Comments on It's Time For the Poor to Pay Their Fair Share

Scott commented on 'It's Time For the Poor to Pay Their Fair Share'

Scott — Tue, 16 Dec 2008 15:56:16 -0700

Haven't looked into it much, but it sure would lead to a vibrant black market for goods and services.

edwojna commented on 'It's Time For the Poor to Pay Their Fair Share'

edwojna — Tue, 16 Dec 2008 11:59:53 -0700

Scott...any thoughts on sales tax only?

Scott commented on 'It's Time For the Poor to Pay Their Fair Share'

Scott — Tue, 16 Dec 2008 10:02:25 -0700

Realistically, I would expect a flat tax to be in the area of 18-20% initially. That being said, I don't think it would stay anywhere near that level for long. The purpose of higher taxation in this country has nothing to do with creating revenue. proponents of higher capital gains, for instance, know that raising the capital gains rate doesn't typically increase revenue and vice versa.

Many nations are having great success with low flat tax rates. Most nations are currently in the 10-15% range. This is an interesting piece on the subject:

http://www.freedomandprosperity.org/Papers/flattax/flattax.shtml

I think the position for lowering taxes is strong anytime the current rate is hurting the economy and/or creating a situation in government where there is the ability to wield (or abuse) extreme power. When government has the power to make or lose someone significant portions of their income based on a single policy, government has way too much power - and will become all the more corrupt.

When most Americans pay over 40% of their income in some form of tax, we have a major problem, a bloated government and a society that is less free. And, as noted, I would say the same all the way down to 10%.

I also believe government revenue would be equal to or greater than it is currently, within 5 years of implementing a flat tax of 10%.

Greg Bearth commented on 'It's Time For the Poor to Pay Their Fair Share'

Greg Bearth — Tue, 16 Dec 2008 09:14:31 -0700

I agree with your list of actions taken by people feeling over-taxed.

Bitching and moaning seems harmless enough.

Increasing use of tax shelters could be desirable or undesirable. For example, increasing donations to charity would be desirable.

Under-reporting income and resorting to black market are undesirable.

Investing money seems to be more related to the capital gains tax than income tax, but avoiding behaviors that are highly taxed could be desirable, undesirable, or neither. Using your Reagan movie example, our society is not worse off because Reagan refrained from making more than three movies per year. I fail to recognize the problem if Reagan makes three movies and he and his family are safe and comfortable, and then someone else makes the next three movies and he and his family are safe and comfortable, and so on. An accounting consultant tried to make the same point during a discussion sponsored by my local newspaper. He said he stops accepting work at some point due to the tax liability. But again, unless one person is somehow uniquely qualified for a task (a rare occurrence I suspect), society doesn't care which individual performs the task as long as it is performed in a competent fashion.

And yes, lobbying for tax reduction when the top rate is 70% or even 90% is a much stronger position than when the top rate is less than 40% as proposed by Obama. You may not be able to answer this given your proposal for a flat tax of ten percent in this posting, but given our current progressive tax brackets, what should be the top rate?

Scott commented on 'It's Time For the Poor to Pay Their Fair Share'

Scott — Mon, 15 Dec 2008 23:12:18 -0700

Greg -

In some ways I of course agree that effective rate is more important. I don't view sales taxes the same way that you do, in that they are forms of discretionary taxation. You can choose to pay a lot of them or you can use their existence as a reason to invest and save more.

Payroll taxes were invented by people who necessarily disagree with all of my beliefs on taxation, and are therefore irrelevant to me. If people didn't disagree with me they wouldn't exist, so I'm not going to allow their existence to be used by the very same people to argue in favor of progressive tax rates. If their existence is a problem that needs to be accounted for, then they should cease to exist.

As far as stopping production, when people believe they are over-taxed they do one or more of a number of things. Either they bitch and moan, or they increase their usage of tax shelters, or they under-report income, resort to the black market, invest less money in behaviors that are highly-taxed, etc. Me, I play more poker, where my income is whatever I say it is.

I recall how Ronald Reagan would stop making movies after his first three every year, because any income after that was taxed at 90%. He felt it wasn't worth his time to work anymore.

If you read my "It's Time to Soak the Poor" piece, even though it is somewhat tongue-in-cheek, my belief that your income reflects your monetary contribution to society is not. I don't buy the argument that the people who are already giving the most (both in taxes and in productivity as measured by dollars) need to be giving more.

The government needs to be taking less.

Greg Bearth commented on 'It's Time For the Poor to Pay Their Fair Share'

Greg Bearth — Mon, 15 Dec 2008 19:45:33 -0700

Scott, can you elaborate on "Stop producing (in the case of individuals with their investment dollars)"? I'm not confident I understand what you mean.

Do you agree with my contentions that the statistics concerning percentage of total income tax paid is incomplete, and inferior to effective tax rate?

edwojna commented on 'It's Time For the Poor to Pay Their Fair Share'

edwojna — Mon, 15 Dec 2008 18:00:06 -0700

Not exactly on topic, but I have always been a fan of having only one tax...sales tax. For those of you that are new to this concept let me explain it. No Income tax. No Gift tax. No Luxury Tax. No Hotel Room Tax. If you make 10 bucks an hour and work 40 hours, you bring home a 400 dollar paycheck. Period. Increase sales tax to 20 or 30 percent, or whatever is necessary to run the country. (Different ways to run the country can be debated elsewhere). What does this do for America? It's simple. If you are rich and think you are being taxed too much, don't buy anything this year. Boom, no taxes. If you really really want that 1500 dollar TV, or that 30,000 dollar car, save up a little extra to pay the sales tax on it. If you are a drug dealer, gambler, waitress, pizza delivery driver, or other member of society who makes untaxed income, you will be taxed on the purchases you make. The only problem I can see with this tax is that it would have to be implemented on a nationwide level. Otherwise "border hopping" for goods with cheaper sales tax will kill the system. I would love to see thoughts and comments on this.

Scott commented on 'It's Time For the Poor to Pay Their Fair Share'

Scott — Mon, 15 Dec 2008 17:30:10 -0700

Instead of taking solace in the fact that they could be getting screwed harder than they currently are, Greg, high earners will continue to do what they've always done when they feel over-taxed. Stop producing (in the case of individuals with their investment dollars) or move their companies overseas (in the case of businesses.)

Greg Bearth commented on 'It's Time For the Poor to Pay Their Fair Share'

Greg Bearth — Mon, 15 Dec 2008 15:14:15 -0700

I contend the percentage of total income taxes paid by a certain percentage of income earners is an incomplete measure of whether a fair share is being paid for at least two reasons.

First, it ignores the percentage of total income received by the group (which I guess is like trying to determine what portion of a bar bill an individual should fairly pay without considering the beverages consumed by the individual). In other words, if the top 1% of income earners earned 90% of the income (they don't) and paid only 40% of the income taxes, then wouldn't you conclude this elite group is not paying their fair share? Even your proposed flat tax could also be rendered unfair by this incomplete measure. If you and I were the only two income earners, and you made $50,000 while I made $1,000,000. You would pay $5,000 in income taxes, while I would pay $100,000. Under your flat tax proposal, the top 50% (me) paid 95+ percent of the total income tax. Would that be fair? Isn't it clear the more relevant statistic would be the effective tax rate, which means the total income tax paid divided by total income?

Second, income taxes aren't the only taxes citizens pay. Lower income people pay a higher percentage of their income relative to high income earners in other taxes, such as payroll taxes. High income earners tend to have more capital gains, which is taxed at a lower rate than their income.

All is not lost for your argument though. According to this Congressional Budget Office document (http://www.cbo.gov/ftpdocs/88xx/doc8885/12-11-HistoricalTaxRates.pdf), in 2005, the top 5% garnered 31.1% of the income while paying 60.7% of the income taxes and 43.8% of all federal taxes. Further, the top 5% paid an effective tax rate of 28.9% while the middle 20% paid an effective tax rate of 14.2%. So, there is some evidence that the highest income earners are paying their fair share. It just isn't as dramatic as the evidence you originally cited, and of course, it depends on your sense of fairness.

In my humble opinion, a progressive tax is ideal. It simply enforces the notion that as one benefits incrementally more and more from our economic system, one should contribute incrementally more and more back to the system. I hope all the high income earners who find our progressive tax system punitive, take some solace in knowing it is remarkably easier to move down the taxable income ladder than it is to move up.

The Daily Elitist commented on 'It's Time For the Poor to Pay Their Fair Share'

The Daily Elitist — Sat, 13 Dec 2008 19:16:38 -0700

The top earners in America are, and have always been, inordinately responsible for American prosperity.

You guys assert that there's a tiny, wealthy elite from whence all good things flow, and in the same breath have the gall to say that liberals are "elitist." That's some powerful double-think, I'm telling you.

And for the record, American prosperity is and always has been driven by innovation - by the working poor and middle class who create new and better ways of doing things, not by the idle rich who merely sit back and collect interest on their fixed income securities.

Scott commented on 'It's Time For the Poor to Pay Their Fair Share'

Scott — Sat, 13 Dec 2008 16:13:17 -0700

I'm equating earning money with providing value, as what you earn is (by definition) what society is willing to pay for your contribution. Whether you deem providing the service of brokering deals a valuable service or not is up to you. But it doesn't change the fact that someone finds that service to be worth what the broker is being paid.

I couldn't care less how hard someone works. What matters is what society deems the value of that work to be.

Mike commented on 'It's Time For the Poor to Pay Their Fair Share'

Mike — Sat, 13 Dec 2008 03:01:36 -0700

"Taxing all income for all people would nearly eliminate the group of people that live off the efforts of others."
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You are committing a logical fallacy here. Work and income aren't the same thing. A person who is, let's say, a stock broker, is arguably, "living off the efforts" of the $6 per hour maid who cleans her house. Even if a person who earns $12k per year (while supporting 4 kids) isn't paying tax, the woman who earns $300k per year and hires her to clean her house is certainly "living off the efforts of" her cleaner. You're (for some bizarre reason) equating "earning more money" with "efforts". But that obviously isn't always the case.