive effect on the economy (by controlling distribution of wealth and spending, etc).

However, I believe progressive taxes are having a negative effect on 'social justice' in this country.

Inherently, people understand that fair means equal; progressive taxes rub many people the wrong way, because they don't meet this basic test of fairness. Others are happy to pay more, but consider it no more than a 'hand-out'.

Progressive taxes are essentially an unfair tax on the wealthy, to mitigate an essentially unfair distribution of the income/prosperity in our economy.

While the intent is noble, the result is debateable. The growing disparity of income in this country, and the continued high levels of poverty, testify to the failure of progressive taxes to encourage social justice (a fair distribution of the rewards to every working person in our economy).

Social justice evolves from a sense of fairness, which must be learned. The best we can do from a legislative standpoint, is to have legislation that embodies the principle of fairness. One excellent example of this is The Fair Labor Standards Act of 1939, which set limits on work hours, work age, minimum wage, etc for some businesses. This legislation created a 'level (equal) playing field' for certain companies so they could compete more fairly without some resorting to grossly unfair business practices.

Most people today would agree that working 12 year olds in meat processing plants 84 hours a week is a bit 'unfair'. But that was not always the case.

Imagine: if you simply taxed companies who employed child labor an extra 20 percent, you would not have curtailed the practice; you would only have made it a little less profititable and encouraged even lower wages and longer hours to make up for it. Progressive taxes, in this way, have put pressure on greater social injustice, not less.

Put a higher tax on some who is paid $5M a year, and they'll demand $7M next year. Taxes do not change attitudes.

Another negative result of progressive taxes is the idea of wealth entitlement. How many times do we hear 'the rich pay more, so they deserve more of a voice in government, more of a refund, more control', 'the rich are the ones who create jobs, the rich pay for government, pay for the poor, pay for our military, etc'.

The laudable but, IMO, misguided 'liberal' argument that the rich should pay more because of some 'social issue' is contributing to this 'entitlement thinking'. I fear this entitlement thinking further erodes the concept of social justice, be allowing people to think they are being 'fair (and even MORE than fair)' simply paying more in taxes.

I believe the best way to impact social justice is with legislative policy along the lines of fair labor and wage standards. These steps will create a system which is inherently more 'fair'. And then we won't need 'after-the-fact' tax policy to try to correct an unfair distribution of wealth.

With regard to social justice, I believe the best tax policy is a flat tax, which encourages, subliminally, the concept of fairness.

We can not go back and take money back from people because the system was inherently unfair when it 'paid them'. Everyone accepts that; for whatever reason, going back to Kings or investment bankers or NYSE president's and taking their money back... just because they got it from a system which grants money 'unfairly'... just seems 'unfair'. We can only effect change going forward.

Now, as the person said re 'what is suffering'. We also have to ask 'what is fair'. Which are exactly the discussions our nations need to be having.

But as long as we continue debating fairness as 'what is the right tax percentage', rather than as a principle, we'll continue letting people who are taking an unfair share of the 'economic pie' off the hook; by letting them believe they 'deserve it' because they pay a bit more in taxes.

By the way, I have a small business, and a friend opened a convenience store. Neither of us did it because we were rich. We were both out of work and were fortunate to be alittle industrious and have some friends to help us get started. Small business owners thrive on a strong economy. If progressive taxes have that result, then they'll be in favor of it.

[lawman]

To NetxMan:
Glad to see we have some points of agreement, although I think you take this conversation in an unproductive direction with the accusation that anyone (stereotypical Democrats or otherwise) has suggested anything as simplistic as "tax the rich!" Also, while tax cuts can have a net positive effect under certain circumstances, things are too complicated to accept a blanket statement like "cutting the taxes of any group helps the economy."

To Tuscat:
Welcome to a fellow Chicagoan! But as a newcomer, have you read the whole thread? Some of the points you raise have already been addressed in some detail. At any rate, it's safe to say that 50% taxation would still be a far cry from "confiscatory," and also that $100,000 in income doesn't necessarily qualify as "rich" without extensive qualification (regarding location, household size, other assets, etc.).

To booboohead: woo, I think this calls for a new post!...

[lawman]

Originally posted by booboohead
lawman, I agree with everything you've said; except the general conclusion that progressive taxes are a way to mitigate social injustice.

I do agree that progressive or regressive taxes are a powerful way to control certain types of behavior, and am intrigued by the arguments that progressive taxes can have a positive effect on the economy...
Wow, what a thought-provoking post! Thank you for the agreement; but I'm afraid you've misinterpreted some of what I wrote.

I didn't advocate progressive taxation as a means to mitigate social injustice, per se. In fact, I generally frown on the idea of trying to use the tax code to achieve legislative ends related to anything other than revenue. I'm using "progressive" not in the colloquial sense of a synonym for "liberal" or "leftist," but merely as a technical term, describing a graduated tax rate structure in which progressively higher marginal chunks of income are taxed at progressively higher rates. Social justice is an issue here only insofar as (given that we presumably want revenue collection to be conducted in a fair and just manner) this structure is consistent with the economic principle of marginal utility (discussed upthread), and thus as fair as possible to all involved.

Inherently, people understand that fair means equal...
Not necessarily. (A) What people consider "fair" almost invariably differs depending on context, and I'd be surprised if there were any social science research to back up such a broad assertion as this. Still, (B) even if it were so, we should be wary of setting public policy based on generalized public sentiment that may precede people actually having an opportunity to become informed on an issue. Marginal utility is a very real phenomenon that makes evident sense to most people once they've been introduced to it -- and a tax structure based on it is intrinsically fair insofar as it asseses greater taxes only from those chunks of wealth that have lesser utility, so that the burden of taxation, if not the actual proportions collected, are shared equally.

progressive taxes rub many people the wrong way, because they don't meet this basic test of fairness... Progressive taxes are essentially an unfair tax on the wealthy, to mitigate an essentially unfair distribution of the income/prosperity in our economy.
I disagree. First, I don't accept the "basic test" (see above); second, I think the system's structure justifies itself in the abstract, not just as a means to other ends. A progressive rate structure isn't a perfect system, of course, but then there probably isn't one, any more than there's any "perfect" form of representative democracy without some kind of systemic flaws. Nor does it prescribe any particular set of rates absent a specific context; such things must be determined in light of factors such as infrastructure needs, demand for public services, and wealth distribution within a given society, among others. Still, it's a good (and fair) starting point.

Social justice evolves from a sense of fairness, which must be learned. The best we can do from a legislative standpoint, is to have legislation that embodies the principle of fairness. One excellent example of this is The Fair Labor Standards Act of 1939... Most people today would agree that working 12 year olds in meat processing plants 84 hours a week is a bit 'unfair'. But that was not always the case.
I agree that that was valuable legislation, and that it helped reshape public attitudes in positive ways. But if in fact public perceptions of fairness "evolve" and "must be learned" in this manner, doesn't that rebut your assertion above that they're "intrinsic"?

Another negative result of progressive taxes is the idea of wealth entitlement. How many times do we hear 'the rich pay more, so they deserve more of a voice in government, more of a refund, more control', 'the rich are the ones who create jobs, the rich pay for government, pay for the poor, pay for our military, etc'.
I can't argue with you here; such simple-minded arguments are indeed far too common, especially these past 20 years. Wealth (or its lack) are too often seen to be self-justifying, some proof of merit (or its lack), rather than just the result of disparate circumstances. We shouldn't give in to such thinking and reshape policy to fit it, though; we can only try to rebut it when it arises and hopefully consign it once more to the dustbin of history.

(continued next post)

[lawman]

The laudable but, IMO, misguided 'liberal' argument that the rich should pay more because of some 'social issue' is contributing to this 'entitlement thinking'. I fear this entitlement thinking further erodes the concept of social justice, be allowing people to think they are being 'fair (and even MORE than fair)' simply paying more in taxes.
You may have a point here, insofar as anybody's actually making that argument. I'm not, however.

I believe the best way to impact social justice is with legislative policy along the lines of fair labor and wage standards. These steps will create a system which is inherently more 'fair'.
No argument from me. As noted, I prefer to see policy set openly through legislation, rather than covertly through tax codes. Insofar as NetxMan and I (among others) were discussing such policies, it was only because the discussion had already strayed from matters of taxation.

With regard to social justice, I believe the best tax policy is a flat tax, which encourages, subliminally, the concept of fairness.
Now here, I disagree vehemently... for reasons I hope I've made clear. (If we're considering alternative revenue structures, I'd mention in passing that I'm partial to replacing the income tax with a consumption (i.e. sales) tax, for several reasons... but only one which would have its own graduated/progressive rate structure based on the luxury level (i.e. "value added") of the goods consumed. It would probably also need to be paired with a wealth-recapture tax that kicked in above a certain fairly high level, if only to avoid letting gross concentrations of wealth slip through the cracks. But I digress...)

Now, as the person said re 'what is suffering'. We also have to ask 'what is fair'. Which are exactly the discussions our nations need to be having.
Exactly. We should be discussing it, not merely acting on assumptions. Unfortunately, today's policymakers seem to take far too much for granted, and indeed often to have an aversion to broad public debate of important issues. But, hey, if you know where we can find some actual thoughtful statesmen, please pass the word along... ;)

Small business owners thrive on a strong economy. If progressive taxes have that result, then they'll be in favor of it.
Well, by and large, history shows that they do. It's too bad our politicians haven't been making that case more aggressively.

[gopman]

Progressive taxes are a fairness issue. It is an indisputable fact that they hurt efficiency. The question is whether the efficiency lost is worth the "fairness" gained. People have different ideas of fairness. With the progressive tax, we are more equal, but we are poorer as a whole. That's rediculous. In a free economy, people get what they earn. I don't think it's fair to take someone's hard earned money and arbitrarily give it to someone else. Why not redistribute it to good people who are nice or volunteer? The total efficiency loss isn't worth it, and I don't think it's "fair".

[lawman]

To gopman:

1) Please define "efficiency," so we're not talking apples and oranges here.

2) Please cite documentation for your "indisputable fact," or I'll probably be inclined to dispute it.

3) All taxation inevitably involves some redistribution of private wealth for public purposes. It's intrinsic, and you can't run a complex modern society without it. Whether the policy priorities involved are "arbitrary" is a whole different discussion, but it's pointless to complain about redistribution in and of itself.

4) [Pet peeve warning--see other threads] What's with this shockingly widespread misspelling of "ridiculous?"

[gopman]

1) If a market is efficient it maximizes surplus. This occurs at the quantity of production where supply and demand intersect.

2) When a tax is factored into the price of a product, less than the efficient quantity of output is sold (with income tax, this is spread through every market in the economy). In addition resources are absorbed through bureaucracy and rent seeking. The documentation for this exists in every economics textbook since 1776.

3) No one is denying that the government needs some taxes to provide certain goods that can't be efficiently provided by private firms, like military and transportation. Everyone benefits from that. (With a flat tax, everyone benefits more equally) When wealth is redistributed, money is taken from one person and given to another, with some being lost to bureaucracy and rent-seeking in the process. That is a fairness issue and it is apt to complain. Not everyone has the same idea of fairness. I think it is unfair to take money away from someone who earned it and give it to someone who didn't.

**BONUS** Another problem with progressive taxes is the destruction of incentives at the top and bottom. There is less incentive for middle class to become wealthy, and less incentive for lower classes to work themselves out of poverty. It also gives the wealthy an incentive to try to cheat on taxes, which creates a host of problems and efficiency losses on its own.

[lawman]

1) Okay, you're talking Econ 101 "market efficiency." Let us note that a perfectly efficient market, like the perfectly fair tax system and perfectly representative democracy discussed upthread, is an ideal that's not achieveable in the real world. It depends on (among other things) participants making rational decisions, acting on accurate information, and endowed with equal bargaining power; also non-significent transaction costs and a full accounting of externalities. Want to get back to me when you've got all these arranged?

2) Again, what works in textbooks is distinct from the real world. In reality, no market system can operate (smoothly or otherwise) without a government to maintain an infrastructure and safeguard the property rights on which it rests... and any such government, of course, requires revenues to operate, which means taxation. This is true even if one adopts the common GOP attitude that facilitating "business" is the proper focus of an effective government (which is itself arguable; I'd submit there are other priorities).

3) "With a flat tax, everyone benefits more equally" is an assertion offered completely without evidence. And "earned" is just as subjective a term as "fairness" here. For example, one could certainly make the argument that the attitude you describe actually privileges labor, making wealth derived from property or through investment (i.e., by the infamous "idle rich") less "deserved" and thus subject to higher taxation.

4) As noted earlier, the "incentive" argument seems dubious in light of the fact that America's greatest surge of economic progress (whether measured at the top, or by population moving into the middle class) came during the postwar generation when marginal tax rates were more steeply progressive than ever before or since. Why, I'd even go so far as to call this argument... rEdiculous! ;)

All else aside, it's always worth remembering... any economy, any market, is only worthwhile so long as it serves the interests of the people in it. It exists to serve us, not vice-versa.

Thus, distribution does matter, even if it interferes with "efficient" maximization of wealth. (Consider a simple hypothetical population of ten. You could have either nine guys scraping by with $10,000 each, and one guy with $20 million -- or ten guys with, oh, $150,000 each. The total wealth is certainly far higher in the first situation... but I hope we'd all agree that the aggregate quality of economic life would be higher in the second.)

[gopman]

You'll notice I admitted to the necessity of some government intervention. There are other things that can hurt efficiency. That doesn't make taxing less harmful to efficiency. You have some knowledge of economics, so you know that.

Other than that, all you've done here is argue with my concept of fairness. Since there is no way to judge fairness, then this is a useless argument. The growth of the economy after WWII would have occured no matter what the tax rate was. It could have been more rapid with a lower tax.

Another bonus argument is that the market naturally awards innovation, and the progressive tax takes away from that.

The bottom line is that higher taxes hurt surplus. You can take your ideas of fairness from there. I think that people should keep the money they earn. If someone inherits money, then by taxing that, not only do you penalize the dead person, who had a right to give it to whomever he wanted, you hurt everyone who works for all their money. That is what I think is particularly unfair.

[Captain America]

Hey, I'm all for keeping taxes low. But I am as equally concerned about what the money, I am taxed, goes to. I am not for government cheese, free handouts or assumed entitlements as a way of life either. But I would rather put 80 billion into infrastructure, education and valuable social programs that provide a return for our buck, than I am for spending that money on Iraq.

Call me a selfish tightwad;)

[booboohead]

Originally posted by gopman
I think that people should keep the money they earn.

gopman. question for you. Why, exactly, do you think people should keep the money they earn?

It seems like you're using the word 'earn' in two tenses.

Technically, 'earn' simply means whatever you get paid. Saying someone should keep what they get paid because thats what they got paid isn't much of a rationale. Any more than saying someone should BE the captain of the team because they ARE the captain of the team.

Granted, 'earn' often has some value meaning... in other words... they 'merit' the money in some way. But to say someone 'merit's their pay, you'd have to give at least some rationale for what constitutes 'merit'. And if merit determines income, how come incomes for similar jobs in different industries and countries vary so much?

More accurately, in our capitalist system, people usually get paid simply whatever the market rate is for the job and industry they are in. And lets face it, they have that job in part due to their own efforts, but also in large part due to the gifts (parents, health, upbringing, looks, intelligence, etc) they got when they were born.

Its not a whole lot different that playing monopoly and happening to land on Boardwalk, while another lands on Continental Ave. Lets face it, most of the people earning real good salaries are there because they got a good role of the dice, and took advantage of it.

Now, Monopoly is a game, and no one would say that the person landing on Boardwalk 'deserved' to. But in life, we're proud enough to say when we land there that we 'earned it'.

So I have to wonder; what exactly is your argument that people should keep what they get paid? Why? Why not keep everything up to $100K, and turn the rest in. fAfter all, its really just the game of life, isn't it? Do you REALLY think someone making $1M a year in our capitalist system (game/rules/etc)... 'deserves' it? Thats just what a guy with that resume gets paid in the capitalist system. It has very little to do with their value. Heck, in our system, a drug dealer gets a ton of money. Did THEY 'earn' it?

If we acknowledge the importance of 'good fortune' in our play, then its a bit easier to envision wanting to play a game where everyone gets soda and cookies around the table, and the winners get a big hurrah, and the losers get bummed... but on the whole, everyone goes home full and happy.

Rather than a game where we encourage people to believe that they truly 'deserve' their good fortune and 'earnings', and others then... did not good fortune?

Government is there to set the rules of the game.

In monopoly, when the game is over, EVERYTHING goes back to the bank. Thats just the rules of the game.

If people kept what they earned as if it were 'theirs', to come back and play with the next time, then Monopoly would get old pretty fast, eh.

My point is... there is no rationale reason for people to keep what they earn, gopman. None. Because for the most part, what they get is the result of good fortune and skill, not worth.

Life is as much of a game with dice as any other. And our goal as a country and government, should be to create a game that maximizes worthy goals like shared prosperity and fun. Socialism takes the fun out of it. Capitalism can take the 'sharing' out of it.

But don't be constrained making the rules (ie taxes) because someone is telling you what they've gotten in this game, they've earned.

[gopman]

There's a reason why the market price for a job exists- because that is the value that the job has for society. It also has to do with the expertise required. Why would anyone go to medical school if they could make the same think managing a McDonalds? When people work hard and make money, that is THEIR money. They received compensation for the service they performed to society. Look at it this way. If I am a janitor, and I work overtime 6 days a week, then somebody who skips work on wednesday and leaves early doesn't deserve any of my money, but they somehow get their hands on it. That is not what I call fairness. People don't have to share if they don't want to, and it's not the place of government to force them to. Especially not when it decreases total surplus.

There is really no use to attacking anyone's argument on fairness since it is all a matter of opinion. Based on my experience, I think I should be able to keep the money I earned.

[Captain America]

I agree 100% GOPman.

[booboohead]

Originally posted by gopman
There's a reason why the market price for a job exists- because that is the value that the job has for society. You like getting paid what society values your job at... but you don't like paying what society values your share of taxes at. Hmmm.

There is really no use to attacking anyone's argument on fairness since it is all a matter of opinion. Based on my experience, I think I should be able to keep the money I earned.
There is a difference between a preference and opinion. Your preference is to keep what you earn. Perhaps thats what you mean by experiences... this is an understandable preference for someone who enjoys the experience of spending money.

And you're correct that preferences can not really be 'debated'. They are what they are. I like tomAto, you like tomAHto.

But fairness, as you say, is an opinion, not a preference. Opinions are based on reason and argument, and are debateable.

[gopman]

Society does value your taxes- in the form of lost surplus. Sure people want more money, and they don't want to work for it, but that doesn't mean they should get it.

We can debate our opinion of fairness until the cows come home, but no one's opinion will change, because it is a subjective topic, and people will make the decision based on their judgement. You can't change people's judgement. We'll just repeat over and over that you think it's fair to redistribute wealth and I don't. Then others will say who they agree with. We'll all offer our own reasons and no one's opinion will change. Enough has already been said on the topic in case anyone would like to examine the arguments. I just don't have the time for it.

[gopman]

Am I crazy or did Captain America agree with me? This is a great day for America.

[Captain America]

Freaked me out too!:eek:

What is even stranger is me and Muley in agreement. Long history there. To long to explain but these days he and I are seeing eye to eye more and more.

This could be perhaps because we have started to listen to each other rather than just talk to each other.

Look, basically, we all want the same thing. We all love our country and want what's best. Swapping opinions and ideas is good. VERY good. I have already learned much from you in the few days we have dialogged. I do not ever want to become closed minded and beyond learning something new.

[lawman]

To booboohead-
Thanks for jumping in and picking up the baton. Very logical and well-expressed posts.

(Do you get the sense that the discourse here is taking place on two completely disconnected levels of complexity?)

To gopman-
I'll confine myself to just one of the yawning holes in your recent "reasoning"...

people want to make money, and they don't want to work for it, but that doesn't mean they should get it.

Do you see, perchance, how if you take that statement at face value you've just invalidated the entire commodities and securities markets -- oh, hell, let's just say capitalism as a whole?

(BTW... if you don't think it's possible to change people's judgements, and you don't have time to examine competing arguments, why did you come to a political discussion board in the first place?)

[gopman]

Fairness is totally subjective- people will think what they want to think. No one's opinion is more valid than another, and you can argue about it untill the cows come home. I came to a political forum to rationalize facts, not opinions.

How does that invalidate those markets? I'd say that is the essence of capitalism- people are selfish and rational. They try to achieve their personal goals by the most efficient means possible. That is why the market is designed to reward people who help society through innovation or production. That is another argument about fairness. (I can't help myself)

The thing you cannot argue with is that taxes reduce surplus, and bureacracy and rent seeking absorbs a very signifiacnt amount of money. You also can't argue with the fact that Bush lowered taxes, the economy grew, and unemployment fell below 400,000.

[lawman]

Fairness (I'd like to expand that to "justice" if nobody minds) may be subjective, but it's never been totally so; as centuries' worth of philosophers demonstrate, it's both possible and valuable to discuss it in depth, and most people generally can agree on a lot of underlying principles, even while maintaining individual differences of interpretation.

That's the context in which this discussion should be taking place. It's worth noting (as Harlan Ellison has so often written) that not all "opinions" are created equal; only informed and rational opinions need be taken seriously. In that light, opinions are really all that's worth discussing, the best way of sharing information and comparing different strings of logic; "facts" merely need reporting, not rationalization.

My point about capitalism, to underline what seemed obvious, was that the set of people who "don't want to work" includes those who want their money or property to work for them, or just to horn in as middlemen in others' transactions without adding anything productive -- i.e., "capitalists." You suggest (not necessarily unreasonably!) that they don't "deserve" reward... yet our system relies upon them.

Besides which, I think it's safe to say that people are not necessarily selfish, are often far from rational, and are almost never efficient. And you're confused about purposes; market economics is "designed" (evolved, actually) not to reward merit (helping society or otherwise), but to maximize future income streams. Period. That's what it does; all else is incidental.

(That's why it's not sufficient to say that "society" places its value on different tasks via supply and demand, a market mechanism. There are many theories of value; that's only one, and it isn't necessarily appropriate in all contexts. Schoolteachers tend to earn less than MBAs, for instance, not because they're less important to "society" but because what they do doesn't increase wealth, at least not as directly and measurably. Other theories of value need to come into play to avoid making us all subservient to the market's often-inhumane priorities.)

So "surplus" is frankly a meaningless term on its own, without discussing some of the other factors I've raised. And yes, Bush did lower taxes -- but I'd submit unwisely (which is the crux of this thread); yes, the economy has grown -- but pretty anemically (until this recent quarter), and it might have done better under different policies, and anyway GDP often isn't the best measure of real people's quality of life. And unemployment numbers may fluctuate, but jobs continue to disappear, so unemployment remains a problem. I can't imagine what sort of comfy and secure enclave you live and work in if you honestly consider Bush's haphazard economic policies to have been successful.

[gopman]

"those who want their money or property to work for them, or just to horn in as middlemen in others' transactions without adding anything productive"

Using your capital for something productive is productive. The use of their land or whatever it is benefits society, so society rewards them.

"I think it's safe to say that people are not necessarily selfish, are often far from rational"

If that were not generally true, then the entire science of economics would be unfounded. Of course there are individuals who violate that general priciple, but society as a whole does not.

As for the market rewarding increased future income and not innovation and social benefit, future income is based on innovation and social benefit you. You wouldn't pay for something if it didn't benefit you, and therefore society as a whole.

"That's why it's not sufficient to say that "society" places its value on different tasks via supply and demand, a market mechanism."

Society and the market are made up of the same individuals. The market isn't some strange mechanism that operates outside of the control of the people.

One reason why teachers are paid less is because there is a greater supply- it is easy to become a teacher than a doctor for example. The other reason is that they are paid by the government, because education is somewhat of a nonexcludable good with a strong positive externality. The price the government pays is not set totally by the market- compare their salaries to those who teach at private schools and universities.

Surplus is a technical term that measures social benefit from an economic point of view, with fairness not taken into account. It is a valuable concept to take into account, and it has a very real meaning.

I live in an enclave called the United States, where Bush lowered taxes, and then the GDP grew 7.2% and there are 5000 less unemployed than there were last month.

So back to taxes, the fact is that lower taxes put more money into the economy, and more confidence in the firms and consumers, and let the economy grow. A limited government is necessary, but I believe it is not worth the efficiency loss, or, in my opinion, the fairness loss, to redistribute wealth. If there was less of this going on, then maybe states would be able to pay their teachers a little more. Remember, there is not a direct correlation between tax rate and tax revenue.

As for the fairness/opinion issue, I admit that it is a good idea to discuss fairness issues, and I will gladly do so- I just didn't think at the time that it was necessary to this particular thread. Looking back, the title is "tax debate," so I guess this does fall under that heading.

[lawman]

Much of your reasoning is circular. I tire of pointing out examples, however, as you ignore them and then repeat the same points later.

Many of your terms remain defined only for your convenience, or not at all. I tire of pointing this out, as well, as you again ignore the examples and repeat the usage.

Economics, while not a useless discipline, isn't exactly physics, either. It's about as "scientific" as psychology.

I didn't compare teachers to doctors, I compared them to MBAs. A Master's in education and a Masters in Business Administration take similar amounts of time, money, effort and talent to acquire.

Just for giggles, please explain why you think that lower taxes necessarily "put more money into the economy" than government expenditures would. For bonus points, explain how any government activity can take place without "redistributing wealth" in some fashion.

If you'd like to offer up a definition of "fairness" for discussion, here or in another thread, please do; be sure to include your premises and the reasoning by which you connect them to your conclusions. To flesh things out, I'd suggest we should also discuss the concepts of "merit" and "value." Everyone jump in; the more the merrier...

[booboohead]

Originally posted by gopman
Fairness is totally subjective

Allow me to test this theory:

Two men do some work for a third. Each does the exact same quantity and quality of work. Identical. One is paid $10 dollars. One is paid $20 dollars.

Given just this limited information, would you classify this as 'fair'? Yes or no.

If you want to say 'it depends', consider that we all have to make judgements in life on less than perfect information. I'm only saying 'given this very limited information', what is your answer?

If you are thinking 'Yes' (even if you are refusing to say), you may have figured 'there must have been a valid reason, and you just didn't know what the reason was'. You tend to trust that people and life are inherently 'fair-until-proven-unfair'.

If you are thinking 'No' (even if you are refusing to say), you may have figured 'it does not make sense to me that 2 people would get a different reward for an identical contribution'. Without more information, you'll judge this to be 'unfair-until-proven-fair'. You tend to be a cynic.

If you refuse to say 'Yes' or 'No', then you are likely still single ;)

What your answer was may reveal something about the extent to which you think 'fairness' is subjective. Heres why:

If your approach to fairness is 'fair until proven unfair', then you likely do not come across many situations that you would say are 'unfair'. Because in virtually every situtation where something may 'seem unfair', or even if someone claims it 'is unfair', YOUR logic will naturally figure that it only 'seems that way'... given more information, it quite likely is 'fair'. And when they hear people forcefully ascribe both 'fair' and 'unfair' to seemingly the same situation; if they 'sense it is fair' they will agree; if they 'sense it is unfair', they will argue that there is not enough information to make that judgement. As a result, this person will not spend much time considering whether a given situation is fair or not - and will over time come to see 'fairness' as entirely subjective. To these people, fairness is more of a 'sense', than the result of reason and logic.

The other approach, 'unfair until proven fair', will continually force you to make judgements as to what circumstances, in your view, constitute 'fairness' or 'unfairness'; because every situation you encounter demands that you consider the facts at hand and make a judgement: fair, unfair? Over time, this person will tend to develop a clear understanding of what they consider 'fair' or 'unfair'. And will tend to see 'fairness' as an objective principle that can be debated. They'll make their best judgement given the facts at hand, and may change their mind based on additional information. To these people, 'fairness' is entirely the result of reason and logic.

[Missouri Mule]

I stand in awe at your post. Did you do this yourself? I am going to share that with some friends of mine.

[lawman]

booboohead-

Brilliant and illuminating post. I've certainly thought (and debated) before about the differing worldviews that apparently underly various commonly encountered political positions, but you successfully cast things in a light I'd not encountered before. Thank you.

[steve_in_mich]

Ok, so there's a whole lot of theories and ideas in this post, but let's get to some real numbers.

Trying to make this as simple as possible, let's assume a family of 4 - married, filing jointly, no special dependent issues (4 dependents). No itemized deductions, no capital gains, etc., etc.

How much federal tax should the following income levels pay as a percentage of their total income. This is income tax only, not FICA.

$30K and below:

$30K - $60K:

$60K - $100K:

$100K - $150K:

$150K - $300K:

$300K - $500K:

$500K - $1M:

$1M and up:


I just came up with the ranges arbitrarily, but tried to break them at lifestyle levels (more or less).

If someone has a good case for adjusting them significantly I'll edit the post.

[Missouri Mule]

Well I might say that the lowest income level should be say 5% and the next 7.5%. But we need to make clear that only that amount over the arbitrary levels given are taxed at the higher rate. Therefore the first $30K at 5%, and the next $10K at 7.5% and so forth.

I think about 40% ought to be the maximum for any income level. But the larger problem is that the very wealthy have all kinds of loopholes that permit some to pay virtually no income taxes. One of the candidates in the California election, Arriana Huffington managed to get by with about $750 in total taxes due to her write-offs. These were "business" expenses not available to the common peon like most of us.

[steve_in_mich]

Originally posted by Missouri Mule
Well I might say that the lowest income level should be say 5% and the next 7.5%. But we need to make clear that only that amount over the arbitrary levels given are taxed at the higher rate. Therefore the first $30K at 5%, and the next $10K at 7.5% and so forth.

I think about 40% ought to be the maximum for any income level. But the larger problem is that the very wealthy have all kinds of loopholes that permit some to pay virtually no income taxes. One of the candidates in the California election, Arriana Huffington managed to get by with about $750 in total taxes due to her write-offs. These were "business" expenses not available to the common peon like most of us.

Would it surprise you to find that using the assumptions that I listed the family making $30K not only doesn't pay any federal taxes but gets ~$150 from the feds?

$40K = 3%

$50K = 5.5%

$60K = 7%

[Missouri Mule]

And the tax revenues remain about the same? If so those are some very attractive numbers.

[steve_in_mich]

Originally posted by Missouri Mule
And the tax revenues remain about the same? If so those are some very attractive numbers.

I think you misunderstood me. The percentages I listed are for 2002 tax returns for those income levels.

Given all the talk about who pays what and who's getting screwed the most I decided to pull out the 2002 1040 forms and run the numbers for those income levels just to see how the numbers came out. Thought it might surprise some folks. For those income levels this is kind of a worst case scenario also (no itemized deductions).

[Captain America]

I kinda like B-dogs old idea of "the more you buy, the more taxes you have to pay." That was you, wasn't it B-dog? Maybe not.

I like the idea of a flat tax also.

[lawman]

Steve-

Interesting attempt to get at some "real numbers," and I don't mean to sound unappreciative of the underlying impulse, but it seems to me like your hypothetical scenario (whether based on 2002 or not) still embodies a lot of questionable assumptions, while also leaving other important variables unaddressed. The level of abstraction of this thread, up until now, would seem to merit more of a "from square one" analysis.

For instance, your scenario assumes (1) a progressive tax (2) on income -- both of which points have been debated -- in which (3) marital status matters, (4) investment income is taxed at a different rate, and (5) FICA is not weighed as part of the overall tax burden. It further (6) uses income ranges that you admit are arbitrary, rather than based on any analysis of national income patterns.

Unaddressed: in this scenario, have we as a nation reached at least provisional agreement on what the proper responsibilities of government are -- also hotly debated above -- and the most effective public policies to meet those responsibilities? Do we have an estimate of what those policies can reasonably be expected to cost? Do we know how that cost measures up against total national income?

And, getting down to brass tacks... do we know how that income is distributed across the population? Do we have a generally agreed-upon "reasonable" standard of living, and a set of income and/or wealth "break points" based upon fractions or multiples of that standard?

Only after all this has been addressed, even if we're otherwise agreed on using a progressive income tax, can we logically tackle the question of what levels of taxation are "fair" within each income tier.

Unfortunately, of course, our policymakers have pretty much never approached things as sensibly as this. Instead they start just as you suggested, with lots of unwarranted assumptions and lots of missing data, and just sort of make things up as they go along. This is how we get a cumbersome and confusing tax code larded with unfair giveaways, complicated deductions and credits, and all sorts of provisions that have a lot more to do with "stealth" behavioral incentives than they do with meeting revenue needs.

We here, however -- since our opinions won't make an iota of difference to actual policy, and we're not under the gun to approve any particular federal budget -- have the luxury of approaching things in a more principled and rational manner (even if it involves a certain unavoidable level of speculation). Don'cha think?

I don't raise all this to be obstinate or uncooperative. I'd sincerely like to see the discussion explore all the various factors I've mentioned above. What do you think about some of them?

P.S. to Cap: The whole flat-tax idea has already been discussed some upthread. In the same spirit as I've been expressing to Steve here... if you're gonna say you like it, it would provide a lot more fodder for ongoign discussion if you'd also explain why you like it, as a matter of principle and/or pragmatism, and how you counter the objections that have already been raised. Whattaya say?

[Missouri Mule]

With all of the tax deductions we could possibly use we still paid about 12% of our income for federal taxes in 2002. Throw in all the rest of the taxes and surely we must be forking over about 25% of our income in taxes; possibly more. Even the Bible doesn't ask for more than 10%. I think I must be getting screwed.

[steve_in_mich]

While I agree that there is much more to this than I suggested, I figured I would try to make it as simple as possible, even leaving out how much money the government needs, to try to find out what people think is acceptable tax levels.

I'm afraid that if we tried to get too detailed we would never get agreement on the assumptions, before going to the numbers.

I've actually been trying to capture some data to play with the different tax rates and income levels but don't have all my numbers together yet.

[Missouri Mule]

And this is exactly why our tax laws are so convoluted. When the Congress with its special interests start writing laws we come up with the monstrosity we now have. I almost feel sorry for the employees at the IRS who have to make sense of it.

I just get my latest copy of TurboTax and plug in the data and hope it comes out all right. The idea of doing this by hand makes me nauseous.

[steve_in_mich]

Originally posted by Missouri Mule
With all of the tax deductions we could possibly use we still paid about 12% of our income for federal taxes in 2002. Throw in all the rest of the taxes and surely we must be forking over about 25% of our income in taxes; possibly more. Even the Bible doesn't ask for more than 10%. I think I must be getting screwed.

I don't disagree with you but I am curious - to not get screwed do you thing someone else should pay more or that the government should just take less of our money?

[Missouri Mule]

Without question I believe the government is far too inefficient and wasteful of our tax dollars. They should take less. I know this because I worked in state government for 22 years and I saw firsthand how bad it is. The federal government, including the military budge is horribly bloated.

Less!!!!!

I am in favor of a VAT tax and get rid of all of the other taxes.

If we are ever to get a handle on two major domestic issues, medical care and the tax code, we must do something about our election process. It is totally corrupt and a national scandal. When our representatives are virtually guaranteed reelection it is no longer defensible. Gerrymandering ought to be by constitutional admendment permanently outlawed. Elections should be held in 60 days and be publically financed. We need to go back to "citizen legislators" and away from professional politicians. Imagine a walking deadman like Strom Thurmond in there for 50 years. Outrageous.

[lawman]

MM-
I couldn't agree more that tax issues (among many others) would be handled with greater public accountability if we could institute some significant electoral reforms. In addition to the ideas you mentioned, I'm partial to such ideas as preference-ranked (i.e., "instant runoff") voting, proportional representation, making election day a national holiday, and on-site registration, among others. Many of these practices are used very successfully elsewhere in the Western world, and they deserve a serious discussion here in America. Unfortunately, we're stuck with a bit of catch-22, as the only people in a position to move them forward are public officials... who, having been elected under the current system, are predisposed to like things as they are.

All that probably deserves a thread of its own, though.

Steve-
I appreciate the urge to make the issue simpler, but it's important to avoid over-simplification, too. Even if we're just discussing what levels people "intuitively" find fair, it's important to note (as MM's remarks implied) that when people believe the government is spending wisely, they object less to the level of taxation, as studies comparing America and several European democracies have demonstrated.

With all that in mind -- what the hell, I'll play along and offer some gut-level impressions of my own. If we could assume (just for the sake of argument) an agreed-upon poverty level that was actually close to a sustainable minimum cost of living, and a national median income that was meaningfully (at least 50%?) higher than that minimum, then I would say... IMHO... that the total tax burden (not just income) should be zero below the poverty level, perhaps 10% above that, maybe 20-25% by the time you hit the median. You might add (roughly) an extra 10% at each multiple of the median (thus a taxpayer grossing 2x median would pay at least 30%, netting up to 70%, or 1.4x the median gross; 3x median gross = at least 40% (leaves 1.8x net), 4x median = 50% (leaves 2x net), 5x median = 60% (leaves 2x net) -- and note that at this point we've hit a plateau beyond which would be a point of diminishing returns, so you stop the increases.

Note again that I'm talking about total tax burdens; I haven't done the math to calculate what the rates for each bracket would need to be to meet this (even setting aside the complicating factors of sales taxes, state income taxes, Social Security and Medicare, etc.). Note that each income level retains a real after-tax improvement in standard of living, thus maintaining "incentives to succeed." Above 5x median gross income, you might add a surtax of, say, 75% or so on additional income only, with perhaps an a jump to 90% when you get into the top 1% of the income distribution.

All this is blue-sky stuff, as I said, and would be subject to revision given actual revenue needs and other variables I discussed above, and (of course) would be best under a simplified system with far fewer deductions, etc. I recognize that it's a lot more steeply progressive than our current system (in fact, when you look at total burdens, our current system is often actually regressive). Still, as a hypothetical, it strikes me as not unfair.

[Captain America]

if you're gonna say you like it, it would provide a lot more fodder for ongoign discussion if you'd also explain why you like it,

Fair enough. First and foremost, I am NOT an economist. perhaps my theory is full of holes and I am not prepared to defend it except to say that it makes common sense to me.

In this day and age, and current tax standards, it matters NOT how much income you make but rather how much income you have to claim. Rich folks with their high dollar accountants, corporations and lawyers easily manipulate their books using legal loopholes to suggest that they make little or no money at all while all the time living the high life.

I say forget deductions. Forget write-offs. You make a hundred bucks income, you pay ten. You make a thousand bucks income, you pay 100.... 10% is fair enough. That way we ALL have to pitch in.

[lawman]

I quite agree about eliminating the vast majority of loopholes and write-offs (not to mention the discount rates for investment income! Why should capital gains be taxed less than income earned from work?).

However, I disagree that a flat rate (even assessed consistently) is intrinsically "fair." Have you read the discussion of "marginal utility" upthread?

[Missouri Mule]

"I say forget deductions. Forget write-offs. You make a hundred bucks income, you pay ten. You make a thousand bucks income, you pay 100.... 10% is fair enough. That way we ALL have to pitch in."

Republicans would go for this. The Democrats never.

Proportional representation has much merit. It occurred to me that I know my presidential vote next year is entirely meaningless. Bush will carry the state regardless of what I do. In California the Dems can always count on getting that huge electorial advantage. Consequently, no one campaigns there. However, if say the electorial votes were carved up per the popular vote then it would count. I think that idea has much merit.

[Captain America]

In this day and age, can anyone give me a solid arguement for keeping the electorial college in effect?

I understand the concept and it was a GREAT concept when conceived... but does anyone think it might be a bit outdated?

[up2date]

Originally posted by Captain America
In this day and age, can anyone give me a solid arguement for keeping the electorial college in effect?

I understand the concept and it was a GREAT concept when conceived... but does anyone think it might be a bit outdated? Hmm, do I see a new thread emerging?

[Missouri Mule]

"In this day and age, can anyone give me a solid arguement for keeping the electorial college in effect?"
===============
Yes it should be retained, but consideration should be given to make it proportional.

Now let me tell you why. If it were merely a popular vote the candidates would spend all their time in the large population areas and the smaller states like Wyoming, Montana and others would simply be forgotten. They wouldn't spend one second in these states. It simply woudn't make any sense at all. By having the Electoral system it forces each candidate to pay attention to those small states. Remember that Bush only got 271 Electoral votes. 270 were needed. A similar situation exists in our Senate makeup. There are two senators for each state; Wyoming has as many senators as does California although California has 70 times the population.

BTW, the correct spelling is Electoral, not Electorial (although it would appear to be spelled that way.)

[lawman]

Okay, devil's advocate time here.

We already have the U.S. Senate, in which power is distributed equally among the 50 states regardless of population, to ensure that the rural/underpopulated states are represented in policymaking.

(The states are basically just frozen historical accidents-of-geography anyway, and to my mind there's a good argument that they're obsolete as political entities -- but as long as they do exist, the Senate gives them considerable influence.)

So -- why should the presidency, an office which is intended to represent and lead the entire country, be decided in a way that also gives those smaller states disproportionate influence, rather than according to a simple, equitable one-person-one-vote standard?

(Especially given all the disproportionate attention candidates have to give to rural states like Iowa, New Hampshire, South Carolina, etc., during the primary process! They're hardly neglected. Where's the sense in extending that disproportionality to the general election, which should properly be about matters of national scope?)

The Electoral College is a relic of an era when (A) a national popular vote in a geographically large country just wasn't imagined to be feasible, and (B) there was great distrust of popular democracy and lots of other limits on enfranchisement. It's no longer either relevant or logical.

...But yeah, all this stuff about electoral reform really should be in a new thread. (I'm just too lazy to start one right now). What about taxes?

[Missouri Mule]

Let me ask the question in this fashion. Would you be satisfied if the presidential candidates spent all their time in California, New York, Texas and Florida? The people in "flyover" country would not be able to see and get close to the candidates. The president is ostensibly supposed to represent all of the people, not just the masses who tend to congregate in the large metropolitan areas.

If most of the time is spent in those areas then the message will be tailored to the needs of those people and it will most likely be liberal in tone; namely gun control, more social programs, etc. Meanwhile the people out in the boondocks will largely be forgotten.

The Electoral College has existed since the founding of the Republic. It should continue as is.

[gopman]

"not to mention the discount rates for investment income! Why should capital gains be taxed less than income earned from work?"

These are taxed. They are taxed as inome from the corporation, of which the stockholder is an owner. It is unfair to tax it AGAIN as personal income. Not to mention it takes away the incentive of investing, which hurts the economy, prevents growth, and lowers tax revenue.

[Missouri Mule]

Absolutely correct. Double taxation. Corporations don't pay taxes, people do.

[lawman]

A discussion of the intricacies of corporate taxation (including various types of capital gains, dividends, alternate forms of compensation, and lots of other complex factors) is way beyond the scope of this discussion. For now, suffice it to say that quips about "double taxation" are oversimplified and misleading to the point of meaninglessness.

As for the electoral college... MM, I submit that what you fear (campaigns targeted at "big" states only) is an unlikely reductio ad absurdum (you didn't address the impact of th eprimaries, for instance)... but even if it did work out that way, you still haven't answered the underlying question: if the result were officials and policies that were, in fact, preferred by the majority of Americans, what would be wrong with that? What's the logic in letting a minority trump the majority just because they chose to live in certain geographic areas?

That said, perhaps I'd be more comfortable with the Electoral College system if more states went with a proportional system (as I believe Maine has chosen to do), rather than winner-take-all by state. When big states like Texas already have a predetermined outcome (as you have noted), the result is the opposite of your feared outcome above -- candidates choose not to waste resources competing there at all, and up to 49% of the people in those states are effectively disenfranchised. How democratic is that?

[Missouri Mule]

Well it's not. Proportional votes would be better, IMHO.

I would say this. Our nation was founded as a republic and NOT as a democracy. It was felt by our founders that it would be reckless to give the masses unfettered access to government simply because of the pressure to raid the public treasury. The Senate was to be a moderating influence over the actions of the House. It was not a direct election in the beginning and was set up kind of like the House of Lords in England. It was changed and ironically is the most radical of the two houses. The House on the other hand has been gerrymandered to the point that only about 15 seats are "in play" during every election.

Clearly, we have gone off the tracks and I would be entirely in favor a constitutional convention to clean up some of these problems. We could even settle such issues as gun control, abortion and other matters. As it is now we have this super control by the judiciary that was supposed to the the "least dangerous" of the three legs of our government. Most people would view the judiciary as the "most dangerous" of the three. I concur.