tax the rich (be careful of what you ask for)

[charliebrown]

	AGI - billions	taxes B	total tax B	avg rate	split point in K	increase to raise 1T	rate needed
top 1%	1685	392	1031	23.26%	380.3	3.55	82.61%
top 5%	2926	605	1031	20.68%	159.6	2.65	54.85%
top 10%	3856	721	1031	18.70%	113.7	2.39	44.63%
top 25%	5678	890	1031	15.67%	67.2	2.12	33.29%
top 50%	7352	1003	1031	13.64%	33.04	2.00	27.24%

I don't know if the web will mangle this layout or not, but basically, if the feds decided to balance the budget by raising 1T from income taxes and miraculously find
500B in cuts, this results in the tax rates above. I used the numbers from 2008 IRS.
So if you make over 67K, and the gvt decides that the 25% and above bracket gets
it, you will have to hand over 33% of your check.

If they only hit the top 5%, if you make 160K a year be prepared to hand over 55%

This does not include fica, medicare, and state, local taxes, and property taxes.
So a 160K family will be left with about 33% of the their pay check or 52k to spend.

Unfortunately Mr. Obama's magic 250K number is not in this table, but if
rates were only raised on the top 1% earning 380K, the rate would have
to go to 83%.

Am I missing something?

[porter]

Re: tax the rich (be careful of what you ask for)

Interesting Analysis. As much as I'm against raising taxes I think it's going to be a non-issue so long as congress is gridlocked. In fact I'm afraid nothing serious will get done at all until the next election cycle, which will probably be too late.

[seanm123]

Re: tax the rich (be careful of what you ask for)

S&P's threatened downgrade will happen just as we start the 2013 budget cycle, anyone running for office will have to promise a no fly zone over Water street and 49th street in Manhattan if they don't cut spending by nearly $500 Billion in addition to raising taxes.

How does that saying go Mr. Market always wins?

[dcarrigg]

Re: tax the rich (be careful of what you ask for)

	AGI - billions	taxes B	total tax B	avg rate	split point in K	increase to raise 1T	rate needed
top 1%	1685	392	1031	23.26%	380.3	3.55	82.61%
top 5%	2926	605	1031	20.68%	159.6	2.65	54.85%
top 10%	3856	721	1031	18.70%	113.7	2.39	44.63%
top 25%	5678	890	1031	15.67%	67.2	2.12	33.29%
top 50%	7352	1003	1031	13.64%	33.04	2.00	27.24%

I don't know if the web will mangle this layout or not, but basically, if the feds decided to balance the budget by raising 1T from income taxes and miraculously find
500B in cuts, this results in the tax rates above. I used the numbers from 2008 IRS.
So if you make over 67K, and the gvt decides that the 25% and above bracket gets
it, you will have to hand over 33% of your check.

If they only hit the top 5%, if you make 160K a year be prepared to hand over 55%

This does not include fica, medicare, and state, local taxes, and property taxes.
So a 160K family will be left with about 33% of the their pay check or 52k to spend.

Unfortunately Mr. Obama's magic 250K number is not in this table, but if
rates were only raised on the top 1% earning 380K, the rate would have
to go to 83%.

Am I missing something?

I think they're Obama's only proposing to raise 2T over 12 years. 1/6T/yr - most of it backloaded. From what I understand, he'll likely propose to get at least half of that from 'closing tax loopholes' - which probably means the mortgage and child deductions that currently drop the actual rate paid for the middle class substantially. I don't know what your numbers are based on, but both Paul Ryan's and Obama's budgets assume what I believe to be 'miraculous' levels of unemployment and economic growth in the near future given current circumstances.

1/6T/yr, backloaded, with half coming from eliminating tax credits and deductions, and assuming 2.5% unemployment (Paul Ryan budget) and 3.5% CPI increase is not hard to come by over a decade. It is not courageous on the part of either party.

This year and next will be strange. Budget expenditures are still laden with stimulus-type extras and they don't factor in increased capital gains that will be realized. 2013 looks brighter unless the other shoe drops (e.g. ALT-A and option ARMs sink us or something).

80 some od percent tax rates will never happen, so I wouldn't worry about it.

My prediction: Cuts are coming, as is likely a reinstatement of Clintonian tax levels. It will not be the end of the world, unless you live at subsistance level off SS and Medicare and/or welfare and Medicaid. If you have elderly family members doing this, their pride may run out after time. It may be wise to start saving for them now.

[touchring]

Re: tax the rich (be careful of what you ask for)

2T over 12 years? Simple, just impose a 7% tax on all imports.

I think they're Obama's only proposing to raise 2T over 12 years. 1/6T/yr - most of it backloaded.

[Hypatia]

Re: tax the rich (be careful of what you ask for)

Am I missing something?

You are missing 2 things:
1. no one is proposing this, certainly not Obama.
2. Waaah! Waaah! Waaaaaaaah!

[c1ue]

Re: tax the rich (be careful of what you ask for)

The issue isn't "raising taxes on the rich to balance the budget".

This issue is: "The rich paying at least a reasonable share of taxes".

By any measure you use, both percentage of disposable income as well as percentage of overall taxes paid vs. overall wealth/income levels, the top 1% and especially the top 0.1% are simply not paying a reasonable share.

Certainly other measures must be taken - particularly egregious spending ranging from military spending, to agriculture subsidies, to bureaucratic waste, to entitlement reform.

However, smacking down all entitlement spending is clearly a regressive move.

I fail to see how cutting Social Security stipends for 75 year old single women from $800/month to $700/month - or ensuring said individuals get no COLA increases even as food and energy prices double - is in any way an equitable arrangement.

[porter]

Re: tax the rich (be careful of what you ask for)

By any measure you use, both percentage of disposable income as well as percentage of overall taxes paid vs. overall wealth/income levels, the top 1% and especially the top 0.1% are simply not paying a reasonable share..

The top 1% pay about a third of all income taxes and the top 50% (those making $70,000 or more per year) are paying 96% of income taxes. Not to mention the fact that if you taxed 100% of all income earned over $250,000 you'd only raise $1.4 trillion. So, the rich already pay their fair share AND if you took as much as possible from the rich it still wouldn't do much. You're ignoring the facts if you don't think the rich pay their fair share.

[dcarrigg]

Re: tax the rich (be careful of what you ask for)

The issue isn't "raising taxes on the rich to balance the budget".

This issue is: "The rich paying at least a reasonable share of taxes".

By any measure you use, both percentage of disposable income as well as percentage of overall taxes paid vs. overall wealth/income levels, the top 1% and especially the top 0.1% are simply not paying a reasonable share.

Certainly other measures must be taken - particularly egregious spending ranging from military spending, to agriculture subsidies, to bureaucratic waste, to entitlement reform.

However, smacking down all entitlement spending is clearly a regressive move.

I fail to see how cutting Social Security stipends for 75 year old single women from $800/month to $700/month - or ensuring said individuals get no COLA increases even as food and energy prices double - is in any way an equitable arrangement.

It is not an equitable arrangement. A combination of measures will be needed to close the budget deficit.

To be clear, the reason why I go off about taxing rentier income is that capitalism is supposed to reward hard work and ingenuity. America was supposed to provide at least some equality of opportunity - if you worked hard, or did something ingenious, you were supposed to get ahead.

What gets to me is that there are those among the wealthiest among us that actually have a cottage industry catering to them whose goal is keeping ones family in the upper 0.1% for 5 generations.

It is galling to think that people are actually paying money to plan and lobby so that someday a kid can never have to work thanks to his great, great, great grandfather's wealth. This is why, with the exception of Delaware, all of the original states taxed land. You weren't supposed to get to keep wealth in a family for eternity. That was what the European nobility did. It is totally un-American.

[c1ue]

Re: tax the rich (be careful of what you ask for)

The top 1% pay about a third of all income taxes and the top 50% (those making $70,000 or more per year) are paying 96% of income taxes. Not to mention the fact that if you taxed 100% of all income earned over $250,000 you'd only raise $1.4 trillion. So, the rich already pay their fair share AND if you took as much as possible from the rich it still wouldn't do much. You're ignoring the facts if you don't think the rich pay their fair share.

1) Those making $70,000 or more include almost all Americans over the poverty line: 2 individuals making $45K each (US average income) is over this line. $70K is in fact average household income, so this statistic you cite is completely meaningless.

2) You focus only on income taxes. Social Security and Medicare revenue is only somewhat less than individual income taxes - the portion of these taxes paid by wealthy people are miniscule in comparison.

3) If we focus on property, sales, and other taxes - equally the share paid by the wealthy is miniscule.

4) The percentage of income paid by the wealthy today by any measure is the smallest it has been for generations.

You then repeat the nonsense notion that the rich can't themselves make up the deficit. Well, I specifically noted that this isn't the issue.

[porter]

Re: tax the rich (be careful of what you ask for)

It is not an equitable arrangement. A combination of measures will be needed to close the budget deficit.

To be clear, the reason why I go off about taxing rentier income is that capitalism is supposed to reward hard work and ingenuity. America was supposed to provide at least some equality of opportunity - if you worked hard, or did something ingenious, you were supposed to get ahead.

What gets to me is that there are those among the wealthiest among us that actually have a cottage industry catering to them whose goal is keeping ones family in the upper 0.1% for 5 generations.

It is galling to think that people are actually paying money to plan and lobby so that someday a kid can never have to work thanks to his great, great, great grandfather's wealth. This is why, with the exception of Delaware, all of the original states taxed land. You weren't supposed to get to keep wealth in a family for eternity. That was what the European nobility did. It is totally un-American.

We have natural rights to life, liberty and property, as was argued by John Locke. What difference is a handful of people can be lazy and not work? That is their right. And certainly the man who created so much value for the world and who earned his fortune also has a right to pass it on to his family. What you are proposing is not un-American, it is theft. And, by the way, you'll find that most wealthy family's are actively engaged in charity, which is far more effective than government will ever be.

[chr5648]

Re: tax the rich (be careful of what you ask for)

The issue isn't "raising taxes on the rich to balance the budget".

This issue is: "The rich paying at least a reasonable share of taxes".

The real question is how you make your wealth, if you shine shoes for 365 days a year and make a billion dollars it is much different than a bankster who gets bailouts, applies the compounded principles of usury, and government support to make a billion dollars. These people use a system that is logically and mathematically meant to give them an advantage.

The real problem is assuming that all income is equal.

At the end of the day they'll end up spending any extra revenue or debt on something stupid anyway. In the long run its better to Starve the beast.

Heres an anecdote
http://www.halfsigma.com/2008/03/value-creation.html

http://www.halfsigma.com/2010/08/the...-movement.html

http://www.halfsigma.com/2010/02/the...stmarxist.html

A combination of measures will be needed to close the budget deficit.

Budget deficit is a talking point, no one is taking it seriously.

http://en.wikipedia.org/wiki/Managerial_state

We have natural rights to life, liberty and property, as was argued by John Locke. What difference is a handful of people can be lazy and not work? That is their right. And certainly the man who created so much value for the world and who earned his fortune also has a right to pass it on to his family. What you are proposing is not un-American, it is theft. And, by the way, you'll find that most wealthy family's are actively engaged in charity, which is far more effective than government will ever be.

You reference John Locke, you must remember that his tabula rasa/blank state is the corner stone of the progressive and liberal ideology.

The current philosophy is one of present consumption and hedonistic pleasures. In the past in a patriarchical a man would save to make sure his kin and family would survive and be able to prosper. That same man would also make sure his community was in good shape. Those who did not take the future into account by preparing and saving, perished. Reproduction was your social security. Today we have a bloated managerial state based on the tabula rasa/blank state. Your biological intuition for self preservation, preparation, and saving is being replaced into a present consumption state.

[ASH]

Re: tax the rich (be careful of what you ask for)

The top 1% pay about a third of all income taxes and the top 50% (those making $70,000 or more per year) are paying 96% of income taxes. Not to mention the fact that if you taxed 100% of all income earned over $250,000 you'd only raise $1.4 trillion. So, the rich already pay their fair share AND if you took as much as possible from the rich it still wouldn't do much. You're ignoring the facts if you don't think the rich pay their fair share.

According to the Tax Policy Center, and based on 2007 numbers, the total effective federal tax rate (which would include payroll taxes as well as income taxes) is moderately progressive:

Lowest 20% = 4% effective rate
2nd Quintile = 10.6% effective rate
Middle Quintile = 14.3% effective rate
4th Quintile = 17.4% effective rate
Highest 20% = 25.1% effective rate

At the top of the income distribution, it's less sharply progressive:

Highest 10% = 26.7%
Highest 5% = 27.9%
Highest 1% = 29.5%

I think the morality of the issue is a matter of taste. From a moral standpoint, I don't think it is desirable that the cost of government be borne unevenly by citizens with equal political rights. From a philosophical standpoint, I'd tax capital gains from asset trading higher than the tax on the wages of labor, establish a longer holding period for "long term" capital gains (at least 5 years), and tax those long term gains only at a small discount to the labor tax rate. (People argue that high capital gains taxes discourage investment, but I think our problem is a lack of productive things to invest in, rather than a lack of capital to do so -- and requiring assets be held longer to qualify for a discounted tax rate would tend to encourage actual productive investment as opposed to speculation.) From a practical standpoint, I think that as the distribution of income becomes less equal, the need for redistribution to maintain social stability increases. It's not 'fair' to tax the rich more than the poor, but on the other hand, capital realizes higher profits thanks to having an efficient labor market. The choice seems to be between market interventions that raise the cost of labor (and thereby reduce the social necessity for redistribution between income classes), or an efficient labor market with higher profits for capital (but also higher tax rates).

[dcarrigg]

Re: tax the rich (be careful of what you ask for)

We have natural rights to life, liberty and property, as was argued by John Locke. What difference is a handful of people can be lazy and not work? That is their right. And certainly the man who created so much value for the world and who earned his fortune also has a right to pass it on to his family. What you are proposing is not un-American, it is theft. And, by the way, you'll find that most wealthy family's are actively engaged in charity, which is far more effective than government will ever be.

1) I was never arguing that every wealthy family does this. "...there are those among the wealthiest among us..." Of course some do very good things through charity.

2) Individuals who derive income from neither labor nor productive capital investment are parasites living off the efforts of the laborer and the entrepreneur-capitalist.

3) Read your John Locke again. Try the second treatise, chapter 5 "On Property."

4) Read David Ricardo's thoughts about rent. Better yet, read it from the source. You will start to discover that classical capitalists thought this way. They were living in a time of existing aristocracy. They wanted a more efficient system that did not let the lazy hoard capital simply by birthright, but rather, a system that encourage competition, opportunity and entrepreneurship.

5) What I am proposing is quite simply adjusting the tax system slightly to disadvantage rentiers and advantage entrepreneurs and workers. It is far from theft, unless you are so radical as to presume that all taxation is theft, in which case, there is no point in furthering this discussion.

[dcarrigg]

Re: tax the rich (be careful of what you ask for)

According to the Tax Policy Center, and based on 2007 numbers, the total effective federal tax rate (which would include payroll taxes as well as income taxes) is moderately progressive:

Lowest 20% = 4% effective rate
2nd Quintile = 10.6% effective rate
Middle Quintile = 14.3% effective rate
4th Quintile = 17.4% effective rate
Highest 20% = 25.1% effective rate

At the top of the income distribution, it's less sharply progressive:

Highest 10% = 26.7%
Highest 5% = 27.9%
Highest 1% = 29.5%

I think the morality of the issue is a matter of taste. From a moral standpoint, I don't think it is desirable that the cost of government be borne unevenly by citizens with equal political rights. From a philosophical standpoint, I'd tax capital gains from asset trading higher than the tax on the wages of labor, establish a longer holding period for "long term" capital gains (at least 5 years), and tax those long term gains only at a small discount to the labor tax rate. (People argue that high capital gains taxes discourage investment, but I think our problem is a lack of productive things to invest in, rather than a lack of capital to do so -- and requiring assets be held longer to qualify for a discounted tax rate would tend to encourage actual productive investment as opposed to speculation.) From a practical standpoint, I think that as the distribution of income becomes less equal, the need for redistribution to maintain social stability increases. It's not 'fair' to tax the rich more than the poor, but on the other hand, capital realizes higher profits thanks to having an efficient labor market. The choice seems to be between market interventions that raise the cost of labor (and thereby reduce the social necessity for redistribution between income classes), or an efficient labor market with higher profits for capital (but also higher tax rates).

This is a well-reasoned argument, Ash. I suppose it is par for the course.

I find it agreeable as well, except for the fact that given this framework I would argue against any discount in regards to the capital gains rate vis-a-vis the labor rate of taxation (or for that matter, vis-a-vis the estate tax rate). I don't believe that it is prudent for a government to reward capital investment over labor (or visa-versa). Imbalances should work themselves out once all things are equal.

As I said earlier, 2013 will clear a lot of these budget problems up. Expenditures are already budgeted to go down significantly. Moreover, the rates will reset. The discount will be reduced as long as no new crazy laws are introduced*.


*giant caveat