That Sioux Falls paper spins its wheels talking to nihilists who don’t want to pay taxes:
“We’ve created a problem that I don’t think has a solution,” Clint Brown, 42, a recruiter for Manpower, said.
The father of three said he and his wife both work, but they haven’t been able to save money for their daughters’ college funds because much of it has gone to the federal government. While Brown said he’s skeptical of candidates’ plans to reform the tax code, he hopes there can be more conversation about lowering tax rates for the middle class [Dana Ferguson, “Voters Clutch Wallets as Candidates Mull Tax Reform,” that Sioux Falls paper, 2016.10.08].
Translation: Oh, woe, there is no solution… but solve my personal budgeting problems by not taxing me! (Sub-translation: I can repave I-29 and fight ISIS by myself.)
A fireworks vendor in the same story says he wants the feds not to raise taxes on small businesses like his. He says he’ll vote for the Republican ticket… which suggests he has failed to notice that Hillary Clinton has proposed not only not raising his taxes but simplifying them with a standard deduction for business.
Republicans John Thune and Kristi Noem tell Ferguson that we need to simplify the brackets, which is Republican code for cut taxes for our rich friends. We have progressive tax rates on marginal income to better distribute the burden to those who can bear it. With easy access to spreadsheets and tax prep software, there’s not reason we couldn’t optimize that fair burden-sharing by setting a different tax bracket for every dollar of marginal income, a nice smooth mathematical curve instead of seven stair-step brackets. Reducing those steps as Thune and Noem want inherently increases the unfairness of the tax system toward lower-income tax earners.
Democrats Jay Williams and Paula Hawks recognize that the problem with the tax code is not complexity but inequity: stop giving breaks to the rich and tell corporations to keep America great by paying their fair share.
Ferguson does at least wheedle from Noem an admission that a system that favors Donald Trump is not fair:
The people with the best attorneys end up getting the biggest breaks [Rep. Kristi Noem, in Ferguson, 2016.10.08].
O.K., so Kristi didn’t say “Donald Trump” in that quote, but she could have.
Small business, middle class, you want tax reform? You want to put away more money for kids and college? Don’t vote for the corporate mouthpieces. Vote for Clinton, Williams, and Hawks, the Democrats who will bring you, not our corporate overlords, real tax reform.
Hoo-boy! Mr Kluznick (as well as cah) seems to long for the good old days of the 70s when there were 26 different tax brackets. The problem Kluznick (as well as cah) ignores (or is ignorant of) is that the steeply graduated rate brackets he is proposing not only creates a huge drag on the economy by removing more money from the private sector but also disincentivizes work and investment. This isn’t tax reform but non-legislated tax increases which punish the lower and middle classes by taxing every additional dollar of income at their highest marginal rate and/or by pushing the individual into the next tax bracket. While the old tax brackets are indexed for inflation, I see no mention of how Kluznick would treat the effects of this hidden tax. But the real killer is the steeply graduated progressive tax he is proposing is not indexed for real economic growth. Every pay raise a person gets above and beyond inflation also gets a boost to their average tax rate. Bracket creep becomes almost a yearly event and a stealthy tax increase becomes guaranteed; a tax hike that no politician had to vote for. Taxation on autopilot, taxation without representation.
If I recall correctly, there were numerous tax brackets that were very progressive during the Eisenhower years, with the highest bracket at over 90% for very high income earnings. If Don’s argument is correct, an economic analysis of those years should show economic decline due to disincentive of work and investment.
To see if Don’s analysis is correct I took a look at our Country’s economic growth during these years. It looks to me like our Country did quite well under this highly progressive tax system. What say you Don about the Country’s economic growth during Eisenhower highly progressive taxation years?
http://politicsthatwork.com/economic-record-president/eisenhower
“This isn’t tax reform but non-legislated tax increases which punish the lower and middle classes by taxing every additional dollar of income at their highest marginal rate and/or by pushing the individual into the next tax bracket.”
When someone is “pushed” into the next tax bracket it is only the portion of their income which exceeds that bracket which is taxed at the higher rate. It isn’t as if when Sally Citizen receives a pay raise of $2,000 on top of her $45,000 annual salary that she suddenly pays a higher rate on that entire $47,000.
I had a high school teacher once try to convince our class that there were times it would make sense to turn down a raise for fear of being in a higher tax bracket. Granted this is the same guy who believed he knew a guy who developed a gasoline engine that could get over 100mpg and that GM bought the rights to the patent never to be heard from again… so logic wasn’t his strong point.
Point being, having more tax brackets wouldn’t by itself create problems or add inequity. In fact, having more tax brackets would be preferable to a system full of loopholes and shelters that benefit a few select taxpayers who happen to have paid for the privilege of influencing members of Congress.
Whether we have 5, 10, or 50 tax brackets really doesn’t matter. What matters is that we have a tax system which is fair and spreads the burden to those who can most easily afford it. That isn’t to say we need to return to the era of 90+% rates, but someone making $32,000 a year should never have a higher effective tax rate than someone earning $3.2MM or $3.2B a year.
@bcb: The primary reason for the growth of the US economy during the 50s was that the major economies of the world lay in ruins after WWII. Britain, France, Germany and the rest of Europe. Japan and China in Asia. The Soviet Union wasn’t in great shape either having thrown back Germany on the brutal Eastern Front. The Eastern Bloc countries of Europe paid reparations to the Soviets and lost much of their resources through outright theft by the Soviets leaving their economies in ruin for decades. Japan was de-industrialized reverting their economy to Great Depression levels. China fought a civil war and when the Communists won, Mao implemented the “Great Leap Forward”, plunging China into the dark ages and causing the death of 30M of it’s people.
But don’t forget, the US still suffered through three recessions under Eisenhower. The last was severe enough that in 1960, JFK ran on an economic policy of across the board tax cuts. In a 1962 speech, Kennedy stated he wanted “an across-the-board, top-to-bottom cut in personal and corporate income taxes.” He complained that the tax system “exerts too heavy a drag on growth in peace time; that it siphons out of the private economy too large a share of personal and business purchasing power; that it reduces the financial incentives for personal effort, investment, and risk-taking,” Kennedy argued that his tax cuts would generate broad growth and even stated “a rising tide lifts all boats”. Imagine that, a Democrat advocating supply side economics.
Don, thanks for your response. It appears, then, that progressive tax rates including very high rates for very high earnings might not be the only factor affecting economic growth. Can you point to a time when high taxes alone actually retarded economic growth?
Here is some analysis by the Center on Budget and Policy Priorities of the economic effect of tax cuts in several States. It also seems to provide actual evidence contrary to the argument that high progressive tax rates hurt the economy:
http://www.cbpp.org/research/academic-research-lacks-consensus-on-the-impact-of-state-tax-cuts-on-economic-growth
Not only is the Kluznickian Tax System a sucker punch to the middle class and the economy, but Kluznick adovcates the return of a poll tax. From his ramblings: “Maybe people who do not pay any income tax should not have the right to vote.”
Debt-free college (Clinton Plan) will solve Mr. and Mrs. Brown’s problem without raising their taxes. meanwhile, the Trump party platform’s “middle-of-three” simple brackets will increase their taxes and provides ZERO breaks in college tuition costs. Another voter against their won interests.
Don, sorry, I have never heard of Kluznick so I cannot speak to his views. Does s/he identify a time when high taxes alone actually retarded economic growth? Does s/he argue Donald Trump shouldn’t be allowed to vote because of his tax situation?
@bearcreekbat: You didn’t read Cory’s link? The one that Cory was all excited about because it set “a different tax bracket for every dollar of marginal income”?
http://www.kluznick.com/Taxation.html
From his ramblings: “Maybe people who do not pay any income tax should not have the right to vote.”
Nor should they be allowed to run, even as a joke, for the office of President.
Don, I looked at the link, but did not notice the name of the author, nor did I see Cory express excitement about it. It was linked as a reference to support Cory’s statement:
I did not question Cory’s point, and I am not a math or statistics wizard, so I moved on without any interest in reading the entire link. Was there a particular problem with the analysis that you could point out? Or can you explain how the link supports what you contend will happen if we adopt progressive taxation, despite the apparent unanimous contrary experiences in our state and local history?
Coyote, Bear reads me right: I cite Kluznick only as an author providing an example of how to make that mathematical curve. I take no position on that author’s policy positions; I only base my policy on math that is quite easily done with these wondrous calculating devices we all have at our fingertips.
Poll taxes are particularly odious: one need not pay taxes to vote or enjoy full citizenship. However, rich guys like Trump ought to pay their fair share… and progressive taxes help us levy that fair share, since rich guys can bear higher taxes on their twenty-millionth dollar than poor guys can on their twenty-thousandth dollar.
@ Craig: There are indeed times when a marginal increase in income is actually very detrimental, not so much from a raw income tax bracket standpoint, but from cliffs in deductions. For instance, at about $100,000 AGI, you no longer get the full benefit of mortgage insurance premium deduction. At $120,000 you don’t receive full benefit for dependent write off (to the tune of about $1,000 per dependent if memory serves). So there are indeed places in the income bracket where making more is harmful, but most of those are actually at the low end of the spectrum, where there are steep benefit cliffs for social welfare programs.
@ Cory: Can you please enumerate what percentage of all federal income tax the 1% should contribute which will then be “fair”?
Wayne, you ask me a difficult question, which I think requires more data than I have at my braintips.
Let me start by questioning the premise. I’m not sure we define “fair” by the percentage of all federal income tax collected. Maybe I have this backwards, but I don’t think we start by saying, “We need $4 trillion to run the country” and then say, “Group A pays $2 trillion, Group B pays $1 trillion, Group C $650 billion, Group D $350 billion, and Group E zero.”
I start from the question of the burden each taxpayer can bear. We see how much money we can get from those tax rates. If that amount seems to be more than enough to meet needs, we decide whether we scale back burdens (and by how much for each group) or whether we invest in some wants. If the amount is too little to meet needs, we decide whether we can squeeze taxpayers more (and which ones, by how much) or whether we have to prioritize and do without certain public goods and services.
I don’t know numerical targets. Our current federal income tax says that single taxpayers, with no dependents, making $10,300 (standard deduction + personal exemption) or less in 2015 could bear no tax burden, 0%. A married couple with three kids pays 0% on up to $24,600; they probably pay a negative rate (i.e., get money back) with Earned Income Tax Credit.
We do that because, for low-income folks, taking 10% of their money means they don’t make rent, or they lose their car, or the kids go without breakfast all summer.
The IRS says a single taxpayer making $100,000 and taking standard deduction and personal exemption has $89,700 in taxable income. Single $100K guy pays $18,481.25 plus 28% of the amount over $90,750, total tax bill $18,218.75, an effective rate of 20.3%.
Take 20.3% of $100K guy’s taxable income, and he keeps about $82K, enough to pay for the bare essentials of life (as defined by SD + PE) eight times.
The IRS says a single taxpayer making a million dollars still gets to pay 0% on her first $6,300 (standard deduction), but no personal exemption. She pays $119,996.25 plus 39.6% of the amount over $413,200, total tax bill $349,874.25, an effective rate of 35.2%.
Take 35.2% of $1M gals’ taxable income, and she’s left with $650K, enough pay for the bare essentials of life 63 times over.
Think of those multiples of essentials of life as buffers against abject poverty.
The guy making $10K has no buffer. The IRS leaves him alone, and he lives a precarious life, eating Ramen, bumming rides, and living in an efficiency apartment with no Internet. One serious illness (without Medicaid or charity), and he’s in deep trouble.
The guy making $100K has seven buffers. After the IRS shakes him down, he still has enough money to live as bare-bones as possible and still provide for seven other people. Or, if we define “serious illness” as a malady whose treatment would cost $10K, enough to wipe out the entire yearly income of the poor guy above, $100K guy could suffer seven serious illnesses in one year and still have money left over to know he can eat and sleep out of the rain. More realistically, $100K guy can pay his taxes, buy better food, rent a better apartment or buy a decent house, buy a car and a darn nice bike, and still have money left over for savings and emergencies. He can bear a 20.3% effective tax rate that $10K guy cannot.
The gal making $1M has 62 buffers, nearly times more than $100K guy. We could raise her effective tax rate to 84%, and she’d still have twice the cushion of $100K guy paying 20.3%. She’d be bummed that she worked her bum off and kept only a sixth of her earnings, and we need to consider the disincentive to working and earning more that really high marginal tax rates may create. That’s probably why the top bracket is 39.6% and not double that. But the mathematical fact here is that even under the progressive marginal rates of the current seven-bracket system, the IRS leaves $1M gal with a lot more buffers and liberty and security that $100K guy enjoys.
I’m pretty sure the fair tax burden for $10K guy is 0% or less. I don’t know when ideally that 0% should turn into a positive number, and I don’t know what ideal positive numbers to set for each income bracket. But I do know those numbers should increase, not remain flat, with income, because rich people enjoy far more liberty, even after paying progressive tax rates, than poor people.
Cory,
You and I agree there should be a tax floor – a point where we just don’t ask for a percentage of income because it’s too much to bear on tight margins. My intuition says it should be poverty level + a margin (so maybe 140%; that’s $34k for a family of four, and fits nicely with other policy levers like the ACA).
But we disagree on whether it’s fair to force people to contribute incrementally more the more they make, rather than a same proportion.
You identify the inherent challenge; you don’t know what’s truly fair for stepping up the tax rate. Why is it more fair for that next dollar earned to be taxed at a higher rate than the dollar before it? It’s pretty easy to see at the floor, but not so clear as we climb.
It’s inherently more fair for a group of people of mixed means to contribute a set proportion of their incomes towards the common goal than it is to ask the people who make the most to contribute a higher percentage than everyone else.
The interesting facts about the 1% is that most of them are not consistently in that category; they’re transient.
Consider this graph on Adjusted Gross Income:
http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/ft_15-03-23_taxesind/
4.2% of tax filers are contributing 57.5% of all federal income taxes. The next bracket down ($100k – $199k) contributes another 21.9% of all income taxes.
$250,000 AGI is solid money, but it’s not yacht-buying money. Yes they have more incremental buffers against the very bottom, but I’m not sure what you mean by enjoying far more liberty. When I was making diddly squat, I still had a lot of liberty (and security). I was able to go down to the river and go fishing whenever I wasn’t working. I could hang out with my friends. I could make a trip down to Omaha if I could scrounge up the gas money.
With a stable job, despite having more income, I have less liberty to go do the things I want, even if I might be able to afford them. I have more financial security, perhaps, but I’m still as safe as before when it comes to risk of crimes being committed against me.
If you’re talking about the “buffers” as surrogates for liberty, then you’re advocating taking away proportionally more liberty from someone than another. That doesn’t sit right with me. The fact that you can’t identify where it’s okay to take proportionally more away from person A than person B should give you pause to examine your values.
I’d encourage a reworking of the tax code to create a tithe, where we create an income floor nobody pays taxes on, then a flat rate with no exemptions. It doesn’t matter how you make your money; you pay.
Wayne B., there are many reasons to support a graduated income tax in which the marginal rates rise as one’s income rises.
Let’s start with the fact that we have a capitalist system that helps people have economic freedoms and incentives. When people flourish within our system, they should be happy to contribute more proportionally than the poor and middle class. And right now the top 1% is flourishing like few times in our history. Most of the gains to income in our economy are flowing to the top income tiers. It is only fair that those flourishing in our economy make a proportionally greater contribution than those who are less fortunate.
Cory has explained other reasons for the graduated income tax. When you make a lower income a much greater percentage of your income is spent on “needs” and not “wants.” Taxing higher income individuals at marginally higher rates means that their income that would be spent on wants is taxed more heavily while lower income individuals that pay marginally lower rates are more readily able to pay for their needs.
We have a system that is great for innovation, access to capital and large consumer markets. The success of the wealthy in our country is not at issue. What is in doubt is the success of the poor and middle class which has been lagging. The last thing we need to do is institute tax policy that favors rich people even more than they already are. Compare capital gains treatment and ordinary income and payroll tax for instance.
More liberty: let me focus on political activity as an example. If I have more cushion against poverty, I don’t feel as nervous about taking time off from paying work to engage in political activity. I can more easily afford to spend a few hours on a Saturday walking around town campaigning. I can more easily justify to my family taking $10,000 out of the bank to by signs and billboards to promote a candidate or ballot measure. I can hire a babysitter to hold down the fort while I volunteer for the local party. I can buy plane tickets to travel to conventions and protests and Congressional hearings. Wealth amplifies my liberty to engage in the political process.
You raise an interesting point, looking at the question from the opposite perspective: I appear to be “taking away proportionally more liberty from someone than another.” That statement does call into question whether I’m really talking about basic liberty that the Constitution (as well as the underlying concept of the social contract) guarantees to all people or about… something else—opportunities? privileges?
If we measure liberty in dollars (and I’m doing that with my “buffer” concept), then yeah, it sure looks like the IRS is taking no liberty from $10K guy (he’s got enough problems), $18K worth of liberty from $100K guy, and $350K of liberty from $1M gal. By effective tax rate, the IRS progressive scheme takes a larger slice of liberty away from the richer payers.
But then we can get into the whole idea of wealth redistribution. If wealth concentrates, so does power. If power concentrates, so does liberty, real practical political liberty. The more money individuals and corporations amass, the more power they have, the more they can tip the balance of power in their favor, and thus the more we can justify asking them to pay in taxes to maintain a government big enough to check their power in case they get out of hand.
We can also get into the concept of the rich enjoying more benefits from civil society and thus being reasonably expected to bear a greater share of the cost of civil society. They have more homes, property, assets, and contracts requiring more protection by police, fire departments, and the courts.
I just don’t think the flat rate captures the greater benefits of wealth and the power imbalance created by wealth. 10% is a greater burden for a thousandaire than a millionaire, and a greater burden for a millionaire than a billionaire.
On personal liberty: I am amused by your recollection of your greater liberty in your old fishing days, before you struck it rich. ;-)
I will agree that, in some important personal ways, we may enjoy more daily practical liberty living on lower, part-time income or on a retirement pension than we do locked into a high-paying job that requires overtime and travel. Making money can be a lot of work, and some financially successful people don’t leave themselves time to truly enjoy the full liberty their wealth should afford them.
Still, I’ll argue that in general, the wise $100K dude has more liberty, more freedom from want, more security, more ability to do more things that he may want to do, than the $10K dude.
On a somewhat related issue: Did you ever wonder how many people who are terribly worried about the size of our national debt have all or portions of their life savings invested in US Bonds?
Let me be clear; I’ve not “struck it rich.” My wife & I are making good money in South Dakota, and we’re in the top 20% of households, but we sure don’t feel rich. We have a modest house, finally own outright reliable transportation, and finally have paid off student loans. We’ve sacrificed a considerable amount of liberty to be in that position.
Sure, and typically they’re also paying for those things via taxes other than federal income; property, sales, excise, etc.
It’s pretty clear I’m not going to persuade neither you nor Darin that a flat tax is fairer.
But consider that the top 5% of tax filers are contributing almost 60% of all federal income tax revenues. Because of this, is it right to rail against them spending their stored labor (money) on political speech? They contribute a disproportionate share of revenues, yet technically get one vote.
Would you appreciate being forced to pay 60% of the dinner party bill and only get one voice in twenty on where to eat? (and also being villainized by the other 19 for trying to influence them where to eat)
“Would you appreciate being forced to pay 60% of the dinner party bill and only get one voice in twenty on where to eat?”
Your analogy only is relevant if I paid 60% of the dinner party bill because I ate 92% of the food.
It does not impress me when someone states the top 5% of tax filers are contributing almost 60% of all federal income tax revenues when I know that there are 20 people in the US who own as much wealth as HALF of our nation. Or that the top 10% of tax filers control over 73% of the wealth and the top 1% control 35%. Think of that – 1% of tax filers in the US control over a third of all wealth in the nation.
Am I concerned that they are paying more than I am in taxes? Oddly no – because currently our tax system allows them to pay LESS of a percentage of their incomes than I do. Warren Buffet and Donald Trump have proven that to be a fact.
Wayne B., You are in the wrong country if you are advocating that a rich person should enjoy more speech and liberty than a poor person. Is Trump rubbing off on people? Is there something in the water?
The rich have benefited from our capitalist system with the largest consumer market in the world along with ready access to capital, innovative technology and a highly trained work force. The rich have benefited from our system and prospered which is good for them. They are prospering like few times in our history. Your 5% contributing 60% of tax revenue is an example of this. It is a reason to make sure that the rich are paying their fair share, not a reason to let them pay proportionately to the middle class or working poor. If you hit it big in this country, you can be the richest person in the world. But people like Bill Gates and Warren Buffett recognize that they have a responsibility to do a lot more for the country that enabled their success.
Darin, did you just hit me with a “if you don’t like it, leave” comment? I didn’t realize it’s that controversial to say people have the right to life, liberty, and the pursuit of happiness. Cory already established those who make more on the average have more liberty and security than the poor. I’m not advocating the rich have more votes; I’m advocating they shouldn’t be maligned for trying to influence voters. If money = liberty, then by default the wealthier have more “liberty” which can buy more speech. To say someone shouldn’t have that speech is, I contend, contra-indicative of the 1st Amendment.
Craig, wealth and income are separate beasts (just like the federal deficit & national debt). The top 1% accounts for 20% of Adjusted Gross Income, yet contributes 38% of all federal tax revenue. The top 5% accounts for 35% of AGI, yet contributes almost 60%.
So in the dinner party, the 5% ate 35% of the food, but paid 60% of the dinner bill. Nowhere near 92%, wherever you pulled that from.
Darin, I absolutely agree those making high incomes shouldn’t be able to pay a rate effectively lower than the middle class. It’s why I advocate forgetting about how your money is made (payroll, capital gains, etc) and taxing it all equally. Make a floor and everyone above pays the same percentage.
A progressive income tax is not fair. It does not treat people equitably; it demands proportionally more from some than from others. Whether or not they can bear that burden is immaterial to that conversation.
The rich already pay more than their fair share. Some weasel their way out of paying any, or pay at a dramatically lower rate (and that’s not fair, either).
Here’s the thing – the US has the 2nd most progressive tax system among developed countries (Ireland takes first). And yet, the income tax system is incredibly inefficient at redistributing income; our SSI & FICA taxes are much better vehicles. They’re also flat taxes.
So amongst our developed nation neighbors, we demand the (second) greatest proportion from our top earners, and still seem to think they’re not paying “their fair share”. Why is that?
@Darin Larson: “But people like Bill Gates and Warren Buffett recognize that they have a responsibility to do a lot more for the country that enabled their success.”
Sure like the Buffett trick of donating his stock to foundations so he not only doesn’t pay capital gains taxes but still gets to take the full price of the donated stock as a deduction on his tax return. Or by limiting his salary to $100,000 @ year so he avoids pay the higher marginal income tax rates. Or how about making tax free donations to foundations controlled by his children and sister earning them nice salaries as well. Or the billions he’s made from selling life insurance to estates so when the principal dies the beneficiaries collect the benefits tax free avoiding paying estate taxes. Or buying family businesses at fire sale prices when the family doesn’t have enough cash to avoid liquidation. Thanks Warren.
Coyote-a good dose of hydrogen peroxide will help cure any number of stomach ailments. You always seem to belly ache when you post here.
This site is like Sesame Street where uninformed and others gather to learn good and necessary things. Try to say something nice about one or both Clintons and Obama before I pass away. BTW my passing isn’t on the horizon,yet.
Don, awhile back I provided you with evidence of generally positive economic growth during times of high tax rates, and I asked you: “Can you point to a time when high taxes alone actually retarded economic growth?”
As best I can tell you kind of changed the subject with a negative opinion about the link advocating a progressive tax system. Now that you are back on can you agree that we have no evidence of any particular times where high taxes alone actually retarded economic growth?
Only Coyote could argue that a philanthropist like Warren Buffett who is giving away 99%+ of his $65 billion estate to charitable causes is getting away with something while Donald Trump wants to do away with the estate tax so his family can keep every last dollar of his billions.
And the part that Coyote leaves out is that Buffett is championing tax reform, asking that his taxes be raised. Trump is trying to create an aristocracy in this country where dynasties of the wealthy rule down through the generations.
Wayne B., I didn’t say love it or leave it. I said you are in the wrong country if you are advocating that a rich person should enjoy more speech and liberty than a poor person. That is not the American ideal. Right now the rich have much more speech than everyone else. That’s the problem with Citizen’s United. SCOTUS says corporations are people and that speech equals money and you can’t limit speech so you can’t limit money in politics, essentially. Wayne, your concern for the rich seems to be misplaced given where we are at in history in terms of who is gaining wealth in this country and whose messages are dominating the marketplace of ideas. Most people are concerned about the dominance of big money in politics–not that the rich have too little influence.
Darin, my concern is for equity. My concern is also what the heck we call rich, poor, and middle class.
It’s funny… our wealth divide is growing, yet we have the 2nd most progressive tax system among OECD nations. Making it more progressive isn’t likely to change that.
I agree the 1% have the means to take care of themselves. But to say we should limit their speech because they have the means to speak more is dangerous. You’re worried about big money in politics. I don’t see why they shouldn’t; they’re the ones paying into the kitty after all. They might as well have their opinions known. It’s up to us as individuals to decide if what they’re saying is worth a hill of beans. Do you really give your fellow Americans such little credence as to sort the wheat from the chaff?
Wayne, picture a stadium filled with people. Everyone can talk and scream and yell. In fact, if everybody isn’t yelling, one person can even be heard all the way across the stadium. The stadium represents the marketplace of ideas and speech in this country. Now, what has happened is that some of the rich have brought megaphones and some of the wealthy have installed huge sound systems that drown out all other speech. One person effectively has no voice if they are being drown out by a sound system that is turned up all the way. Many or even most voices can be drown out by the sound systems that are cranked up. My contention is that allowing corporations to interfere without limits in our political process is to allow certain people to control the sound system and drown out all other citizens to a great extent.
Wayne, why do you say that “Making it more progressive isn’t likely to change” our growing wealth divide? It would seem that the opposite would be true – the greater the progressive rates the less income that can be hoarded at the top. Our current progressive rate gives away too much to high earners, or allows them to hoard too much.
If we went back to the Eisenhower years progressive tax rates with a top rate of 91% it seems obvious that we would lessen the income equality divide.
http://www.politifact.com/truth-o-meter/statements/2015/nov/15/bernie-s/income-tax-rates-were-90-percent-under-eisenhower-/
And recall that the 91% rate is only the top rate and only would apply after a certain income threshold was reached. Amounts below that threshold would be taxed at gradually decreasing rates, so this type of progressive system would necessarily begin to address the wealth divide in a substantial way.
“Craig, wealth and income are separate beasts (just like the federal deficit & national debt).”
I’m well aware of that, but wealth does a better job of showing the huge disparities we have in our nation… and that wealth builds upon a favorable tax system which benefits the wealthy. The problem with focusing on income is that it doesn’t tell the whole story. Warren Buffet has shared his taxes and his effective tax rate for 2015 was about 16%. I know for a fact my effective tax rate last year was greater than that, and it isn’t because Buffet is cheating the system. He is merely following the law and taking the deductions he is legally able to take.
The truth is you’ll find a lot of examples where the ultra wealthy pay very little tax. They have shelters and havens and loopholes and clever tools like carried interest to avoid paying taxes or to reduce the amount of income reflected on their taxes. It isn’t their fault of course as they didn’t write the tax law, but it shows a problem.
You seem to like the idea of a flat tax, and although I like the idea of simplifying our tax structure I don’t feel a flat tax will do enough. I suppose you could expect the first $30,000 or so from each taxpayer, but it would still result in massive inequalities between someone making $31,000 and someone making $31MM because the person making $31k would have much less disposable income.
I believe the progressive tax system is currently the best and most fair system available. It allows tax rates to be ramped up on higher incomes not as a form of punishment, but because we all know those people have benefitted from society as a whole. They have utilized the system to their advantage and thus have a responsibility to fund the machine that has allowed them to prosper.
I just don’t know how we could ever get a flat tax to work properly without having to deal with thousands of loopholes and rebates and deductions. In the end you are right back where we are today.
People like me who are dependent on SS should be allowed to shift several millions per year to offshore havens like the rich guys do. Level the playing field.
Darin, I disagree. Cory’s blog is an excellent example of individual voices being able to pierce the “sound system tampering” of the stadium without a high dollar investment. Cory gets a lot of speech in South Dakota without a lot of financial resources.
That beats the pants off the dozen or so shiny Marcy’s Law mailers I’ve gotten.
With social media, grassroots initiatives have a greater chance than ever of achieving success.
@ Bearcreek:
You have to be ultra careful when looking at tax codes, tax rates, and timeframes. It’s true that we had very high tax rates during the Eisenhower years, but look at what the inflation adjusted AGI would look like for those households – those paying 90%+ were making $1.7 million in today’s dollars. Let’s also not forget that correlation does not mean causation.
To directly address your question about tax policy (I’ll aim this at Craig, too), please refer to this article:
http://taxfoundation.org/blog/news-obama-oecd-says-united-states-has-most-progressive-tax-system
The income tax helps fund the general budget, so infrastructure, defense, debt service, etc. gets funded. Those aren’t really direct wealth distribution mechanisms.
Our social safety net – Social Security, SSI (disability), Medicare, Medicaid – those are all funded by the flat tax on our payroll. So it’s the flat tax that’s actually doing the work of direct wealth redistribution. And there’s a weakness; we stop collecting SSI payments at about the $120k income point. There’s no need to create a ceiling; we should remove it.
I stand by the flat tax as a way to treat everyone more equitably; we’re not discriminating against individuals. We don’t need exemptions, deductions, and loopholes if we set the tax floor appropriately. For instance, if we say everyone needs $40,000 of gross income to have a modicum of financial security, or $80k for families, then we just lop off that amount from your gross & don’t tax it. Then we tax everything else at a flat rate. Not that hard. No deductions for homes. No deductions for medical expenditures. No carried interest. No deductions for children. Just a flat rate that everyone pays. Maybe that’s 10%. Maybe that’s 15%. Maybe that’s 20%.
In any event, you’re taking the same percent from everyone above that floor. It is by definition fair because it treats everyone equitably. It removes any barriers or disincentives to strive for that better paying job.
The tax code shouldn’t be used to drive social policy. It’s a mechanism to fund collective needs.
@DarinLarson: “Only Coyote could argue that a philanthropist like Warren Buffett who is giving away 99%+ of his $65 billion estate to charitable causes is getting away with something while Donald Trump wants to do away with the estate tax so his family can keep every last dollar of his billions.
And the part that Coyote leaves out is that Buffett is championing tax reform, asking that his taxes be raised. Trump is trying to create an aristocracy in this country where dynasties of the wealthy rule down through the generations.”
Warren Buffett can raise his own taxes by being less aggressive in calculating his taxes. Warren could just as easily sell his stock, pay the capital gains and make cash charitable donations. Instead he chooses to avoid the higher taxes he claims he wants. Easy peazy.
Warren Buffett can raise his own taxes by increasing the amount of salary he is paid and paying the taxes in the much higher brackets than he pays on capital gains, easy peazy.
Warren Buffett would certainly have more credibility in defending higher estate taxes if he wasn’t cutting a fat hog with his life insurance companies. Maybe he should be calling for the closing of the tax exemption loophole of life insurance in estate taxation.
And of course if St Warren wanted to, he could certainly send the government additional funds above and beyond the taxes he currently pays. You see Darin there is nothing stopping St Warren from rectifying his not paying his “fair share”.