The top 10% pay over 80% of the federal taxes in the US. This, combined with one of the highest corporate tax rates in the world means they are already paying more than their "fair share".
It would be interesting to compare these yearly figures with movement of capital between US and other international markets.
For example, how connected is this late raise in effective tax rate with the fact that US seemed (at least, from what I seen) increasingly interesting for investors compared to other markets in this period, especially with the slowing growth of China?
Could it be that when the capital flows in, US decides to get a bigger cut, but when investment is slowing down, US tries to slow the process by making capital taxes lower? The article mentions that Bush's tax cuts happenned in 2001, right in the recession and after dot-com burst, when growth stopped and investors started to pay more attention to China.
This is just a thought; I honestly don't know enough to understand if I'm right about it.
The top marginal long-term capital gains rate in 1992 was 28%. From 2003-2012 it was 15%. In 2013 it went up to 20%. I bet the difference between 20% and 28% explains the rest of the gap noted in the NYT article.
What does this translate to in terms of dollars from the 400 so called high earners? And then what portion of US overall tax revenue is from that group vs other segments? Any such data broken out like that exist?
> But today's IRS report suggests the biggest reason the super-rich paid lower tax rates over the last decade was the fact that Congress lowered taxes on the super-rich, particularly taxes on capital income.
Most of the these articles never consider state/local level income taxes. For a person in California the total top capital gain tax rate is more than 33%. This is actually the second highest in the world.
If you consider the regular income tax its even much worse, currently the combined income tax rate in California is more than 50%
I live in California. I'm not "super rich" but we earn more than $1MM/year.
For every additional dollar I earn, I only get to keep 47 cents of it, just counting _income_ taxes. In reality, only high earners pay taxes. And high-salaried people are getting screwed under Obama's war against the most productive citizens.
You're caught in the middle ground. If you were a billionaire earning hundreds of millions per year you could afford to spend 10 million a year to hire a team of experts to hide all your money in the Caymans.
It's a real mystery what that piece never explains that the biggest reason for the drop in % of income paid in taxes is just the drop (from 28% to 15%) in the top cap gains rate.
For every additional dollar I earn, I only get to keep 47 cents of it, just counting _income_ taxes.
If that were for all taxes, and the marginal rate was still better for lower incomes, I don't think that sounds so bad. Sure, we humans always want to keep more of our hard work for ourselves, but pragmatically speaking I'd be okay if my marginal rate at 7 figures (which I'm nowhere near) was 53% in exchange for the societal stability and upward mobility my taxes could enable.
While you are entitled to that opinion, I think it's really hard to say with any confidence what your attitude would be at a vastly different income level. It may be useful to frame the idea in a different way:
You sound as if you'd approve of a ~53% tax rate at an income level higher than your own, but not necessarily at your own level. For the sake of argument, if you were to work just as hard for every dollar at that level as you do now for every dollar, but simply worked that much more (so every dollar required the same amount of work), do you think you'd still be willing to only keep 47 cents of each dollar? Similarly, if you were earning 7 figures and wanted to help society / people in need, would the government really be your best choice in terms of bang for your buck?
> if you were earning 7 figures and wanted to help society / people in need, would the government really be your best choice in terms of bang for your buck?
Has anyone ever tried to make a serious attempt to analytically tackle this question? There are a lot of people that try to rank charities against each other in terms of effectiveness. Could the same be done with government? Or even some portion of government? I have absolutely no idea, but this seems like an interesting question.
I don't think so, just because the goods it provides are so numerous and muddled.
Take one example: the fact that if I sign a contract I will feel legally obligated to follow through on it. This provides tremendous social good (billions of dollars worth), but it's very hard to quantify exactly how much.
Then you have to figure out how much it costs to provide that good. Should you include the total cost of government? No, probably not, because that includes lots of other goods. But the direct cost of say the courts isn't enough because they can only function thanks to the explicit backing of law enforcement and the implicit backing of the military.
It might be useful to start with a comparative analysis for governments though. It's probably impossible to delineate and assess every good the government provides, but you can compare the cost of governance and standard of living between countries.
In such an analysis, I highly doubt the US comes out well. Personally, I am 99% sure that my donations to the Against Malaria Foundation provide more total social good per dollar than my taxes.
> Take one example: the fact that if I sign a contract I will feel legally obligated to follow through on it. This provides tremendous social good (billions of dollars worth), but it's very hard to quantify exactly how much.
It's not so clear how much of a service the government is providing there. Do you eagerly sign contracts with people you suspect would cheat you if they thought they could get away with it?
> Do you eagerly sign contracts with people you suspect would cheat you if they thought they could get away with it?
Yes, especially you include corporations as "people." Without the rule of law, I'm quite sure that corporations would find even more ways to generally break contracts and not honor their commitments.
I don't know if anyone has made a serious attempt to tackle that question, but I would also be surprised if many people genuinely believe that donating a dollar to the US federal government is better for society than donating it to any remotely competent charity.
If you're donating to specific government programs, sure, some of those are pretty similar to charities (although you can probably find a more efficient charity in nearly any area of focus). But simply donating a dollar into the funding of the US government, and having it split the same way that all US government revenue gets spent, seems to me like an obviously poor choice.
"Similarly, if you were earning 7 figures and wanted to help society / people in need, would the government really be your best choice in terms of bang for your buck?"
Under the current tax code, people already have the ability to donate up to 50% of their income to charity tax free. How many people do you know who donate 50% of their income to charity every year?
I make somewhere around ~150k and feel like people in my income bracket should pay more taxes. I absolutely have no sympathy for a household making $1M "only" keeping $0.47 of ever additional dollar.
And yes. I could write a check to the IRS, but it isn't about my $2000, it's about the cumulative revenue from taxing everyone in and above my income more.
It's an annual salary, not an isolated winning lottery ticket. Even if he doesn't currently have a super high net worth, he will soon enough unless he's spending like a lottery winner.
Maybe. I guess it depends on what you consider "super high". It'd take a few years to build up $1m from a $1m salary, and there's no guarantee the job is even kept that long.
Odds that this brand new account is getting a million cash: basically zero.
Anybody who's getting a million cash is probably getting many millions through lower-tax vehicles (e.g. equity), and over the course of a decade has a much much lower effective tax rate.
One perspective is that you are making 20x the average household income but keeping 1/2. Not too shabby. However I agree that it seems ridiculous that income is taxed so much more than capitol gains and likely provides much more positive contributions to society.
It's somewhat infuriating. People get to sit on wealth, watch it grow, and then pay less in taxes on that income than someone who is contributing to society by working for a living.
You earn $1MM per year. That means either a) you spend way too much or b) you actually would be, even at an 80% tax rate, 'super rich'. I assume you live in an area where housing is expensive? That's a luxury you're paying for.
Of course people who already have large sums of wealth should be highly taxed as well. But you cannot tell me that the state taking 50% of the income of someone who makes a million a year is too much, right?
maratd:
We live in a society where money is allocated with little regards to justice. Of course it doesn't matter what SlowComputer does. Agnostic to his occupation, the law should assist the poor by shaving a portion off the exorbitant sums SlowComputer makes yearly.
That means that someone valued my time, ability and labor enough to pay me for it. That is, the exchange took place because given the circumstance of my employer, my time, ability and labor were worth more to them than $1MM. I was just able to capture the $1MM portion.
The idea assertion 'I spend too much' absent any context is as meaningless as the assertion that 'the government spends too much.'
There are myriad ways to make obscene sums without doing anything for the world, as there are myriad ways to make an incredible impact while making relatively little.
PS: the 'spend too much' situation is the one where the poster spends $500,000 on Bengal Tigers and blow.
> I live in California. I'm not "super rich" but we earn more than $1MM/year.
> And high-salaried people are getting screwed under Obama's war against the most productive citizens.
Stop whining and blaming Obama; there's no war against productive citizens, you aren't a victim. You don't get to complain when you're among the wealthiest in the world that you don't get to keep enough money. 99.9% of the country makes less than you, have some fucking perspective and perhaps a bit of humility for gods sake.
What does it matter what the rest of the world has? If he/she earned it legally, they deserve it. You don't get to make victims out of the rest of the world.
Utter nonsense. Legal doesn't equal moral nor does it mean fair. Slavery was legal, that doesn't mean the slave owners deserved the profits from their labor (you apparently think it does). Legals means nothing more than we can't put you in jail yet.
No, we; that's what democracy is for, we evolve and over time, the law catches up as the common morality evolves. Or do you really think slave owners deserved their money because it was made legally? That was your argument, that legal means they deserve it, stand by your argument.
You earned however much the state says you've earned legally; the state makes the laws. Every cent you've made is off the back of the state and at the state's whims, so the state gets to decide how much of its money it will take back, and how much of its money you get to keep as an incentive to keep helping others. If you claim you somehow 'deserve' the millions you are making, then you also 'deserve' to get taxed. You can't have it both ways.
Yes, and some people should be ashamed of complaining in the name of decency.
> How about when you are the among the ones that took the most risk in life, the ones that worked the hardest
Ah, the just world fallacy and survivor-ship bias all in one. You didn't work the hardest or take the most risks, far more people who worked harder and took equal risks didn't get lucky.
You're promoting the false narrative that if someone does better in life it is just chance and nothing else... If you fail, it's not your fault. If you succeed, it's not really your doing.
The formula for success has more than the single variable of luck in it. Luck plays a part, but so does allot of other variables.
> You're promoting the false narrative that if someone does better in life it is just chance and nothing
That's a straw-man, I didn't say it's "just" chance and it's called a fallacy, not a narrative, and it's a fact, not false. It's a cognitive bias all humans have to attribute their success to their own efforts, and that's what's false.
Reality is those biases exist, and chance plays a far greater role in everyone's lives than most like to admit; that's a fact. The just world fallacy is a fact. Survivorship bias is a fact. These are not debatable points, they're truths and they're true regardless of opinions to the contrary.
Are you a post-tax income maximizer? (If not, what are you maximizing?)
If so, it speaks to the higher income generating power you have in California that you can be taxed more there than elsewhere and it is still the optimal result for you.
Since this individual is paying way more in taxes than the 99%, should they not have better services from the Gov? Do we not as Americans assume the more we pay for an item or service the better the product? It's only fair?
Why is this an issue with Obama? I understand he allowed a tax cut to expire that raised the top tax bracket, but it sounds like the issue you're having is more with California?
Also, productive <> those that make the most money. Having worked on Wall Street, I know an entire class of mutual fund managers that I would argue are negative value to society given that they've underperformed their index benchmark for years yet are making millions of dollars a year for their active management "service".
Seriously, the more you earn the more taxes you should pay. If you think the US is bad then look at the UK. I call BS on higher earners paying taxes in the US where the top earners also have the biggest tax loop holes. I probably pay more taxes on my 25k a year than you ever have. Yep, that is right 25k a year with a teenager, by myself. So please go on with your first world problems.
Same here, which is why I'm a proponent of market anarchism. Central planning does not have an effective price discovery mechanism, which is one reason why we've been getting much less for much more. Just look at our shitty education system or our police, which both seem to get worse and worse the more we spend on them.
Markets allow experimentation and level the playing field, whereas states ossify corporate power and centralize wealth. Not to mention, they're based on mutually beneficial transactions between consenting individuals rather than a monopoly on violence.
I'm not a Trump fan, and despite likely tax hits, his proposal of simplifying the tax code (as many have done before him), getting rid of the IRS (yes jobs lost, but really, I got a certified letter owing $0.51 and they were "too busy with this category to answer. click") would be a positive thing.
I think a pure flat tax would actually be bad for the country implemented immediately, but maybe a gradual rescinding of tax breaks (mortgage, etc -- i use said benefit) might be worth considering.
Wall Street bankers running off pure capital gains is a big problem.
The challenge of a "flat tax" is defining "income". It's not as easy as you think, and basic intuitive "fairness" will result in a lot of income being excluded. Given that today's graduated tax system results in top-earners paying lower percentages, a "flat" tax will surely be worse.
As for getting rid of the IRS, who will collect, administer, and audit the flat tax?
That's the problem, too -- it applies equally to necessities and luxuries. Sales taxes are regressive because there is a certain amount of non-discretionary spending everyone has to make, regardless of income, just to live.
Most sales tax proposals include a "universal rebate", which is a fixed monthly amount given to everyone that's intended to cover the tax on necessities.
Yachts were more expensive and due to highly elastic demand, the industry plummeted. Companies went under or laid off thousands.
But don't worry. Guess who works at yacht manufacturing plants? Not rich people. They weren't hurt, and they were fine with taking their money elsewhere.
It doesn't necessarily need to. We could have a `digit-sales tax', i.e. count the number of digits in the item cost and add a tax at that percent. Something less than $10 only has a 1% tax, while something costing $10,000 has a 5% tax.
Clearly the numbers should be adjusted if someone wants to turn this into a serious tax proposal, but it seems possible to design a progressive sales tax.
It's not quite so simple. Many non-essential things are cheap (e.g. iOS games), and many essential things are expensive (e.g. housing, transport). The line between essential and luxury is also subjective. So you have to start categorising, and things get messy.
It's a terrible idea, a sales tax taxes spending instead of earning which automatically is a huge tax cut to the wealthy who by definition spend a far smaller percentage of their income than the middle classes who basically spend it all. Taxes belong on income, not on spending; sales taxes are incredibly regressive.
And as with all things government, it's the opposite of what it's named. The fair tax is anything but fair. If you only tax spending, then the rich, who spend far less than their income, can effectively avoid taxation of most of their earnings by simply living below their means, which they do anyway because that's what being rich is. If I make a million a year but consume like someone making 100k a year, I only pay taxes on 1/10 of my income; hardly fair since the guy actually making 100k is paying taxes on 100% of his income.
A sales tax is the ultimate regressive tax. At the low end, you don't have much to save anyways (you need to eat!), so you are spending your income and getting taxed. At the high end, you can save a lot more since you make more. And you can always fly off to Hong Kong for a weekend to buy things (that is what happens today in China which has a high VAT/import tax).
No, I think you mean a true flat tax, e.g. a poll tax, is the ultimate regressive tax.
I have come to find that "regressive" moves the goalposts. It sounds as if the rich pay less. They don't pay less; they pay more. They just don't pay more when dividing taxes by their total income. I've never heard a convincing argument for why that formula is the ultimate benchmark.
And anyway, virtually all sales tax proposals have some per capita rebate/basic income, and that can be tweaked to make it as progressive as your heart desires.
Who administers, audits, and collects the flat sales tax? And who decides what counts as "sales" on which to collect this super-simple tax? I assume we would tax the sale of pencils and computers. What about houses? Stock? Haircuts? Babysitting? Will companies be asked to pay taxes on their cost-of-goods-sold (currently deductible from corporate income taxes)? Or their employee's salaries?
I don't think the GP was claiming it was more challenging. The point is making the tax flat doesn't help solve this key problem, so all you get is a less progressive system overall.
Tax "Simplification" will only happen if it's a massive giveaway to the wealthiest individuals and corporations. In any other case, it will be vigorously opposed by the most politically powerful individuals.
A wish for simplification is nice; but in reality, it simply won't happen unless it comes at the expense of people like us (the top end of the working class).
The flat tax is opposed to a progressive tax, that says that instead of having a tax rate of 15% for 100% of your income, you have a tax rate of 0% for the first $10000 of your income, 10% of the next 20000, and so on. This is something that can be calculated mentally, looked up using IRS published tables, or calculated with no effort in a 10 line script or some of the simplest Excel sheets possible.
The progressive nature of income tax is absolutely not a problem and recognizes the marginal value of money.
The problem is exemptions, etc., which a flat tax as opposed to a progressive tax does nothing to resolve.
Sure the mortgage deduction exemption is horrendous, but I think income source discrimination is a bigger issue. We have different rates for wages, long-term capital gains, bonus income. Don't even get me started on carried interest.
I'd also like to see social security contributions get uncapped. After $118k in income, your average tax rate falls until $189k. Even then, your mean tax rate will still be lower than someone earning $118k until you earn in excess of $411k.
1) Wages and bonus income aren't taxed differently.
2A) When you take into account corporate taxes, inflation, and risk the difference between tax rates on wages and cap gains aren't as big as you might think.
1) It looks like I'm mixing up the California withholding rate with the tax rate. Thanks.
2A) Granted. If I had a magical tax wand, I'd obliterate corporate taxation.
2B) It's an argument I've heard, but I'm more interested in avoiding arbitrage. My preferences might be mistaken. :)
3) If I hold the belief that we shouldn't tax income differently based on its source, Mankiw's argument doesn't have much force. His reasoning is sound, sure, but I'm not sold on the premise.
1) Yes. This is true and annoying especially if you care about short term cash flow. If you super care about this you can play games with your W4 to cut down your withholding and instead pay quarterly tax payments. Though if you screw up and underpay you'll owe penalties.
2A) Indeed I agree. Though personally I put the chance of this ever happening at precisely zero due to the political optics.
2B) The difficulty of determining what is a capital gain and what is income is, in fact, one of the biggest theoretical arguments against a zero cap gains rate.
From my perspective, corporations already pay a lower effective tax rate and have access to tax avoidance strategies that not available to the individual.
I've read the argument that eliminating the corporate tax would spur growth but that's like saying eliminating individual income tax would spur consumer spending.
If you eliminate corporate taxes then the shareholders of the corporation would make more money(1). You can then make up for the lost corporate tax revenue by taxing those shareholders more. It would be a simpler and more efficient system overall.
1. Probably also the employees would make more and the customers would pay less for products as well. This has to do with something called tax incidence.
The same incentive they have to pay you anything more than the minimum wage: the market. If there is more profit in the system how that profit gets allocated (higher wages, lower costs to customers, shareholder value) depends on the relative leverage of the various parties involved.
At the end of the day money is going to land in someone's pocket. It'll be paid out as wages and dividends. A company will spend it on equipment, vendors and consumables. When money is retained, it'll get priced into shares and will get taxed (albeit indirectly) once a shareholder realizes a gain.
Corporations are really good at playing a tax minimization shell game. Big corporations are especially good. This leads to all sorts of nonsense like laundering profits through Bermuda and parking capital outside of the US. In the end all we end up doing is compounding the advantages of size to the disadvantage of smaller corporations. Meanwhile there's the added inefficiency of churning money into tax lawyers.
My expectation is that revenues would increase if we set the corporate tax rate to zero and reallocated the burden to personal taxes.
> When you take into account corporate taxes, inflation, and risk the difference between tax rates on wages and cap gains aren't as big as you might think.
This doesn't make any sense. All of these things (with the exception of corporate taxes, which shouldn't exist) are priced into the return of the investment[1] and have nothing to do with taxation.
Why would you take risk into account for purposes of taxation? Should gambling income be taxed at a commensurately lower rate?
[1] More precisely, investments with a lower return are less desirable and their price tends to drop until the return (including risk, inflation, etc) is.
> Why would you take risk into account for purposes of taxation? Should gambling income be taxed at a commensurately lower rate?
There's actually some bizarreness in the English tax code around this. Most taxpayers are subject to a 28% levy on investment returns. Gamblers themselves aren't taxed on winnings while the house pays 15% on their profits. (The treatment of professional gamblers is a conversation for your accountant.)
If I buy an asset that only appreciates at the rate of inflation, then I end up paying taxes on what amounts to a fake gain. Even if it appreciates faster my effective tax rate is higher than the actual number used to calculate my taxes.
> If I buy an asset that only appreciates at the rate of inflation, then I end up paying taxes on what amounts to a fake gain. Even if it appreciates faster my effective tax rate is higher than the actual number used to calculate my taxes.
The same is true of getting a raise and paying higher taxes on a "fake gain" (i.e., your effective tax rate slowly rises as each boundary shifts lower in real terms). That being said, I guess my main complaint wasn't with the inflation claim but rather with the idea that the risk/return line is somehow relevant to taxation.
What you are describing is different from what I'm talking about. You are talking about how tax rates can go up over time if the brackets are not adjusted for inflation.
What I'm talking about is the fact that you can have a nominal gain that you pay taxes on that is not a real (inflation adjusted) gain at all.
These are two different problems. The first we handle by adjusting the tax brackets every year. The second we do not handle. I suppose we could, but it would be a lot more complicated.
I really liked the discussion of the Chamley-Judd model, especially in parable form.
Question though: I worry that some individuals have the ability to recharacterize their earnings as either income or gains by shifting their contracts and methods of compensation.[0] If so, then you end up with odd results. Scenario 2 (a 50% tax on wages) turns into Scenario 1 (no taxes) for that subset of the population.
Looks like a well studied topic, so I'm sure someone tackles this?
[0] Say I build machines that make widgets, and your new widget factory wants such a machine. You could hire me as an machine-building employee, I could own my own business and you could buy the machine from me, or you could give me shares of ownership in your factory. Each of these could result in the same actions and changes in wealth for all parties, but would be taxed under completely different systems. CEO compensation packages are the most transparent real world example of compensation structuring I can think of. On the other hand, Jon Ronson interviewed a woman making 1.5-3 million per year who claimed she paid 35%, that she wasn't rich enough to restructure to avoid income taxes. This was in a piece on income inequality, maybe for GQ. So maybe this is non-trivial until you start getting near the top...
Indeed if you look at the Wikipedia link I posted you'll find a section on "Avoidance of tax arbitrage between capital and labor incomes" which is exactly the problem you describe.
Incidentally, when people talk about "tax shelters" and "complicated schemes the rich use to avoid paying taxes"(1) they're mostly talking about this. Though often they don't make that as clear as they should.
It's not a terrible solution. Ideally a flat tax (which pretty much always means a lower rate than high earners pay) simplifies the tax system, and makes high earners less likely to evade taxes. However it doesn't change the fact that really high earners get a lot of their wealth from investments, so in the end they'll still pay a lower total 'rate'. The highest tax burden will still be paid by upper middle-class professionals who have a high salary but few investments.
If governments really want to collect taxes from the ultra-rich, a wealth tax is what is necessary. However that alone poses problems because 'wealth' is not always liquid - do you tax the old lady whose house has appreciated significantly but who doesn't have an income? Do you tax an entrepreneur whose firm is worth several million but hasn't actually realized any significant income?
Anyhow, just a few musings, but the summary is that taxes are hard. Too high and people evade them, too low and the government has a shortfall...
It's precisely a terrible solution. Yes, taxes are hard, but a solution that punishes the poor (or the not rich) by not recognizing the marginal utility of money is terrible in any form.
> punishes the poor by not recognizing the marginal utility of money
What does this have to do with the poor? Are you under the impression your federal tax dollars get redistributed to the poor? Government contractors aren't poor.
Do you have any idea what percentage of government proceeds are redistributed to the poor? Do not include social security. That money was taken from them to begin with.
Look up what regressive means and what marginal utility means; nothing I'm saying has anything to do with how taxes are redistributed. Flat taxes are inherently unfair, they ignore the marginal utility of money; they are regressive.
There's pretty much always a minimum amount you need to make to pay taxes, most flat tax schemes are still progressive on the low end. Very few 'flat tax' proponents want to tax the poor (not much money in it anyway).
The idea with a flat tax isn't to punish the poor, but to reduce tax evasion on the higher end, and to reduce to burden on the middle class.
Taxes should be progressive at all levels, setting a floor to exclude the poor from the unfairness doesn't make it more fair for the guy in the middle income ranges. All flat tax solutions are bad as they are all inherently unfair.
Depends what your definition of 'fair' is. Conservatives think it's 'fair' that everyone pays the same rate. Progressives think it's 'fair' that everyone pays what they can afford.
'Fair' depends strongly upon one's beliefs, and can't be objectively defined.
> Conservatives think it's 'fair' that everyone pays the same rate.
Which is a position completely ignorant of the marginal utility of money. No, it isn't fair that for one guy 10% could be the difference between getting by and not getting by while for the other guy 10% means no change to his lifestyle all.
No, progressives think it's fair that the burden is felt equally and that requires understanding how money works.
> 'Fair' depends strongly upon one's beliefs, and can't be objectively defined.
Fair does depend on beliefs, but some people's beliefs are objectively stupid. Anyone who denies the marginal utility of money and insists a flat percentage is fair, doesn't understand money and doesn't belong in the conversation just as anyone who believes vaccines cause autism is objective stupid and doesn't belong in that conversation. Everyone has opinions, that doesn't make them equal.
Some people also thought "From each according to his ability, to each according to his needs" was fair. Most seemingly disagreed, given how history has unfolded.
For the record, I agree with Piketty, Marx, and others of that particular persuasion. I'm all for progressive taxation, wealth and inheritance tax, all of it. But I'm also not ignorant of history...
Nor are you what? I said I agree with Piketty and Marx.
Anyhow, the example was just rhetoric. The point is that communism started because people thought it was unfair that there was a rentier class who essentially monopolized wealth because they had inherited wealth. And communism fell because people thought it was unfair that people who were lazy made the same as people who worked hard.
Studies have shown that most people in western societies prefer inequality as long as someone has less than them. They think inequality is 'fair'. Why do you think people value celebrities and rich people? People are happy with our 'lottery' system, where anyone can become rich, even if the majority don't, and even if the average struggles...
And we're back to communism again. This thread has nothing to do with communism. That you keep going there shows you can't have a serious conversation; goodbye.
Socialism, the labour movement, and communism all come from the same place.
It's funny, you're arguing for progressive taxation, but you don't understand the history behind labour movements, equal rights, welfare, socialism, etc... Or why communism is relevant in a discussion about rational choice, inequality and perceived fairness.
I do get it though - Americans have been taught to hate communism, and thus have purged an entire century of socialist philosophy from their collective thoughts.
> Socialism, the labour movement, and communism all come from the same place.
That doesn't make them all equivalent.
> It's funny, you're arguing for progressive taxation, but you don't understand the history
Yes I do, put your phony superiority aside, there's no place for it here.
Communism is not relevant just because we're talking about progressive taxation and that you think is simply shows you're too biased to have an intelligent conversation.
> I do get it though - Americans have been taught to hate communism, and thus have purged an entire century of socialist philosophy from their collective thoughts.
Then you don't get it, because that's not what's happening here. What's happening here is you think you're smarter than you are when you're not even able to engage intelligently in the conversation. A conversation about the fairness of progressive taxation does not have to devolve into a conversation about communism or socialism.
You're taking it there because you have nothing more intelligent to offer. You have no thoughts of your own to offer other than regurgitating what you think you remember from history while pretending no one else is aware of history. Your arrogance is sickening. You're a kid, still in college, and you're acting like no one else has heard of history, grow up and learn to engage like an adult. Have some thoughts of your own. No one is here for a history lesson from a kid who screams communism and socialism every time tax policy is brought up.
> A conversation about the fairness of progressive taxation does not have to devolve into a conversation about communism or socialism.
Comparing different schools of economic thought absolutely relates to a discussion about rational choice and fairness.
> Communism is not relevant just because we're talking about progressive taxation and that you think is simply shows you're too biased to have an intelligent conversation.
Too biased? In what direction? Have you even been able to ascertain what my position is?
> Your arrogance is sickening. You're a kid, still in college, and you're acting like no one else has heard of history, grow up and learn to engage like an adult. Have some thoughts of your own.
Do you know me? Yet you decide to attack me. Here's a few fun facts about me: I'm not a kid, I'm 30 and have been married for 4 years, have already had a successful career and am changing pace for awhile, and I'm in university because I want to be.
What I know about you - most of your replies in this thread have been one or two liners about progressiveness, with the words 'marginal utility' occasionally thrown in.
> No one is here for a history lesson from a kid who screams communism and socialism every time tax policy is brought up.
Again, just 1 question: What do you think my opinion on taxes is?
You started off your replies by implying progressives are communists with this little nugget
> Progressives think it's 'fair' that everyone pays what they can afford.
Which is not what progressives believe, and then you went full on communist with this little nugget
> Some people also thought "From each according to his ability, to each according to his needs" was fair.
And then you started pretending only you knew history.
I don't care what you position is, I'm replying to what you say, not what you think; I can't read your mind, only what you write.
> Do you know me? Yet you decide to attack me.
I don't have to know you to tell you you're behaving arrogantly, and I haven't attacked you, if you think I have, you don't know what attack means. I've criticized your bad behavior, nothing more.
> I'm not a kid, I'm 30
Still a kid to me bub.
> Again, just 1 question: What do you think my opinion on taxes is?
I know what your position is, you stated it
> I'm all for progressive taxation, wealth and inheritance tax, all of it. But I'm also not ignorant of history...
But that's not what we're talking about anymore because you can't stop being arrogant and have derailed any conversation to the point that I no longer care what you think. "But I'm also not ignorant of history", please, grow up, your superiority complex is disgusting.
The personal attacks in your comments are completely out of line. If you don't stop doing this I'm going to have to ban you, which I would hate, because we've both been around here for years and I've enjoyed your HN comments (especially about Smalltalk) since long before I became a moderator.
But you've been breaking the HN guidelines over and over again, and I've asked you to stop many times. You need to stop categorically if you want to keep commenting here. These rules apply to everyone, and it wouldn't be fair to other users to let you get away with it.
Well I'll stop this thread, though I don't agree I've attacked him at all; I've done no such thing and while I'll respect your wish to stop, you're wrong to claim I've attacked anyone as no such thing happened. If fact please point me at the guideline you're accusing me of breaking because I just reviewed them and I don't see anything that violates them; I am being civil and saying exactly what I would say to him in person. Pointing out bad behavior like arrogance and superiority is not a personal attack on the person, it's addressing the person's behavior.
While it's true that fair is hard to define objectively progressive tax rates are easy to support from quite a few underlying premises:
1) utility maximization
2) Rawlsian justice
3) fee for service model based on benefits received from government
It's actually pretty hard to justify a flat tax from most underlying axioms. I think you'd actually have an easier time justifying a flat fee where everyone pays the same $ value regardless of income.
I also contest your assertion that "Conservatives think it's 'fair' that everyone pays the same rate." While that might be true for some conservatives, political support for progressive tax rates go much beyond Democrats.
> Regressive taxes are inherently economically destructive.
The current system, in practice, is progressive up to the upper middle class, and regressive after that.
Flat tax rates aren't about taxing the poor (you can still build in income exemptions and most flat tax schemes do), but reducing tax evasion by the rich...
1) That isn't how regressive taxes work. Stating its regressive on rich ppl is simply a failure to understand what the word means in context of taxation.
2) The proponents of flat tax schemes frequently set the exemptions low enough to raise the tax burden on the poor.
The problem with the flat tax is it doesn't address the problem. What makes the tax code complicated is determining exactly what constitutes taxable income. Dealing with different tax brackets is simply a matter of looking a number up in a table.
I know this is about US taxes only, ( And i am not from US ). But shouldn't mortgage reduction only be acceptable if you have one property only? If you have multiple property, then you are basically accumulating asset over a long period of time.
The biggest difference moving to a flat tax system can make is that you can shift income tax collection from the payee to the payer.
Under a progressive system, Company A paying you $10,000 and Company B paying you $10,000 results in a different tax rate so neither company knows how much tax you owe. Under flat tax, Company A can just take $1500 out of your earnings before it gets to you, regardless of any arrangements you have with other payers. Since there are far fewer companies than employees, this makes tax enforcement significantly easier and evasion much less likely. Ordinary citizens now no longer have to deal with the IRS and tax is handled transparently.
Every flat tax proposal also tends to come with a negative income tax component to make up for the regressivity. The NIT essentially becomes a basic income like social safety net to make up for the loss of progressivity. And since it involves the govt giving you money rather than you giving the govt money, compliance will naturally be much higher.
I have a problem when people call tax burdens fair. There are so many ways to define fair its rediculous and has no solid meaning.
Also, on that note, its not logically possible to tax a business alone. Any tax a business pays must by necessity be passed on to consumers, else the company goes out of business. You can get around it by only taxing profits, but then you open the giant loophole of all value that's not profits, like capital, income, tax free expenses, etc. There is no "fair" way to do that makes everyone happier.
> I have a problem when people call tax burdens fair.
Well I have a problem with people who think fair doesn't matter.
> There are so many ways to define fair its rediculous and has no solid meaning.
Fair is like porn, it's hard to define, but everyone knows when they see it. It's genetic, even monkeys have a sense of fairness and refuse to cooperate when they're being treated unfairly. If that's not enough meaning for you, look harder.
> There is no "fair" way to do that makes everyone happier.
Sure there, look up the veil of ignorance; people think more fairly when they don't know which side of the equation they'll come out on.
Obama also wanted to reduce income tax filing to a single-page affair. Almost all such proposals along these lines founder on the rocks of legislative buy-in. Given Trump's penchant for denouncing other people as idiots and worse, even if he were to be elected I'm skeptical about his ability to get anything substantial done. Sure, some in congress would be intimidated or enthused into working with him, but others would conclude that he would be in place for 8 years at most, whereas government projects and finances typically involve much longer time horizons. I seriously doubt anyone trusts Trump to supervise a rewrite of the Constitution.
A flat tax is a bad idea. A progressive tax without deductions might work, but a flat tax would just be a huge tax increase overnight for 90% of Americans.
> It showed that the effective tax rate paid by those Americans jumped in 2013 to nearly 23 percent.
As a data point, my family paid 28% average federal tax, on AGI of $355k. We are California residents. Taxes are regressive on the higher incomes, and that doesn't seem right.
Some had argued that allowing taxes to rise would lead to an epidemic of capital flight, but this has failed to take place in the two years since tax rates went up. While I'm not hopeful, it would be nice if economic debates in the coming election year were firmly grounded in empirical evidence. With the increased computer power at our disposal it should be easier to model the impact of policy changes on wealth distribution, economic activity and so on.
Yes those arguments often turn out to be false. In California, we had an income tax increase on the "job creators" that many argued would cause the affluent to leave the state, and an "Amazon Tax" that many argued would reduce jobs in the state. Those predictions couldn't have been more at odds with the eventual reality.
183 comments
[ 4.4 ms ] story [ 238 ms ] threadFor example, how connected is this late raise in effective tax rate with the fact that US seemed (at least, from what I seen) increasingly interesting for investors compared to other markets in this period, especially with the slowing growth of China?
Could it be that when the capital flows in, US decides to get a bigger cut, but when investment is slowing down, US tries to slow the process by making capital taxes lower? The article mentions that Bush's tax cuts happenned in 2001, right in the recession and after dot-com burst, when growth stopped and investors started to pay more attention to China.
This is just a thought; I honestly don't know enough to understand if I'm right about it.
> But today's IRS report suggests the biggest reason the super-rich paid lower tax rates over the last decade was the fact that Congress lowered taxes on the super-rich, particularly taxes on capital income.
If you consider the regular income tax its even much worse, currently the combined income tax rate in California is more than 50%
For every additional dollar I earn, I only get to keep 47 cents of it, just counting _income_ taxes. In reality, only high earners pay taxes. And high-salaried people are getting screwed under Obama's war against the most productive citizens.
http://www.nytimes.com/2015/12/30/business/economy/for-the-w...
If that were for all taxes, and the marginal rate was still better for lower incomes, I don't think that sounds so bad. Sure, we humans always want to keep more of our hard work for ourselves, but pragmatically speaking I'd be okay if my marginal rate at 7 figures (which I'm nowhere near) was 53% in exchange for the societal stability and upward mobility my taxes could enable.
You sound as if you'd approve of a ~53% tax rate at an income level higher than your own, but not necessarily at your own level. For the sake of argument, if you were to work just as hard for every dollar at that level as you do now for every dollar, but simply worked that much more (so every dollar required the same amount of work), do you think you'd still be willing to only keep 47 cents of each dollar? Similarly, if you were earning 7 figures and wanted to help society / people in need, would the government really be your best choice in terms of bang for your buck?
Has anyone ever tried to make a serious attempt to analytically tackle this question? There are a lot of people that try to rank charities against each other in terms of effectiveness. Could the same be done with government? Or even some portion of government? I have absolutely no idea, but this seems like an interesting question.
I don't think so, just because the goods it provides are so numerous and muddled.
Take one example: the fact that if I sign a contract I will feel legally obligated to follow through on it. This provides tremendous social good (billions of dollars worth), but it's very hard to quantify exactly how much.
Then you have to figure out how much it costs to provide that good. Should you include the total cost of government? No, probably not, because that includes lots of other goods. But the direct cost of say the courts isn't enough because they can only function thanks to the explicit backing of law enforcement and the implicit backing of the military.
It might be useful to start with a comparative analysis for governments though. It's probably impossible to delineate and assess every good the government provides, but you can compare the cost of governance and standard of living between countries.
In such an analysis, I highly doubt the US comes out well. Personally, I am 99% sure that my donations to the Against Malaria Foundation provide more total social good per dollar than my taxes.
It's not so clear how much of a service the government is providing there. Do you eagerly sign contracts with people you suspect would cheat you if they thought they could get away with it?
Yes, especially you include corporations as "people." Without the rule of law, I'm quite sure that corporations would find even more ways to generally break contracts and not honor their commitments.
If you're donating to specific government programs, sure, some of those are pretty similar to charities (although you can probably find a more efficient charity in nearly any area of focus). But simply donating a dollar into the funding of the US government, and having it split the same way that all US government revenue gets spent, seems to me like an obviously poor choice.
Under the current tax code, people already have the ability to donate up to 50% of their income to charity tax free. How many people do you know who donate 50% of their income to charity every year?
And yes. I could write a check to the IRS, but it isn't about my $2000, it's about the cumulative revenue from taxing everyone in and above my income more.
Annual Income: 1,000,000
Your percentile is: 99.9%
Anybody who's getting a million cash is probably getting many millions through lower-tax vehicles (e.g. equity), and over the course of a decade has a much much lower effective tax rate.
What do you mean by this?
Of course people who already have large sums of wealth should be highly taxed as well. But you cannot tell me that the state taking 50% of the income of someone who makes a million a year is too much, right?
Edit: downvote storm! When did HN become /pol/?
2) You have no idea what I do.
That means that someone valued my time, ability and labor enough to pay me for it. That is, the exchange took place because given the circumstance of my employer, my time, ability and labor were worth more to them than $1MM. I was just able to capture the $1MM portion.
The idea assertion 'I spend too much' absent any context is as meaningless as the assertion that 'the government spends too much.'
PS: the 'spend too much' situation is the one where the poster spends $500,000 on Bengal Tigers and blow.
Yikes. So scratch the 'absent any context'. Context was there I missed it.
Stop whining and blaming Obama; there's no war against productive citizens, you aren't a victim. You don't get to complain when you're among the wealthiest in the world that you don't get to keep enough money. 99.9% of the country makes less than you, have some fucking perspective and perhaps a bit of humility for gods sake.
Utter nonsense. Legal doesn't equal moral nor does it mean fair. Slavery was legal, that doesn't mean the slave owners deserved the profits from their labor (you apparently think it does). Legals means nothing more than we can't put you in jail yet.
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newswelcome.html
Everyone gets to complain, you don't have a monopoly on it.
> when you're among the wealthiest...
Not everyone that is wealthy won the lotto. Some people actually worked for it (took risks, worked harder, etc).
> How about when you are the among the ones that took the most risk in life, the ones that worked the hardest
Ah, the just world fallacy and survivor-ship bias all in one. You didn't work the hardest or take the most risks, far more people who worked harder and took equal risks didn't get lucky.
The formula for success has more than the single variable of luck in it. Luck plays a part, but so does allot of other variables.
That's a straw-man, I didn't say it's "just" chance and it's called a fallacy, not a narrative, and it's a fact, not false. It's a cognitive bias all humans have to attribute their success to their own efforts, and that's what's false.
You say that as if that's a problem.
If so, it speaks to the higher income generating power you have in California that you can be taxed more there than elsewhere and it is still the optimal result for you.
Also, productive <> those that make the most money. Having worked on Wall Street, I know an entire class of mutual fund managers that I would argue are negative value to society given that they've underperformed their index benchmark for years yet are making millions of dollars a year for their active management "service".
Markets allow experimentation and level the playing field, whereas states ossify corporate power and centralize wealth. Not to mention, they're based on mutually beneficial transactions between consenting individuals rather than a monopoly on violence.
One short summary of his proposal -- http://www.thepoliticalinsider.com/donald-trump-unveils-his-...
I think a pure flat tax would actually be bad for the country implemented immediately, but maybe a gradual rescinding of tax breaks (mortgage, etc -- i use said benefit) might be worth considering.
Wall Street bankers running off pure capital gains is a big problem.
As for getting rid of the IRS, who will collect, administer, and audit the flat tax?
Yachts were more expensive and due to highly elastic demand, the industry plummeted. Companies went under or laid off thousands.
But don't worry. Guess who works at yacht manufacturing plants? Not rich people. They weren't hurt, and they were fine with taking their money elsewhere.
However, if I misunderstood and you advocate having the same tax rate on luxury goods as other goods, then we are in agreement on this point.
Clearly the numbers should be adjusted if someone wants to turn this into a serious tax proposal, but it seems possible to design a progressive sales tax.
[1] http://www.pressofatlanticcity.com/business/new-jersey-cuts-...
https://en.wikipedia.org/wiki/FairTax#Monthly_tax_rebate
I have come to find that "regressive" moves the goalposts. It sounds as if the rich pay less. They don't pay less; they pay more. They just don't pay more when dividing taxes by their total income. I've never heard a convincing argument for why that formula is the ultimate benchmark.
And anyway, virtually all sales tax proposals have some per capita rebate/basic income, and that can be tweaked to make it as progressive as your heart desires.
Yes.
I'm not sure if you're aware, but sales tax is already ubiquitous in the US.
The taxable entities are far fewer than income tax, making for less administrative overhead. Tax evasion rates also lower.
Of course there are tricky questions, but they're already being answered, IMO better than the personal income quagmire.
Having both today is a complicated tax structure (corporate taxes and sales taxes). Between the two, sales tax is the simplest choice.
A wish for simplification is nice; but in reality, it simply won't happen unless it comes at the expense of people like us (the top end of the working class).
The flat tax is opposed to a progressive tax, that says that instead of having a tax rate of 15% for 100% of your income, you have a tax rate of 0% for the first $10000 of your income, 10% of the next 20000, and so on. This is something that can be calculated mentally, looked up using IRS published tables, or calculated with no effort in a 10 line script or some of the simplest Excel sheets possible.
The progressive nature of income tax is absolutely not a problem and recognizes the marginal value of money.
The problem is exemptions, etc., which a flat tax as opposed to a progressive tax does nothing to resolve.
I'd also like to see social security contributions get uncapped. After $118k in income, your average tax rate falls until $189k. Even then, your mean tax rate will still be lower than someone earning $118k until you earn in excess of $411k.
2A) When you take into account corporate taxes, inflation, and risk the difference between tax rates on wages and cap gains aren't as big as you might think.
2B) Many economists argue that there should be no capital gains taxes at all as they create a distortion between consumption and saving behavior. https://en.wikipedia.org/wiki/Optimal_capital_income_taxatio... is as good of a place to start as any on this discussion. I also like http://www.thebigquestions.com/2010/01/27/a-quick-economics-... if you prefer things in parable form.
3) With respect to carried interest I generally agree with you but this piece will make some people question their opinions on the matter:
http://www.nytimes.com/2012/03/04/business/capital-gains-vs-...
2A) Granted. If I had a magical tax wand, I'd obliterate corporate taxation.
2B) It's an argument I've heard, but I'm more interested in avoiding arbitrage. My preferences might be mistaken. :)
3) If I hold the belief that we shouldn't tax income differently based on its source, Mankiw's argument doesn't have much force. His reasoning is sound, sure, but I'm not sold on the premise.
2A) Indeed I agree. Though personally I put the chance of this ever happening at precisely zero due to the political optics.
2B) The difficulty of determining what is a capital gain and what is income is, in fact, one of the biggest theoretical arguments against a zero cap gains rate.
From my perspective, corporations already pay a lower effective tax rate and have access to tax avoidance strategies that not available to the individual.
I've read the argument that eliminating the corporate tax would spur growth but that's like saying eliminating individual income tax would spur consumer spending.
I'm not sure I see that happening.
1. Probably also the employees would make more and the customers would pay less for products as well. This has to do with something called tax incidence.
But naively speaking, what's the incentive for a corporation to increase employee pay in this scenario rather than just maximize shareholder value?
At the end of the day money is going to land in someone's pocket. It'll be paid out as wages and dividends. A company will spend it on equipment, vendors and consumables. When money is retained, it'll get priced into shares and will get taxed (albeit indirectly) once a shareholder realizes a gain.
Corporations are really good at playing a tax minimization shell game. Big corporations are especially good. This leads to all sorts of nonsense like laundering profits through Bermuda and parking capital outside of the US. In the end all we end up doing is compounding the advantages of size to the disadvantage of smaller corporations. Meanwhile there's the added inefficiency of churning money into tax lawyers.
My expectation is that revenues would increase if we set the corporate tax rate to zero and reallocated the burden to personal taxes.
This doesn't make any sense. All of these things (with the exception of corporate taxes, which shouldn't exist) are priced into the return of the investment[1] and have nothing to do with taxation.
Why would you take risk into account for purposes of taxation? Should gambling income be taxed at a commensurately lower rate?
[1] More precisely, investments with a lower return are less desirable and their price tends to drop until the return (including risk, inflation, etc) is.
There's actually some bizarreness in the English tax code around this. Most taxpayers are subject to a 28% levy on investment returns. Gamblers themselves aren't taxed on winnings while the house pays 15% on their profits. (The treatment of professional gamblers is a conversation for your accountant.)
The same is true of getting a raise and paying higher taxes on a "fake gain" (i.e., your effective tax rate slowly rises as each boundary shifts lower in real terms). That being said, I guess my main complaint wasn't with the inflation claim but rather with the idea that the risk/return line is somehow relevant to taxation.
What I'm talking about is the fact that you can have a nominal gain that you pay taxes on that is not a real (inflation adjusted) gain at all.
These are two different problems. The first we handle by adjusting the tax brackets every year. The second we do not handle. I suppose we could, but it would be a lot more complicated.
Question though: I worry that some individuals have the ability to recharacterize their earnings as either income or gains by shifting their contracts and methods of compensation.[0] If so, then you end up with odd results. Scenario 2 (a 50% tax on wages) turns into Scenario 1 (no taxes) for that subset of the population.
Looks like a well studied topic, so I'm sure someone tackles this?
[0] Say I build machines that make widgets, and your new widget factory wants such a machine. You could hire me as an machine-building employee, I could own my own business and you could buy the machine from me, or you could give me shares of ownership in your factory. Each of these could result in the same actions and changes in wealth for all parties, but would be taxed under completely different systems. CEO compensation packages are the most transparent real world example of compensation structuring I can think of. On the other hand, Jon Ronson interviewed a woman making 1.5-3 million per year who claimed she paid 35%, that she wasn't rich enough to restructure to avoid income taxes. This was in a piece on income inequality, maybe for GQ. So maybe this is non-trivial until you start getting near the top...
Incidentally, when people talk about "tax shelters" and "complicated schemes the rich use to avoid paying taxes"(1) they're mostly talking about this. Though often they don't make that as clear as they should.
1. http://www.nytimes.com/2015/12/30/business/economy/for-the-w...
If governments really want to collect taxes from the ultra-rich, a wealth tax is what is necessary. However that alone poses problems because 'wealth' is not always liquid - do you tax the old lady whose house has appreciated significantly but who doesn't have an income? Do you tax an entrepreneur whose firm is worth several million but hasn't actually realized any significant income?
Anyhow, just a few musings, but the summary is that taxes are hard. Too high and people evade them, too low and the government has a shortfall...
It's precisely a terrible solution. Yes, taxes are hard, but a solution that punishes the poor (or the not rich) by not recognizing the marginal utility of money is terrible in any form.
What does this have to do with the poor? Are you under the impression your federal tax dollars get redistributed to the poor? Government contractors aren't poor.
Do you have any idea what percentage of government proceeds are redistributed to the poor? Do not include social security. That money was taken from them to begin with.
Look up what regressive means and what marginal utility means; nothing I'm saying has anything to do with how taxes are redistributed. Flat taxes are inherently unfair, they ignore the marginal utility of money; they are regressive.
The idea with a flat tax isn't to punish the poor, but to reduce tax evasion on the higher end, and to reduce to burden on the middle class.
'Fair' depends strongly upon one's beliefs, and can't be objectively defined.
Which is a position completely ignorant of the marginal utility of money. No, it isn't fair that for one guy 10% could be the difference between getting by and not getting by while for the other guy 10% means no change to his lifestyle all.
No, progressives think it's fair that the burden is felt equally and that requires understanding how money works.
> 'Fair' depends strongly upon one's beliefs, and can't be objectively defined.
Fair does depend on beliefs, but some people's beliefs are objectively stupid. Anyone who denies the marginal utility of money and insists a flat percentage is fair, doesn't understand money and doesn't belong in the conversation just as anyone who believes vaccines cause autism is objective stupid and doesn't belong in that conversation. Everyone has opinions, that doesn't make them equal.
For the record, I agree with Piketty, Marx, and others of that particular persuasion. I'm all for progressive taxation, wealth and inheritance tax, all of it. But I'm also not ignorant of history...
Anyhow, the example was just rhetoric. The point is that communism started because people thought it was unfair that there was a rentier class who essentially monopolized wealth because they had inherited wealth. And communism fell because people thought it was unfair that people who were lazy made the same as people who worked hard.
Studies have shown that most people in western societies prefer inequality as long as someone has less than them. They think inequality is 'fair'. Why do you think people value celebrities and rich people? People are happy with our 'lottery' system, where anyone can become rich, even if the majority don't, and even if the average struggles...
It's funny, you're arguing for progressive taxation, but you don't understand the history behind labour movements, equal rights, welfare, socialism, etc... Or why communism is relevant in a discussion about rational choice, inequality and perceived fairness.
I do get it though - Americans have been taught to hate communism, and thus have purged an entire century of socialist philosophy from their collective thoughts.
That doesn't make them all equivalent.
> It's funny, you're arguing for progressive taxation, but you don't understand the history
Yes I do, put your phony superiority aside, there's no place for it here.
Communism is not relevant just because we're talking about progressive taxation and that you think is simply shows you're too biased to have an intelligent conversation.
> I do get it though - Americans have been taught to hate communism, and thus have purged an entire century of socialist philosophy from their collective thoughts.
Then you don't get it, because that's not what's happening here. What's happening here is you think you're smarter than you are when you're not even able to engage intelligently in the conversation. A conversation about the fairness of progressive taxation does not have to devolve into a conversation about communism or socialism.
You're taking it there because you have nothing more intelligent to offer. You have no thoughts of your own to offer other than regurgitating what you think you remember from history while pretending no one else is aware of history. Your arrogance is sickening. You're a kid, still in college, and you're acting like no one else has heard of history, grow up and learn to engage like an adult. Have some thoughts of your own. No one is here for a history lesson from a kid who screams communism and socialism every time tax policy is brought up.
Comparing different schools of economic thought absolutely relates to a discussion about rational choice and fairness.
> Communism is not relevant just because we're talking about progressive taxation and that you think is simply shows you're too biased to have an intelligent conversation.
Too biased? In what direction? Have you even been able to ascertain what my position is?
> Your arrogance is sickening. You're a kid, still in college, and you're acting like no one else has heard of history, grow up and learn to engage like an adult. Have some thoughts of your own.
Do you know me? Yet you decide to attack me. Here's a few fun facts about me: I'm not a kid, I'm 30 and have been married for 4 years, have already had a successful career and am changing pace for awhile, and I'm in university because I want to be.
What I know about you - most of your replies in this thread have been one or two liners about progressiveness, with the words 'marginal utility' occasionally thrown in.
> No one is here for a history lesson from a kid who screams communism and socialism every time tax policy is brought up.
Again, just 1 question: What do you think my opinion on taxes is?
> Progressives think it's 'fair' that everyone pays what they can afford.
Which is not what progressives believe, and then you went full on communist with this little nugget
> Some people also thought "From each according to his ability, to each according to his needs" was fair.
And then you started pretending only you knew history.
I don't care what you position is, I'm replying to what you say, not what you think; I can't read your mind, only what you write.
> Do you know me? Yet you decide to attack me.
I don't have to know you to tell you you're behaving arrogantly, and I haven't attacked you, if you think I have, you don't know what attack means. I've criticized your bad behavior, nothing more.
> I'm not a kid, I'm 30
Still a kid to me bub.
> Again, just 1 question: What do you think my opinion on taxes is?
I know what your position is, you stated it
> I'm all for progressive taxation, wealth and inheritance tax, all of it. But I'm also not ignorant of history...
But that's not what we're talking about anymore because you can't stop being arrogant and have derailed any conversation to the point that I no longer care what you think. "But I'm also not ignorant of history", please, grow up, your superiority complex is disgusting.
But you've been breaking the HN guidelines over and over again, and I've asked you to stop many times. You need to stop categorically if you want to keep commenting here. These rules apply to everyone, and it wouldn't be fair to other users to let you get away with it.
I'd be happy to try to clarify this if you want to discuss it further, but hn@ycombinator.com would be better than here.
1) utility maximization 2) Rawlsian justice 3) fee for service model based on benefits received from government
It's actually pretty hard to justify a flat tax from most underlying axioms. I think you'd actually have an easier time justifying a flat fee where everyone pays the same $ value regardless of income.
I also contest your assertion that "Conservatives think it's 'fair' that everyone pays the same rate." While that might be true for some conservatives, political support for progressive tax rates go much beyond Democrats.
Are you proposing replacing the tax bracket system with an algebraic equation?
I wonder if that would be more or less confusing. I guess if you just showed people "this is what the tax curve looks like", it would be obvious that:
1) They need to use a calculator or look up in the tax table.
2) You don't actually lose money when your income goes from $37,449 to $37,451.
I'm sorry but its just a terrible idea.
You can get a 0 deductions system with a progressive tax system too, it isn't some magical property of a flat tax.
The current system, in practice, is progressive up to the upper middle class, and regressive after that.
Flat tax rates aren't about taxing the poor (you can still build in income exemptions and most flat tax schemes do), but reducing tax evasion by the rich...
2) The proponents of flat tax schemes frequently set the exemptions low enough to raise the tax burden on the poor.
https://www.irs.gov/publications/p936/ar02.html
Under a progressive system, Company A paying you $10,000 and Company B paying you $10,000 results in a different tax rate so neither company knows how much tax you owe. Under flat tax, Company A can just take $1500 out of your earnings before it gets to you, regardless of any arrangements you have with other payers. Since there are far fewer companies than employees, this makes tax enforcement significantly easier and evasion much less likely. Ordinary citizens now no longer have to deal with the IRS and tax is handled transparently.
Every flat tax proposal also tends to come with a negative income tax component to make up for the regressivity. The NIT essentially becomes a basic income like social safety net to make up for the loss of progressivity. And since it involves the govt giving you money rather than you giving the govt money, compliance will naturally be much higher.
It would be bad in any form, it's regressive; marginal utility and all that, taxes should be progressive or they're not a fair burden.
Also, on that note, its not logically possible to tax a business alone. Any tax a business pays must by necessity be passed on to consumers, else the company goes out of business. You can get around it by only taxing profits, but then you open the giant loophole of all value that's not profits, like capital, income, tax free expenses, etc. There is no "fair" way to do that makes everyone happier.
Well I have a problem with people who think fair doesn't matter.
> There are so many ways to define fair its rediculous and has no solid meaning.
Fair is like porn, it's hard to define, but everyone knows when they see it. It's genetic, even monkeys have a sense of fairness and refuse to cooperate when they're being treated unfairly. If that's not enough meaning for you, look harder.
> There is no "fair" way to do that makes everyone happier.
Sure there, look up the veil of ignorance; people think more fairly when they don't know which side of the equation they'll come out on.
As a data point, my family paid 28% average federal tax, on AGI of $355k. We are California residents. Taxes are regressive on the higher incomes, and that doesn't seem right.
You made the mistake of earning that money by working. I am making the same mistake.
If you factor in sales taxes, property taxes, state income taxes, etc. I'm pretty sure you're giving half of what you earn to the government.