The rich, the poor, and taxes: what’s a fair share?
Our friend Paul Krugman tackles the idea that the right is misrepresenting the facts when it says the rich pay a lot more in taxes than the poor:
The claim that only rich people pay taxes is a zombie lie ”” something that keeps coming back no matter how many times it’s killed by evidence…
Yes, high-income people pay the bulk of the federal income tax. But that’s not the only tax! And while the income tax is quite progressive, the payroll tax ”” the other major federal tax ”” isn’t; and state and local taxes are strongly regressive.
Krugman then offers a chart based on research by a group called the Citizens for Tax Justice (here’s a link to the more complete version of their charts and research).
I find this worth talking about because, despite the straw man argument with which Krugman begins his comment (“the claim that only rich people pay taxes”) and his later typical accusation that the right is purposely lying, he raises an interesting topic: how much should the rich contribute? How much do they actually contribute? And what is a fair share for rich and poor and everyone in between?
Of course, a book—or several—could be devoted to these questions. But let’s just deal with a post right now.
To start with, I noticed—by the title of the group offering the chart Krugman cited, “Citizens for Tax Justice”—it can hardly be considered an objective source (here’s the Board of Directors of its research arm, the Institute on Taxation and Economic Policy). But no matter; I don’t have competing figures from a truly objective source (are there any?), so let’s just work with what we do have (their figures, by the way, are based on a method explained here).
Krugman is absolutely correct that income tax is only part of the picture, and is progressive in the sense that income tax rates (not just amounts collected) rise with income. Capital gains taxes and estate taxes (and to a certain extent interest and dividends taxes) are similarly progressive, and are also borne disproportionately by the wealthy because the wealthy tend to be the ones with those assets. Then there is the payroll tax, which is arguably regressive (see this for the arguments pro and con), but is also at least theoretically not a regular tax but is instead supposed to go towards later entitlements such as social security and Medicare. Those are the major federal taxes involved.
State taxes fall mainly into the categories of property and sales taxes, and are not progressive. However, once again, if the rich own more property and buy more goods, they will pay more tax in terms of total amount, although not in terms of percentage of income or tax rate. Some states also have income tax and/or taxes on interest and dividends, which vary in their progressiveness from state to state.
I’ve often said that economics and finance are not my field of expertise, so I may be making some errors here in the details, but that’s my understanding (have fun correcting me in the comments section if you so desire). The point is that the situation is nothing if not complex, but the bottom line is that even Krugman’s charts, furnished by the left-leaning Citizens for Tax Justice, indicate that the tax code does result in the rich paying not only a great deal more money in taxes in the sense of total amount, but more in terms of percentage of income as well. Therefore the entire system is progressive.
Who are these rich? The charts don’t tell us, except in terms of quintiles of the population. If you look at the graphs, you will notice that the three lowest quintiles pay not only a smaller amount of taxes in general (not just income taxes), as one might expect, but a smaller percentage of income as well. In the fourth quintile that begins to change, and in the fifth quintile the percentage of income paid is considerably larger.
Krugman writes, “The overall system is barely progressive at all.” His point is obscure; the system is progressive overall, not just the income tax part of it. What’s more, he does not address the point the right makes, which is (a) that the rich contribute a huge percentage of tax revenues compared to their actual numbers, and (b) that the lower quintiles do include many people who pay no regular income tax (as opposed to payroll tax) and therefore have an incentive to raise income taxes for the rich only. Another point is that the left and many of these people would like there to be more outright income redistribution as a result.
One can either agree or disagree with that goal. One can also believe taxes should or should not be progressive. But right now our overall tax structure (not just the income tax) is already progressive, as even Krugman concedes. One of the differences between left and right is that the left thinks it should be even more so and the right does not. Here is a summary of the arguments pro and con; judge for yourself.
Perhaps the most interesting detail, however, is one omitted by Krugman’s charts, and that is what those top quintiles represent in terms of actual income. I’ve been unable to find a relevant chart for the year 2010, the one that corresponds to the chart Krugman used. But if you look at this chart for 2004, you will see that the fourth quintile starts at an income of $55,000 per household, the fifth quintile begins at $88,000, and the top 5% starts at $157,000. The figures may have gone up somewhat in the intervening years, but my guess is that they haven’t jumped substantially.
I don’t know about your definition of rich, but mine does not involve households earning $55,000 or $88,000. So we don’t seem to really be talking about rich people at all. We’re talking about basic, middle-class, working people—particularly married couples, who tend to be disproportionately represented in those top quintiles.
So forget the super-rich, those who have great tax accountants and shelters anyway, and can move abroad if they wish—how much more can the middle-class be tapped to support the federal government and entitlements? Isn’t that really the question here? Are these groups not already paying their fair share, and then some?
“The rich don’t pay their fair share”. This phrase has become a cliche. It’s said so often one would suppose “their fair share” must be a universal constant like pi, known to a zillion decimal places. So what, pray tell, is their fair share? How do the rich know when they’ve met their social obligations? When it comes down to it, I suspect that it’s a fuzzy-headed relative proportion: their fair share is always just a lot more than what they’re paying at present!
One thing, at least, which the Zombie Krugman does not consider: Earned Income Tax Credit/Child Tax Credit which reduces the effective proportion the lower quintiles pay.
I would like to see in depth discussions not of how much to tax the rich, but how much of the wealth of this nation the Federal government should be entitled to. Too many libs, like Krugman, come at this from the point that the Feds need X amount of income and the citizens should just provide it. Their assumption is that they know best how to use the wealth of the nation for the common good. It makes no difference to them that such an approach has proved wrong over and over again.
IMO, even the figure of 19% of GDP is a bit rich. I would like to see the government get by on 15% of GDP except in times of war. Defense of this country is the primary duty of the Federal government. No other entity can or should do it. In time of war I would suggest that War Bonds be sold and the money used only to directly support the war and nothing else. (I think Bush should have dione this.)
It has been proven that the Washington establishment is addicted to other people’s money. Increasing taxes to increase revenue is like giving a junky another ounce of coke. It just enables their habit. For that reason, I want no new taxes or increases in taxes unless the money can be earmarked for repayment of debt and not new spending. Call me when they come up with a plan to do that.
Here’s a graph from my favorite economics blogger (who I’ve mentioned before), professor Mark Perry, whose blog is called Carpe Diem:
http://mjperry.blogspot.com/2011/04/tax-rates-and-share-of-tax-revenues.html
It shows that when the highest marginal tax rate was 70% in 1979, the top 1% paid only 18.3% of the share of total income taxes collected. By 2007 the top tax rate was 35% (half of the 1979 rate), and the tax share of the top 1% had more than doubled to 39.5% (from 18.3% in 1979).
I think the takeaway is that the super-rich, those in the top 1%, will shift income to other periods, move money out of the country, or take whatever steps they can to avoid paying taxes when the rates go as high as 70% as they were in 1979.
Now, for something a bit off topic. But since it concerns Krugman and is tax related, I’ll post it anyway. Enjoy this open letter to Krugman from the Heritage Foundation, who apparently got fed up with Krugman using his platform at the NYT to unfairly criticize and demagogue the analysis Heritage did on Paul Ryan’s budget proposal.
http://blog.heritage.org/2011/04/18/an-open-letter-to-paul-krugman/
That Neo can bring herself to read Krugman testifies to something, but what?
I am way past the point of discussing or debating with these Krugmanesque roaches. It is futile.
The common theme of all modern totalitarian movements is the destruction of the middle class, that body of folks interposed between the grovelers and the elites. Pol Pot shot everyone with glasses, ‘cuz they could read. Stalin, Mao, Castro, Chavez, Peron, Adolf, blah blah; the bottom line is the same, only the details differ.
There’s some real confusion: the Income Tax was only EVER supposed to be applied to the super-wealthy.
Not even the rich — just the super-wealthy.
It was lowered drastically to pay for WWII.
I insist that WWII is over.
I further insist that WWIII is over. ( AKA Cold War )
We are on WWIV — but ’tis but a shadow of either WWII or WWIII.
So the threshold needs to return to its roots: incomes of $ 2,500,000 per year and below pay no tax. Above the threshold the rate is 6% on all income.
Zero out tax credits, refundable tax credits, etc.
——–
Unload Medicare to the states; un-Federalize it.
Eliminate chain migration and anchor babies.
Break up the Money Trust.
Raise the retirement aged to 70 ASAP and then on up to 73.
Zap the department of Energy. Phase NASA out of the rocket designing business.
Scrap any plans of going to Mars — with astronauts. It’s pre-mature.
Straighten out HUD.
Krugman is a savant-idiot. It takes a PhD to actually believe his spew.
Pardon the following screed, but this touches a major nerve!
First and foremost, the “rich”and their taxing is never concretely defined by those leftists who wish to raise the taxes on the “rich.” As Neoneocon points out, 2004 figures allow one to draw the conclusion that $55k/yr is “rich.” The left never defines this because their purpose is not to specifically identify a particular income group, but to instill class warefare at ALL economic levels. In other words, a rich person is anyone who makes (or owns) more than you. As Dave (above) points out above, what’s their fair share, then? Simply put, more than they’re paying now (now being ANY point in time).
But lets talk payroll taxes and social security to see how the left screams about class warfare, but insidiously digs into the pockets of the middle class. When social security was initiated in 1935, the full retirement was set at Age 65. At that time the ave. life expectancy was 59.9 yrs for men and 63.9 yrs for women. Keep in mind that this is an average, so for every male worker who actually reached age 65, there was a male worker who died at 54.8 (or a female who died at age 62.8). This progressive system was planned so that most workers would pay into the system, but in fact, never collect much of a benefit, if any at all.
Now, how is it funded? Of course, it’s funded with payroll taxes. Whose income is primarily paid through payroll? Why, workers of course. The wealthy receive much more (if not all) of their income from bond interest and capital gains, which are not subject to payroll taxes. So the system was planned to allow govt to reach into WORKER’S pockets (payroll) to pay for a social security program from which the bulk of those workers would never have the opportunity to collect.
This is the way the progressives designed the system. Bernie Madoff would be proud.
Now let’s look at a recent attempted re-incarnation of this Ponzi scheme. In 2008 when Obama was running for president, part of his “tax the rich” mantra was to suggest eliminating the limitation of income on which payroll taxes are levied. Now most workers didn’t care, because most workers didn’t make near the $102,000 (in 2008) where social security taxes stopped.
But here’s the deal. There are two halves to social security taxes the worker pays 6.2% and the employer pays another 6.2% on behalf of each worker. Now when you eliminate the wage base for taxation and collect payroll tax on ALL payroll, the employer as well as the effected worker must pay more. Now, how many people in your municipality make more than the social security wage base? Your mayor? Your alderman?, your city councilman/woman? Their employer, the municipality would have to cough up additional funds for this increased employer’s share of the higher payroll tax contribution. Multiply this by the number of municipal and state employees making more than $106,800 (wage base in 2011) and ask yourself, just where is my municipality/state going to get this extra money to pay the fed?
Where do municipalities and state govts get their revenue? Income taxes, sales taxes and PROPERTY taxes. Soooo guess what? Your property taxes and perhaps other taxes would have risen if Obama’s plan had been implemented. The fed would have been increasing the tax burden on the “rich ” (those making >$106,800/yr) and you/we, the citizen property owner, would have been stuck with the bill, not even realizing why your municipal taxes were increasing while many workers would demonstrate in front of their state capitol building in support of “taxing the rich” even more! Perhaps the next union protest sign we see might read “Tax The Rich Even More! I’m Not Paying Enough Taxes Yet Either.”
Bernie Madoff’s great mistake was never having been a politician like John Edwards, Chris Dodd, Barney Frank or Charlie Rangel. Bernie’s in jail; these guys still get re-elected.
By the way, in an article some years ago, Krugman called Social Security FDR’s most enduring legacy. That he should see a bankrupt Progressive Ponzi scheme which digs into worker’s pockets as an enduring legacy implies much about the economic advice he had given to Enron, his former employer.
I’ll tell you who doesn’t pay their “fair share” – it’s the poor. They’re free-riding on the rest of us, and voting to get more to boot.
Everyone – everyone – should pay some tax, and it should scale with the general level of taxation. Either that, or those who do not contribute either monetarily or in kind (i.e., in the military) should not be allowed to vote.
To do otherwise presents a severe moral hazard, because those not paying any tax have every incentive to vote to raise taxes on those who do. And that’s just wrong. As that great thinker Earl Butz said, “You no playa the game, you no maka the rules.”
Oops. Neglected to close the italics. Sorry.
The kind of discussions are difficult because the terms are undefined. Not just a question of who counts as rich, but more vitally, where the burden of any tax ultimately falls.
The tax code is used to influence behavior. How do we measure and distribute that burden? Calculating tax burdens and tax incidence is a sub-discipline of economics.
Ordinary people talk of tax shelters like they are something arcane. But they’re merely more detailed versions of itemized deductions and tax credits, just like most filers can choose to use. The home mortgage interest deduction, for example, it a tax shelter.
Working with mortgage deductions as an example, the shelter reduces the cost of owning houses, and shifts demand for houses up. So anyone who generates and income in the housing industry benefits. And everyone outside the housing industry or who does not pay much mortgage interest (renters) suffers.
That sort of thing is not revealed in the linked graphs. Krugman rarely touches on the complexities the ripple out from messing with a modern economy. The whole argument is just for funsies; it’s like trying to describe organic chemistry via 140-character tweets.
But even the linked graphs fail to account for distributing the effective tax burden in less philosophical terms. Take a corporate tax. In order to decide who ultimately loses, we have to first decide if that tax causes higher prices or reduced profits. Or perhaps a mix.
Then do those higher prices fall on the rich or the poor? Depends on the product. Do the reduced profits reduce the income of the rich or the poor? Depends on how the company’s ownership is structured. Reduced profits on something held in your 401K mutual fund means the ultimate burden falls on the ordinary person. Just a little tax burden per person, but there are lots and lots of ordinary people.
I say Henry George has the best argument. Taxes are always paid by labor at the moment of production. All the accounting games that tax codes inspire only mask that fact. You cannot tax the rich, you can only tax the more productive. And how is that ever just or fair?
Taxes, what’s fair, what isn’t, how much, and who pays are complex questions. But, it is also very simple. The federal government (the fed) is ‘supposed’ to have limited responsibilities. It was not installed to be anyone’s mommy, daddy, or nosey old aunt.
10th: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
Along the way, we as a society have forgotten who we were. Taxes beyond a certain level (I’m not offering my take on what that means because I’d have to type more than I am willing at this time.) are robbing Peter to pay Paul. Why should someone who is ‘rich’ pay a larger percentage than someone else who is ‘poor’? Does the ‘rich’ person receive more government services? Does the ‘poor’ person receive less government services? The answers are no, and no.
Occam’s Beard has it right, “I’ll tell you who doesn’t pay their “fair share” – it’s the poor. They’re free-riding on the rest of us, and voting to get more to boot.”
Correct.
Another element that needs to be included in the discussion is what the various income groups contribute to society. To achieve a high income one must, unless one is on the public payroll, produce a product or service others are willing to buy with money from their own pockets. Others are willing to enter the exchange only because they feel they receive value in some product greater than the money they give up. The person making a million a year is being paid by someone who thinks they are receiving value in excess of a million a year. So the rich, by definition, are already contributing greatly to society. The poor, in contrast, are poor because they contribute little or nothing anyone else finds valuable. Yet it is the rich who are then supposed to disproportionately pay the taxes.
The left often uses the phrase, “give back to society” when they try and extract wealth from the productive. The productive have already given to society. We should show some gratitude.
Remember the Laffer Curve. The logic behind it was indisputable: If tax rates were zero, tax collections would be zero; if rates were 100%, tax collections would also be zero. So the question focussed on the shape of the curve between zero and 100%. The data cited by Scott, clearly supports the long-held view that the curve is “pear-shaped” with revenues bulging at the “lower end”. The tax and spenders’ view is of an up-side down pear with tax collections increasing as rates increase. Never was true; never will be true.
Foxmarks,
You are correct; taxation influences behavior. This simple fact is what the “tax the rich” leftists simply refuse to accept. Thy believe that by raising taxes they increase revenue. In fact, they suffocate the economy which reduces the sconomic pie which net out at about the same (larger %age on a smaller whole= same tax revenue).
Evidence aqbounds and the left refuses to accept it. John Kerry docks his new yacht in Rhode Island to avoid $500k in taxes; taxation influences behavior. Clinton imposes surcharge on luxury autos and yachts, yacht demand falls, workers are laid off, less income to tax; taxation influences behavior.
For those who would doubt the relationship try this simple exercise. Say the president declares a one-year tax holiday; no income or payroll tax. Conversely, say the president declares a one year taxation of 100% of income. Under which declaration is the incentive to earn money (i.e., be productive) greater? Which declaration results in the more productive economy?
Now clearly neither extreme is good for the govt; lots of production but no tax revenue vs. 100% of potential tax revenue, but no production to tax. However, the closer we get to a tax holiday the more incentive there is to be productive the tipping point is closer to 0% tax than 100% tax. In fact I have mentioned before that history shows tax revenue to be stable at about 18.9% of GDP regardless of income tax brackets. Should we perhaps call that the John Galt constant?
and OB,
I agree with you completely, it is important for all Americans to have some skin in the game. I do not dislike the concept of only taxPAYERS (not taxFILERS) being able to vote.
jvermeer,
an interesting point, but I think it breaks down when you consider the “trust fund” babies like the Kennedys. Their family long-ago stopped contributing to this country’s economy; I mean that in the sense of prodviding a product or service. They live off of the gains and growth of the productivity from an earlier generation.
That they game the system goes without saying. How else could they transfer immense wealth to 3 successive generations each subject to an estate tax of 55%? Like unindustrious poor at one end of the economic spectrum (not that ALL the poor are unindustrious), they are the unindustrious wealthy at the other end of the spectrum and their contribution to our country is also minimal in many cases.
By the way, nice paintings!
The ‘krug” is a zombie.
You can prove him wrong, but he bounces back.
Scaling down the scope of the feds’ involvement in society is what must be done to promote fiscal responsibility and individual liberty. This means eliminating all fed involvement in education, agriculture, welfare, and health care (as a start); reforming social security (I’m resigned to the idea it can not be eliminated); and cutting DOD expenditures by 20% (most off shore installations need to be closed down, along with an orderly withdrawal from Iraq & Afghanistan) are all necessary. The feds should not, except in the case of a declared war, consume more than 5% of GDP. Stop feeding the monster.
10th: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
Its up to us at the state and local level to determine what we want to do about education, health care, welfare, etc. Get DC off our backs and out of our pockets.
Why are you perpetuating Krugman and his lies? Why are you wasting your time explaining why some reason may exist in Krugman’s lies? Why do you waste our time exposing Krugman’s lies?
Krugman knows he is a liar. He knows what is being said by those who show tax contributions by income.
There is no question that high income earners pay more taxes. The reason social security is not included is simple, the benefits one receives upon retirement are based on tax paid.
A little advice, stop referencing Krugman. He is a liar that cares not one wit for the truth.
T offers the “Should we perhaps call that the John Galt constant?”
I understand your reference to a historical percentage of GDP, it is accurate throughout most of the 20th century, but IMO your John Galt constant is too high. The feds consuming close to 20% of GDP is far too much. I want it to be lower than 10%, but if we can’t get it into single digits, a 10% cap is necessary. Many, if not most, of the problems in society are a product of DC becoming involved in issues that are not within the limitations imposed by the Constitution.
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
Parker,
Funny you should mention that. The number I’ve quoted (18.9%) for Tax Revenue/GDP is from the reading I’ve done. When I calculate this “Galt Constant” myself, using date from about 1935, I get 16.5%; a lower number, but not as low as your 10%.
Clearly, as mentioned above, we must starve the beast (the nanny state). After nigh on 70 years, however, this will require a paradigm shift and this will not happen overnight. I am empathetic, however, to your keeping the govt out of our lightbulbs and out of our toilet tanks.
Bee,
I agree Krugman is a devious and nasty person. He’s not a zombie, he’s a clever vampire. I regard his every inhalation as a waste of atmosphere. But knowing what Krugman says is useful.
“”To become the enemy, see yourself as the enemy of the enemy.”
“Know your enemy, know his sword.”
“The important thing in strategy is to suppress the enemy’s useful actions but allow his useless actions”
Miyamoto Musashi
My first Japanese instructor drilled this into my head: Control the enemy’s strength by inviting the enemy to attack what he perceives to be your weakness.
The concepts of jujitsu are priceless.
Bee: I believe I answered that question in the post, if you take the trouble to read it. It’s not about Krugman. It’s about the fact that I think the question of fairness is interesting. I also think some of the things I discovered in researching the post are interesting, such as what the quintiles actually represent.
T,
Regarding trust fund babies, e.g. the kennedys. They live off income from a trust, which would be principal provided capital markets. They therefore provide a product to others. They might devour their principal in even more debauchery, alcohol and drugs than they have but, old Joe, being wise to the character of his clan, no doubt structured the trust to save them from themselves.
Merchandise Mart…
The location from the Fugitive movie…
Is the Kennedy’s nest egg.
It’s also mob connected — like the rest of the Kennedy fortune.
You must know that the rag trade has been compromised by the mob for more than a century.
Review “Who’ll Save the Tiger” ( Jack Lemmon )
So you have an ENTIRE industry paying annual tribute to the Kennedy clan by way of the Merchandise Mart.
If you peak under the carpet, you’ll find that the MM gambit is rife with payolla to the mob and associated Chicago unions.
The mob is the real reason that the industry has not taken their annual show to Vegas….
Another mob run town — at least back when.
T says, “Clearly, as mentioned above, we must starve the beast (the nanny state). After nigh on 70 years, however, this will require a paradigm shift and this will not happen overnight. I am empathetic, however, to your keeping the govt out of our lightbulbs and out of our toilet tanks.”
I think we may well be headed towards a ‘perfect storm’. IMO we have a very narrow, and rapidly closing, window of opportunity. In the best of circumstances it will require more than overnight (3 to 5 years?) to shift the paradigm of conventional wisdom. This will require breathing space. In other words, Ryan’s proposal is accepted in totality within the next 6 months.
In the worst of circumstances, all bets are off. Based upon all that I can ingest and comprehend, we are tittering on the edge of an abyss. As history has shown, once the panic starts no one can predict where it will end (DJIA at 300, oil at $500, wheat at $15, corn at $20, soy beans at $ 30, gold at $3,000?). Think about the crash of tulip mania and multiply it by 10E12. All of this is possible unless we severely tighten our belts.
“A fair share” simply depends upon whether you support equality of opportunity, or equality of result.
Walter Williams nails it:
This year, Congress will spend $3.7 trillion dollars. That turns out to be about $10 billion per day. Can we prey upon the rich to cough up the money?
According to IRS statistics, roughly 2% of U.S. households have an income of $250,000 and above. By the way, $250,000 per year hardly qualifies one as being rich. It’s not even yacht and Learjet money.
All told, households earning $250,000 and above account for 25%, or $1.97 trillion, of the nearly $8 trillion of total household income. If Congress imposed a 100% tax, taking all earnings above $250,000 per year, it would yield the princely sum of $1.4 trillion. That would keep the government running for 141 days, but there’s a problem because there are 224 more days left in the year.
How about corporate profits to fill the gap? Fortune 500 companies earn nearly $400 billion in profits. Since leftists think profits are little less than theft and greed, Congress might confiscate these ill-gotten gains so that they can be returned to their rightful owners.
Taking corporate profits would keep the government running for another 40 days, but that along with confiscating all income above $250,000 would only get us to the end of June. Congress must search elsewhere.
According to the Forbes 400, America has 400 billionaires with a combined net worth of $1.3 trillion. Congress could confiscate their stocks and bonds, and force them to sell their businesses, yachts, airplanes, mansions and jewelry. The problem is that after fleecing the rich of their income and net worth, and the Fortune 500 corporations of their profits, it would only get us to mid-August.
link:
http://www.investors.com/NewsAndAnalysis/Article/568737/201104111831/Tax-The-Rich-Good-Luck-With-That.aspx
Ben David,
Bill Whittle did an excellent video of this on PJTV.
Ben David:
Walter Williams sourced Ben Whittle on RCP. But Whittle’s “Eat The Rich” piece began on PJTV, wherein he correctly noted his own source, the great Iowahawk.
Which makes me wonder about how deeply Williams digs before writing.
The simple-minded socialist left believes that if government owns and runs all businesses things would cost less because “profits go back to the people”. Give me more capitalist “greed”; it’s socialist/communist greed that destroys us. Old joke from Soviet Union days: Comrade, what would do if you had two cars? I’d keep one and give one to the state. What would you do if you had 10,000 rubles? I’d keep 5,000 and give 5,000 to the state. And,what would you do if you had two pairs of pants? (No answer.) Why aren’t you answering? I have two pairs of pants.
Just one footnote to this learned discussion. “Payroll taxes” is a relatively new term. I believe that it came into vogue when the Left needed an argument to show that the poor, who pay no income tax, are indeed taxed. Previously, these were considered with holdings were considered “investments”. Krugman, and his like, also ignore that FICA with holdings are matched by employer contributions as part of an “investment” for the wage earner’s future. (I made a joke)
The usual knock against a national consumption tax is that it would be regressive. That would not necessarily be true, depending on how the tax was levied. In Virginia the sales tax rate for food stuffs is already 1/2 of the tax on other commodities. Medicines are not taxed. Assuming that lower income individuals spend a higher percentage of their income on those items, they are protected.
What is fair depends on whether you’re a lion or a sheep.
I am inclined to highlight the leftoid relativism, and how that contradicts the idea that there can be any absolute fairness. But they get around that dilemma through their faith in
mobmajority rule (which is always given a sheen of virtue by calling it “democracy”).If the lions win the election, what happens to the sheep is fair.
The Austrian School’s answer seems more robust. Fair is what happens when everyone is free to choose.
T:
Last week I heard a Progressive radio host tell his audience–on this topic of taxation–that incentives do not matter. Swear to god, that quintile of the population believes the rich would just pay more if rates (and “loopholes”) were changed.
Foxfire,
What a ridiculous assertion by the radio host. I guess s/he volunteers his/her time 40 hours/week.
Sorry, that should be “Foxmarks. My apologies
You are correct; taxation influences behavior. This simple fact is what the “tax the rich” leftists simply refuse to accept.
Oh, they accept this fact all right, in other contexts. I cite their arguments for CO2 taxes. They understand the principle perfectly well. They just refuse to apply it sometimes, for reasons that I do not understand.
OB,
That’s an excellent point. It requires that we look past simple ignorance. Tus, if the left is suffocating the economy through vile and ineffective economic policies, then it must men that they are intentionally creating a substandard economy. This raises makes the classic observation about socialism being “shared poverty” from a casual criticism to a description of its very essence.
OB,
I’m sorry, let me try that one more time for readibility:
That’s an excellent point. It requires that we look past simple ignorance. Thus, if the left is suffocating the economy through vile and ineffective economic policies, then it must mean that they are intentionally creating a substandard economy. This raises the classic observation about socialism being “shared poverty” from a casual criticism to a description of its very essence.
T
The economic principles and policies of the Left are vile indeed. But hardly ineffective in achieving their goals. Pretty damn effective. They mean your doom.
OldFlyer – you wrote what was on my mind. There was a real resistance years ago to calling payroll deductions ‘taxes’. The fact that the terminology has changed alerts me to the fact that the Left is trying something new, again. I wish we could just live our lives without having to fight off these vampires/blood suckers.
http://iowahawk.typepad.com/iowahawk/2011/03/eat-the-rich.html
Enough said!
Tax not me, tax not thee, tax that man behind that tree.
Tax “fairness” is just a euphemism for getting someone else to pay more taxes. The only thing that would be “fair” is to pay for what you use. Anything else is just someone taking from someone else.
Here’s what I would consider fair (and very free market): Provide people with a weighted vote that rises in direct proportion to the taxes they pay. My theory is that the rich will vote for people who lower their taxes and then they will not have as many votes the next time around. Eventually, you would get to a free market version of fairness.
1. IMO Neo, Oldflyer, JuliB et al have nailed the Left’s scam:
a. Divert payroll deductions into the general fund instead of sequestering them for their intended future use.
b. After such diversion is taken for granted, redefine such deductions as taxes.
c. Use the redefinition to claim that taxes are not progressive enough.
2. The Right is not blameless because it acquiesced in step (a).
3. This is yet another example of how our government routinely abuses its power, whether legislated or discretionary. When the government demands or asserts power to address a problem or “crisis”, it does so with the intention of extending that power beyond its ostensible limits. In the lower ranks of the ruling class, that intention may be subconscious; at executive levels, it is deliberate and sinister.
progressive tax is the same as soviet tax, communist tax etc..
a flat 20% tax would achieve more than the progressive tax… which pretends to get the wealthy, but actually allows them through all the complex compromises pay little
ie… the power elite pretend to tax the wealthy but give it back in behind so that the wealthy dont oppose them with their money.
so a progressive tax is a way to tax maximally the small person, while pretending the opposite (inversion).
with the now starting hyperinflation taking the rest of it and leaving their property easy to buy and work.
big problem is that wars require funding, and if our credit is gone, we are broke, and vulnerable with no recourse but to surrender
Good to know I’m not forgotten in my silence, T. ^.^
The Fair Tax, in and of itself is not a bad idea, and it accounts for the regressive nature of itself with a “kickback” scheme for life’s basic expenditures.
However, I will point out that not one single proponent to the best of my experience calls for connecting The Fair Tax to a repeal of the 16th Amendment (the one essentially allowing for the Income Tax).
DO NOT TRUST THE GOVERNMENT. Demand that ANY “Fair Tax” >>> MUST promise to end it after that”” — and that “end” will NEVER come.
And you will wind up with BOTH the “Fair” (now decidedly unFair) Tax *and* an Income Tax.
I have raised this concern with Fair Tax proponents. Almost to a man they say, “Let’s pass it and we’ll worry about that later…”
JUST SAY NO.
Make that “F*** NO!!!”
Insist that the Fair Tax be tied to a full and complete repeal of the 16th, not just an “abolishment of the existing tax code and the IRS”.
Otherwise, I’ll come back from the grave
**, and haunt each and every one of you for supporting it until you publicly recant and say, “He warned me quite plainly and clearly exactly what would happen, but I was a total and complete fool, and so ignored him”.
;-D
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** While I may see the passage of such, I don’t really expect to live long enough to see the results I predict. So don’t bet against me being unable to come back to follow up my word.
(8^D
Sorry, useless POS html interpreter ATE part of the above:
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DO NOT TRUST THE GOVERNMENT. Demand that ANY “Fair Tax” **** MUST **** be absolutely and directly associated to the repeal of the 16th!!!
Otherwise, any experienced individual will see exactly what is to follow — some “fiscal crisis” requiring a “reinstatement” of the “income tax” ””Just For The Duration Of The Emergency — we promise to end it after that”” — and that “end” will NEVER come.
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The great Dr. Sanity wrote a piece dealing with one aspect of this whole “Rich Bastards” thing that most people are entirely unaware of (emphasis mine):
BAD ECONOMIC THINKING–A HALLMARK OF PROGRESSIVE POLICIES
Be sure to read the linked piece that the Doc references for a clearer understanding of how blatantly misguided the entire idea is.
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Yeah, there are the “super rich” that pretty much stay that way — the Kennedys, the Rockefellers, the Vanderbilts, and so forth. But they aren’t the ones these taxes hit — they have “Tax Free Foundations” in which to hide their money.
Look at the history, these Foundations were created and passed just before the income tax was created — so much for the “soaking the rich” that the income tax was passed based on in the first place… eh?