Give me you best reasons for the Progressive Income Tax.

[JanMichael]

Not that America actually has much of a Progressive system anymore, it seems that even many liberals have forgotten why we ever had a graduated progressive income tax.

Fact is that we have a mix of Progressive and Regressive taxes. Federal Income Tax is moderately Progressive while Local Sales Taxes are Highly Regressive.

Anyway what are the best philosophical reasons in your opinion for Progressive Taxation?

[rman]

1. to compensate inequality in income distribution

though it'd be more efficient to start with preventing this inequality in the first place, my limiting maximum income.

Reward of labour should be proportional, the thing is that no CEO (or anyone for that matter) does (nor can) work 400 times as hard as the next guy.
That's just looking at income. Include capital and the disproportion becomes even more extreme; no-one can or does work a million times as hard as the next guy.

[san antonio]

4. One thing you're forgetting...

You can't look at a strictly proportional payment structure and claim that the #1 guy in a firm should only make 5/4 what the new intern does if he works 50 hours vs 40 hours. It completely ignores the contribution to the company, loyalty (time spent with the company), potential contributions to the company, and the ability to bring in new business.

Sure that may sound good to the average Joe who comes in off the street but it fails to reward the people who have contributed to creating the jobs the average Joes have.

[IrateCitizen]

18. Strawman alert!!!

If you'll reread the post to which you are replying, you will note that in no way did the poster say that a CEO should make the same amount as a guy working in the mailroom. The point was -- and many here feel it is an accurate one -- that there is nobody that can justify making 400, 700, or even 1000 times as much as the average employee. There is just NO WAY that they bring that much more value to the company than anyone else.

THAT was the argument given. Please don't do us all the disservice of expressing intellectual dishonesty in trying to spin it into something else.

That kind of thinking is borne in the teachings of American business schools, especially Ivy League ones. A childhood friend of mine went to Harvard for his MBA, and I was astounded at the elitism expressed by both he and his business school friends when I was around all of them. The "commoners" are considered to be beneath them, a cost to be minimized rather than an asset to be valued. They believe that the true value lies with them -- the management.

[san antonio]

23. Ummm.

If you'll reread the post to which you are replying, you will note that in no way did the poster say that a CEO should make the same amount as a guy working in the mailroom.

Sorry, my bad. I've just got a friend who really does think that way. I'll go back to my hole.

[IrateCitizen]

28. No! Don't go into your hole!

I wasn't trying to chase you away, it's just that we often see a lot of propaganda on these kinds of threads. If it was an honest mistake, then I apologize if I came down too hard on you.

[san antonio]

36. Thanks

I did the thing where you have a discussion with somebody and then see something that is somewhat similar to what they were saying and automatically link the two arguments. My friend is a communist (card carrying) and his arguments are much different than yours after reading your post again. I apologize.

[Valarauko]

67. STRAWMAN ALERT II!

"that there is nobody that can justify making 400, 700, or even 1000 times as much as the average employee. There is just NO WAY that they bring that much more value to the company than anyone else"

Why do they need to JUSTIFY earning more money?

[ComerPerro]

71. They should justify making that much more money

If their employees can't reasonably live on their wages, or if they are resorting to massive layoffs to offset decrease in profits.

[Valarauko]

73. What do you mean?

Justify to whom?

[LiberalFighter]

82. And management thinks that only they know the best way to do anything

The workers on the floor in a factory or any environment where management is rarely involved directly with the laborers are generally not considered intelligent enough to make the decisions that are best for the company.

Management may see an idea or new approach someplace and decide that they will put it in place in their company even though the setup or company is not similar.

ISO is another organization that I have a problem. They will be paid to come into a workplace to audit and certify the company. Of course, when the company pays for it wouldn't there be a conflict of interest? Also, ISO just as management will require certain procedures to be implemented the same everywhere even though there are differences.

[matt53]

43. that's pretty rare

I don't think there's many cases where the gap is as large as you suggest. Maybe Bill Gates vs. the cleaning lady at some microsoft subsidiary, but that's a rarity. I would argue that a CEO is worth, say, 10-20 times as much as the lowest paid worker... wouldn't you? That's typically more the case in a small to medium sized business. Take an entry level $20K/yr vs. CEO $200K/yr.

[LiberalFighter]

85. Here is a link with corporate wages

Executive PayWatch

CEO Compensation Index by Company

[nhtfopo]

47. It's called supply and demand

It's not about effort. It's about how many other people could do your job. I'm a programmer. When I was in school there were less programmers out there and jobs were paying alot. Now that I'm out of school I can barely find jobs starting at over $12 an hour. That's be cause there are tons of programmers and few jobs because of the economy. If I was one of 30 people in the country who was a programmer I would be making 100 million a year. If everyone was born with the ability to program (like flipping burgers) I'd be making $6 an hour. That's life.

[political virginian]

55. Incone is EARNED, not DISTRIBUTED

I kow that thisa is a foreign concept to many people out there. Who brings more to the team Donovan McNabb or David Akers? (For those who don't know, that is the Pro Bowl QB or the Place Kicker)...So, should Akers be paid equal to McNabb or does McNabb do things for the team that justifies him being paid about 100 times what Akers is?

[prolesunited]

Prepping for the show tomorrow?

:hi:

[JanMichael]

3. Yep. Already written some of it.

Doesn't hurt to get some fresh takes on the issue though:-)

[prolesunited]

10. Here's something you may find useful

Trickle-Down Economics: Four Reasons Why It Just Doesn't Work
By Mehrun Etebari

We’ve all heard the claims that cutting tax rates for the richest Americans will improve the standard of living for the working class. Supposedly, top-bracket tax breaks will result in more jobs being created, higher wages for the average worker, and an overall upturn in our economy. It’s at the heart of the infamous trickle-down theory.

http://www.ufenet.org/research/TrickleDown.html

[Creideiki]

2. People who make more benefit more from the status quo

That's probably the biggest one.

The next good one is that there's a reasonable expectation that simply living costs X amount of money. If you take away from the people making the least so that the Y > X they made becomes Y < X, then there's social unrest or you have poor people starving in the streets which is, um, unsightly. Which goes back to the first reason.

There's also a bit of social stability (see reason #1) that is injected into the system from at least an illusion of class-mobility. Part of that mobility comes from social programs that cost money.

[alpizzy]

5. Expanding on the idea of...

"simply living costs X amount of money"....it is in the whole country's
best interest for each individual to have disposable income....
keeps the economy rolling along.

[GreenPartyVoter]

6. I can't say it better than Dennis does

"Tax cuts to the wealthiest one percent of Americans do not create jobs and do not increase wages for working people. The only way to real economic strength and security is to provide real tax relief to those who need it most, workers and families."

[Coldgothicwoman]

7. Social Viability

The taxes we pay are used for social programs, social services (Does everyone else differentiate between the two, or is it just me? Just curious. :) ), and public infrastructure constitute the viability of a society. The more viable a society is, the less cost there is in inefficient use of public money - for example, programs and services that help prevent crime are more efficient than those that regressively simply punish for crime. Either way, the money has to be spent, so why not spend it in the best way? This also promotes general quality of life. :)

Just my $0.02 worth. :)

[bryant69]

9. This is the one I buy

I mean how comfortable are we with the idea that the government should determine how much compensation a person should recieve?

I remember a line from the West Wing

"Henry; last fall, every time your boss got on the stump, and said, 'It's time for the rich to pay their fair share,' I hid under a couch and changed my name. I left Gage Whitney making $400,000 a year, which means I paid twenty-seven times the national average in income tax. I paid my fair share, and the fair share of twenty-six other people. And, I'm happy to, 'cause that's the only way it's gonna work, and it's in my best interest that everybody be able to go to schools and drive on roads, but I don't get twenty-seven votes on election day. The fire department doesn't come to my house twenty-seven times faster and the water doesn't come out of my faucet twenty-seven times hotter. The top one percent of wage earners in this country pay for twenty-two percent of this country. Let's not call them names while they're doing it, is all I'm saying."

At any rate the only reason to have a tax code is that the government has enough money to pay for the necessary work of government. (Which includes good schools, unemployment insurance, job training, and a lot of other things).

Bryant
Check it out --> http://politicalcomment.blogspot.com

[SharonAnn]

45. Since the tax cuts, they don't pay that much anymore

They pay a lot less. So do corporations.

However, Average Joe and Jane pay more.

[trogdor]

8. progressive (small p) taxation is the most equitable means...

...of generating revenue, not to mention the most efficient. I'm not a fan of confiscatory taxation for anyone, but you could hardly call the 39.5 marginal rate we had under Clinton confiscatory. My point is merely that those who have the greater ability to pay should pay more than the guy who pumps your gas, stocks the shelves at the grocery store, or tells you where you might find drill bits at the Home Depot. The latter already make less than they're worth, and to hit them up for a bunch of taxes on top of that is just not right.

[meti57b]

11. The wealthy have created an economy and society that benefits themselves.

The tax structure that the wealthy special interests pay to have implemented, supports the continuation of their privilege and wealth. The poor are usually that way because they are somehow not useful to the wealthy and their business interests. Let the wealthy pay for the casualties (the poor) of their economic system.

[fishguy]

12. Look at Network Lobby website

www.networklobby.org

It is a Catholic Social and Economic Social Justice organization.
Type in taxes under the search.
Great arguments for progressive taxes.
Makes right wingnuts shut up about taxes because it inserts the Christian and moral arguments for progressive taxes into the argument.

Hard for a wingnut to argue with the "Christian" view of things because then they look like a major hypocrite if they say the religious view is wrong on some things and right on others.

[LiberalFighter]

86. Did a quick check and I like it

Will have to include the website to mine.

[brainshrub]

13. Watch me get in trouble:

I think a flat tax is a good idea.

As far as I know, I am the only Liberal I know who thinks this way.

Here's why: A progressive tax inherently pits one group of voters against the other; Eventually the more powerful groups are able to finagle their way out of paying their share of the burden.

I could write a long essay on this...but I'll take questions as they are asked.

[Muddleoftheroad]

16. With a big caveat

I like the idea of a very high floor. That limits or eliminates the tax that low-income folks pay and ensures the tax is evenly applied to all Americans.

[JanMichael]

19. It's not evenly applied if low incomes are exempt.

All you've done is continued the regressive trend on the Progressivity of the Federal Income Tax that's already occured.

0% to 30k then 15% over (Whatever) is simply a two tiered Progressive tax. Ie. more regressive.

That doesn't even begin to take in Regressive State and Local Taxes which are already flatter than the average conservative's brain-scan.

[IrateCitizen]

21. ROTFLMAO!

That doesn't even begin to take in Regressive State and Local Taxes which are already flatter than the average conservative's brain-scan.

That one's a keeper, JanMichael!

[Muddleoftheroad]

30. Yes it is

All taxpayers get the same rates, and the same exemptions.

Let's say the first $30,000 is untaxed -- for all taxpayers. That establishes the same system for all, but drastically aids the lower-income workers.

[JanMichael]

31. They get the same (edit: except the AMT) rates now.

That's why they're called marginal rates.:-)

Same exemptions? How's that? Life is complex, the ways people earn a living are complex and varied, why the need for one size fits all when all people and their incomes are certainly not all alike? That's why we have a tax code and the fact is that it isn't that gawd awful difficult either.

My point was that all the "Flat Tax" proposals that I've ever examined are essentially simplified, more regressive, "Progressive Taxes".

Double edit: The AMT is only paid by some 1.5% of Americans today so it's just a complementary progressive tax.

Triple edit: "Evenly Applied"? Sorry I misread that originally to mean "The Same", my bad. That said I agree that people should all be treated equally in the application of whatever taxes that they have to pay.

[brainshrub]

32. OMG!!

We agree on something! :wow:

I also think that if a flat tax is adopted, then no other taxes should be implimented on the federal level.

[apsuman]

38. agreed n/t

[JanMichael]

17. No trouble, just a question.

Do you not believe in the principle of Progressive Taxation (Remember that the Income tax was only 34.5%, U.S. Census Bureau (2002), of all tax reciepts in 1999 and is probably even less now.) or are you just playing politics with it because some very rich people don't want to pay to play?

Also, what's this about pitting voters against each other, so what? That's the way this system works, isn't it?

[brainshrub]

33. No

I don't belive in the principle of Progressive Taxation. I feel that ALL taxes are a form of redistributing wealth, and I don't have a problem with that. A flat tax would make the system more honest.

About pitting voters against each other: It doesn't need to be that way in the arena of taxation. The complex rules that progressive taxes create benefit the wealthy who can afford tax lawyers.

[Valarauko]

69. I don't believe in progressive taxation either.

As a principle.

[JanMichael]

70. Then I guess you like, believe in, Regressive Taxation?

That wonderful thing that hits those with meager means the hardest?

Interesting.

Please correct me if I'm mistaken.

[Valarauko]

74. How so?

So the middle-class should pay less taxes than the wealthy? Why?

And the VERY poor shouldn't pay any of course. That I do agree with, of course.

[JanMichael]

78. Why should the very poor pay less than the simply poor?

Or the simply poor pay less than the moderately poor?

Or the moderately poor pay less that the plain old poor?

Or the plain old poor pay less than the low middle class?

Or the low middle class pay less than the middle middle class?

Or the middle middle class pay less than the upper middle class?

Or the upper middle class pay less than the low upper class?

Or the low upper class pay less than the middle upper class?

Or the middle upper class pay less than the very rich?


Does that sound silly to you?

It does to me. This is a simple proposition: The more able pay more ("More" is a funny word since "graduated" means that the billionaire pays the same on his first $50k as the person that makes $50k. Then pays a little more percentage wise on the next gradation. That's equitable.) than the less able. Why? To pay for Government.

Nothing complex here.

Also remember that Regressive taxes; Sales, Property, Excise, etcetera soak the less affluent at a much higher percentage of their income than the affuent. The US is becoming more Regressive as time goes by http://ideas.repec.org/p/dae/daepap/03-10.html with the diminishing Corporate and Personal Income Taxes. States and Local Government pick up the slack with Regressive Taxation and debt financing via Bonds.

Maybe the following site can explain it better?

http://www.psnw.com/~bashford/taxation.html

=====================================
Why should the rich pay more?
Some say, for the same reason reason John Dillinger robbed banks: because that's where the money is. There is some logic to that, the richest 2% control in the ballpark of 40% of the private wealth in the USA. Others say; "Because they can afford it." Others who complain about progressive taxes say it's because people want "revenge on the rich", or it's "class envy". Or they say, "Why should the successful people be penalized?" That is an interesting take on reality.

But there is one argument that is not often seen, the "follow the money", or follow the tax money argument. Simply put, it says you get what you pay for. It says that if you eat a gourmet meal, you have purchased an entire different meal (not just more of it) than for a McDonald's Happy Meal. We claim that progressive taxes buys Rich Boy toys, regressive taxes buy Poor Boy toys. We say fair is fair. To test this idea, we follow the tax money.

Progressive taxes (such as income taxes) pay mostly for Rich Boy toys: Desert Storm, Cold War, gunboat diplomacy, the Fed's infinite labor pool (WANTED: unemployment) and any related poverty, NAFTA, GAT, free trade agreements, interstate freeways, National Parks, FBI, CIA, a hot-shot standing military, etc. And regressive taxes: (mostly local sales taxes and fees) go for Poor Boy toys: local roads, hospitals, schools, local parks, libraries, cops, city/county councils, fire fighting, etc.
=================================

I hope this helps.

[LiberalFighter]

90. It is worse in states and local taxes.

[IrateCitizen]

20. No trouble, just some disagreement...

A few questions for you, if you don't mind. :D

1. What do you think should be the tax burden borne by corporations/businesses, as a percentage of all federal receipts?

2. What is your opinion on other forms of taxation (Social Security, Sales Tax, etc.)

3. Would your flat tax apply equally to both earned and unearned income, or earned income only?

4. Do you believe that the federal government should assess an estate tax on estates over, say, $2 million, at the same rate as the flat tax?

5. How would this alleviate "pitting one group of voters against another", if you still have large disparities of wealth?

6. How would such a system prevent the rich from finding loopholes to avoid paying?

7. How would you handle charitable contributions under your flat tax system?

[brainshrub]

35. Answers:

1. What do you think should be the tax burden borne by corporations/businesses, as a percentage of all federal receipts?

I do belive in a progressive tax for businesses & corporations. Individuals would pay a flat tax, businesses would pay progressive tax.
I know that doesn't answer your question, but I think businesses should take up the bulk of tax burden because they benefit the most from government services.

2. What is your opinion on other forms of taxation (Social Security, Sales Tax, etc.)

In my opinion, if there is a flat tax, I suspect we would not need a national sales tax. I have no problem with the current SS program.

3. Would your flat tax apply equally to both earned and unearned income, or earned income only?

both

4. Do you believe that the federal government should assess an estate tax on estates over, say, $2 million, at the same rate as the flat tax?

Hadn't given it much thought...but my knee-jerk reaction is to say yes.

5. How would this alleviate "pitting one group of voters against another", if you still have large disparities of wealth?

There will always be disparities in wealth, some people are just more talented, harder workers or just plain lucky.
As long as ALL Americans have access to healthcare, food, shelter, a clean environment, education and security I see no problem with disparities of wealth.
Under the current system, the rich play a shell-game to prevent them from shouldering most of the burden. A flat tax would fix that.

6. How would such a system prevent the rich from finding loopholes to avoid paying?

Here's how the tax form would work:

a) How much did you earn: ______________

b) What is 15% of a? : _______________

c) Subtract a from b: _______________

You owe whatever is in line c. It's much easier to catch tax-cheats because the above formula is so simple.


7. How would you handle charitable contributions under your flat tax system?

I suggest eliminating them altogether. No deductions for anything.

[IrateCitizen]

44. OK, I've found a few openings here...

In my opinion, if there is a flat tax, I suspect we would not need a national sales tax. I have no problem with the current SS program.

Then you are aware that the current FICA is highly regressive, right? The rate is a flat rate, but it is only applied up to an income of, I believe, $84,000 per year. This means that anyone making over that figure actually pays a LOWER overall rate than anyone making a poverty-level wage. Would you agree with extending the rate indefinitely, and perhaps lowering it? What about applying a FICA to capital gains as well? And should benefits be paid out under Social Security to people who do not at all need them?

I suggest eliminating <charitable contributions> altogether. No deductions for anything.

So, you're proposing a one-size-fits-all system? This means that the working class person earning $45K per year for a family of four will pay the same amount as an elderly couple (with far fewer essential expenses) with the same yearly income. Additionally, there are many services which government does not adequately provide. Are you also saying that charitable contributions to organizations that help provide those services would NOT be tax deductible? If they are not, then where is the financial incentive to give? I know that I would personally not give as much in charity without tax deductions, because it would be too costly financially-speaking.

Personally, this is why I find a lot of holes in any flat-tax scheme. If you allow deductions, then it just allows the rich to pursue means of avoidance from an even lower starting point. If you eliminate deductions, then you end up trying to apply the exact same tax code to people with very different living conditions.

I appreciate your answers, but you've only served to further confirm my belief in a highly progressive tax system as the best means for promoting a more egalitarian society.

[brainshrub]

53. Here are some more answers

Then you are aware that the current FICA is highly regressive, right?

Yup.

Would you agree with extending the rate indefinitely, and perhaps lowering it?

Possibly.

What about applying a FICA to capital gains as well?

Capital gains are a business issue and I have no problem with Progressive taxes for businesses.

And should benefits be paid out under Social Security to people who do not at all need them?

No.

[IrateCitizen]

57. Thanks for the SS answers, but I'd appreciate answers for...

... the second part of my post, since that was where I raised my biggest concerns with your system.

[LiberalFighter]

91. I agree with eliminating the cap.

I have been advocating that for about 20 years.

[TahitiNut]

27. How about a "flat income" too?

:silly: Should the same "flat tax" structure be employed for both individuals and corporations? Including the exact same definitions of "taxable income"? (That'd be interesting.)

How about a "flat definition of income"? All kinds of income, including inheritance and captial gains taxed at the same "flat rate"??

I have never heard anyone who actually advocated a "flat tax" -- every time I've heard it advocated, I also hear "except ..." that I could drive a truck through. The above questions highlight just some of these truck routes.

[Valarauko]

75. I don't believe inheritance should be taxed in the first place

nt

[LiberalFighter]

92. Inheritance is income

It is income that is not even earned.

Even before the recent tax changes under bush very few individuals had to pay or pay much of a tax on inheritance. Just like the income tax there is a threshhold before the tax started to take effect.

Not even when it comes to passing the farm on to the kids that work on the farm. Why? Because the son(s) don't work for free. They are paid just like any other worker.

[beyurslf]

29. There is a reason you'd the only liberal who thinks this

It is not a liberal ideal.

[matt53]

40. Flat taxes are the bane of rich republicans AND democrats with connections

That would actually level the playing field. As it stands now, tax code is incredibly additive and unnavigable on purpose. Why? To provide ample loopholes for specific political contributors to both parties. Democrat insiders push for higher taxes, then write in an exemption for themselves. Republican insiders cut taxes, but make sure in the process that their category gets the greatest benefit.

Both parties manipulate taxes into becoming a monster that only the best tax preparers can comprehend, succeeding in collecting mucho dinero from everyone else, and insuring they will be spared from having to pony up.

Flat tax seems to ensure a more level playing field, whether you have connections or not. Kind of what the "alternative minimum" tax tried to do.

[SharonAnn]

46. Studies have shown that a flat tax would have to increase

significantly the federal income taxes that the poor and middle-class would pay. SIGNIFICANTLY! It would be close to 25% of income.

However, it would reduce the amount of taxes the high-income and wealthy would pay. SIGNIFICANTLY!

Also, in most "flat tax plans", it's only earned income that falls under the flat tax. That means that unearned income like dividends and capital gains doesn't, inheritance doesn't, and wealth doesn't.

Sounds like a good deal for the very high-income and the wealthy. They would, of course, still require all the services and protections the US provides to protect them and their wealth.

However, others would get to pay for it.

[Muddleoftheroad]

66. It all depends on the floor and what you tax

To me, you tax all income at the same rate with the same floor for everybody. The net result is that all are treated equally, but that the higher-end earners pay much higher percentages of tax.

[Valarauko]

68. You're not the only liberal who thinks that way.

I do too.

[0rganism]

72. Didn't we discuss this before?

I seem to recall beating this topic to death in the economics forum a couple months ago.

Anyhow, the main reason you are asking for a flat tax is that its simplicity makes tax cheating harder. Now this is all well and good, but it is possible to have a simple tax system which doesn't resort to flat taxing for its basic premise. I believe I illustrated just such a system for you at that time.

The funny thing is, under your flat tax system a rich twit wouldn't even WANT to cheat, they'd have it so good. Money has an inherent capability to breed more of itself, and those with more money can do so exponentially faster than those with less. The idea of income tax as a means of redistributing wealth is premised on the concept that a large gap between a tiny powerful rich minority and a huge disenfranchised poor majority is an undesirable social structure to be avoided.

Consider three people and their AGIs, all taxed evenly at 15%.

* Ted earns $30000/year teaching, pays $4500 in taxes, and has $25500 to pay rent and bills.

* Bob earns $100000/year as a dentist, pays $15000 in taxes, and has $85000 left over for rent, bills, and good times.

* Don grosses $10000000/year as an investment banker, pays $1500000 in taxes, with $8500000 left over for rent, bills, good times, and dynasty-building.

Which of the three do you suppose likes your tax structure the most, compared to what we have now?

[Valarauko]

76. And?

I don't see any reason at all why Don shouldn't have more money.

[0rganism]

87. No one is denying the wealthy men more money

The question is, and always was, how much more should it be?

Read the whole post next time, please.

Is a society with a wide spread between the wealthy and the poor with no middle class one in which you wish to live? A flat tax is one of the best ways to get there.

[LiberalFighter]

89. There was a study and it found that the flat tax would cost us more

About 17% flat.

The way it is now many of us pay less than that but too many believe that if it says that the tax rate is 15% for someone making $56,800 or less then it is 15% on the whole amount.

Instead, only after exemptions are made on income does the taxing start. For each exemption claimed in 2003 $3,050 the income is reduced. So a family of four could reduce their income of $56,800 down to 44,600. With the standard deduction of $9,500 it is pared down to $35,100. Still that 15% is not on the whole $35,100.

$21,700 of income that is not taxed.

The first $10,000 of taxable income is at 10%
From $10,000.01 to $56,800.00 it is 15%
From $56,000.01 to $114,650 it is 25%

So to start paying any taxable income at the 25% rate the income would have to reach at least $78,500 and a penny.

By the way... they always talk about how long it takes to do the income tax each year. Personally, I think that is hogwash. If people have the necessary paperwork it should take less than an hour.

In addition, it appears that too many people don't prepare their own taxes. They have H&R Block or some "professional" do the work for them. Unless they have something special they can save some money by doing it themselves. Maybe if more people did their own taxes and understood what they were doing they wouldn't complain as much.

[prisonerseven]

14. Because wealth redistributrion is good for the less wealthy people

It's the only way to help balance the wealth.

[Hammie]

64. Hello?

Income tax taxes income (hence the name) not wealth. Progressive income taxes are one means for the wealthy to prevent you from joining their ranks. If you somehow manage to secure a high income, it is heavily taxed so that you cannot accumulate much wealth.

[Killarney]

15. Discretionary Income

To me, discretionary income is a big factor.

Everyone has bills to pay-- housing, electric, phone, gas, etc. Someone who makes minimum wage can just about pay his bills and not much else. A CEO can pay his essentials with a minimum of his income and the rest is discretionary income. I do believe that they should be taxed higher because so much of their income is for non-essentials.

I think it's totally and completely fair that I would pay a higher tax percentage of my income as a middle-class citizen than someone who makes minimum wage and I'm happy to do so.

[Code_Name_D]

34. Thus, progresive income tax helps to secure an adiqute money supply.

When money is locked up in savigns acoutns, this takes money out of cerculation. And if you have too much locked up, than you start to run low on the genral economey. As is happening now. The economey stalls.

A pregresive tax helps to take money out of these pools, and places it back into cerculation. A powers the economey.

[SharonAnn]

63. Actually, the money in savings acocunts is not locked up.

That's the money that financial institutions use to make loans which individuals use to buy things.

Example: 10 people put $1,000 in savings accounts - financial institution has $10,000 to lend. Financial institution pays the savers 'x' percent and charges the borrowers 'x+y' percent. The borrower gets the capital to use, pays it back with interest, the financial institution makes some money to pay its employees and stockholders, the savers make some interest for the use of their money.

[JHB]

49. I refer to this as "taxing REAL-LIFE disposable income"

The financial definition of "disposable income" is income after taxes, but we all know for most of us most that's not exactly spending money; how it will be "disposed" of is ordained by our current living standard. As you note, low incomes are largely devoted to covering basics; as you go up the income ladder, the "excess" is increasingly devoted towards higher-quality basics, minor luxuries, kids, their education, etc., and generally achieve what we think of as a middle-class lifestyle. At still higher incomes, you start getting into true excess and start needing servants to help you take care of it all.

"Real life disposable income" is income above covering the basics and (on a sliding scale) modest improvements in the quality of one's life.

A progressive income tax is the simplest (and, IMHO, close enough to fairest) way to tax that without becoming overly intrusive.

[starroute]

22. There are several distinct arguments

One I haven't seen mentioned yet is that there is an inevitable tendency for the rich to get richer and the poor to get poorer. (Once, years ago, I saw some mathematical modelling to back this up.) This is a major cause of social problems -- it undermines social cohesion, leads to inefficient use of resources, etc.

The most common solution over the course of history has been to force the rich to give away large amounts of their wealth, preferably in ways that directly benefit the poor. Whether it's potlatches or income taxes, the desired result is that the rich become a little poorer, the poor become a little richer, nobody starves, and everybody feels a greater sense of mutual connection.

The bottom line is that what's good for the system is also good for individuals -- but the opposite is not equally true. The social Darwinist/greed is good/market-economy-supplies-all-needs types are blind to this. Their arguments are based entirely on me-firstism, but they fall down badly on maintaining a viable social structure.

However, if you need to argue with this sort of individualist, there are good grounds for claiming that the rich get far more benefit from government services -- just not directly. On a local level, police and fire services do far more to protect the valuable property of the wealthy than to guard the meagre property of the poor. On a national level, the entire military and diplomatic apparatus of the federal government is overwhelmingly devoted to shoring up American business and the American elite. And in a million little ways, tax dollars go into making the lives of the rich more comfortable and worry-free.

There are certainly legitimate areas of argument: How steeply progressive should the system be? Where should significantly higher rates kick in, and how high should the top rate go? Should different categories of income be taxed in different ways? How can particular classes of people (farmers, small business owners) be protected if the tax code makes them look more affluent than they really are? But the basic fact of a progressive tax system should be beyond dispute.

[starroute]

25. Or just say that progressive taxation is the only alternative to communism

I just re-read my above post and realized that the first part of what I wrote can be put in even simpler terms:

- In human societies, newly-generated wealth is inevitably distributed unequally.

- Without intervention, this inequality becomes greater and greater over time, to the point where the social system breaks down.

- One possible response is forced equality, as advocated by communism, where everybody shares equally. However, this tends to undermine the very mechanisms which lead to wealth-creation.

- The other obvious alternative is to allow the continuation of disparities of wealth but to prevent those disparities from reaching a breaking point.

- Progressive taxation is the best method modern societies have come up with for achieving that goal.

- Anyone who doesn't like progressive taxation is free to come up with a different method -- but it still has to achieve the goal of preventing runaway disparities and social breakdown.

[Yupster]

24. Best reason to me is

the same as why you climb Mt Everest -- because it's there. Why did Willie Sutton rob banks? "Because that's where the money is," he said.

Forget fairness. If you're going to run a multi-trillion dollar government, the money has to come from wealthy people. The poor people don't have much to give since they're ---- poor.

It's really just practicality. Forget fairness. Fairness would be everyone paying the same amount. That isn't practical and no one wants it anyway.

[seasat]

26. Progressive tax mobility enhances social mobility

You can plot the increasing gap in growth in income of the bottom 80% of the population vs the decline in taxation on the top. A strong middle clase, IMHO, is neccessary for an inovative business community. If a given person knows that he can come up a new idea, bring it to market, and create the next Intel Corporation, then the whole business community is much stronger and stable. A progressive tax structure allows this to happen by lowering the burden on the middle class relative to the wealthy.

The larger tax burden on the wealthy, especially inheritance taxes, aids in keeping a "Corporate Royalty" from being established. They preserve the status quo since it is in their best interests. Innovation is risky so they don't try to develop significantly new products or new businesses. With our tax structure nowdays, we are returning to an economy of the the early 1900s.

Finally, progressive taxes tax the income not needed for basic needs. If we had a flat tax, then folks who spend everything on food, medicine, and housing would be hit the most. Even a flat tax with a large personal deduction would still hit those at the lowest levels. The authors of the original book on the flat tax admit that this is a mathematical rule of their proposal.

added on edit:

Finally, progressive taxes are needed because the real world is imperfect. If markets and businesses functioned perfectly and rationally, then we could have a true democracy (one vote by each person on everything) and we could have a libertarian society (minimal laws). The problem is that people are lazy, dishonest, and irrational some of the time. This applies equally to both the wealthy and the poor. A progressive tax provides money to a social saftey net that protects people when affected by this market. It provides money for education, food, shelter, and medicine. If we relied on an anything goes Darwinistic view, then we lose our humanity. By helping the least of us we help us all.

[cryofan]

37. umm...just look at the social democracies of Europe

They have it going on...and they are deeply into progressive taxation. You have heard of the "cradle-to-grave welfare state" Well, take it literally! They do have it, and it takes 50% or more taxation rates for those who make a lot of money, but let me tell you something....citizens of those nations do not generally have to worry much when it comes to money, housing, daycare, schooling (including university), medical, or whatever. They may never be rich (and the odds are heavily against any American ever being rich), but they do not generally have to fear for being homeless, hungry, or lacking in medical care....

I am talking primarily about Scandanavia, Netherlands, Luxembourg, Germany, Belgium and Switzerland. To some degree this is true of France and Italy, and also the UK and Canada and Australia.

In general, these countries tax 45-55% of GDP, and the USA taxes about 30% of GDP.

Read these URLs for more:

http://www.american-pictures.com/english/racism/articles/welfare.htm

It tells the story of how the Danes have fought time and time again for their welfare state. And it tells you what a welfare state is, and should be.

I highly recommend it!

Also, here are some other links of similar nature:


http://www.thirdworldtraveler.com/Economics/AmericanProsperityMyth.html

http://www.geocities.com/kew1788/SocialDemocracy.htm
http://www.geocities.com/kew1788/TakeBackNation.htm

http://maxspeak.org/gm/archives/00000791.html

http://geocities.com/aufheben2/stc_intro

http://faculty.insead.fr/fatas/econ/Articles/Chasing%20the%20Leader.htm

http://post.economics.harvard.edu/hier/2001papers/HIER1933.pdf

http://www.mylinuxisp.com/~cryofan/

[cryofan]

39. also read the thread "fighting for the welfare state"

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=104&topic_id=920274

[matt53]

42. How long will that last?

Aren't the socialist european countries headed for eventual failure? Once the old money runs out and the citizens become increasingly more dependent on their government for every need, doesn't the productivity drop, therefore the GDP falls, and the welfare state can no longer support itself? Wealth redistribution can only happen when there's wealth to be redistributed, right?

[Name removed]

48. Deleted message

Message removed by moderator. Click here to review the message board rules.

[matt53]

60. oh, come on

just making a point, dude. Thanks for the harrassment.

[IrateCitizen]

50. First off, Western Europe is not "socialist"

The governments of Germany, Scandanavia, France, etc. could best be described as social democracies, which places them more in the camp of capitalism than anything else -- just capitalism with an extensive safety net.

Once the old money runs out and the citizens become increasingly more dependent on their government for every need, doesn't the productivity drop, therefore the GDP falls, and the welfare state can no longer support itself?

What old money? Their budgets operate just like ours do -- current expenditures are financed by current income.

Also, tell me how their citizens are "dependent on their government for every need". If you're referring to things like health care and child care, Western European nations spend far less, per capita, on these services. Contrast that with the US, in which corporations provide the health care, and per capita expenditures are higher than anywhere else in the world -- with 14% of the population left completely uninsured, and probably another 25-30% with less-than-adequate coverage.

What productivity drop? Western European workers are actually MORE productive, per working hour, than their US counterparts. The only reason that our overall productivity is slightly higher is because our businesses work to squeeze every last drop of blood out of every employee -- by working us longer hours and with less vacation than our European counterparts.

As for GDP, it is a grossly inaccurate measure of productivity. By GDP standards, a year in which you wrecked three cars, had major heart surgery, saw your house burned down and rebuilt would be considered an EXCELLENT year, because you pumped more money into the economy.

The system in Europe is not about wealth redistribution, it is about creating a much more healthy SOCIETY. Work and productivity is only a small part of what makes up a healthy society. They have realized it -- I wonder why we have such a hard time. :shrug:

In short, your post smells of propaganda. All the classic point are there. However, if I've accused you wrongly, I apologize and would be happy to engage in an honest and open discussion.

[matt53]

61. Not according to the previous article

"citizens of those nations do not generally have to worry much when it comes to money, housing, daycare, schooling (including university), medical, or whatever."

that would be depending on the government for every need. I think "whatever" pretty much swallows any other needs...

I was responding the the other articles' glorification of wealth redistribution.

My point is that once one need is covered, another is lobbied for, and another, etc. While it may not be exactly socialism yet, it doesn't take long to get there.

I admit, though, my analysis was based pretty much on speculation and fatalism. That's just my general opinion of full-on socialism. I'm not an advocate of that system. If that makes me somehow unfit for the democratic party nowadays, that's really frightening.

Sorry to offend you, but to label it pure propaganda is a little much.

[cryofan]

77. your labels do not make your arguments for you here on DU

You can call something you do not like 'X' or 'Y' or 'Z'. It matters not to me. I am not concerned with labels. I am only concerned with improving my country, that I own jointly with my fellow citizens, in order to improve my life and that of my fellow citizens.

I think that the EU social democracies afford better lives to more of their citizens than American affords to its citizens. Period. Your throwing around of labels will go over real big on someplace like FR, but I and many others around here like to exercise our craniums independently of propaganda created by the rich and powerful and disseminated by their media in order to further their own interests to the detriment of most Americans.

[info being]

41. We don't live in isolation

When 10 or 20% of a population becomes rich, the economy changes and its harder for the poor to get by because prices go up for everything...housing, auto repair, whatever. So it is only natural that the rich have a responsibility to maintain a certain minimum decent living standard for the less fortunate / experienced / educated / capable.

Of course this assumes that some of this tax money actually goes to help the poor. In this country, it just goes to killing more of the poor overseas.

[Tierra_y_Libertad]

51. Simple. Class war. A truly progressive income tax is fair.

But then I'm a socialist and believe that everyone should have enough to eat, housing, equal opportunities, education, and all that kind of commie stuff.

[Cleita]

52. My idea about taxation?

Well, it would never go past the freepers because I favor exempting the lowest income earners with no taxes or very few ones.

I would give a deduction of $30,000 on wages to each American, yes even the filthy rich. I would tax the next $30,000 at 10% and I would do the same for all income of retirees up to $60,000. I would then tax everyone 25% on what they earn above $60,000 in wages or pensions. Now as far as dividend income, interest income, real estate income and any kind of income other than wages, capital gains, inheritance, etc. I would tax at 25% over $1,000 a year. This should exempt interest on modest savings.

Of course I would still honor tax exempt IRA's and other venues for building a retirement nest egg. But after that, I would eliminate all tax credits and other loopholes, because hopefully we will have social programs in place, like health care, day care, elderly care etc. in place so that tax relief would not be needed

[arewethereyet]

79. I like that

it does not nail those of humble earnings, its reasonable for the rest. Blow off loopholes and I think you're getting somewhere.

[Uzybone]

54. Wealth should be taxed at a higher rate than Labour

n/t

[arewethereyet]

83. OK and could you suggest a why for that ?

or any other guidelines etc ?

[DjTj]

56. Everyone gives up an equal amount of utility.

The most important things that we get from the government aren't easily measured in dollar terms: national defense, a stable currency, education, police protection, etc. We all share the benefits of these services, so we should all contribute equally.

However, just as the benefits are hard to measure in dollar terms, determining equal tax contributions should not be measured in dollar terms. Each citizen should make an equal sacrifice for their country to share in the same benefits. We should all give up the same amount.

For a family of four making $25k a year, if you ask them to pay $250, they will be reluctant to do so because that will easily be food off the table, rent money, or the heating bill. For a family of four making $250k a year, $250 is the size of their 3rd TV. Even in a flat tax system, $2500 might be the sunroof on their new car; it isn't going to take food off the table.

When each citizen pays taxes, they should give up an equal amount of what economists call utility. In this sense, it should be the same as church tithes or charitable contributions. You give up what you can for benefits we all share.

The progressive income tax seeks to set guidelines for the proper amount each individual should be able to give up. It's imperfect, but any truly fair system must be progressive in nature.

[JanMichael]

59. Good points. I think the "flat tax" proponants, the honest ones...

...at least, are falling prey to holding our systems failings now as evidence that Progressive Taxation is somehow philosophically flawed.

Every system has flaws and drawbacks!

My chief problem is that while the Federal Income Tax is steeped in Progression (although under attack) the Regressive Taxation of States and Local Government are choking the life out of the poorest of the poor.

[fob]

58. No Taxation Without Representation!

Isn't that what our country was founded on? If so then it is everyone's duty to see that taxation is relative to their representation.

Ways you have representation;
Voting - 1 per person - Limited by age requirement
House - proportional representation based on district in which you reside
Senate - 2 reps per state - representation per capita of state is equal(and minute)
Electoral College - representation is actually conglomerated and made more dense in this "place". Admission is exclusive and voting highly structured
Money - This is actually where ACCESS to your representation comes in - You may have an equal part of your Senator, but money will grant you greater access to influence/use/benefit from your representation.

It is from this very foundation of our country that Progressive Taxation springs forth, not as an ideology, but a TENET of our REPRESENTATIVE REPUBLIC! DEMOCRACY cannot stand without it.

Therefore, All base representation being proportionately distributed, it is ACCESS to your representation that is the key. When you make/have more money, you are bound to pay more for the privelege of access!

fob

[arewethereyet]

84. ask a DC resident about that

its not their reality

[Hammie]

62. It is simple really

This is a Democracy and there are more of us (modest means) than there are of them (the rich). Consequently we vote to tax them as much as they can stand without modifying their behavior to the point that additional taxes become counter productive. Might makes right. Right?

[not systems]

65. Prevent the creation and continuation of oligarchies.

This is the best structural reason I know of.

The second best is to aid the poorest people gain a foot up in life
by funding government with money from people who can best afford it.

http://dictionary.reference.com/search?q=oligarchies&r=67

[durutti]

80. The way I see it...

Those who reap the most material benefit from a society should be expected to contribute the most to maintaining and improving that society.

[mmonk]

81. Because the poor live closer to the margins

and the lower middle class tends to struggle. It's that simple for me in defending a progressive tax system.

[AP]

88. Because, if you do the math, it makes sense.

If you want to make sure that the tax code doesn't burden some people more than others you have to recognize that people have different marginal valuations of an additional dollar as they have more dollars. As you get more dollars, your marginal valuation of another dollar decreases (because the more money you have, the easier it is/less risk it requires to make another dollar). So how do you tax people in a way that recongizes that a secretary making 35K has a higher valuation of her next 5K in income then a millionaire has in his next 5K in income? You do it by charging the secretary a lower marginal rate on her 5K.