High taxes are not inherently bad

[Ardent15]

In fact, a progressive tax system leads to more income equality and a better society for ALL citizens.

But conservatives are short-sighted and seem to think that "greed is good." They make it sound good with phrases like "we believe we have the right to keep what we earn," when what they're really saying is, "Fuck society, look out for number one."

Is it any wonder that countries with a high tax on the wealthy have the highest standard of living?

[CaliforniaPeggy]

1. It's no wonder at all...

They refuse to see it.

Stubborn AND greedy.

What a combination...

[hfojvt]

2. I would jump on one of those words

"earn"

Particularly since so many of the tax cuts are aimed at what is classified as UNEARNED income - capital gains and dividends.

I can provide an example of that myself. I saved $1,500 in taxes this year thanks to the Bush tax cuts. I made $15000 by the sale of some real estate that I bought in 1987 and will pay a zero percent tax rate on that money.

Yet if I had made the same money in wages, I would have paid $563 in income taxes (now reduced to $163 thanks to the Obama tax cuts) and another $1,147.5 in FICA taxes. And at my job I would have also had to pay $600 into my retirement system, reducing my take home pay to just 85% of my income.

[Alias Dictus Tyrant]

4. Technically, capital taxes are adjusted for risk

Risk premiums are real, hence why capital taxes are lower since you can't deduct "risk losses" even though they have very material impacts on finances. Rather than trying to quantify something so difficult to pin down for individual paperwork purposes, they just ballpark it in the tax code.

The capital taxes are only lower if you look at the rates. In real mathematical terms, they are quite high relative to income taxes. Income is a much "cheaper" investment of sorts, and the losses and costs are much easier to quantify. If capital taxes were anything like income taxes, no one would invest in small business ventures because it would be an idiotic waste of money for anyone with basic math skills. We need more small business investment, not less.

Our economy requires capital investment in small business ventures. It is why the US leads the world in technology by a huge margin. In fact, you can defer *all* taxes on capital investments in small-ish businesses indefinitely, it is that important to the economy. (Most of this 'lost' tax gets immediately recovered as income tax, so it is productive.)


I would also question your "unearned" assertion. A significant portion of capital investments are actively managed; it is not as though money just magical appears at the end of the year unless you are a small-fry, in which case you are effectively paying someone else to actively manage things.

[hfojvt]

7. right, I am only investing my LIFE in my job

and Bill Walton is investing his MONEY.

Got it.

Rich people's money = important
Working people's live = not important

and low tax rates for rich people are really high.

and low income working people are really lucky duckies because they pay zero income taxes.

Is war also peace?

[MercutioATC]

5. So you didn't "earn" that $15k?

True, there are people who inherit, but their benefactors EARNED that money.

Regardless of how one feels about the capital gains tax rate, capital gains ARE "earned" income.

[hfojvt]

8. no, how do you figure that I did?

I bought land in 1987 and sold it in 2009. There was no work involved in the gain. True I paid about $3500 in property taxes which makes my real gain a little smaller, but I also lived on it for a year or more which saved me over $3,000 in rent.

Here are the definitions of earned income
http://www.google.com/search?hl=en&source=hp&q=define%3A+Earned+income&aq=0&aqi=l1g3g-m3&oq=earned+income+defini

[MercutioATC]

12. You performed an action that resulted in monetary gain.

Yes, I know the IRS definition of earned income...which is why I used quotes in my post.

My point is that whether or not it meets the legal requirements of earned income, you DID "earn" it.

[hfojvt]

13. so any action that results in monetary gain is 'earned' income

including robbery and embezzling? And buying a winning lottery ticket?

No, I think there are qualitative differences in generic 'actions that result in monetary gains' and the narrower group of 'productive work'. Only income that is worked for is 'earned'. That simply does not include interest, dividends and most capital gains. There's no productive work involved. Normally I would perform over 1,000 hours of community service to get $15,000 and in this case it just sorta dropped out of the sky without doing even one minute of community service.

[MercutioATC]

16. I would classify investment income as "earned".

Hell, there are people who earn their living that way.

Proceeds from criminal acts are...well, illegal.

Lottery winnings are winnings.


Unless you're working for somebody else, none of the money you make (profit) is earned income by your definition.

[hfojvt]

17. people make their living that way

they don't earn it. You only earn a living by actually working.

Sure, retail is a little bit like real estate. I bought books for wholesale or rummage sale prices and sold them at retail prices.

Except there's a lot more work involved, and a lot less money. True, sitting around and waiting for customers is not really producing anything any more than sitting around waiting for somebody to buy my land is, except that it has to be done at one particular location. I had to open the doors at 9 a.m. or earlier and be there until 6 p.m. or later. Then there were other activities required too, like stocking shelves, assisting customers, making change, making window displays, looking through catalogues, phoning in orders, going to the rummage sales, writing ads, cleaning the store, paying for the overhead, etc.

Unlike the research work which may be done in investing, this work was done as a service to potential customers. So they would have a place to go to find the latest Harry Potter or Grisham book or a used copy of 'Catcher in the rye' or a new copy of "The People's History of the United States". Research work in the market seems more like going to the race track and doing research on the horses and jockeys. The money from a winning bet is still not earned, whether it was made at the track or in the stock market.

[MercutioATC]

18. Perhaps we should be defining "work" first.

What is work?

I'd argue that work is any action taken to produce a desired result.

[Alias Dictus Tyrant]

3. They only have a high income tax on the wealthy

Many countries with high standards of living have lower capital taxes than ours.

This is all basic economic policy: you can get (roughly) 3 dollars of income tax for 1 dollar of capital tax, with the same loss to the economy. American tax structures are stupid. If the object is to generate revenue and grow the economy at the same time, lowering capital taxes and raising income taxes is a good way to do it. Capital taxes cause far more damage than they are worth relative to income taxes. Even the socialists in Europe know it.

[Meldread]

6. It depends on how you tax and what you tax. It also depends on what you mean by "progressive tax".

I define a progressive tax system as something that takes money proportional to your income. For example, I view sale tax as a regressive form of taxation. Let me use numbers that are easy to understand to illustrate the reason. Let's say you take two individuals, one earns $10,000 a year and the other earns $100,000 a year. Over the course of the year the individual earning $10,000 pays $1,000 in sales taxes. (That is insanely high, but work with me.) The individual earning $100,000 pays $5,000 in sales taxes. Is this progressive? No, not in my book. While the individual earning more did pay more in taxes, it was not proportional to their income in relation to the individual who earned less. In order to be proportional the individual making more money would have to pay $10,000 in sales tax.

In almost every case when it comes to something like sales taxes, the poor and middle class end up paying more in taxes proportional to their income than the wealthy. To make matters worse, sales taxes harm economic activity by inflating prices, which disproportionately harms small business, and therefore also impacts the job market.

In my mind, there are two fair and progressive ways to collect taxes.

The first is to have the bulk of taxation shift to property and other natural resources. How is this progressive? Because landowners have built in advantages over non-landowners in the economy; one of the largest is the fact that they can use the land as collateral. Tax property based upon value, and not upon improvements as some areas do. Taxing for improvements discourages improvement, and in my view is not very progressive or smart. The greatest advantage going this route is that untaxes wealth directly, meaning you can't hide it - there is a reason wealthy people own seven houses and huge swaths of land. Taxing based upon the value of the land, and not improvements, also encourages people to make the best use of the land. It discourages sprawl that we commonly see with large cities, and overall it has a fantastic benefit to the environment. As a general rule of thumb the taxation on land gets spread out through the entire economy in a fairly equal way.

However, there is a second method I view as rather progressive as well. That is to target income directly. I do not favor the way the income tax is currently done, because I favor transparency in government. Ideally, the government would be able to track how much money you make and then send you a bill each month. The amount they can charge you would be capped, based upon income, and they would take the money in proportion to your total earnings. The bill you receive each month would allow you to view what exactly you're paying for and who supported it. You should be able to track every penny spent down, and in turn this would allow you to hold your congressman or congresswoman accountable. This will discourage wasteful spending, and make people completely clear on what the government is taking from them and how much.

I think both systems could work well together to create a fair, transparent, and progressive tax system. Just imagine if people had to pay money each month to pay for a war. I'm certain this country would see a rather large surge in pacifism. :P

[nickinSTL]

9. yeah - ask Norway what they think of high taxes

they are SO suffering with one of the highest standards of living in the world :eyes:

[stray cat]

10. Across the board increases would be a good idea - we should all pay but it should be progressive

but the middle class can not expect to be completely spared

[FLDCVADem]

11. Yep

Repeal all of the Bush tax cuts.

[Edweird]

14. I believe progressive taxes are a good idea. We had them before and put them to good use.

Our country has been gutted in the name of low taxes for the wealthy. It's long past time to wise up and fix this.

[DailyGrind51]

15. Not if you have guaranteed healthcare and secure pensions, they aren't!

[hack89]

19. They are not inherently good either

if you still spend more than you bring in. Or, as evident in the present recession, if your budget depends on the most optimistic revenue forecasts.

Look at California or Rhode Island - high tax states who were devastated economically when their revenues plummeted.

High taxes are not a panacea if they simply allow you to dig a deeper hole.