Soak The Very, Very Rich

[babylonsister]

http://www.newyorker.com/talk/financial/2010/08/16/100816ta_talk_surowiecki


Soak The Very, Very Rich
by James Surowiecki August 16, 2010


The fight on Capitol Hill over whether to extend the Bush tax cuts is about many things: deficit reduction, economic stimulus, supply-side ideology. But at its core is a simple question: who counts as rich? The Obama Administration’s answer is that you’re rich if you make more than two hundred thousand dollars a year as an individual or two hundred and fifty thousand dollars a year as a household, and therefore you should have your taxes raised. Conservatives suggest that this threshold is far too low, and argue that Obama would be taxing mostly small-business owners, or the people a Fox News host has referred to as “the so-called rich,” rather than fat plutocrats. You might think this isn’t really much of a debate. An annual income of two hundred and fifty thousand dollars puts you in the top three per cent of American households, and is more than four times the national median. You’re rich, and a small tax increase isn’t going to rock your world.

Good luck convincing people of this, though. Judging from surveys of how Americans describe themselves, most of the privileged don’t feel all that privileged. Why is that? One reason is the American mythology of middle-classness. Another is geography: in a place like Manhattan, where the average apartment sells for nine hundred thousand dollars, your money doesn’t go as far. And then there’s a larger truth about how wealth is getting concentrated in this country. As the economists Thomas Piketty and Emmanuel Saez have documented, people who earn a few hundred thousand dollars a year have done much worse than people at the very top of the ladder.

Between 2002 and 2007, for instance, the bottom ninety-nine per cent of incomes grew 1.3 per cent a year in real terms—while the incomes of the top one per cent grew ten per cent a year. That one per cent accounted for two-thirds of all income growth in those years. People in the ninety-fifth to the ninety-ninth percentiles of income have represented a fairly constant share of the national income for twenty-five years now. But in that period the top one per cent has seen its share of national income double; in 2007, it captured twenty-three per cent of the nation’s total income. Even within the top one per cent, income is getting more concentrated: the top 0.1 per cent of earners have seen their share of national income triple over the same period. All by themselves, they now earn as much as the bottom hundred and twenty million people. So at the same time that the rich have been pulling away from the middle class, the very rich have been pulling away from the pretty rich, and the very, very rich have been pulling away from the very rich.

The current debate over taxes takes none of this into account. At the moment, we have a system of tax brackets well suited to nineteenth-century New Zealand. Our system sets the top bracket at three hundred and seventy-five thousand dollars, with a tax rate of thirty-five per cent. (People in the second-highest bracket, starting at a hundred and seventy-two thousand dollars for individuals, pay thirty-three per cent.) This means that someone making two hundred thousand dollars a year and someone making two hundred million dollars a year pay at similar tax rates. LeBron James and LeBron James’s dentist: same difference.

This makes no sense—there’s a yawning chasm between the professional and the plutocratic classes, and the tax system should reflect that. A better tax system would have more brackets, so that the super-rich pay higher rates. (The most obvious bracket to add would be a higher rate at a million dollars a year, but there’s no reason to stop there.) This would make the system fairer, since it would reflect the real stratification among high-income earners. A few extra brackets at the top could also bring in tens of billions of dollars in additional revenue.

more...

http://www.newyorker.com/talk/financial/2010/08/16/100816ta_talk_surowiecki

[dkf]

1. This makes more sense to me.

It's amazing we haven't heard this before. The biggest earners aren't even the CEOs but the hedged fund managers. The profits they make are obscene.

We should give capital gains tax advantages to incomes under a certain level too. At the higher ends the capital gains rates and income rates should be the same.

[dmosh42]

2. Tax the heck out of them, and their estates! n/t

[annabanana]

3. They should count themselves lucky if they don't end up

as an entre.

[glitch]

8. Too fatty. Or way too lean. Either way, not organic, no doubt toxic. nt

[Scuba]

4. Tax and tax and tax them until they are only "fabulously wealthy"

[felix_numinous]

5. Capitalism, A Love Story

explains it so nicely. I think FDR's additional Bill of Rights should be the battlecry of the Left.

[BridgeTheGap]

6. But one day I might win the Power Ball lotto and then I'd be rich and have to complain about how

much I'm taxed.............................
Naw, ain't gonna happen...tax the hell out of them!

[klook]

7. Sound logic

$200k would be a lot of dough to me, but it's nothing like what the wealthiest Americans make. In fact, $200,000 is 1 percent of $20,000,000, the income of the world's 15th richest billionaire, Wal-Mart heir Jim Walton.

I'm not asking to "punish" the rich, no matter how ill-gotten their gains may be. Maybe we could just get back to a little more realistic sharing of the tax burden.

[TreasonousBastard]

9. The problem with taxing the rich is that the rich tend to find ways out of paying...

How many volumes and thousands of pages is the tax code now? And how many times have we seen it "fixed" and "simplified"?

"Well we have to fix that." Sure. Again? Don't hold your breath.

The first problem is defining income, and that isn't nearly as easy as someone who hasn't been through the CPA boards might think. Just how do you value stock options, anyway? Should we differentiate capital gains between a risky startup venture and a safer investment? If you own a small business, how do you depreciate inventory-- and does it make a difference if you are a partnership and/or how are you incorporated? You're a landlord? Hoo boy-- play it right and the system is designed to let you pay less taxes the more you make.

I find it fascinating, when I don't find it outrageous, that you pay less in taxes on most investment income than you pay if you work for a living.

Personally, I have two fantasy tax ideas that I think would work well but have no chance in hell of ever passing.

Tax brackets--

The median family income is around $50,000 or so. I don't have any sensible numbers for tax rates under that, but something light and easy. Above the median, however, every $25,000 would have an increasing rate-- say 2% on the first $25,000, 3% on the next $25,000, and so on. I'm tossing numbers out off the top of my head since I haven't worked this out in a while, but the idea is that each tier up has a higher rate, not the entire income.

A real death tax--

The estate pays no tax, but the heirs pay tax on their inheritance as ordinary income.

[klook]

12. How about a flat tax rate

on those earning, say, more than $10 million a year? Let everybody making more than that amount pay a straight 30% (for example) off the top -- no deductions, no loopholes, no tax accountants for them. So, for example, Alex Rodriguez makes $33 million this year. Under my proposal, he would pay $9.9 million in taxes and have to scrape by on $23,100,000.

However, the guy selling popcorn at Yankee Stadium, who makes, say, $10,000 a year (I have no idea, that is just a nice even number to make calculation easy), shouldn't have to pay $3,000 in income tax. This is what boneheads who advocate the flat tax seem to miss. To "the little guy," paying the same tax rate as the uber-wealthy is a heavy burden.

So I would keep a graduated income tax for those making below $10 million a year, and have a cutoff at an arbitrary poverty line, below which people pay no income tax.

The typical Republican/Libertarian position: Have everybody pay the same tax rate, and if that's too much -- Let 'em eat popcorn.

[kestrel91316]

10. Never happen. Makes way too much sense.

[Phil The Cat]

11. Distribution by need, not production for greed!

EQUALITY NOW! NO MORE PRIVATE PROPERTY!

Tax 'em until everyone has the same size slice of pie!

Housing should be distributed based on who needs to live in a certain geographic area, not who has stolen the most money from the poor and working class! Same with food, medical care, travel... If someone is hungry, sick, or needs to go somewhere, they should not need to feed the fat Limp-balls loving pigs to do it!

Imagine - no more looking for a job and starving because you are too old or too brown or too gay or whatever! Jobs could be assigned as needed to achieve labor needs by a "colorblind" national computer system programmed with everyone's qualifications and geographic accessibility, and not some individual's whims and prejudices! And if there's no assignment for you that particular day - enjoy the sunshine, free from worrying because you will still get enough to live (not just barely survive on)! Just do your part for your fellow humans: Work your 32 hours a week as assigned, perform your citizenship duties (vote, pay your taxes, give 8 hours of volunteer service a week) and you are golden!

And if all the food stores were "For The People" and not "For The Enrichment Of Fat Lazy Capitalists", they could be forced by not only law, but rules, to only sell healthy, environmental, organic foods and not meat and processed garbage like they do now, and to make it available to EVERYONE! So we all would be healthier not eating Frito Lay / Nabisco garbage food (less medical costs and more productivity)!

So, to recap, taxing the rich until they are economically and socially the same as everyone else, stop them from owning real estate, oil/ore/mineral deposits, distribution, and production assets, and instead having the people as a whole own everything via national and regional trusts, communes, and cooperatives we can achieve REAL equality while getting the billions of homeless, sick, and hungry people around the world taken better care of!

Get the word out to stand up against capitalism and the pampered rich!

[TBF]

13. K&R nt

[leveymg]

14. From World War Two until the 1960s the nominal tax rate on the top bracket was 65%-90%

That was the also the period of greatest general prosperity in American history. Bring it back. If T. Boone Pickens and Warren Buffett have to sell half their investment residences and airplanes, I will not lose sleep at night.