Why the top 1% in income should pay 99% of the taxes paid in the country.

[JDPriestly]

After doing a little research in order to respond to a great post by McCamy Taylor, I suddenly had the following insight. Some of you may have already realized. I apologize if I bore you.

Why the rich should pay a larger percentage of the nation's taxes than they currently pay.

We are often told, "Well, you can't increase the tax rates of the rich because they already pay such a high percentage of the taxes that are paid."

That is based on a logical fallacy. The poorer the rest of us get the less in taxes we pay and the greater the percentage of the nation's taxes that the rich pay. That's without our increasing the tax rates on the rich.

That is why the issue of what portion or percentage of the overall tax revenue it is "fair" to ask the rich to pay is irrelevant.

To be concrete, if my husband and I earn $10,000 one year, we probably pay nothing or next to nothing in taxes. The percentage in taxes that we and others with incomes of $10,000 per household pay is next to 0%.

If some other person makes $345,000 and pays 35% of their income after deductions, any percentage of the overall tax bill that person pays will be huge compared to the percentage of the overall bill that we pay.

Yet wealthy people often argue that their taxes should not be raised because they already pay such a large portion of the taxes collected. What nonsense. The more of the money they grab, the less other people can pay in taxes. It's the money that has to be taxed, no matter who has it. Those with the most have to pay the largest amount of tax revenue. If the top 1% get 1% of the income earned in the country, wouldn't it make sense that they should pay 99% of the taxes in the country?

[happy_liberal]

1. "The more of the money they grab, the less other people can pay in taxes"

perfectly stated
:applause:

[Rosa Luxemburg]

2. they would try to flee the country to somewhere like the Cayman Islands and hide

[kag]

3. Nicely put n/t

[aquart]

4. Because I say so, that's why.

[BlueJazz]

5. Good Points

[era veteran]

6. Never understood that the country that gives you that

opportunity to get rich. Like no where else in the world, but the rich bastards don't want to give back to the country that made it possible. Tax the rich and get that money working for the people. You know "We the people....

[slay]

7. Huge K&R

right now they rape the land and use us as slaves while they live better than kings! This HAS TO END. Tax the hell out of the fuckers!!! :mad:

[gristy]

8. 99%

If the top 1% get 99% of the income earned in the country, wouldn't it make sense that they should pay 99% of the taxes in the country?

Any yes, of course it makes sense. You make a very good and simple point.

[BzaDem]

22. The top 1% don't get 99% of the income earned in this country. The point is irrelevant.

They get around 17%.

[dsc]

9. if you earn the 10k the percent you pay in taxes is at least 7.5

and that doesn't count sales taxes which you likely pay on a goodly portion of what you earn.

[Yo_Mama]

10. Your numbers are off

In 2007 the top 1% in incomes got about 17% of the total income according to Census. We are spending far more than that, so we need to raise more in taxes than the top 1% have in total income.

Another way to look at this is to use IRS data, which never matches Census data. According to the IRS, in 2007 the top 1% reported 23% of all AGI, and paid 40% of all taxes.

In part the discrepancy is the different ways "income" is measured. In part it is just survey error - comparisons of IRS data with Census data seem to show that people remember their major sources of income but forget about minor sources. Also, people lie about their incomes because they are embarrassed.

The latest Census data now available are here:
http://www.census.gov/hhes/www/cpstables/032009/hhinc/new01_001.htm
According to Census, which tracks only up to >100K for incomes, about 20.5% of all households have income greater than 100K.

In any case, the top 1% of income earners don't have enough income to even cover the personal taxes we need. In 2007 you got into the top 1% of income earners with a bit over 500K in earnings. With about 160K of earnings you got into the top 5%.

There is another problem here as well - if you tax high earners too much overall, they'll just stop earning because their net will be higher if they have less income.

In any case and for reference, in 2007 the top 5% of income earners paid about 61% of all personal income taxes, and the top 25% of income earners paid 87% of all income earners. If you have an income of 66K that gets you into the top 25%. (AGI).

The bottom 50% (less than 32.8K) earned 12% of all income (AGI) and paid 3% of all income taxes. This is really pretty progressive as it stands.

It's important to remember that these numbers would change a great deal if you included payroll taxes such as Social Security/Medicare tax.

[JDPriestly]

12. Wealthy people argue that they pay most of the taxes, more than their share.

Are you saying that, in fact, they don't earn most of the income, therefore they don't pay most of the taxes?

Is their argument false?

I wonder if you read the post of McCamy Taylor. Here is the link.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x8857818

He discusses the significance of the so-called "jobless recovery."

In a world in which fewer and fewer people have jobs and enough income to live and to pay taxes, doesn't it seem logical that those who continue to earn will pay a larger and larger portion of the nation's taxes.

How do you propose that we fund our bloated military in a jobless economy? I propose that we will simply have to raise the taxes on the rich. When everyone who works is, compared to those who have no jobs, rich, the rich which will then be synonymous with the few still employed, will have to pay all of the taxes.

The choice is up to those who control and enjoy capital. They either find a way to employ the rest of us so that we earn enough that the portion of the money we can pay in taxes is helpful and we can contribute to keeping the government going, or they pay an increasing share of the overall tax revenue.

You are talking about an economy in which people have incomes. Right now, it is still the case that a fair number of people have jobs. But the number of employed is declining. Worse yet, incomes are declining more rapidly than prices. More and more people rely on food stamps, spending down retirement funds and taking handouts.

And yes, if the rich have 99% of the income, they should pay 99% of the taxes. And that could happen if things continue as they are going right now. Folks on Wall Street need to realize that.

The share of the tax burden that falls on the wealthy increases as other people are impoverished. That's the way it works.

[BzaDem]

17. You are missing the point.

The top 1% earn 17% of income in this country. You could tax 100% of that income, and you wouldn't even come close to raising enough revenue to fund our government.

They are not arguing they shouldn't pay 17% of the taxes. In fact, due to progressive taxation, they pay much more than 17% of the taxes. They simply don't want to pay more than the "much more than 17% of the taxes" than they are right now.

I would disagree; taxes are very low now historically and relative to the rest of the world, and their tax rate should be higher.

But the idea that we should just tax 100% of their income is silly. The top 1% threshold is around 400k/year of income. If we simply said anything above 400k/year income would be confiscated, few would start businesses. Most new businesses fail; the probability of success is relatively low. If the most anyone could ever earn from a business were capped at 400k, the expected value of the return on most investments would be negative. Rational people do not make investments when the expect to lose money.

Taxation should be progressive, and it should be suitably progressive to fund the government and a strong social safety net. But taxation does not need to be confiscatory and destroy the economy to fund the government and safety net.

[Hannah Bell]

18. "confiscatory" = lol. i'd be happy with a return to reagan 1986. 33% for the top 1% instead of 23%

[BzaDem]

19. Are you talking about marginal tax rates? Effective taxation? Or something else? n/t

[Hannah Bell]

20. i'm talking about REAL average tax rates from IRS data.

http://www.irs.gov/pub/irs-soi/05in05tr.xls

[BzaDem]

21. OK... I don't think anyone here would argue with you.

I was addressing my post at the "let's confiscate all the wealth of the top 1%" types.

[Hannah Bell]

23. which people were calling for that? i didn't see it. fact is, when you add in

money borrowed from social security & all the penny-ante nickel & dime stuff that goes to the feds, the top 1% pays even less than their advertised share.

[BzaDem]

24. This thread for one.

If the top 1% pay 99% of the taxes, one would have to confiscate all of their wealth. (It wouldn't even work, since the top 1% do not earn enough to fund the government or safety net.)

Though this thread certainly isn't the only example. One (with hundreds of supporting posts) is here:

http://demopedia.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4699816

[Hannah Bell]

28. you apparently didn't actually read beyond the headline.

[BzaDem]

30. The thread beyond the headline makes no logical sense.

It argues that the rich should be paying more of their income as taxes because they earn a higher percentage of the country's income. That would be true even in a flat tax system.

He is arguing that this implies that the top 1% should be paying 99% of the taxes. Well, this (the premise above) does not imply that the top 1% should be paying 99% of the taxes. One could logically argue that the top 1% SHOULD pay 99% of the taxes, but it has NOTHING to do with the premise of the implication.

Because the implication makes no sense, I know of no other way to interpret the post than as a policy perscription the title calls for.

[Hannah Bell]

32. it argues that the larger the share of income the top 1% has, the larger its share of taxes will be.

last line has a typo but what he meant to write was if the top 1% has 99% of the income they should pay 99% of the taxes.

if you can think of no other way to interpret it than as policy perscription (sic), then you have poor reading skills.

[BzaDem]

33. That is not what the OP is arguing downthread.

They are saying that because the top 1% earns 99% of all income above 350k, then the top 1% should pay 99% on all income above 350k.

[JDPriestly]

26. You are missing the point of my OP.

Here is what I said.

It's the money that has to be taxed, no matter who has it.

Those with the most have to pay the largest amount of tax revenue.

If the top 1% get 1% of the income earned in the country, wouldn't it make sense that they should pay 99% of the taxes in the country?

Note that I say "if" the top 1% wget 1% of the income earned in the country . . . .

That is a hypothetical. We are moving toward that hypothetical.

It is undeniable that the rich have become much richer over the past 10 and more years while the rest of us have become poorer. Yet tax rates were changed, I believe in 2003, to reduce the rate on the top marginal incomes. Thus, the wealthiest among us enjoyed a reduction in the share of the taxes that the pay leaving either a deficit or requiring the rest of us to pay more.

It's the money that should be taxed. And the more of it that you earn and enjoy, the higher your top marginal rate should be. We should all pay the same rate on the first $10,000, the same rate on the next $10,000 and the rates should increase on those who make the most money. They have to pay the taxes. The rest of us cannot.

And as fewer and fewer of us are employed, fewer and fewer of us have enough income to be taxed, the rich should and inevitably will pay a larger and larger percentage of the taxes. The argument that the wealthy present -- that they already pay such a large portion of the taxes -- is ridiculous. They have more income -- and more of it is rightfully subject to the high tax rates on marginal income. If they are so worried about balancing the budget, they will have to agree to pay higher taxes. The larger their share of the national wealthy, the higher the taxes they will and should pay.

IF the top 1% gets 100% of the income at the very top, say over $350,000 per year then they should pay 99% of their top income in taxes. That's the way it will have to work.

If they, in fact, only (!) earn 23% of the overall income in the U.S., they will have to pay very high taxes on the top portion of their income. Those without jobs and those with low incomes cannot pay more. And we cannot really cut back government services. Cutting government services will endanger the wealthy as much as the poor. Let's say you own a trucking company. Your income will decline drastically if the states in which you operate stop hiring police officers who enforce traffic and criminal laws and regulations. That's just one example. Cut this or that government program, even Social Security and Medicare and you will find that the government just has to find money somewhere else to fund the performance of the jobs or the services that were cut.

[BzaDem]

27. The title of your post is "Why the top 1% in income should pay 99% of the taxes paid in the country"

Even under a FLAT tax promoted by Steve Forbes, the wealthy would pay a larger share of the taxes as the share of their income rose.

Under a progressive tax like we have, the wealthy pay MORE in taxes than the share of the income they have.

And they aren't even complaining about that. Most do not advocate for a flat tax; they are fine with paying more as a percentage of taxes than their share of the country's income.

"The larger their share of the national wealthy, the higher the taxes they will and should pay."

Again, even under Steve Forbe's flat tax, this would be true. NO ONE argues with this -- not even Steve Forbes himself.

If you want to tax 99% of the top 1%'s income above 400k, that would EASILY decrease revenues to the government because NO ONE would take a high risk in starting a business. You would have to MASSIVELY have to GUT government services if that was the top effective marginal rate for that income level.

Tricke-down economics is voodoo economics because it is not true that lowering tax rates from (say) 39% to 35% will generate more of an incentive to take risk and therefore "pay for itself." But if you raise the top rate to 99%, this will ABSOLUTELY be true. There will be NO incentive to take risk, because the expected return on high risk investments will be negative.

The point is, no matter how much you might want to or try to tax the top 1% at 99%, you will not get any additional revenue out of it. To the contrary, you will lose massive amounts of revenue. At a certain point, the more you raise, the less revenue you will get. That point is obviously well above where we are today (which is why the supply-side, trickle-down Reagan economics is such baloney), but that point is CERTAINLY below 99%.

[JDPriestly]

34. No one would take the risk of starting a business.

What a joke. Of course people would take risks and start businesses no matter what the tax rates. They always have and always will.

The problem is not tax rates, it's whether your clients can pay.

Raise the tax rates on the rich and lower defense spending. Transfer some of the wealth and buying power back to the middle class where in was during the '50s and '60s, and you will, in the end, be able to lower tax rates not just on the rich but on everyone.

Sharing increases wealth. Hoarding, which is what the rich are doing now, decreases wealth.

Sharing increases hope, creativity and prosperity.

The wealthy in our country live in enclaves. The Clinton wedding was an example of the insensitivity of the wealthy toward the rest of the country. Shoving de la Renta gowns in the faces of millions of young women who are already married and can barely feed their children or who would like to have a child but cannot afford to risk that.

99% would not be too much to ask the Clintons to pay.

[BzaDem]

38. You have no idea what you are talking about.

Let's say for example that the probability of a business achieving profitability after 5 years is 25%. (After all, most new businesses are not around after that length of time.)

That means that for the expected return to be positive, the initial investment has to earn a greater than 400 percent return. (Why? 0 *.75 + 4I * .25 = I, the initial investment.)

So if the initial investment is say 200k, they would need an 800k return just to have a positive expected return of even one dollar.

Your 99% marginal tax rate would prevent that investment from being made, because no rational person would make an investment with a huge negative expected return.

[JDPriestly]

37. Example in point -- Pete Peterson. He knows what is right.

The income disparities have to be closed -- but he just can't part with his dear money. I am reminded of the Moliere play, L'Avare (The miser).

Ma cassette. My chere cassete.

My treasure chest. My treasure chest.

Worth reading.

But the larger question that was posed by Mr. McCurry is unavoidable: Can a man who has scored riches from an industry that has benefited from a generous, controversial tax break emerge as a credible voice in favor of broad fiscal constraint in Washington?

It is a quandary that has plagued Mr. Peterson for years. And while he supports increased taxes on the wealthy (along with broad-based benefit reductions), he remains firm in his defense of the special provision for private equity partnerships despite the view of many on Wall Street, including the billionaire investor Warren E. Buffett, that the rate is too low.

“This is a fairness argument,” said Mr. Peterson, who says that increasing the 15 percent rate for so-called carried interest, compared with ordinary tax rates of roughly double that, would force private equity companies overseas. “There are so many other partnerships, why pick on this high-growth sector?”

http://fdlaction.firedoglake.com/2010/08/02/reasonable-peterson-reasonably-suggests-reasons-to-balance-budget-on-backs-of-working-class-while-preserving-reasonable-tax-breaks-for-reasonably-affluent/

I love the argument that these folks will move overseas. Where? Where is there a government with a) courts that can and will enforce their oppressive, often adhesive contracts with each other and third parties; b) not grab all of their wealth in some political upheaval? Yes, they will move overseas at their peril.

[The Magistrate]

29. Wealth Is Everything, Sir: Income Means Very Little

Share of taxation ought to be apportioned to wealth possessed....

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

[BzaDem]

31. How do you propose that would work?

Taxation in the world is based on money changing hands. Some of it happens when people earn money (income tax). Other parts of it happens when goods are sold (sales tax). Other parts of it happen when goods are produced and sold (VAT tax in other countries).

But the point is that taxation is on money changing hands. Not money sitting around.

Inflation is considered by some a tax on wealth. If we have 2% inflation, then wealth decreases in value by 2% per year.

At low levels, this is fine. But at very high levels, you promote a cycle where everyone thinks their wealth will be worth less and less, so they buy and buy and buy. This causes more inflation, which makes money worth even less, which causes more buying. Hyperinflation results.

[The Magistrate]

36. In Ways, Sir, That Doubtless Would Seem Intrusive And Confiscatory To Those Most Affected

The reason capital is taxed on its transfer from hand to hand is tradional, rooted in the practical impossibility in the pre-modern era of determining what a man's holding were worth; it was only when someone offered a money in exchange for them, or when they transfered in probate to an heir, that a value could readily be fixed. That objection no longer really applies. In our computer age, it is quite possible to maintain minute by minute records, second by second, even, of what any person's holdings are worth. To ease out fluctuations, a tax set at a particular percentage yearly could be collected in monthly or weekly increments, so that, if a tax was six per cent per annum, say, one half of one percent might be colected at the start of each month, or one eighth of one percent at the close of each week.

If people choose to disposses themselves of wealth to avoid such a tax, they will effect no reduction in the quantity of wealth, nor affect the value of the currency; they will simply be in possession of less, while others come to be in possession of more. Inflation occrs only when their is an increase in the quantity of money in circulation, without a corresponding increase in the quantity of goods and services available to purchase with that money. It has nothing to do with increases in spending by individual persons.

[BzaDem]

40. "Inflation occrs only when their is an increase in the quantity of money in circulation."

That is not at all accurate. That is exactly what free market moneterists constantly say (not saying you are one at all), but they are wrong.

The reason is very easy to see. Inflation is a rise in prices of the goods on the Consumer Price Index. What causes a rise in prices? Higher demand and/or lower supply FOR THOSE GOODS.

Japan has doubled its money supply. Yet they are still in deflation. Why? Because an increase in the money supply does not necessarily cause an increase in demand for goods. It is simply hoarded or lent back to the government. Again -- Japan doubled the money supply, and prices did not rise one cent.

So right now, higher inflation would be a good thing. It would reduce hoarding, because the value of money drops relative to goods (so people will buy goods and part with their money).

But in a normal economy, your wealth tax could be catastrophic. If people's money rapidly shrinks in value (because of your tax), they will immediately exchange money for goods. Even without a single dollar added to the money supply, prices for goods would reflect heightened demand and skyrocket.

Your tax is essentially a tax on savings. And as they say, if you want less of something, tax it. People will save less and less and buy more and more, resulting in higher demand and higher prices.

Having a reasonably stable currency (inflation or other forms of devaluing in the low to mid single digits) is essential for having the necessary trust that is essential to a functioning economy.

[The Magistrate]

41. The Concentration Of Wealth Is Catastrophic, Sir

It ruins societies, makes destitute the mass of the people, and renders democracy a practical impossibility.

Taxing wealth would not shrink the value of money, nor the value of items people posessed.

Your idea of what constitutes wealth seems curiously limited, as indicated by saying to tax wealth is essentially to tax savings, and would reduce savings, replacing it with purchases. Wealth is capital goods, ranging from land and minerals to machinery and tools and housing stock. It is not produced by saving forty dollars from each pay-check; it is the differential between what people are payed for the value their work creates, and the actual value their work creates. It does not matter whether this is saved or spent by any particular individuall it will collect in some depository or another, controlled by someone or something, regardless.

[Hannah Bell]

15. census figures aren't good for income distribution. they basically don't survey the top 5% of the

income distribution.

irs data is better.

in 2005, the top 1% was any filer with adjusted gross income over 186K.

the top 1%'s total combined income was 21.5% of all income.

they paid 23% of it in income tax. (in 1986, they paid 33% of it in income tax).

but even though their tax rate was lower in 2005 than in 1986, the top 1% paid a larger share of total income tax in 2005:

39% v. 25% in 1986.

That's because in 1986 the top 1% only had 11% of total income.

And in 2005 the top 50% had 87% of the income, leaving the bottom half of the income distribution with 13% of the income -- enough to feed & house themselves, if that.

all the top brackets paid at lower rates than in 1986. leaving them lots of extra cash to invest in bubbles.

which is why we're in our present depression.

http://www.irs.gov/pub/irs-soi/05in05tr.xls


And that's after all the jiggerty-pokerty they do to hide some of their income from the taxman.

[ProgressiveProfessor]

11. If you don't fundamentally fix the tax code, raising rates will accomplish little

You are forgetting that the US tax code is its own worst enemy in this mess. Its massive and convoluted, chock a block full of deductions and allocations all put there by well intentioned law makers. The problem is that the law makers create all sorts of opportunities with their good intentions that they did not intended. When inheritance taxes go back in force next year, there are other tools that will be used to get around paying when the patriarch dies. Since tax avoidance is legal, I have a hard time blaming those who is better at the game than the rule writers, who are in the end the source of the problem.

The answer is clear, we need to radically simplify the US tax code and quit using it as a means of social engineering. This includes sin taxes and some of the other crap pols pull to get their pet rocks into law. Not the Steve Forbes version (which is radically recessive), but one where everyone gets to do the short form.

[JDPriestly]

13. In a world of ever increasing unemployment, in a world in which very

few have enough income to keep up on a mortgage, most of us will be using the short form. Tax reform will just happen because the employed will be considered rich, and they will have to pay all of the taxes. The rest of us will not have enough to contribute to the national treasury.

We aren't there yet, but we get closer and closer.

We have to have more jobs so that more people have decent incomes and can share the tax burden. Otherwise, the top 1% will have to pay 99% of the taxes.

People who have no money cannot create jobs.

See this McCamy Taylor post on

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x8857818

[EC]

14. Well, yeah

If they have 99% of the cash, they should pay 99% of the taxes. You can't get blood from a turnip as they say...we can't pay more..

[BzaDem]

16. .

[Sherman A1]

25. Agreed & Well Said

If we simply return to the tax rates of the Eisenhower era, perhaps the ship of state might start to right itself a bit. I would also take the cap off of SS taxes and that program improves.

[Nye Bevan]

35. Should the top 0.1% pay 99.9% of the taxes?

If not, why not?

[ThomWV]

39. What you are arguing for is, in the final analysis, a Flat Tax

It comes from the notion that we should tax the money, no matter who's hands its in.