I am really tired of seeing sensationalist headlines like these. The top 1% of income earners earn an absolutely massive portion of all income in the state, but only pay 45% of taxes. We should be asking if that's enough, not implying that the wealthy are somehow propping up the state's finances when inequality is accelerating every year.
Only pay 45% of the taxes? What do you want?? Should they pay 70% of the taxes??? At which point will you be happy precisely???? 90%?????
When the top 1% pays for about 50% of the infrastructure, it is time for them to think about seceding. I mean, the top 50% move together, poof they can have something like half of what is provided by the state, without the 99% bothering them anymore.
I think he meant that if the top 1% has 99% of the wealth, we should expect them to pay 99% of the taxes. However, that wealth is not just income, so the argument is not quite correct.
This is a democracy, so how much ones owes in taxes is decided by the people. As far as seceding is concerned, good luck with that.
It is a surprisingly common fallacy to believe that income is generated in a way that is not deeply coupled to the system in which it was generated. This is just muddy thinking if you are talking about the "1%" or your own IRS bill.
I think that the comment you were responding to was suggesting that the tax load should be directly proportional to the income fraction, which I suppose you could make a cogent argument of.
Yup. As one of my economics professors likes to say (paraphrasing): There is no 'natural' equilibrium. The economy develops based on the set of laws already in place. People earn money based on the 'system' already in place.
So the idea of 'fairness' is already an artificial construct. It's far easier to make a billion in a society like the US, than say, Vietnam, or Argentina, or Romania. So in a very real way, US billionaires do 'owe' something to the system that allowed them to attain that wealth in the first place (and that 'something' is pretty much 'everything'). If wealth could be attained completely independently of the 'system', then the distribution of billionaires would be completely different than it is right now.
Someone's been vigorously rubbing Ayn Rand novels against his privates again.
The real question is how does wealth manage to concentrate so highly so quickly and by those who actually contribute so little.
edit: this guy is literally pulling an Atlas Shrugged. If you think you as the owner of the company 'make all of the money', I heartily suggest you try going it alone.
I never got why people read and get this 'owner of the company makes all the money' narrative from the book.
She is obviously glorifying these man, making them the 'hero', but don't we do exactly the same in every other fictional book? It's been a while since I read a book about John and Jane that details their virtuous lives that is not played out, one way or another, on a high level (either starting or becoming a hero etc).
My take from the story was more that these people exist at every level. I remember parts (I might be grossly mistaken here, but this is what I took from it) where Rearden talks about and with his most valued employees, or where Dagny has her valued associates, where the train men that 'stand their ground' are praised. I'm not sure the 'owner makes the money' story is what she wanted to portray, or possibly I just took my biased view and ran with it while reading ;)
Do you really believe the 1% richer would earn so much money without exploiting the work of the 99% others you want them to get rid of? That's ridiculous.
Given that it's only those at the top that receive the benefits of economic growth (FTA: the bottom 80% of Californians saw no growth in their adjusted gross incomes between 1994 and 2013) higher is absolutely better. They're clearly skilled at harvesting the economic contributions of those worse off than them.
If they secede, they will still need the goods and services provided by the 99% - I doubt that many janitors, mechanics, painters, secretaries etc. are in that 1%. They'd need to have these servicepeople commute in and out of "rich California" every day from far off, and they probably wouldn't want unsightly public transport, enormous highways, high-rises, or low-income housing cluttering up their little paradise, so commutes of an hour or more would become normal. That would never work.
Until then it does not show up as income, so it really is hiding. Further, you can send money off shore by paying off shore subsidiary's for arbitrary costs, in no way does that money purely represent off shore profits outside of pure accounting magic.
It seems strange that your definition of "hiding" is "not present in the US". Is most of the population of the world then a "hidden" group of people? That sounds a bit condescending.
It's hiding from the IRS not the US. Apple still makes what's going on clear to the SEC which is just a different branch of the US government, stock holders, etc.
Still, using the term "hiding" makes little sense to me. It's money that not connected to the US or the IRS in anyway, and the information is readily available anyways. Are citizens of other countries "hiding" their income from the IRS then? That makes about as much sense to me as claiming that companies operating in other countries are hiding money from the IRS.
“Apple Sales International buys Apple’s finished products from a manufacturer in China, re-sells them at a substantial markup to other Apple affiliates, and retains the resulting profits,” the Senate report says.http://www.foxbusiness.com/politics/2013/05/21/apples-irish-...
They do this even for phones sold in the US. So, it really is US profits being shifted off shore.
Further they negotiated a 2% rate with Ireland and report profit from other countries there as pure accounting magic.
Moving IP off shore and renting it back to the US is a common tactic, as is buying something with subsidiary A in Ireland which Resells to subsidiary B in the US at a markup before selling in the US. So, much of this really is US income.
Thank you for restating the point of my comment. Apple is not paying tax on the $190B. So it would seem the numbers from the article are skewed in favor of the 1%, as Apple is one of the largest members of that exclusive club.
Did you read the article? If anything it talks far more than it should about income inequality. Frankly I find the tax disparities astounding: 45% paid by 1%? 90% paid by 20%? That is crazy.
From the article I get that the top 1% pays tax at 2x the rate per dollar earned than the bottom 99% does in aggregate. That seems like a reasonably progressive rate to me.
"earn an absolutely massive portion of all income in the state" - it's not as if the money is just sitting there and 1% are taking most of it. Wealth is _created_. The top 1% _create_ most of the wealth in California. How is it just that they are required to pay so much in taxes? Before I left California, my marginal tax rate (including Federal) was over 52%. Super-high earners in California have marginal rates over 60%. How is that just?
Money is created from bank loans. Wealth may be slightly different, but at any given time there is a fixed amount of money in existence and the only way to increase it is to originate more bank loans.
Money changes hands in exchange for something of value. I give Apple $300 and I get an iPhone. Apple takes that $300 and gives it to someone else in exchange for something they value. Money is merely a medium of exchange. The wealth is the products we produce and trade for.
The money could have come from a gold deposit 150 years ago. Who knows. It doesn't have to come from debt. The number of units of currency I have is also irrelevant. The only relevant thing is how valuable those units are to someone else. The value of the units is directly correlated to the amount of work required to get the units.
The amount of non-debt money in circulation is <20% and always shrinking.
>The value of the units is directly correlated to the amount of work required to get the units.
Do you have a proof of this? I doubt there is much correlation between "amount of work required" and the value of the units. The FRB has instantiated ~$4,000,000,000 with almost no work required and its dependents have gotten those units, also with very little work required.
I am familiar with the argument, but note that Randgalt said:
> it's not as if the money is just sitting there and 1% are taking most of it
Well, the money is just sitting there. Additionally, of all the money that exists, banks effectively take ~10% off-the-top annually through interest privilege, giving them (and their shareholders) a headstart. Everyone else gets to fight from what's left before it gets destroyed in a principal payment.
You do not appear to be acquainted with how wealth works.
Suppose I buy $15 of Xynodyne stock and $1 per share. Suppose later it is trading at $2 per share. I have just made $15 without any money being added to the system. I sell my shares. Do I keep money? No! I buy shares in a money market. Leave it there for 3 months, then sell that for shares in Apple. At each step I am wealthier and wealthier. And it is wealth that wasn't sitting there, it was created out of the fact that people price assets differently. And they price them differently because the company is producing something valued more highly by our whole society.
Money doesn't actually enter into the picture. I write a check from my bank account to my broker. My broker settles transactions electronically. I eventually get a transfer from them to my bank, from which I pay my taxes. All of the "money" in this system is a brief record created in one place, destroyed in another.
This is all basic economics of fractional reserve banking. The size of our economy is no more limited by the amount of money that exists than it is by how much gold is in the ground. Money is a medium of exchange, not a measure of value. And the rich got that way in one of three ways, owning something that became valuable, creating value where none existed, and theft.
In general the ones who got really rich through theft did so through political connections (Carlos Slim comes to mind). Successful entrepreneurs like Paul Graham fall in the second bucket. And the first bucket happened historically, for example the Astor family of New York, but isn't so common now.
"Most earnings for the top 1 percent come from investment proceeds; the stock market has risen steadily since mid-2011." There's no particular reason that middle-class people couldn't make the exact same investments in the stock market. The only difference is a lower amount of capital to invest. "Created" is not the word I'd use to describe investing your wealth and sitting around waiting for a return.
When I buy a stock or invest in some company, I'm taking a risk. That risk is a type of production - it requires me to think and make decisions. Obviously, I can lose in an investment. So, yes, it is a productive activity.
From the article: "Average adjusted gross income for filers in the second-highest fifth dropped by about 1 percent.... Adjusted gross income in the second-lowest fifth declined the most, 9 percent".
On an adjusted basis, sure. I was speaking in absolute terms. What's happening is that people are leaving the second quintile. About 1/3 move down, 2/3 move up.
The sort of thing people in the second quintile used to do has evaporated.
That exact statement applies to the work of stealing a painting. If you want to defend investment as productive activity, you're going to have to be a little more thorough than that.
If you think anyone can make the same investments then you don't know finance very well. The highest earning investments require huge amounts of cash to participate in and they are not a matter of simply holding some stocks.
I don't think this is true any more. If you buy and hold index ETFs you'll outperform the majority of professional investors due to the very low expense ratios. Some people with lots of influence like Warren Buffett or David Swensen @ Yale have access to slightly better risk-reward adjusted opportunities but that's a very small group of folks. Even Warren Buffett has instructed his estate to keep its assets in SPY the S&P 500 index fund after his death. Every time you hear about wealthy people earning a huge return on an investment just remind yourself that risk-reward is baked into almost everything in the markets and what you're not seeing is the many other investors who chased similar investments but lost.
We don't know exactly how few people are making all the money at the top. The article only gives us 1% granularity, but maybe it is "a very small group of folks" who are bringing up the average.
You're not considering arbitrage trades which is where the earnings are disproportionate to the risk because such trades require a huge amount of capital and a lot of expertise to take advantage of.
Do those investments consistently outperform S&P 500 and Russell 2,000?
I think you can always cherry-pick some real estate deals or angel investments in Google, Inc. that were available to accredited investors and returned superb results, but through survivorship bias skip deals like Las Vegas Monorail, Greek bonds and angel investments in Fab.com and Color.
If you can find a way to consistently outperform the index funds, you can find a way to securitize it and make it available to smaller-tier investors. The fund have "absolute return" or "unconstrained" somewhere in its name and join a long list of funds that were unable to outperform index funds for statistically significant periods of time.
Isn't investing the definitive way to use money to create wealth? The companies they're investing in have obviously been able to use that money to grow, right? And growing usually means providing more jobs and creating wealth.
It used to be 90%. Also, a broader discussion could be had around the services the government provides that allow people to generate wealth. I'm not going to voice an opinion on what is "just," but the money has to come from somewhere.
* create most of the wealth from employees educated under taxpayer funded education, utilizing tax-payer funded infrastructure, on business verticals where the bedrock technology was funded through federal tax funded research & grants
Fixed it for you. It's fair because it works. America didn't become an economic powerhouse through poor income stratification and letting the rich hoard all the money. It grew through investment in the conditions that are conducive to the rich having the tools to build wealth. Those investments didn't happen when the system didn't force it, see the early half of the 20th century. What we are doing now, all of this lunatic libertarianism that goes on in the valley, this has all been tested before with disastrous results.
In Europe is far worse. In Italy I believe that 60% is the minimum, with two caveats:
- there is a huge problem of tax evasion, in the sense that a big portion of the middle-high income professionals declare only a small fraction of their earning
- the health system is public
We could argue for hours about whether it's right or not to increase taxes on the richer, but truth is that there is a natural balance that occurs when the tax rate is so high that people prefer to ask Putin for a citizenship. I believe that with these numbers, California might have a problem.
In a lot of EU countries taxes get rally high really quickly (>50%), but there's not much you're getting back in any kind of service so, no one in the right
state of mind is going to pay that, not even the ones setting those taxes.
Need a life saving heart surgery? Sure, in 6-12 months,
just wait in line like everybody else irrespective of how much in taxes you paid.
Want you're kid to go to a good school? Well, there's the shit
public schools they can go to paid for with your taxes.
Want your kid to go to a good college in another country?
Well, the government already took away most of what you earned
so bad luck, you don't have enough left to make choices like that, just use the shitty public ones you paid for...
A big chunk of income tax that comes from states with high earners gets redistributed via the federal government to other states. States with wacky politicians, that want to legalize bigotry via laws.
On top of that, many of those states actively try to make their resides worse off (not taking free federal money for healthcare). People living in those states keep re-electing the same representatives who vote to make them worse of.
As a result of this I've become pretty apathetic politically (yay political tag lines) and in all honestly I stopped carrying what happens in other states. I can't be bother to want things to change there more then people who live there.
Everybody gripes about paying taxes, but I would much happier if a big chunk of that federal tax money (non-mutual goal like defense, treaties etc) that gets redistributed instead ended up in local communities (say 50 mile range). Since a lot of people in the area (NYC) could use a leg up, and it's on our own selfish interest to make them successful.
However it's important to add that state income taxes are deductible on your federal return. While this doesn't entirely offset the imbalance, it does mean that the federal government indirectly subsidizes states with high tax rates (often wealthy+coastal+more to the left politically) in a proportional way.
I'm actually glad that in the US this isn't a charged political issue. My family comes from a place where half the country (by region) hates the other half in part because of this kind of tax redistribution. It's not a pretty way to run a country.
If you work in state without high state / local income taxes you're a lot less likely to trigger AMT. So really the federal government subsidize wealthy residents of those places the most.
If you're like a middle class family in NYC where two parents work. One person is a cop (detective) the other person is a teacher both with experience you're prob pulling $100k + $80k + overtime in the cop case. Congrats your family is probably paying AMT every year.
There is definitely a wealth transfer dynamic from blue states to red states, but keep in mind that wealth isn't the only thing needed to keep a country running and some states help in other ways. Red states, for example, send a disproportionately high number of recruits into the military.[1]
Wow that chart is astonishing, and in the context makes the headline a little misleading.
Having a such a small percent pay such a huge share is toxic. I've heard people who pay high taxes say incredibly entitled things about "paying for" things. It destroys a sense of shared investment and purpose.
Clearly the solution has to be to ensure income is more evenly distributed, though I don't know how to do that exactly. Education and learning skills necessary for high paying industries would certainly help, but every time I hear that it feels like kind of a weak solution. That said, I don't really have a better one.
What are some interesting off the wall ideas for reducing income disequilibrium?
Remember that the chart only deals with income, not the net wealth of tax filers. It's probably harder to get reliable statistics on call Californians' net wealth, but I bet that would be a much more interesting graph. (I am not suggesting a California wealth tax.)
There'd be a lot of overlap, but it would also highlight the very wealthy that pay low taxes (likely landowners and retirees) and high earners with few assets that pay high taxes - the top 5% to 0.5% - that are often politically vocal and frustrated at their relative tax burden and the difficulty they face to accumulate wealth despite high income.
There's no magic bullet. Runaway disequilibrium takes concerted and relentless effort across a wide array of arenas. This goes for income inequality as much as it does for climate greenhouse effects. In both cases the alternative is that it goes until we hit a breaking point.
The millionaires and billionaires of today are betting that this breaking point won't happen in their lifetimes. They're probably right.
But how can they do that? Effort is one thing, but this? If we use the story of the greatest such behavior in history - that of Marcus Licinus Crassus of Rome, who would not allow certain ships to land to manipulate commodity prices - I'd defy anyone to say that's even possible in the modern economy. Compared to the world now, Rome en toto was one small town. We have thousands of years of improvement on the mechanisms of Rome.
The first step may be realizing that there may not be any disequilibrium per se.
I'm still thinking about it, but I watched "All Watched Over For By Machines Of Loving Grace" by Adam Curtis and it totally appealed to my skepticism fetish about these things. If our models are wrong ( and to some limit, all models are wrong ) , the it's (solopsistic) Hubris to complain that the world is incorrect.
(ObDisclosure: I have a child who did graduate work in ecology and left it in disgust, so I'm extremely biased. I also believe firmly in Adam Smith's "Man of System" to keep myself from thinking I can solve certain problems, as a self-defense mechanism ).
So here's my solopsism on the subject:
- this state of affairs represents our collective revealed preferences to some fraction of 0...1.
- If it is much less than half, then what makes up the rest?
- we have significant policy, legal and outright cultural boilerplate to protect us from this. Why doesn't it work?
- Saying "it's because people cheat" seems to me to abdicate the field. "Double down on the rule-making." But based on what?
- Given the Pareto distribution, what can actually be done? This one scares me but it reeks of mathiniess. But what if it's true?
At the core of it, does emergent phenomena exist or is that yet another "I give up" thing?
Maybe we need a rich and operational model of rents, and base all taxation on that. Doesn't seem to even begin to address finance and financialization at all, though.
... and the solution is what? Punitive tax rates? Wage caps? Re-education camps?
I don't see anything broken, other than a state government that taxes people too much for too little value in return. (Either add value, or tax lower).
Corporate tax structures which encourage middle class employment and things like R&D and discourage minimum wage and overpaid executives.
Inequality is getting bigger and again reaching historic highs, if you don't see anything broken then your eyes are shut. The only thing that stopped the inequality which occurred around the great depression was WWII and entering into a pseudo-planned economy. So it's a problem that can correct itself, but the outcomes aren't always welcome... or peaceful.
Having them earn such a huge share might be slightly problematic, but having them receive such a huge share without even earning it is what's truly toxic.
"Reduce inequality in income distribution" is the easiest solution that comes to mind with this respect, however I think that is is not the real problem.
In truth, we are getting to the time where there will be too many people for the amount of work required by the whole humankind to possibly satisfy its needs. We should all embrace this new reality and think of a way in which people can live without working, or in other word, we should solve the economic problem [0].
I highly agree. We depend so much on consumerism and planned obsolescence. We cannot have infinite expansion/growth. Sooner or later we need to make things that last forever, lower the number of factories (a good thing).
It needs to be a huge paradime shift. It also involves some huge technological barriers to be overcome: solving the energy problem, dealing with resource scarcity, etc. But I think if humanity is going to survive another 10,000 years -- we need to see an end to money in general.
In the short term, more automation and guaranteed minimum income are a start. Not everyone needs to work. We should be able to focus more on art and culture rather than polluting the world with more plastic shit.
Cool essay written 1930. If you get a standard income for being a citizen that gives you shelter, food, clothing, healthcare, education. You then will be working for improving the quality of those items. And there will be some people who reproduce without an economic disincentive not to. Citizenship will now be even in more demand. Workers will be motivated not out of fear of losing shelter, healthcare or food. Firing a worker will not have the responsibility of having taken food out their mouth.
We already have a population that does not work. As of Mar 2016 there are 16.6 million men age 16 to 65 not disabled not in labor force, and 28.2 million women. (44.8 m total) (from: http://www.bls.gov/webapps/legacy/cpsatab6.htm) A lot of those are probably those who gave up though.
Many though are retired or in school. In 2014 ages 55 to 64, 13.8% were retired. (http://www.bls.gov/opub/btn/volume-4/people-who-are-not-in-t...) (Note I consider home responsibilities as working as you would probably have to hire someone to do those if you didn't do them yourself). In 2014, both genders age 25 to 54, 1,479,000 were retired!
Or we can work to help people appreciate how they would have nothing without the work of billions of humans toiling over the past 10,000 years to bring us to the modern day where they can live comfortably in a society that provides high paying jobs enjoyed by the more gifted or fortunate citizens. I say this is as someone who was in the upper 10% of CA income last year.
Is there objective evidence that government is "too big" in all cases?
When you look at health care as an example - the US seems to have a rather inefficient system when compared to single payer (government) in other western countries.
I think we need to give up our dogma (capitalism == good, government == bad) - and look at the objective evidence.
I expect that's far from the truth. It's the expected result from something-other-than-capitalism. Mercantilism is one such. Rent-seekey K-Street lobbying is another.
Capitalism is essentially a system where wealth is deployed to generate income, which in turn, increases wealth, which again generates more income. Without checks and limits, the end result of this is, almost by definition, wealth concentration.
None of that is actually true. In capitalism, market capitalism, selling someone something produces what's called "consumer surplus". The buyer receives more in utility than they spent. It's one of the few un-controversial principles of economics.
There is no one story for the present apparent concentration fo wealth. We've had capitalism before such that there wasn't a lot of concentration of wealth - and the tax system wasn't always the reason.
I think the reason is economic rents, and rents are specifically not capitalist.
Russ Roberts has some ... mash note podcasts, peans to Adam Smith on EconTalk. He's much better situated to speak on it than I am. Shortly, Smith wrote "Theory of Moral Sentiments" before "Wealth". "Wealth" was a critique of Meracntilist (royal) patent systems.
The short version is that capitalism has a moral founding. What we now call capitalism can be pretty amoral, but that's our doing.
I'm hoping that a better understanding of rents can enable us to have a better capitalism. Principally, because I don't much think collectivism can be demonstrated to work, and collectivism is frequently seen as the answer to the excesses of what we call capitalism.
If we see income from rents as less morally defensible than income from work then that's possibly a method for getting closer to what we want. As it is now, they're simply "profit". Rather than taking two binary positions - pro and anti capitalism - perhaps the work that needs to be done is a better critique of it , and a refinement of terminology.
Finally, the ways in which we are unequal are much less ... physical than in the past. Capital itself has become more and more ephemeral, and it may be that returns to what I'd consider "real" capital - think a building full of lathes - is just as low as that to labor. So much inequality is due to the abstraction of control of capital.
As they should. That's what happens when you have a progressive tax structure. Do you think we should we shift some of that tax burden onto people who make less than $25k per year?
I never understand why the term "progressive" gets painted in a positive light?
If I eat a steak, the restaurant doesn't come to me and say "Hey, you make 10% more than the guy two tables down, so you'll pay 10% more for your steak".
Why did this sliding rule ever get enacted for taxation? If you use something, you pay for it at the established price.
Taxation is a generally accepted necessary evil way to fund projects and services for the common good. A progressive tax policy recognises that a person with a high income can bear a greater burden; taxing a minimum wage earner 30% of their income would have a much higher proportional effect on quality of life that someone earning, say, 200k. We seem to accept progressive taxation as fair, in the sense that it causes no more inconvenience to low earners than high earners.
The comparison with a private commercial service is flawed, in the sense that engagement with it is an entirely personal choice.
> The comparison with a private commercial service is flawed, in the sense that engagement with it is an entirely personal choice.
That's exactly what a lot of people are up in arms about, they get taxed hugely but get no real say in how the money is spent. Sure they get a vote, but if your candidate loses it's not as though you're exempt from paying taxes.
In some way these people are right; if they choose to engage in commerce they aren't being forced to do anything and as such "whatever the market will bear" is a good metric.
Taxes aren't about "whatever the market will bear" though because you don't have a choice to not consume and therefore not pay.
A "progressive" tax policy is so named because it hijacks the positive associations of the word for political gain. Patiently explaining why we should all love the definition doesn't actually address the point being made.
Wait, what? I'm pretty sure it's called 'progressive' because the rate of taxation 'progresses' as income increases – not because of any association with progressivism per se.
An argument I've heard for income tax progressivity is that the very wealthy have far more to lose if the state crumbled and society devolved into a state of nature.
In other words, the state, by upholding the rule of law (particularly property law), is providing the ultra wealthy with a service of far greater value than that which it provides those with lower wealth/income.
Those who are wealthy are generally not high-income (at least they can heavily tweak their income by using asset-backed loans and accrue capital gains only when it's beneficial).
Those who are high income in California are generally not wealthy (as opposed to everyone's favorite high income poster boy - the NY hedge fund manager), but are subjects to windfall effect - a few years of work at below market wages in hopes for a giant payback (royalties in Hollywood, stock options of a successful tech startup in the Valley).
I agree entirely. I just moved to a tech city and make totally insane amounts of money. I looked at my tax burden and it's close to 30%..and I'm totally okay with that. My take home is still insane, even after the insane housing costs.
It bothers me a bit though. I'd actually rather earn less and things be more affordable. The homeless situation in the city I moved to is truly insane and unsustainable. Tech companies drive up prices. I have a friend who lives in a neighbourhood where all the homes were around $100k when she was a kid; and now the same homes can go anywhere from $500k to nearly a million!
You see some of the average working class taking those big payouts and moving further from the city (and potentially driving more; increasing the traffic problem).
I'd rather earn less, my housing be more affordable and things be more equal for everyone. Supply and demand for housing really drive these crazy swings in gentrification.
When two people order a steak, regardless of their income, they get the same thing. On the other hand, one of the largest services a government offers its citizens is protection of the citizens' persons and wealth, both from domestic and foreign threats. The value of that protection is relative to how much each citizen is worth. If you're in debt, like many Americans, you're basically getting protection only for your person, as you have little to no wealth to protect. On the other hand, if you're worth billions, the government is protecting your wealth as well. It only makes sense that the more you have to protect, the more you should have to pay.
> The value of that protection is relative to how much each citizen is worth. [...] On the other hand, if you're worth billions, the government is protecting your wealth as well. It only makes sense that the more you have to protect, the more you should have to pay.
Fyi, those sentences in your reasoning are already handled by a hypothetical flat tax percentage. It's the percentage that handles your cases as you stated them. For example, if a flat 15% tax was applied for everyone, the billionaire earning $30 million pays $4500000 in taxes, while the Walmart earning $20k pays $3000.
Mathematically, 4500000 is greater than 3000. In that case, the billionaire has paid more taxes which satisfies your reasoning.
On the other hand, the previous posters were emphasizing "progressive" taxes. That means that the percentages themselves are increased as income increases. Your rationale isn't specific to that. Probably the most common math rationale for progressive taxation is the concept of marginal utility of money[1]. In other words, a billionaire's $1 million of money made between $29 million and $30 million is less significant to him and therefore, can be taxed at a more "progressive" tax rate of 40% instead of 15%. On the other hand, the Walmart employees $1000 from $3000 to $4000 pays for food and rent and is not discretionary play money.
Well, despite using the term progressive, the poster I replied to was not emphasizing progressive taxes, because he used an analogy where everyone literally pays the same amount.
In any case, what I said wouldn't be covered under a flat tax percentage unless that flat tax percentage were on wealth, not income. A person making approximately 20k or less currently pays no income tax, which makes sense, because there's virtually no way they can accumulate any wealth at that income. On the other hand, as you move up each income tier, the amount of wealth you can accumulate goes up progressively. So a progressive tax is a close enough approximation to a flat tax on wealth, which is what I'm arguing makes the most sense.
Based upon your example, you seem to be arguing for a flat (as in dollar amount) tax. I have no idea how that would ever work unless there were no taxes at all.
And how would the government pay for things? Clearly even with 200mn people, each paying $2000 in tax, you'd only have $400bn in tax revenue. The current total US tax revenue is $6.8tn (federal + state + other).
If you upped the tax to $10k, you'd still only be talking about $2tn, but you'd have huge swathes of the country forced into poverty as they'd be unable to pay it.
You'd need immense corporation taxes in order to make up the shortfall. Currently US business taxes make around 8% of the budget, compared to 36% for income tax. A flat dollar tax is nuts. The rich make their money from the labour of many, many people. They may only personally use the roads the same as others, but the thousands of their employees that need to drive to work need it a thousand times more. Without that, the rich would have no business. Ditto with healthcare. You need your workers healthy and they can't afford healthcare, you pay for it or you soon won't have many workers. $10k does not pay for much healthcare. Blindness to the social costs that are picked up by the government, does not mean that they don't exist.
The rich can pay a bit more and still be rich. They need to pay a bit more or they won't be rich for long, their workers and customers won't exist anymore.
But that too is as it should be. Extra tax on the wealthy means they have to settle for the Citation Jet instead of the Gulfstream. Extra tax on the poor means they have to choose whether to pay for food or rent this month.
Right but that goes against the narrative which permeates indie media where the 1% are freeloading devils with offshore accounts who are running the state into the ground because they are not paying their fair share of taxes.
Mind you I'm not a 1%er. Not that that should have any bearing. But indie media have their dead horse they like to climb on and it wears thin.
You don't understand. 45% of 1 million means nothing. Maybe skimp on the next vacation to Paris. 20% income tax on 60k means someone might never be able to retire or help pay for his kids college degree.
As long as we can poke fun at what they spend their money on, and dehumanize them, we can justify any tax level. Maybe that extra 17% could have gone into angel investments.
Perhaps the idea that those that earn 28% of the income need to be taxed at 45% is an indictment on California's spending.
If you look beyond the fun poking and focus on the facts, you'll still find that the trickle down economic policy your argument imply simply doesn't work.
who has more to lose if order and the fabric of society break down, those with or those without? if you already have nothing, and live in uncivilized territorty, the breakdown of order will make things worse, but marginally less so than for those isolated from the ills of poverty.
lets call a spade a spade and treat tax like what it is, a protection racket. you are protecting yourself from two things: alien invaders and zombie hoards. health care, food, housing, and, entertainment keep the hoards from destroying your logistics infrastructures and disrupting transportation routes. it also keeps them just alive enough to keep buying what you are selling. defense, police forces, and tough crime laws reduce your risk of having your factories and warehouses bombed or burned to the ground. in short, you are paying for muscle and placation, keeping the peace. (edit: forgot, you are also paying for intellectual property protection, so your inventiveness cant be cloned or repackaged.)
why should the 'rich' pay the majority of the taxes? because it benefits them the most to have low crime healthy consumers. whose problem does it end up being if the 99% are unemployed, homeless, starving, diseased, and unable to consume. whose house slash bunker is going to get broken into, the person with nothing, or the person with years of survival stockpile? why should the 'rich' pay the majority of the taxes? because they are the ones with something to lose (a business, a family, a lifestyle), worth paying to protect.
all that said, im not defending the current tax code or federal government as an efficient or effective way to put that "protection/socialorder" tax to good use.
Why not tax consumption if your concern is consumption? Tax (NET_INCOME-(NET_SAVINGS+POVERTY_LEVEL)) or something.
EDIT: The responses are all assuming the tax is regressive. Note the POVERTY_LEVEL constant in there. And the tax rate itself could be progressive. 0% under 20k (if that's the poverty level), 15% on the next 30k, 25% on the next 50k, etc.
Progressive consumption taxes based around this enjoy a great deal of support among economists and very little support among politicians, unfortunately.
The real problem is the positive feedback loop where money buys political influence, which then results in laws that favor the already-rich at the expense of everyone else. Taxing consumption won't fix that. Taxing political contributions might fix it, but you can't do that because political contributions (a.k.a. bribes) are now protected under the First Amendment thanks to Citizens United. High marginal income tax rates or a wealth tax (or reversing Citizens United) are the only ways to fix the problem AFAICT.
How come? There are entire categories of consumption that open up with significant wealth? Private aviation, yachts, fine arts are all categories with spending heavily concentrated up top - a poor person is unlikely to own a proportional 1/1000th share of a Gulfstream jet or a Picasso.
Because people who buy Gulfstreams are so rich that the cost of the Gulfstream is only a small fraction of their wealth. It's really hard to fathom how filthy stinking rich some of these people are. A Gulfstream V, the absolute top of the line, costs $50M. That's one year's salary for e.g. Rush Lumbaugh (just to pick a random example out of a hat whose income is publicly known).
Also, most jets are not bought by filthy stinking rich people, they are bought by businesses, mainly airlines, which operate on pretty thin margins. If you raised taxes on jets significantly you would probably put a lot of them out of business. If you tried to raise taxes on jets that were disproportionately bought by filthy stinking rich people they'd just go out and buy different jets to avoid the taxes.
On the other hand, if you're poor then just the bare necessities of life will cost a significant fraction of your income.
The only equitable taxation scheme is a progressive income tax and/or a wealth tax.
The way the things are set up now, things that are considered basics (rent, utilities, food) are exempt from consumption tax (which in the US is mostly sales tax). Exempt a category like clothing, and most of the basic consumption remains untaxed.
Well if the problem is general excessive consumption, then a tax on consumption will help. But consumption tax is not necessarily progressive (or at least not sufficiently progressive enough to warrant the label) as its impacts on the poor (as a matter of marginal welfare as opposed to % of income/consumption) are usually much greater than on the most wealthy.
Often VAT regimes will not tax certain basic good such as bread, eggs, or essential household products, but in the UK most goods including many that you may consider basic have 20% VAT.
Someone being taxed say 20% on their consumption when their typical yearly consumption is $1 million has a much smaller impact to their marginal welfare than someone with a typical expenditure of $10k taxed at 10-15%. If someone has an income and consumption of $10k, then you probably don't really want tax them much or anything at all (you probably want to give them money/job/training/something!).
Provided you offset the increased taxation by consumption with increased services and benefits to the poorest, then you can mitigate most of the worst regressive effects.
Ah sorry. Consumption tax is usually understood to mean a tax collected at the moment of transaction based on the value and type of product/service, not as a yearly calculation that is more akin to a variant of an income tax.
That's how a progressive tax system works. The poor pay fewer taxes, because as is well documented elsewhere, ordinary life taxes them at a higher rate than the wealthy. At the other end of the spectrum, the wealthy earn additional income much more easily, so they are taxed at a higher rate. What's astounding is not the 160% ratio of tax share to income share for the wealthy, but the 2800% ratio of their income share to their population share. This illustrates just how powerful the "rich-get-richer" rules of our economy are in transferring money from the poor to the wealthy.
Maybe hard to take but these people are wealth creators and make a terrific contribution to society in general (everyone in the state, in this case). Of course they're propping up everyone else.
Assuming you're not subject to the naive 'wealth is a pie' fallacy, why are you so bothered about inequality of wealth? As a non-rich person, I don't get it! Questions of power and influence on the folk who sit in government and have really massive sums at their disposal with little ultimate responsibility if they foul up - are much more pertinent but should and can be dealt with separately.
Does anyone know why the tax liability/taxable income doesn't seem to reflect the state tax percentage? For instance the 9k to 10k bracket has tax liability = 2,970 and taxable income = 1,156,047 for liability/income = .0025 or .25%, which is significantly less than the tax rate of 1% for income under even 8k (http://www.bankrate.com/finance/taxes/state-taxes-california...)
>> "but only pay 45% of taxes. We should be asking if that's enough"
How much is enough?
We often hear that the wealthy should "pay their fair share." But we rarely hear a concrete figure.
Look. I work 3 jobs and bring in about $200,000 per year. I work hard and diligently for that money. I use it to provide for my wife and kids and our future.
And I paid nearly $60,000 in taxes in 2015.
I don't want to pay any more. I'm fed up with how much of my hard-earned income disappears by way of taxation.
More taxes subtract from my kids' future. More taxes subtract from dates with my wife. More taxes subtract from my retirement when I am old and unable to provide for myself.
How much tax is enough? What, exactly, is my "fair share"?
Everyone likes to demonize the rich 1%, but few concede the reality that we in technology are all rich. Heck, even the poor in the US are rich by the world's standards.
We "rich" people are not all demons whose money is an infinite fountain waiting to be sapped by those without. No: we work hard for that. And we have families. Some of us hold multiple jobs in order to provide for ourselves and our kids.
So I ask, how much is enough? Give a specific tax percentage you think I, as a husband and dad of 2 children, ought to pay to the federal government, and please tell us compellingly why you feel entitled to take my hard-earned money away from me and my wife and kids.
And how much is their income compared to the total? 80%?
What matters if the percentage, not the total amount. Of course someone who earns $1 million a year would pay "more" in taxes than someone who earns $100,000 (at least I would hope they do).
A better question would be what percent of the wealth do they own? That would be much, much higher. If your investment portfolio doubles, are you richer? Of course. But it doesn't count as income. You're just making money off the backs of the poor whose wages are being depressed in favor of giving more money to capital.
Disposable income would be a better metric in this case. They may earn only 24% of the income, but how much of that is excess? ie. beyond providing their needs.
For the other 76%, all of that income may be spent on just food/rent/other essentials. Whereas the 1% have excess that they can save, or spend on luxuries. That's why tiered tax regimes exist.
NB. The definition of "needs" is obviously very debatable. The top 1% in California is defined as ~$90k, but given a median rent of >$4000/mth in SF, that skews the needs/excess taxable money argument considerably.
This is grossly misleading. What I'd love to see is a chart that shows tax-paid-per-dollar-earned. I know it won't tell the whole story, but it'll tell a straight story.
Yeah, you really do need more information to decide if that's fair or not.
I don't really see a problem with tax brackets though (I'd rather see a formula though rather than discrete ranges).
I'd argue that a lower income bound and upper taxation rate should be established - say $20,000 and 60%. That means that no person earning less than the lower bound will be taxed and no person will pay more than the upper bound in taxes. Then it's just a matter of describing a curve that satisfies those two constraints.
There's ten people in a room and you are tasked with distributing $1000 among them. The catch is you have to get everyone to vote on the distribution. Seems easy right? Everyone get's $100. But wait somebody has a suggestion. Why don't we give $500 to the two handsomest people in the room? Everybody votes yes. Eight people leave shocked and angry.
Edit: this wasn't intended to be a 1:1 analogy of wealth distribution. It's just something interesting I think of about human nature when the topic is brought up. A lot of people outside the 1% will defend the 1%, there's nothing wrong with that, but I wonder if those people count themselves among the future 1% or even feel some connection to it for one reason or the other. I wonder if this skews our perception of wealth inequality and if wealth inequality is actually a graver threat because of such a shroud.
The better analogy is you have 10 people in a room and only a few of them are producing anything yet they are forced to give a portion of their production to everyone else in the room.
You can't equate earnings and production. First, when you earn so much money as the top 1% richer do, it is largely because you rely on (or exploit) the work of others. Secondly, not all "production" finishes as income. Making art, raising kids, etc. are examples of productive work for the society that people are not necessarily paid for.
The Randian view of this is just not very productive. Let's take a Randian hero, a self-made man (and it seems to always be men in her world) who is super creative, independent and gets shit done. Maybe he runs a construction company. He's the 1 guy in the room.
Now, he could build one house with his bare hands but then he would have one house to sell. OR he could hire another 4 people, build 5 houses and sell them all. Clearly in the second scenario he'd make far more money and create more. But in the second scenario, who are the "makers" and the "takers"? Maybe our hero had the creative drive so he deserves some extra credit, but surely the workers also did some making.
The idea of "makers" and "takers" that animates the Randian world view doesn't really make practical sense. To make something at scale, no matter your personal genius, you need lots of others to join you in that enterprise. And to have what you made be worth anything, you need a lot of people to buy it.
Bottom line: everyone is a maker and everyone is a taker, thinking about taxation in those terms doesn't hold up to moral or practical scrutiny.
Rand only used money as a scorecard and only when convenient. If you'll read "The Fountainhead", Howard Roark ran far and fast away from money.
Rand was constructing ... essentially Russian novels against the concept of collectivism. It's not particularly complete work. It's essentially propaganda.
And like it or not, her side in the debate mostly won. But that has nearly nothing to do with our present state of affairs - the headcount of Randians among SiVa is probably higher than in the economy at large.
If that's what it takes to maintain society, yes. I don't know about you, but living in a world where only people deemed "useful" deserve to live is not a world I want to live in. I'm happy to contribute to the well-being of others.
More like they pay the people who they order to produce things for their profit less than those people need for medical needs, education, and maintenance of the roads they commute on, then they are forced to give a portion of the profits they made by paying those people so little to the government to provide those things for them.
I'm sure most other people are just as tired of arguing against this kind of silly Randian nonsense as I am. I wish Thiel's braindead Seasteading Institute had succeeded in building their dream island in the middle of the ocean. Then we could all watch it collapse in utter failure and not have to have this tiresome conversation anymore -- we could just point at the seagull-shit-covered ruins and move onto different topics.
I don't mean that nobody can be harmed in the process of creating wealth - certainly they can. I mean that the process of accumulating wealth is not zero-sum: each dollar that I earn is not a dollar that somebody else lost. The economy is not some big pie that we split up unequally. The process of creating wealth increases the size of the pie.
I would concede that yes, the process of creating wealth does increase the overall size of the pie, but it does not increase the size of this pie proportionally for all involved.
That increase in pie, is the aggregate effect on the outstanding wealth. So, it could follow any such distribution that in the ends provides a net win. For example, automating some job will not increase the level of wealth of those who have now become jobless. It will undoubtedly increase the wealth of those who are now benefited by this automation, and in the end it will be a net win for the economy. However, those who were negatively affected see no benefit from this increase in the pie.
I believe that wealth is sometimes increased through tactics and strategies that negatively affect the wealth of other through mechanisms such as slavery, indentured servitude, extremely low wages and other situations that take advantage of the less advantaged (usually in 3rd world countries).
So yeah, the size of the pie increases, but those bigger slices are not appearing on everyone's plates, and often times people are ending up without any pie on their plate.
There's ten people in a room. Nine of them have $1, one of them has $1,000. You need $10 for some shared project. You take 10 cents from each of the nine, and $9.10 from the last person. He looks at his remaining $990.90 and says, "I'm getting screwed!"
For those curious about how the percentage of taxes paid in relation to percentage of income earned, these statistics shed some light on the issue:
> According to a projection from the non-partisan Tax Policy Center, the top 1 percent of Americans will pay 45.7 percent of the individual income taxes in 2014—up from 43 percent in 2013 and 40 percent in 2012 (the oldest period available)... In 1979, the top one percenters earned 8.9 percent of pretax income and paid 18 percent of federal income taxes. In 2011, the top 1 percent earned 14.6 percent of income and paid 25.4 percent in 2011 of federal income taxes.
New Jersey is an utterly incompetent state when it comes to fiscal matters, as the last paragraph starts to hint. If this state wasn't propped up by its proximate location to other big cities and states, I imagine it'd be a backwater comparable to Mississippi.
California officials are aware of these risks also. I give a lot of credit to Gov Brown for constantly reminding the state legislators that the good times won't last forever. The challenge with a tax system that draws so heavily from top earners is that you have greater ups (during boom times, like the current) and greater downs (during recessions, like 2008-2010). Moreover, such a huge amount of California's tax haul is due to one-time events such as stock and real estate sales which are even more amplified during boom times.
This is ridiculous. Of course the top income earners pay the most taxes. When you are uber rich the trick is convert all your income to capital gains to avoid the taxes. There are a lot of tricks to further reduce your capital taxes to a fraction of what you would pay were it income.
A lot of that is because in California capital gains are taxed as income; the set of people who have meaningful capital gains in a given year is small (a core of people in that set every year, and another set who are in it some years due to infrequent sales of assets like houses, businesses, major equity stakes from stock grants or options, etc.)
One of the interesting explanations I've seen for income inequality is that globalization has massively increased the size of the market. So the top end for incomes has massively expanded along with it. But on the bottom end, the floor of 0 never changes. So an increase in income inequality is a natural consequence of globalization.
if we had government that spent as a function of some trailing average of tax receipts (it could be a greater than 1 multiplier), we'd have built in responsibility with a counter-cyclical kicker. makes way too much sense for politicians who want control.
The title is inaccurate. The article says that the top 1% of earners pay 45% of income taxes. It says nothing about what percent of total taxes that they pay. Since income tax is 68% of California's taxes, they could pay anywhere from 30% to 62% of the taxes.
The headline is inaccurate. The headline should read "Top 1% of Income-Earners pay 45% of California's Income Taxes."
The rest of the data don't really give a meaningful view either since they ignore California's 10% sales tax. According to IETP, California's tax system is proportional or even slightly regressive. (Higher-income earners pay a smaller share of their income as tax.)
The HN title continues the proud American tradition of conflating "taxes" with income taxes, ignoring all others. And of course this makes it look like wealthy people bear more of a burden than they really do, since other taxes hit the poor far more.
This happens constantly. I can't remember ever seeing a statement of the form "the top X% pay Y% of taxes" which didn't ignore a substantial set of taxes that hit the poor the most.
I think someone is out there manipulating public opinion on tax policy, and doing an amazing job of it.
I'm not very up to date with tax policy or politics but it sounds reasonable to me that everyone pay a fixed percentage. That or just have a consumption tax. Are there good reasons not to do it that way??
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[ 3.3 ms ] story [ 226 ms ] threadI am really tired of seeing sensationalist headlines like these. The top 1% of income earners earn an absolutely massive portion of all income in the state, but only pay 45% of taxes. We should be asking if that's enough, not implying that the wealthy are somehow propping up the state's finances when inequality is accelerating every year.
When the top 1% pays for about 50% of the infrastructure, it is time for them to think about seceding. I mean, the top 50% move together, poof they can have something like half of what is provided by the state, without the 99% bothering them anymore.
This is a democracy, so how much ones owes in taxes is decided by the people. As far as seceding is concerned, good luck with that.
I think that the comment you were responding to was suggesting that the tax load should be directly proportional to the income fraction, which I suppose you could make a cogent argument of.
So the idea of 'fairness' is already an artificial construct. It's far easier to make a billion in a society like the US, than say, Vietnam, or Argentina, or Romania. So in a very real way, US billionaires do 'owe' something to the system that allowed them to attain that wealth in the first place (and that 'something' is pretty much 'everything'). If wealth could be attained completely independently of the 'system', then the distribution of billionaires would be completely different than it is right now.
The real question is how does wealth manage to concentrate so highly so quickly and by those who actually contribute so little.
edit: this guy is literally pulling an Atlas Shrugged. If you think you as the owner of the company 'make all of the money', I heartily suggest you try going it alone.
She is obviously glorifying these man, making them the 'hero', but don't we do exactly the same in every other fictional book? It's been a while since I read a book about John and Jane that details their virtuous lives that is not played out, one way or another, on a high level (either starting or becoming a hero etc).
My take from the story was more that these people exist at every level. I remember parts (I might be grossly mistaken here, but this is what I took from it) where Rearden talks about and with his most valued employees, or where Dagny has her valued associates, where the train men that 'stand their ground' are praised. I'm not sure the 'owner makes the money' story is what she wanted to portray, or possibly I just took my biased view and ran with it while reading ;)
CEOs once upon a time made "too much salary" so pay for performance was used. Now this.
Do you really believe the 1% richer would earn so much money without exploiting the work of the 99% others you want them to get rid of? That's ridiculous.
I've had this conversation three times: "What'd it take to get you to move to California?" "More than you have."
So there's that.
https://www.ftb.ca.gov/aboutFTB/Tax_Statistics/Reports/2013/...
They do this even for phones sold in the US. So, it really is US profits being shifted off shore.
Further they negotiated a 2% rate with Ireland and report profit from other countries there as pure accounting magic.
PS: Remember if your getting information from Tax info that the information was adjusted to minimize taxable income.
For example, you cannot have $2,000,000,000,000,000 in annual income, simply because $2,000,000,000,000,000 do not exist.
>I got it by trading with someone else.
If you examine the transaction in its historical context, there will be a chain of trades going back to a bank loan (or multiple).
You seem fixated on the trade of dollars, while seeming unconcerned about how dollars come to exist.
>The value of the units is directly correlated to the amount of work required to get the units.
Do you have a proof of this? I doubt there is much correlation between "amount of work required" and the value of the units. The FRB has instantiated ~$4,000,000,000 with almost no work required and its dependents have gotten those units, also with very little work required.
Note, Paul Graham was the public face of founding ycombinator.
> it's not as if the money is just sitting there and 1% are taking most of it
Well, the money is just sitting there. Additionally, of all the money that exists, banks effectively take ~10% off-the-top annually through interest privilege, giving them (and their shareholders) a headstart. Everyone else gets to fight from what's left before it gets destroyed in a principal payment.
Suppose I buy $15 of Xynodyne stock and $1 per share. Suppose later it is trading at $2 per share. I have just made $15 without any money being added to the system. I sell my shares. Do I keep money? No! I buy shares in a money market. Leave it there for 3 months, then sell that for shares in Apple. At each step I am wealthier and wealthier. And it is wealth that wasn't sitting there, it was created out of the fact that people price assets differently. And they price them differently because the company is producing something valued more highly by our whole society.
Money doesn't actually enter into the picture. I write a check from my bank account to my broker. My broker settles transactions electronically. I eventually get a transfer from them to my bank, from which I pay my taxes. All of the "money" in this system is a brief record created in one place, destroyed in another.
This is all basic economics of fractional reserve banking. The size of our economy is no more limited by the amount of money that exists than it is by how much gold is in the ground. Money is a medium of exchange, not a measure of value. And the rich got that way in one of three ways, owning something that became valuable, creating value where none existed, and theft.
In general the ones who got really rich through theft did so through political connections (Carlos Slim comes to mind). Successful entrepreneurs like Paul Graham fall in the second bucket. And the first bucket happened historically, for example the Astor family of New York, but isn't so common now.
Parody Level: Poe.
The sort of thing people in the second quintile used to do has evaporated.
I think you can always cherry-pick some real estate deals or angel investments in Google, Inc. that were available to accredited investors and returned superb results, but through survivorship bias skip deals like Las Vegas Monorail, Greek bonds and angel investments in Fab.com and Color.
If you can find a way to consistently outperform the index funds, you can find a way to securitize it and make it available to smaller-tier investors. The fund have "absolute return" or "unconstrained" somewhere in its name and join a long list of funds that were unable to outperform index funds for statistically significant periods of time.
Fixed it for you. It's fair because it works. America didn't become an economic powerhouse through poor income stratification and letting the rich hoard all the money. It grew through investment in the conditions that are conducive to the rich having the tools to build wealth. Those investments didn't happen when the system didn't force it, see the early half of the 20th century. What we are doing now, all of this lunatic libertarianism that goes on in the valley, this has all been tested before with disastrous results.
- there is a huge problem of tax evasion, in the sense that a big portion of the middle-high income professionals declare only a small fraction of their earning
- the health system is public
We could argue for hours about whether it's right or not to increase taxes on the richer, but truth is that there is a natural balance that occurs when the tax rate is so high that people prefer to ask Putin for a citizenship. I believe that with these numbers, California might have a problem.
[citation needed]
http://www.theguardian.com/world/2013/jan/03/putin-grants-ge...
But you might say, well that's only one guy, who cares.
So here's a couple more, but if you just google "the rich flee EU" or similar all will be revealed.
http://www.france24.com/en/20150808-france-wealthy-flee-high...
http://www.thelocal.fr/20141229/france-75-percent-super-tax-...
In a lot of EU countries taxes get rally high really quickly (>50%), but there's not much you're getting back in any kind of service so, no one in the right state of mind is going to pay that, not even the ones setting those taxes.
Need a life saving heart surgery? Sure, in 6-12 months, just wait in line like everybody else irrespective of how much in taxes you paid.
Want you're kid to go to a good school? Well, there's the shit public schools they can go to paid for with your taxes.
Want your kid to go to a good college in another country? Well, the government already took away most of what you earned so bad luck, you don't have enough left to make choices like that, just use the shitty public ones you paid for...
etc.
On top of that, many of those states actively try to make their resides worse off (not taking free federal money for healthcare). People living in those states keep re-electing the same representatives who vote to make them worse of.
As a result of this I've become pretty apathetic politically (yay political tag lines) and in all honestly I stopped carrying what happens in other states. I can't be bother to want things to change there more then people who live there.
Everybody gripes about paying taxes, but I would much happier if a big chunk of that federal tax money (non-mutual goal like defense, treaties etc) that gets redistributed instead ended up in local communities (say 50 mile range). Since a lot of people in the area (NYC) could use a leg up, and it's on our own selfish interest to make them successful.
Data: https://wallethub.com/edu/states-most-least-dependent-on-the... Just look at highest X per $ spend on federal taxes.
http://www.huffingtonpost.com/2014/03/26/republican-states-m...
However it's important to add that state income taxes are deductible on your federal return. While this doesn't entirely offset the imbalance, it does mean that the federal government indirectly subsidizes states with high tax rates (often wealthy+coastal+more to the left politically) in a proportional way.
I'm actually glad that in the US this isn't a charged political issue. My family comes from a place where half the country (by region) hates the other half in part because of this kind of tax redistribution. It's not a pretty way to run a country.
If you're like a middle class family in NYC where two parents work. One person is a cop (detective) the other person is a teacher both with experience you're prob pulling $100k + $80k + overtime in the cop case. Congrats your family is probably paying AMT every year.
[1] http://www.ijreview.com/2014/07/158892-military-pride-states...
And yet after tax one of those super-high earners will still take (way) more money home than people who earn less.
Having a such a small percent pay such a huge share is toxic. I've heard people who pay high taxes say incredibly entitled things about "paying for" things. It destroys a sense of shared investment and purpose.
Clearly the solution has to be to ensure income is more evenly distributed, though I don't know how to do that exactly. Education and learning skills necessary for high paying industries would certainly help, but every time I hear that it feels like kind of a weak solution. That said, I don't really have a better one.
What are some interesting off the wall ideas for reducing income disequilibrium?
The millionaires and billionaires of today are betting that this breaking point won't happen in their lifetimes. They're probably right.
The first step may be realizing that there may not be any disequilibrium per se.
I'm still thinking about it, but I watched "All Watched Over For By Machines Of Loving Grace" by Adam Curtis and it totally appealed to my skepticism fetish about these things. If our models are wrong ( and to some limit, all models are wrong ) , the it's (solopsistic) Hubris to complain that the world is incorrect.
(ObDisclosure: I have a child who did graduate work in ecology and left it in disgust, so I'm extremely biased. I also believe firmly in Adam Smith's "Man of System" to keep myself from thinking I can solve certain problems, as a self-defense mechanism ).
So here's my solopsism on the subject:
At the core of it, does emergent phenomena exist or is that yet another "I give up" thing?Maybe we need a rich and operational model of rents, and base all taxation on that. Doesn't seem to even begin to address finance and financialization at all, though.
Having such a small percent _earn_ such a huge share is toxic.
I don't see anything broken, other than a state government that taxes people too much for too little value in return. (Either add value, or tax lower).
Inequality is getting bigger and again reaching historic highs, if you don't see anything broken then your eyes are shut. The only thing that stopped the inequality which occurred around the great depression was WWII and entering into a pseudo-planned economy. So it's a problem that can correct itself, but the outcomes aren't always welcome... or peaceful.
These studies also leave out all of the good jobs created by the 1% and the massive amount of taxes going back into the state from these employees.
If you counted this, they are responsible for nearly all of the taxes.
In truth, we are getting to the time where there will be too many people for the amount of work required by the whole humankind to possibly satisfy its needs. We should all embrace this new reality and think of a way in which people can live without working, or in other word, we should solve the economic problem [0].
[0](http://www.econ.yale.edu/smith/econ116a/keynes1.pdf)
It needs to be a huge paradime shift. It also involves some huge technological barriers to be overcome: solving the energy problem, dealing with resource scarcity, etc. But I think if humanity is going to survive another 10,000 years -- we need to see an end to money in general.
In the short term, more automation and guaranteed minimum income are a start. Not everyone needs to work. We should be able to focus more on art and culture rather than polluting the world with more plastic shit.
We already have a population that does not work. As of Mar 2016 there are 16.6 million men age 16 to 65 not disabled not in labor force, and 28.2 million women. (44.8 m total) (from: http://www.bls.gov/webapps/legacy/cpsatab6.htm) A lot of those are probably those who gave up though.
Many though are retired or in school. In 2014 ages 55 to 64, 13.8% were retired. (http://www.bls.gov/opub/btn/volume-4/people-who-are-not-in-t...) (Note I consider home responsibilities as working as you would probably have to hire someone to do those if you didn't do them yourself). In 2014, both genders age 25 to 54, 1,479,000 were retired!
If we did that, we would all pay less taxes (both low income and high income earners).
When you look at health care as an example - the US seems to have a rather inefficient system when compared to single payer (government) in other western countries.
I think we need to give up our dogma (capitalism == good, government == bad) - and look at the objective evidence.
There is no one story for the present apparent concentration fo wealth. We've had capitalism before such that there wasn't a lot of concentration of wealth - and the tax system wasn't always the reason.
I think the reason is economic rents, and rents are specifically not capitalist.
The short version is that capitalism has a moral founding. What we now call capitalism can be pretty amoral, but that's our doing.
I'm hoping that a better understanding of rents can enable us to have a better capitalism. Principally, because I don't much think collectivism can be demonstrated to work, and collectivism is frequently seen as the answer to the excesses of what we call capitalism.
If we see income from rents as less morally defensible than income from work then that's possibly a method for getting closer to what we want. As it is now, they're simply "profit". Rather than taking two binary positions - pro and anti capitalism - perhaps the work that needs to be done is a better critique of it , and a refinement of terminology.
Finally, the ways in which we are unequal are much less ... physical than in the past. Capital itself has become more and more ephemeral, and it may be that returns to what I'd consider "real" capital - think a building full of lathes - is just as low as that to labor. So much inequality is due to the abstraction of control of capital.
So the top 1% earned 28% of the income, but paid 45% of the total taxes:
https://www.ftb.ca.gov/aboutFTB/Tax_Statistics/Reports/2013/...
If I eat a steak, the restaurant doesn't come to me and say "Hey, you make 10% more than the guy two tables down, so you'll pay 10% more for your steak".
Why did this sliding rule ever get enacted for taxation? If you use something, you pay for it at the established price.
Taxation is a generally accepted necessary evil way to fund projects and services for the common good. A progressive tax policy recognises that a person with a high income can bear a greater burden; taxing a minimum wage earner 30% of their income would have a much higher proportional effect on quality of life that someone earning, say, 200k. We seem to accept progressive taxation as fair, in the sense that it causes no more inconvenience to low earners than high earners.
The comparison with a private commercial service is flawed, in the sense that engagement with it is an entirely personal choice.
That's exactly what a lot of people are up in arms about, they get taxed hugely but get no real say in how the money is spent. Sure they get a vote, but if your candidate loses it's not as though you're exempt from paying taxes.
In some way these people are right; if they choose to engage in commerce they aren't being forced to do anything and as such "whatever the market will bear" is a good metric.
Taxes aren't about "whatever the market will bear" though because you don't have a choice to not consume and therefore not pay.
In other words, the state, by upholding the rule of law (particularly property law), is providing the ultra wealthy with a service of far greater value than that which it provides those with lower wealth/income.
Those who are high income in California are generally not wealthy (as opposed to everyone's favorite high income poster boy - the NY hedge fund manager), but are subjects to windfall effect - a few years of work at below market wages in hopes for a giant payback (royalties in Hollywood, stock options of a successful tech startup in the Valley).
It bothers me a bit though. I'd actually rather earn less and things be more affordable. The homeless situation in the city I moved to is truly insane and unsustainable. Tech companies drive up prices. I have a friend who lives in a neighbourhood where all the homes were around $100k when she was a kid; and now the same homes can go anywhere from $500k to nearly a million!
You see some of the average working class taking those big payouts and moving further from the city (and potentially driving more; increasing the traffic problem).
I'd rather earn less, my housing be more affordable and things be more equal for everyone. Supply and demand for housing really drive these crazy swings in gentrification.
Or is it just a commodity that we all utilize and is payed for with a flat rate, regardless of the value/un-value is provides?
Fyi, those sentences in your reasoning are already handled by a hypothetical flat tax percentage. It's the percentage that handles your cases as you stated them. For example, if a flat 15% tax was applied for everyone, the billionaire earning $30 million pays $4500000 in taxes, while the Walmart earning $20k pays $3000.
Mathematically, 4500000 is greater than 3000. In that case, the billionaire has paid more taxes which satisfies your reasoning.
On the other hand, the previous posters were emphasizing "progressive" taxes. That means that the percentages themselves are increased as income increases. Your rationale isn't specific to that. Probably the most common math rationale for progressive taxation is the concept of marginal utility of money[1]. In other words, a billionaire's $1 million of money made between $29 million and $30 million is less significant to him and therefore, can be taxed at a more "progressive" tax rate of 40% instead of 15%. On the other hand, the Walmart employees $1000 from $3000 to $4000 pays for food and rent and is not discretionary play money.
[1]https://en.wikipedia.org/wiki/Marginal_utility
In any case, what I said wouldn't be covered under a flat tax percentage unless that flat tax percentage were on wealth, not income. A person making approximately 20k or less currently pays no income tax, which makes sense, because there's virtually no way they can accumulate any wealth at that income. On the other hand, as you move up each income tier, the amount of wealth you can accumulate goes up progressively. So a progressive tax is a close enough approximation to a flat tax on wealth, which is what I'm arguing makes the most sense.
If you upped the tax to $10k, you'd still only be talking about $2tn, but you'd have huge swathes of the country forced into poverty as they'd be unable to pay it.
You'd need immense corporation taxes in order to make up the shortfall. Currently US business taxes make around 8% of the budget, compared to 36% for income tax. A flat dollar tax is nuts. The rich make their money from the labour of many, many people. They may only personally use the roads the same as others, but the thousands of their employees that need to drive to work need it a thousand times more. Without that, the rich would have no business. Ditto with healthcare. You need your workers healthy and they can't afford healthcare, you pay for it or you soon won't have many workers. $10k does not pay for much healthcare. Blindness to the social costs that are picked up by the government, does not mean that they don't exist.
The rich can pay a bit more and still be rich. They need to pay a bit more or they won't be rich for long, their workers and customers won't exist anymore.
Mind you I'm not a 1%er. Not that that should have any bearing. But indie media have their dead horse they like to climb on and it wears thin.
Some are. Some aren't.
Perhaps the idea that those that earn 28% of the income need to be taxed at 45% is an indictment on California's spending.
https://psmag.com/the-imf-confirms-that-trickle-down-economi... http://www.imf.org/external/pubs/cat/longres.aspx?sk=42986.0
lets call a spade a spade and treat tax like what it is, a protection racket. you are protecting yourself from two things: alien invaders and zombie hoards. health care, food, housing, and, entertainment keep the hoards from destroying your logistics infrastructures and disrupting transportation routes. it also keeps them just alive enough to keep buying what you are selling. defense, police forces, and tough crime laws reduce your risk of having your factories and warehouses bombed or burned to the ground. in short, you are paying for muscle and placation, keeping the peace. (edit: forgot, you are also paying for intellectual property protection, so your inventiveness cant be cloned or repackaged.)
why should the 'rich' pay the majority of the taxes? because it benefits them the most to have low crime healthy consumers. whose problem does it end up being if the 99% are unemployed, homeless, starving, diseased, and unable to consume. whose house slash bunker is going to get broken into, the person with nothing, or the person with years of survival stockpile? why should the 'rich' pay the majority of the taxes? because they are the ones with something to lose (a business, a family, a lifestyle), worth paying to protect.
all that said, im not defending the current tax code or federal government as an efficient or effective way to put that "protection/socialorder" tax to good use.
There's an entire cottage industry in places like Monaco, Panama or St Kitts & Nevis built on rejecting that thesis.
Additionally, is California with its high income tax rates significantly safer and healthier than states with no such tax, like Washington or Nevada?
EDIT: The responses are all assuming the tax is regressive. Note the POVERTY_LEVEL constant in there. And the tax rate itself could be progressive. 0% under 20k (if that's the poverty level), 15% on the next 30k, 25% on the next 50k, etc.
The real problem is the positive feedback loop where money buys political influence, which then results in laws that favor the already-rich at the expense of everyone else. Taxing consumption won't fix that. Taxing political contributions might fix it, but you can't do that because political contributions (a.k.a. bribes) are now protected under the First Amendment thanks to Citizens United. High marginal income tax rates or a wealth tax (or reversing Citizens United) are the only ways to fix the problem AFAICT.
How come? There are entire categories of consumption that open up with significant wealth? Private aviation, yachts, fine arts are all categories with spending heavily concentrated up top - a poor person is unlikely to own a proportional 1/1000th share of a Gulfstream jet or a Picasso.
Also, most jets are not bought by filthy stinking rich people, they are bought by businesses, mainly airlines, which operate on pretty thin margins. If you raised taxes on jets significantly you would probably put a lot of them out of business. If you tried to raise taxes on jets that were disproportionately bought by filthy stinking rich people they'd just go out and buy different jets to avoid the taxes.
On the other hand, if you're poor then just the bare necessities of life will cost a significant fraction of your income.
The only equitable taxation scheme is a progressive income tax and/or a wealth tax.
See this 2009 IFS report for the nuance in the context of UK VAT - in particular figure 10.1 and 10.2 (http://www.ifs.org.uk/budgets/gb2009/09chap10.pdf).
Often VAT regimes will not tax certain basic good such as bread, eggs, or essential household products, but in the UK most goods including many that you may consider basic have 20% VAT.
Someone being taxed say 20% on their consumption when their typical yearly consumption is $1 million has a much smaller impact to their marginal welfare than someone with a typical expenditure of $10k taxed at 10-15%. If someone has an income and consumption of $10k, then you probably don't really want tax them much or anything at all (you probably want to give them money/job/training/something!).
Provided you offset the increased taxation by consumption with increased services and benefits to the poorest, then you can mitigate most of the worst regressive effects.
"Gross income in United States tax law is receipts and gains from all sources" [0] This includes wages, interest, gains etc.
I'd like to see the same data with un-adjusted gross income.
[0]: https://en.wikipedia.org/wiki/Gross_income
Assuming you're not subject to the naive 'wealth is a pie' fallacy, why are you so bothered about inequality of wealth? As a non-rich person, I don't get it! Questions of power and influence on the folk who sit in government and have really massive sums at their disposal with little ultimate responsibility if they foul up - are much more pertinent but should and can be dealt with separately.
How much is enough?
We often hear that the wealthy should "pay their fair share." But we rarely hear a concrete figure.
Look. I work 3 jobs and bring in about $200,000 per year. I work hard and diligently for that money. I use it to provide for my wife and kids and our future.
And I paid nearly $60,000 in taxes in 2015.
I don't want to pay any more. I'm fed up with how much of my hard-earned income disappears by way of taxation.
More taxes subtract from my kids' future. More taxes subtract from dates with my wife. More taxes subtract from my retirement when I am old and unable to provide for myself.
How much tax is enough? What, exactly, is my "fair share"?
Everyone likes to demonize the rich 1%, but few concede the reality that we in technology are all rich. Heck, even the poor in the US are rich by the world's standards.
We "rich" people are not all demons whose money is an infinite fountain waiting to be sapped by those without. No: we work hard for that. And we have families. Some of us hold multiple jobs in order to provide for ourselves and our kids.
So I ask, how much is enough? Give a specific tax percentage you think I, as a husband and dad of 2 children, ought to pay to the federal government, and please tell us compellingly why you feel entitled to take my hard-earned money away from me and my wife and kids.
What matters if the percentage, not the total amount. Of course someone who earns $1 million a year would pay "more" in taxes than someone who earns $100,000 (at least I would hope they do).
[1] http://www.sacbee.com/site-services/databases/article9349178...
For the other 76%, all of that income may be spent on just food/rent/other essentials. Whereas the 1% have excess that they can save, or spend on luxuries. That's why tiered tax regimes exist.
NB. The definition of "needs" is obviously very debatable. The top 1% in California is defined as ~$90k, but given a median rent of >$4000/mth in SF, that skews the needs/excess taxable money argument considerably.
I don't really see a problem with tax brackets though (I'd rather see a formula though rather than discrete ranges).
I'd argue that a lower income bound and upper taxation rate should be established - say $20,000 and 60%. That means that no person earning less than the lower bound will be taxed and no person will pay more than the upper bound in taxes. Then it's just a matter of describing a curve that satisfies those two constraints.
Edit: this wasn't intended to be a 1:1 analogy of wealth distribution. It's just something interesting I think of about human nature when the topic is brought up. A lot of people outside the 1% will defend the 1%, there's nothing wrong with that, but I wonder if those people count themselves among the future 1% or even feel some connection to it for one reason or the other. I wonder if this skews our perception of wealth inequality and if wealth inequality is actually a graver threat because of such a shroud.
Now, he could build one house with his bare hands but then he would have one house to sell. OR he could hire another 4 people, build 5 houses and sell them all. Clearly in the second scenario he'd make far more money and create more. But in the second scenario, who are the "makers" and the "takers"? Maybe our hero had the creative drive so he deserves some extra credit, but surely the workers also did some making.
The idea of "makers" and "takers" that animates the Randian world view doesn't really make practical sense. To make something at scale, no matter your personal genius, you need lots of others to join you in that enterprise. And to have what you made be worth anything, you need a lot of people to buy it.
Bottom line: everyone is a maker and everyone is a taker, thinking about taxation in those terms doesn't hold up to moral or practical scrutiny.
Rand was constructing ... essentially Russian novels against the concept of collectivism. It's not particularly complete work. It's essentially propaganda.
And like it or not, her side in the debate mostly won. But that has nearly nothing to do with our present state of affairs - the headcount of Randians among SiVa is probably higher than in the economy at large.
Many wealthy people produce nothing, but society owes them by virtue of who they are.
Not sure I agree with that. Even in the US, we can point to slavery or even more recently discriminatory housing/zoning laws.
I'm sure someone with more knowledge than me can provide a better argument here.
That increase in pie, is the aggregate effect on the outstanding wealth. So, it could follow any such distribution that in the ends provides a net win. For example, automating some job will not increase the level of wealth of those who have now become jobless. It will undoubtedly increase the wealth of those who are now benefited by this automation, and in the end it will be a net win for the economy. However, those who were negatively affected see no benefit from this increase in the pie.
I believe that wealth is sometimes increased through tactics and strategies that negatively affect the wealth of other through mechanisms such as slavery, indentured servitude, extremely low wages and other situations that take advantage of the less advantaged (usually in 3rd world countries).
So yeah, the size of the pie increases, but those bigger slices are not appearing on everyone's plates, and often times people are ending up without any pie on their plate.
> According to a projection from the non-partisan Tax Policy Center, the top 1 percent of Americans will pay 45.7 percent of the individual income taxes in 2014—up from 43 percent in 2013 and 40 percent in 2012 (the oldest period available)... In 1979, the top one percenters earned 8.9 percent of pretax income and paid 18 percent of federal income taxes. In 2011, the top 1 percent earned 14.6 percent of income and paid 25.4 percent in 2011 of federal income taxes.
http://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-fede...
"Hey, look, this rich guy moved in to NJ! Let's hire more bureaucrats!... Oh, now he left! What should we do!?"
Nationally they have like 80% of the wealth: https://www.youtube.com/watch?v=QPKKQnijnsM
[1] http://www.sacbee.com/site-services/databases/article9349178...
Especially for governments that are bad at long term planning for tougher times.
The rest of the data don't really give a meaningful view either since they ignore California's 10% sales tax. According to IETP, California's tax system is proportional or even slightly regressive. (Higher-income earners pay a smaller share of their income as tax.)
http://www.itep.org/whopays/states/california.php
This happens constantly. I can't remember ever seeing a statement of the form "the top X% pay Y% of taxes" which didn't ignore a substantial set of taxes that hit the poor the most.
I think someone is out there manipulating public opinion on tax policy, and doing an amazing job of it.