Time for Super Taxes for the Super Rich?

Figures in second to last paragraph should be $700 Billion, not $700 million.

Some $700 Billions here, some $700 Billions there, and before you know it, you’re talking real money!

Yep, $700 Billion is just the approximate budget of the Department of Transportation over the same time period (ten years).

Stephen, your article seems to be based on beliefs, none of which were substantiated with evidence. These beliefs seem to be:
1. Federal deficits should be reduced.
2. Taking more money out of the economy, by raising taxes on the rich, will benefit the economy.
3. Closing the gap between rich and poor not only is beneficial, but should be done by taking money from the rich rather than by giving money to the poor.
.
What evidence exists that the economy will benefit if the federal deficits are reduced?
.
What evidence exists that increasing taxes on any group, rich or poor (i.e. taking money out of the economy) would benefit the economy?
.
What evidence exists that closing the gap between rich and poor, benefits the economy? And if such evidence exists, what evidence exists this should be accomplished by taking money from the rich rather than by giving money to the poor?
.
I address these questions in these two very short posts: Closing the gap and in Closing the gap II.

Rodger Malcolm Mitchell

“While I know this is a little bit of a third rail, …..Again, I know people hate this idea of redistributing wealth, but consider ….”

What are you apologizing for, and whose opinion are you so differential to? Either you have cogent arguments for what you are advocating (It seems to me that you do), or you shouldn’t be writing on this subject.

Roger, I think one of your questions was already (somewhat) addressed in the article; in particular, #2.
As Stephen mentioned, a significant portion of that “excess” money contributed to the recent housing bubble (and may be contributing to a gold/cotton bubble). It stands to reason that if that money’s removed from the bubble, it’s smaller and will be less disruptive when it eventually bursts. Also,
“What evidence exists that closing the gap between rich and poor, benefits the economy?”
Unfortunately I’m unable to find the link, but I recall reading a study that came to that almost that exact conclusion: a more narrow income-gap has an almost universal benefit to the economy and the people of a nation (I’m paraphrasing). I’ll keep trying to track it down.

The problem right now is that government wastes so much of the revenue it already gets.

Start by cutting 20% of the federal workforce, defense spending by 50%, and eliminating useless departments, offices and agencies. Simplify the tax code as much as possible.

If structural reforms are implemented and tax increases are still necessary, well then they’re necessary. Most people would probably support modest increases if they felt it was absolutely necessary, and that the money would be well spent. Neither is the case right now.

I would like to point out that there is a difference between wealth and income — wealth is the total stock of accumulated assets, while income is the flow of revenue. If you really want to tax wealth, then why not do so directly, and levy (for example) a land value tax. Surely, someone who owns acreage on Martha’s Vineyard should pay more to the federal government than someone who owns a tiny plot of land in the middle of Alaska.

In addition, there are a wide range of options to increase government revenue, ranging from the beneficial (Pigovian taxes on negative externalities, e.g. pollution), neutral (taxes on site location, and anything of quantity fixed by nature, such as radio frequencies), and harmful (taxes on activities that we wish to encourage, like work, capital formation, and trade). We should concentrate on the first two types of taxation before we ever think of increasing the third type — if greenhouse gases are harming the atmosphere, they should be taxed at 100% of the societal cost before income taxes are raised at all, and if land is fixed in quantity, it should be taxed at 100% of site value (with all improvements tax-free) before we even think of adding a national sales tax.

The claim that the super-rich will not invest money in the US and create jobs for Americans — re-invigorate the slumping US economy *if* they are heavily taxed is belied by the facts which Time itself has related: corporations are globalized. There is a disconnect between the US economy and “American corporations” (companies listed on US exchanges. I would point out that just as companies once thought of as “American” are increasingly “global”, so too are the American rich or super-rich. These individuals have gone “global” with their investments. Indeed, many of the super-rich investors are the very people whose desire to beat down middle class American labor costs fueled the offshore outsourcing craze now so much a part of the “global economy”. So, having helped eliminate millions of middle class American jobs (or having looked on approvingly as CEOs offshored work to places like India, China and Vietnam) the American public is being sold a timeworn assertion that the super-rich will invest their earnings to fuel the job engine in America. Well, this one-time Republican conservative from blue-blood Grosse Pointe knows better! Those of us in the middle classes blue-collar and white-collar (who also shop at Brooks Bros.) know full well that the ultra-rich are ultra-richer now having soaked up the wealth which once made millions of Americans *middle class*. I am out of sympathy for the rich whose indifference and investment strategies have done grave injury to the American middle class. Targeted tax incentives for individuals and firms which create and retain middle class jobs for Americans is the only “tax cut” which can truly help American workers.

Excellent post, infotechguy.

While it’s certainly easy to be duped into the logic that taking money from those who *APPEAR* to be spending the most is harmful for the rest of us (see: recent studies that say when upperclass [250k/year+] citizens stop spending, economies falter), it’s really being misconstrued as a solidified economic principle, rather than the sort of anomaly it should be.

I read the original article that this piece references and this was a good analysis. I liked the point about growing tax burdens, way to beat off another misleading message with scientific fact.

The American People Are Obsolete…

http://www.salon.com/news/feature/2010/07/27/american_people_obsolete/index.html

“The rich make increasingly more of the nation’s income. So shouldn’t they pay a larger percentage of the income tax. Isn’t that how it is supposed to work? As Suroweicki says, from 2002-2007 the income of the top 1% has roughly doubled. Yet on Laffer’s chart their tax burden has not risen nearly that much, just 40% over that time from about 2.25% of GDP to 3.25%. Based on their income growth alone the top 1% should be contributing 4.5% of GDP, or 1.25% points more than they do now.”

Lies, damned lies, and statistics.

If this section of the article got you nodding your head in agreement, well… I have a pile of apples here… Would you like to be enraged that they’re nothing like oranges?

Let’s disect this pile of bad math and bad logic piece by piece.

“The rich make increasingly more of the nation’s income. So shouldn’t they pay a larger percentage of the income tax. Isn’t that how it is supposed to work?”

First… That should be a question mark, not a period. Second, we have a progressive tax system. BUT. If we had a flat tax system, (as he suggests we do when he describes loopholes) the richer of us would still pay a larger percentage of the income tax than the poorer of us. A flat percentage of more money is larger than a flat percentage of less money.

“As Suroweicki says, from 2002-2007 the income of the top 1% has roughly doubled. Yet on Laffer’s chart their tax burden has not risen nearly that much, just 40% over that time from about 2.25% of GDP to 3.25%.”

There is not enough information in there to draw an accurate conclusion. Only enough to make people angry about the wrong thing. If GDP increased at the same rate as the salaries of the top 1%, their tax burden would have “doubled”. Without knowing the change in GDP, you can’t draw an accurate conclusion from these sentences, yet the author leads you to a false conclusion. The 40% number is plain wrong, since GDP grew by over 25% during that period. The tax burden of the top 1% indeed did not grow by as much as their income, however the gap is much narrower than this article incorrectly states.

“Based on their income growth alone the top 1% should be contributing 4.5% of GDP, or 1.25% points more than they do now”

Again, this is false logic. If income growth and GDP growth are equal, the percentage of GDP contributed should remain unchanged to keep the tax burden level.

“Raising taxes on the super rich now would show the bond market that the US has the political will to raise revenues when we need to.”

Would it? It would tell me that the US has the political will to remove capital from the investment engine that drives economic growth. Do you think these rich people keep their cash under their mattresses? No! They invest them in businesses that use the capital to hire people and grow the economy.

Raising taxes on the super rich should signal to foreign and domestic investors that the US government thinks wealth equality is more important than growth.

In the real world, the gap between rich and poor doesn’t make a lick of difference as long as everybody is getting richer.

Yeah, great. The politics of jealousy kicks in.

Given that the superrich generate millions of jobs and income from abroad, why punish them?

Think of what Bill Gates and Steve Jobs have done for their country vs what, say Barack Obama has done.

Let Obama pay and other government employees pay the big taxes. Let the entrepreneurs and creators who actually do something for the country pay the reasonable rates.

Otherwise, they’ll just be forced to use their creative intelligence to legally avoid getting raped by the government.

The irony is that journalists and politicians, the least entrepreneurial people, the least likely to add wealth to the country — these two categories of our citizens have the biggest megaphone to be heard on the topics of economics, finance, and taxes.

How many jobs have journalists and politicians created? How much foreign income do they bring into the country?

I know writers well. I oversee writers in my business. I AM a writer. Writers are often brilliant and engaging people.

But when it comes to money and business and other practical stuff, the are more often than not, dead stupid.

ADDENDUM to above.

As to politicians, not only do the know little about business or finance, they are rarely brilliant and engaging. They are almost never creative.

Except at stealing other people’s money.

The rich, corporations, and politicians find loop holes and pay as little in taxes as possible.

You and me? Well, we pay our taxes….

This is a very very misleading article. The rich do not have earned income at that tax rate. Most rich people have “capital gains and dividend income” which is taxed at a much much lower rate.

I would encourage everyone to get an education by watching the video Warren Buffett’s Tax Rate is lower than his Receptionists- google it.

Which one is grammatically correct?

(a) The super-rich are very different than you and I.

(b) The super-rich are very different than you and me.

(c) The super-rich are very different from you and me.

Give it a rest.

Until Saint Ronny cut taxes in 1981, the top tax rate in the US was more than 77% all the way back to the 30′s. It was 95% during WWII.

50% is still a tax cut for the super rich.

And you wonder why there’s a deficit.

Sheesh!

This article is horrifyingly misleading, sways by emotion and uses selective quotes. First, the article promotes the concept that people should be unequal under the law. The more people who accept this idea of mandatory distribution of wealth, the more it can and will be used to persecute those groups not in favor. Study history. Second, there is not a constant direct ratio between tax increases and increased tax revenue. For example, states with too high state taxes lose their rich to states with lower taxes. The same with corporate taxes – businesses do not hire or soon relocate to other states or countries. With federal taxes, there are numerous ways to shelter money. Sadly, these shelters benefit federal revenues less than if they were taxed at lower tax rates. The tax rate vs return line is not some straight line going up or down but rather has thresholds, valleys and peaks. Economists know this but politicians (throughout the spectrum) try to mislead with the help of numerous partisan journalists far too unintellectual to talk with an economist. Third, economics is complex. Neither major party has shown how new 21st century economic factors affect old theories whether they be Keynesian, Austrian or supply side.

Once the general public weans itself from reality TV and the rampant narcissim of banal and inane Facebook postings by mediocre (at best) people, and then chooses to educate themselves regarding basic economics, they will clearly see the lies and misleading statements by politicians throughout the spectrum, along with the Bernankes, Greenspans and Paulsons who transmit this white propaganda. For the record, the Keynesian economics of the Left has always been a total failure in every country. So has focusing on the quantity of regulation rather than quality regulation. The right’s laissez faire approach leads to corruption, natural disasters and financial crime. The Austrian approach takes some good concepts to excessive extremes and does not account for how certain 21st century economic factors now play a role in world economics. Only an educated populace will get our politicians to actually listen to economists instead of promoting horrifyingly bad economic approaches to support their ideological world views.

Our unequal tax system should be compared with a flat tax or tax on consumption in terms of the pros and cons of each. The affects of free trade related to each approach should also be taken into account. Only then will our choices be laid out and we will have the possibility of creating equality under the law. Until then, the Senator McCains (economic illiterate), the President Obamas (crappy Keynesian economic imbecile) and the journalists (obviously partisan, economic illiterates and propagandists) will continue to promote ignorance and stupidity. Democracies require an intelligent populace to survive. Each of us who is an economic (and political) illiterate is participating in national suicide heartily helped by the Stephen Gandel’s of the world.

Wrote “you and I” because I thought that was the quote. But you are right Fitzgerald had better grammar than I thought. He still used than and not from.

Soaking the rich will only cause the rest of the US to become more like San Francisco (where I live) … a city filled with a huge amount of homeless, urine covering most of the city sidewalks, a handful of people owning all of the property, more potholes than many roads I’ve seen in Mexico … and hardly a rich person in site. Every large corporation that used to be based there left — Bank of America, Chevron, PG&E, etc. The rich have option … they can leave. And when they do, the only ones of us left are the multitudes of poor who came to feed at the trough of the soaked rich, and those of us in the middle, who are rapidly being squeezed down to the ranks of the poor. Those who think otherwise have either never read Atlas Shrugged, or failed to absorb it’s central lesson: the only ways to motivate people are positively (through compensation) or negative (through force). And as the rich leave, my home city scrambles to fill the financial gap … guess how … that’s right: force — more taxes, higher parking fees, higher permit fees, and the impossible-to-gripe-about substantially higher fines for traffic violations. Of course, it perpetuates the cycle … more upper income people than ever want to leave. Witness on a national level, how more and more companies are moving their operations out of the US, over to China and India. Soaking the rich will only speed that process. But reality never seems to bother socialist intent on soaking the rich. But as Margaret Thatcher reminded us: the problem with socialism is that eventually you run out of other people’s money. Keep up the soak the rich movement, and we’ll run out of the rich’s money sooner than ever. And our once wealthy nation will be come a banana republic. Don’t think it can happen? Apparently, you never paid attention to the history of Russia and Argentina.

Couple thoughts:

In the 60′s our country faced a perceived danger so we drafted young men (I think it was just men then) for military service. Many died and many still suffer. Now that we face another perceived danger, I’d be for “drafting” a little money from overpaid sports stars, ridiculously paid executives and drunken movie stars. We have a real national crisis and It wouldn’t be asking nearly as much as we once asked of others.

Also, reality. When taxes go up or down, so also goes charitable giving. Funny how charitable some people get as they approach a higher bracket. Talk about a stimulus, a supertax would pump so much adrenalin into all charity programs, just as those programs are so drastically needed. I think it’s a no brainer.

“Let Obama pay and other government employees pay the big taxes. Let the entrepreneurs and creators who actually do something for the country pay the reasonable rates.”

I understand that people are angry at Washington and the people who work there but let’s not forget that fire fighters, policemen, and soldiers are “government employees”. I think that they “actually do something for the country”, and aren’t getting rich doing it. I hate it when people view anyone who works for the “government” as a worthless drain on everyone else. If your house catches on fire or someone robs you why don’t you call one of those “creators” to come help you out since they are the only ones that contribute to the country.

Thank you for explaining super rich’s.I am pleased with your information.
——————-
Green Business

Very few statements on the economy over the decades have been based on “facts”. Reagan told us, that by reducing taxes, that would stimulate so much growth, that the net effect would be more tax revenue, the same tune George W. was singing, but both ran record deficits. George “senior” had the courage to bring revenue & expenditures more in balance (and lost the support of his party for it), but that, and the responsible spending of the Clinton administration, well you know the rest of that story.

Politicians treat us like idiots when they talk about reducing taxes. The don’t have the guts to “tell it like it is”. Reducing taxes in the present, without making corresponding spending cuts actually creates a tax increase, by “kicking the can down the road”, making someone else pay for that spending gap, plus the accumulated interest. They should be honest with us and offer us the choice of reduced taxes ONLY IF we accept reduced benefits & services at the same time. Given that about half the Federal budget is for entitlements to seniors and about 30% for the military, they don’t have the guts in the political arena to have an honest discussion about the subject. It takes no guts, imagination or morality (yes, I believe it’s immoral for us to “live like there’s no tomorrow”, giving the bill to our children) to cut our taxes, provide us the same level of benefits while stiffing our children with the bill.

Most of the “economic theory” proposed by our politicians is just plain “BS”.

Our so-called progressive tax system is the worst in the world. It was designed to help the rich and bilk the poor. Yes, the super rich in this country are getting fatter and richer at the expense of the middle class who pay most of the taxes, fight all the wars and die for the country. This has got to change –or someday, there will be revolution chopping off the heads of all the rich and their families. Before that happens, it is smarter to get the rich pay their fair share of taxes and help the country recover from the present crisis created by the rich alone.
I see there are too many armchair economists commenting in these pages supporting the rich and the status quo. They are all going to go down with the rich in the near future. These morons want everything for themselves and let the rest of us take the crumbs. This has got to change. Our tax system needs a permanent overhaul and make the rich pay their fair share as income taxes.

I think it’s funny that people equate taxing the super-rich with cutting jobs and innovation.

We’re talking about a PERSONAL income tax — not a corporate tax. If we tax the CEO, how will that affect how many new employees his company can hire?

Exactly how much of a CEO’s PERSONAL income do you think goes to paying for employees? The answer is, of course, 0.

The argument would be that the CEO would simply dip into corporate profits and compensate themselves more to make up for the increased taxes. That may be true, but it also implies that a CEO controls their own salary — which isn’t true.

I’m not saying that there aren’t issues that would be to be dealt with. I’m simply rebutting the logic that higher taxes = lower jobs.

Also, I think it’s funny that people defend the salaries of the super-rich so vehemently in an effort to “protect jobs”, yet corporate big-wigs are more than happy to slash employees — even during a period of growth — if it means more money to the bottom line.

This isn’t directed at anybody in particular, but at those who argue against higher taxes for the rich as socialist while also complaining that certain sectors of the workforce make too much money. I’m a teacher, and I hear too often how much money I make. Ignoring the fact that I make less than the average for masters-level workers (because teachers are required by state laws to take classes, many wind up getting their masters as a matter of course), and also ignoring the fact that, if you were to pay me what you paid your babysitters I’d be making a comfortable 6-digit income, there’s an inherent hypocrisy in the argument of a lot of people.

“Higher taxes for the rich is socialist.” Okay. But do you also find yourself saying, or thinking, “People in such-and-such an industry are overpaid”? Or, “Those (insert workers in a particular line of work) have too high a pension, or a ‘cadillac’ insurance plan, or get too much severance pay.”

So…what you are saying is, we should have a country where we don’t have a progressive tax, but people’s incomes should be limited.

Rethink this stand. You can’t have it both ways. Either we live in a country where people are encouraged to make the highest possible salaries/benefits (in other words, a pure laissez-faire capitalist economy) or we live in a country that attempts to make up for the inherent deficits in public and private sectors where no product or service can be sold (police, military, fire, education, etc.) to recoup costs.

Or are you just hoping you’ll someday be rich beyond your wildest dreams but in the meantime feeling oppressed/inferior/stressed by your own current financial situation and therefore resentful of the success of others?

It is way past time to tax the super rich and it is way past time to eliminate the tax loopholes that allow GE to pay zero taxes. It is also way past time to get the clowns out of congress who continue to oppress the middle class with their tax cuts for the rich. Wake up America…. How much BS are you willing to swallow…..

Can You Say…. SOCIALISM?

Redistribution of wealth has been occurring for many years now, but in a most unhelpful way. The rich take advantage of the poor and middle classes, and redistribute the wealth of those lower classes to gain more wealth. I am an independent voter because I agree with the Republicans on many moral and ethical issues, but agree with the Democrats concerning economic and regulatory issues. No one can believe it is right to have a small group of people with so much while there a many people with nothing. You can claim they worked for the money, but the reality is most of them stood on the backs of “lower” class citizens who did all the hard work for them. Tour a factory sometime and you’ll know the character of the owner based on the countenance of the workers. If the owner(s) understand that the workers are carrying them and not the other way around, you’ll see a lot of happy employees and gain respect for the owner. On the other hand, when you enter a workplace run by a greedy man you’ll know it in just a couple minutes.

No discussion about taxes is going to be complete unless you talk about the tax that is REALLY killing the middle-class and small biz: THE PAYROLL TAX!

Warren Buffett, billionaire, pays 17% tax rate. I’m a small biz owner, make under 106K, and pay 40% (25% income + 15% self employment (payroll)). THAT is why small biz can’t generate jobs – we are getting royally hosed by the tax system. The big guys don’t have to contribute 15% over 106 K! Its a POOR tax, it really is.

We need ONE number for ALL income that pays for ALL things. ONE number for ordinary income, dividends, capital gains, etc., that pays for Medicare, SS, Defense and everything else.

If you are discussing tax fairness and you leave out the payroll tax; you might as well not talk at all.

We should go back to the tax rates during Ike’s administration. When families could survive on one paycheck and mothers could stay at home with the kids. Things were pretty good back then. The tax rate on anyone making more than a million (up it to say 5 million) was 87%.

Best sign that the silly season is approaching again: the socialist-leaning talking heads start suggesting “taxing the rich more” as a magical solution to the largely-unrelated problems of big government, economic dysfunction, and government malfeasance. I’m not really sure why, or why otherwise intelligent people continue to get deceived into thinking that stealing more money disproportionately from the successful people in a society will somehow encourage more people to try to be successful, or why people continue to persist in thinking “this time will be different”, but yet it continues to happen.

I’m not sure what else would be worthwhile to say; I could debunk the whole argument again, but you could just as easily look at any of the historical evidence, or apply common sense… but none of these will do anything to sway a “true believer” in socialism. I would love if we just had an area where socialism advocates could congregate, and practice their ideas together without harming the rest of the country. After all, as they say, the only problem with socialism is that eventually you run out of other people’s money to steal; but as long as socialists are only stealing other socialists’ money, I say it’s fine.

Letting the Bush-era tax cuts expire on only the “rich” will net $700 billion over 10 years, but letting them expire altogether will net $3.7 trillion over the same time period. Why aren’t our leaders paying more attention to that $3 trillion?

Regardless, Washington has proven time and time again that it can and will spend every penny that it collects (and often more). Our country has a spending problem, not a revenue problem.

To dmcquickly, you make a valid point, but I think one premise of your argument is flawed. Most people I know who think that certain groups are overpaid base that belief on the fact that those groups’ compensation is the product of government-sanctioned coercion and not the free market. I have no problem with unions or with collective bargaining, but I believe employers should have the option not to participate in those processes if they choose not to. That would allow compensation to be determined by the truest test of value—what someone else will do the job for. With that understanding, it’s pretty easy to reconcile those positions: People deserve to be paid whatever the market will bear for their services.

Back to the taxation issue – my objection to “super taxes” (which would benefit me, or at least not hurt me) is not based on economic policy or political tendencies; I think it is immoral to force someone to give up money that they earned and give that money to someone who did not earn it. That idea moves from immoral to dangerous when you consider that, before such a “redistribution” can take place, someone has to decide which groups “deserve” to give and which groups “deserve” to receive. What is that other than tyranny of the majority?

cadamsesq, very well written and true. My brother and I (I hope this is right, oraclemcsnacker) run a family business in the Bay area. It has been in our family for over 100 years. We are not rich or poor, but make a good living. Our father and his 2 brothers owned almost all of the stock in the company. When my Dad and both Uncle’s passed away, we had the option to buy their stock, at a rate that a valuation company came up with. Until we are able to earn, borrow or beg the money to do this, the company that has been in our family for 100 years, is in jeopardy of being converted to the government should we not be able to devote a substantial amount of our income to repurchasing our own stock. Mind you, we have complied with all requirements on paying taxes, SS, FICA, and must comply with all EEOC mandates, even as a privately held business. Sound unfair that we must buy back our own business? It does to me. Then people naive or ignorant think that we have it made because we (own) this business. I can tell you that for at least another 10 years my brother and I will be directing almost our entire income to this repurchase. Want to buy a boat, that will have to wait, same for investing in the stock market, both of us and our wives drive cars that are all 10 years old. We could sell the business, divesting ourselves of this responsibility, but would all the people (400) we employ have a job after that? More than likely they would be absorbed and culled down to “pay” for their new employer’s purchase of said business. That scare’s the hell out of me because we like the people we work with, they are our family. So the next time some of you start complaining about the owners of a business not earning their income, remember that there are a lot of us that do it for our employees.

Why are the super rich even being given super taxes? Someone should not be penalized for earning more money than someone else.

Say a student earns an A in a class, and another student earns a C. It would be entirely unfair to give both students a B, just to make the grades fair. Why should taxes be any different?

“That idea moves from immoral to dangerous when you consider that, before such a “redistribution” can take place, someone has to decide which groups “deserve” to give and which groups “deserve” to receive. What is that other than tyranny of the majority?”

Now, I have read all of the comments to this article and have understood everything until your comment… So what you are saying is that you have a problem with the “redistribution” of the tax money?

What is the point of taxing a populace then? It is ALL being redistributed… You imply that the taxes on the super rich will go directly to welfare and such… How about Medicare/ Medicaid? Social Security? And countless other programs that support millions of hard working people. The point of a government is to protect all of it’s citizens. This is not socialism. The problem is, a point brought up by many people, is that the super rich have no morals. They don’t see that it is their obligation to “give-back” to a country that has allowed them to become as wealthy as they are (or their parents or grandparents – whoever made the family fortune). When the all mighty dollar is more important than their loyalty to this country, then things have to be done in order to show them that they got where they are because of the country they live in. When the ultra-rich stop funneling money away from this country then something has to be done.

Now when the rich were taxed higher than 50% in the past, then the rich understood that they needed to directly invest in their companies and not into an imaginary market where they get to keep their riches and don’t care about those they climbed on to get to their life-style. Ethics and morality have to be cornerstones in order for a free-market economy to survive.

The super-wealthy stay that way by spending a portion of that wealth having world-class experts use and devise methods for legally sheltering money from taxation. There are many many legitimate ways this can be done. If it ultimately necessary, they will move their assets and taxable entities out of the country. They already have the means and at that point will have the motive to do so. It is folly to imagine otherwise. Only fools mismanaging inheritances would be effected, and the net effect on the economy is unlikely to be positive.

ask661

“So what you are saying is that you have a problem with the ‘redistribution’ of the tax money? What is the point of taxing a populace then? It is ALL being redistributed…”

Yes, that is exactly what I’m saying. Social Security taxes are not redistributive because you receive a tangible benefit in return; the same is true of that portion of taxes that support the military, the National Park Service, etc. Redistribution is taking earned money from one group without giving them anything in return for it and giving that money to another group that has not earned it, and that is what I have a problem with.

“The point of a government is to protect all of it’s citizens.”

That’s right, and taking by force from one group and giving to another is not protecting, it’s exactly what the government should be protecting against.

“They don’t see that it is their obligation to “give-back” to a country that has allowed them to become as wealthy as they are (or their parents or grandparents – whoever made the family fortune).”

First, the country protects and provides for all of us equally; if that creates a moral obligation to “give back” it is a moral obligation that every citizen shares equally. That would make the 50% of the country that pays no taxes pretty immoral, wouldn’t it? Second, giving to the “country” (e.g. paying for soldier’s body armor or to mow the lawn on the White House) is very different than giving to its citizens. We all may have some moral obligation to shoulder the cost of running the country, but no citizen has a moral obligation to pay another citizen’s car payment.

There are a couple of really irresponsible items in this piece.

First, the author mentions that “income inequality when it gets to extremes can add to all types of social ills” and then proceeds not to explain how.

Second (and even more importantly), the author’s point seems to be that the if the rich are paying more, we may have smaller deficits. However, the author also notes how the rich are getting richer. Doesn’t that mean that the rich are already paying more? If the rich are getting richer and the poor are getting poorer, doesn’t that mean in a progressive tax system that tax revenues are increasing? If this is not true, it is incumbent upon the author to say why. I don’t think it is enough to say that the increase in the tax burden of the rich has not matched their increase in income. The question that needs to be answered is have revenues decreased merely due to the shift in economic distribution of the population. Otherwise, this piece is really just a straw man.

“Our tax system needs a permanent overhaul and make the rich pay their fair share as income taxes.”

I’m normally not very political, so my 12-year-old does not have much exposure to politics. I did ask him a question a few months back.

“If you and six friends are ordering a pizza that costs six dollars, how do you split the cost?”

Being a math wizard, he replied “One dollar each”.

The follow-up question was “If one kid had $100 and the other five had $10, how would you split the cost?”

His honest answer: “Why would it be any different?”

Maybe it’s just the way I raised him…

Stephen, you are an idiot.

Right now, I have a new non-chemo cancer therapy that I cannot bring to market because the venture/angel cash from the super-rich has all but dried up since Obama has been elected and the healthcare plan passed. On it’s best day, the Federal government cannot effectively fix a clogged toilet. The answer is simple. The government needs to quit spending money and let those with creativity, vision, and innovation work with those that have the money (your super-rich) so that they will invest with the hopes of a PROFIT (no, it isn’t a dirty word). When that happens, we can create actual jobs and pay real taxes based upon our corporate success.

Take the money from the private sector and you will doom us all to a future where our youth graduate from college or high school and have nothing to look forward to but job as a census taker. Yeah, there are going to be a lot of kids going into college debt so that they can get a high paying job as a census worker.

And by the way, the next time you have a friend or family member contract a horrific disease and you grieve and cry and wonder why we can’t find a solution or cure…go look in the mirror, slap the person that is staring back at you and remember…you were the person advocating that the taxes really the best way to spend the money of the super-rich.

Kevinspeterson, your son is smarter than a lot of liberal politicians. A tax overhaul would be another step further towards socialism for the Obama administration, a step which (no offense to Marx and Engels) obviously does not work as a economic system. There are currently 5 countries who declare themselves socialist: China, Cuba, Laos, North Korea and Vietnam. The healthcare systems in all of those countries are pretty much shot, only one of them is an economic powerhouse (China) and the quality of life for the majority of their citizens is terrible. It would not be in the our best interest as a nation to overhaul the tax system.

Rodger,
Looking back at historical data, when we have had a top marginal tax rate of 50-70% our economy has performed the best.

http://logicsearch.blogspot.com/2010/08/laffer-curve-and-marginal-tax-rate.html

As others have mentioned, the wealthy no longer limit their investments to America, so even taking into account federal government bloat, taxing the rich is more likely to put American earnings to work in America, if the tax increase is accompanied by spending directed towards infastructure upgrades, small business r&d, and green energy projects.

It’s not a question mark, the rich do make a larger share of the income than in previous years.

http://economistsview.typepad.com/economistsview/2008/10/does-wealth-con.html

Everyone isn’t getting richer. The standard of living for Americans has decreased, life expectancy has fallen, wage increases have not kept up with inflation.

“Tax the rich” is fine and acceptable socialist dogma. And it has the added benefit of inciting jealousy and promoting class warfare. Fine thinking, if that is your goal. But drop the derogatory word rich and you are left with the word “investor”. And when you super tax investors, you super tax investment. Will that help? No, it will only drive investments out of the country. Driving those out of the country doesn’t sound very smart does it? Income, tax revenue and jobs will leave with it, Time’s goals for the country are very different and that is why Time carefully chose the words they did, and why they published this article.

1. There is nothing wrong with taxing every income category to the point when it will start hurting economy.

2. All categories but the super rich are already taxed way over this level (if we would count payroll taxes).

3. Taxing the super-rich would not solve any fiscal problem – because there is so very few of them.

4. If we solve the “deficit problem” dollar will be sky high again and it will drive a lot of business to do manufacturing abroad.

So,

Tax the super rich as long as we do not drive them out of the country, cut taxes on everybody else, most important eliminate corporate income tax (both federal and state), cover the deficits by printing more money until nobody but the Fed would buy US treasuries

This will make US a pretty attractive place for a lot of businesses and will create a ton of lower middle class jobs for semi-qualified workers.

It will bad for the environment though.

I think this is probably the bigger issue at hand. Arguments can be expertly made for and against more taxation, but what difference does it make when the money received drains away? I do believe in parks, police/fire/health services, national defense, etc., however how much more is just wasted effort and more importantly how much of our taxed money are used in some corrupt way?

If federal programs were more effect I would buy into it (with more taxing), but it is not. I would like to return to the days of actual surplus and see our government run their budget like they expect us to do.

Class warfare is already being promoted, and indeed enacted — by the rich against the rest of us. Even Warren Buffet says so.

You’re also forgetting the country was thriving with high marginal tax rates on the haves back in the day. Then, along came Mr. Friedman with a free market dogma lie in the seventies. Thirty years of lower taxes on the rich and massive deregulation later, we’re reeling from a crappy economy brought to us by your rich masters.

We the people should fight by by general strike. Everyone takes a day off and brings society to a grinding halt.

http://www.nakedcapitalism.com

I agree with the sentiment in this article. I would like to point out one error:

A couple filing jointly with an income of 137,000 does not have their entire income taxed at 25%. Only the income past 68,000 is taxed at this rate. This means that the actual percentage comes closer to 19%.

Admittedly this is a small error. But in an article that argues for a more progressive tax system, we should be careful not to spread misinformation that might fan the flames of the so-called “populist” tax revolt.

What if you asked your son “What if one kid had $10,000 and the other 5 had $0.05 each? Also, there is nothing else to eat and if they don’t get the pizza they might starve to death. Then what would be the right thing to do?”

You and your son are clearly right that it is not fair to make someone pay more than their share. But this issue is about where fairness splits away from morality, and what duty to we have to help others, and what it means to live in a society.

I am not arguing in favor of (or against) super high taxes for the super rich. I am just saying that your question to your son simplifies the issue to a point beyond much relevance.

Take, take, take – it never ends. I’m not rich enough for this stuff to impact me, but I can stand back unemotionally and see that stealing is wrong.

Everyone gets caught up in trying to create a web of laws and regulations with tweaks here and levers there with the goal of making everyone, not necessarily equal, but at least in the same ballpark. The problem is that in trying to achieve the goal we lose sight of the most basic principles, such as – it is wrong to steal.

It’s sad that we (the people) only support the politicians that promise to make our own personal lives better, regardless of the methods that the politicians will use – like stealing. After all, “they” have too much anyway and “they” need to share? Sharing is good – our religions tell us that – so we think we are justified. Except…sharing is not sharing if it is forcibly taken – that’s stealing. You can ask, but you can’t take.

This crazy complicated web of laws and regulations we have is insane. All the political parties spend their time telling us how they will make our lives better (because that’s what we demand). What if we would all just man up and support a party that will do what’s right and doesn’t have to promise us that our life will be better off.

I would personally live in a lean-to shelter and do it with dignity to the best of my ability and never begrudge the gains of someone else.

In the end it’s very simple – you can ask, but you can’t take. If you feel that you really need something from someone else then you’re free to ask. Plead your case. Put some effort into it. Pull out all the stops. Make a big audio visual presentation. Just don’t ever cross the line and steal. And don’t attempt to justify stealing because of some vague perception like “they don’t need that much” or “they didn’t earn it”. If “they” committed a crime in gaining their wealth then prosecute the crime – don’t take the easy way out and justify stealing to even things out.

“They” are gaming the system in all kinds of ways like paying off legislators and “you” are gaming the system trying to even things out. Drop all the complications and simplify the game: it’s OK to ask, but not to take.

I say exempt all those making $1 million or more a year from paying any income tax. For that concession, they cannot vote, they cannot contribute to politician’s election campaigns, they cannot drive on a public highway, they cannot eat food inspected by the FDA, they cannot call 911, they cannot exercise the right of free speech by contacting their elected representatives, they cannot use a public airport, they cannot sue in a court of law, they cannot use a drug approved by the FDA, etc. etc. All that the wealthy seem to do in this country is whine about taxes and complain about government. Well, try life without government!

“What if you asked your son “What if one kid had $10,000 and the other 5 had $0.05 each? Also, there is nothing else to eat and if they don’t get the pizza they might starve to death. Then what would be the right thing to do?”"

“I am just saying that your question to your son simplifies the issue to a point beyond much relevance.”

Babyjin,

Saying that this is strictly a morality issue is simplifying the issue even further. Let’s unsimplify the issue:

The one kid who had $10,000 worked the last 5 summers in a row mowing lawns to earn the money.

Four of the remaining 5 worked a little bit, but spent all their money on video games and comics because they knew the first kid would be forced to buy them pizza.

The 5th worked as hard as the first, but had medical problems and had no money remaining to buy pizza.

I’ll ask him later, but I know him well enough to know he would offer to pay the share of the 5th kid. He’s a pretty charitable boy. He’d tell the other 4 to take a hike.

The funny thing is that of the five kids with no money, the 5th would be the only one that wouldn’t accept the offer unless he really was in dire straits.

That’s the unsimplified view. Most people who are enraged over ‘redistribution of wealth’ are simply not heartless individuals with no moral compass. I have way too much first-hand experience with people who are on public assistance because it is (in their own words) ‘easier than working.’

antiks72,

Who is a strike going to hurt more, the haves or the have-nots? Ayn Rand wrote a great book about a strike called ‘Atlas Shrugged’. The strike worked the other way, though..

jstrate,

Make these same concessions apply to all who do not pay any taxes and I’m with you 100%. Bravo!

A couple making 137K would pay approx 19% income tax PLUS approx 15% self employment = 34%.

Their marginal rate on the last dollar earned would be 28% + 15% = 43%. FORTY THREE PERCENT!

FYI, billionaire Warren Buffet pays 17%.

Yeah, those rich guys are really getting soaked.

If we have a “teen” trillion dollar deficit and the rich pay tax, or a super tax, and GE and all the others that avoid taxation pay taxes, even at a super rate if necessary, then maybe the middle class might start spending, and the deficit would disappear.

And if the “haves” start to provide secure employment, maybe the tax rates could appropriately be reduced.

I note that increasing the capital gains rate will not necessarily result in high net worth individuals paying more tax.

Under our “realization” system of taxation, taxes aren’t paid until property is sold.

But wealthy individuals who hold appreciated publicly-traded stock can hedge their risk and borrow against their stock holdings to buy yachts or run for office without selling any stock or paying any tax.

And this is exactly what they do. Larry Ellison, the founder of Oracle Corp., is famous for having borrowed over $1 billion against his Oracle shares in 2000. Meg Whitman in California (eBay) , Rick Scott in Florida (Columbia/HCA Healthcare), and Linda McMahon in Connecticut (World Wrestling Entertainment) all own appreciated public securities and are using their wealth to finance their own political campaigns.

The magnitude of this untaxed wealth is staggering. Ellison is worth over $26 billion, Sergey Brin and Larry Page together own over $28 billion of Google stock, and Warren Buffet has over $40 billion of appreciated Berkshire Hathaway shares. Every year their shares appreciate, these gentlemen earn economic income that they can tap, but which goes untaxed.

Rather than increase the tax rates, Congress should repeal this tax benefit of deferral for the publicly-traded stock and securities of the very wealthiest individuals. For individuals and married couples that earn over $1.6 million of income, or own $5 million or more of publicly-traded securities (representing the 0.1% wealthiest and highest-income earning individuals), the annual appreciation in publicly-traded stock and securities should be “marked-to-market” and taxed, regardless of whether the securities are actually sold. The tax would be imposed at long-term capital gains rates, so the proposal would not raise tax rates; it would just tax what today can be “monetized” and spent without tax.

The proposal would raise meaningful revenue. It could conceivably raise $500 billion over the next ten years. (To put this figure in context, Larry Page’s shares in Google appreciated by over $8.7 billion in 2009 alone.)

This proposal would not affect middle-class Americans. It would affect only individuals who are extraordinarily rich.

It would not affect small business owners. Only publicly-traded stock would be marked-to-market.

Republicans endorse no tax and certainly would resist this one. But mark-to-market taxation follows the Reagan model by broadening the “base” of tax without increasing rates.

Crucially important, a mark-to-market tax on the appreciated securities of the ultra-rich is enactable. The wealthy have no lobby, they are diverse and divided, many of them are Democrats, and a few are actually in favor of progressive tax increases. Warren Buffett, for example, was chagrined to learn that his effective rate of tax on taxable income is lower than his secretary’s. Imagine his surprise when he realizes that the effective tax rate on his economic income – including the annual appreciation in his Berkshire Hathaway stock – is a tiny fraction of his secretary’s.

A mark-to-market tax would change that. The most profound effect of a mark-to-market tax would be to level the tax playing field between wage earners and securityholders. Wage earners are taxable on every dollar of economic income they earn (aside from what they can put into pension funds). Securityholders, in contrast, can defer tax on appreciation indefinitely and, when they die, permanently. Under a mark-to-market tax system, super-wealthy holders of publicly-traded securities still would enjoy the benefit of lower rates, but could no longer escape tax entirely.

For more on a mark-to-market system, see http://www.cadwalader.com/assets/article/120505MillerTaxNotes.pdf

or my slides from President Bush’s Tax Reform Panel http://govinfo.library.unt.edu/taxreformpanel/meetings/docs/miller_052005.ppt

Somehow I’m rather drawn to the idea that the ultra-rich, the super-rich, and the rich, say those with incomes greater than $1 million per year should pay more in taxes than the rich small business owner who is earning $200K per year. Just as long as the additional tax brackets and rates don’t run afoul of making these people spend more money on ways to elude the tax code, as described in the article ‘The Left Can’t Have It Both Ways’ (http://www.forbes.com/forbes/2010/0809/opinions-rich-karlgaard-digital-rules-left-have-both-ways.html)

But no matter how drawn to this one is, the numbers don’t hold this up as a feasible option or approach. Check out the graph below: (http://upload.wikimedia.org/wikipedia/commons/6/66/Income-curve-%2410k.png) or (http://en.wikipedia.org/wiki/File:Income_groups.jpg)

These graphs basically say that those who are making $150K / year or more are a mere 3.17% of the population. That’s far too small a population to make any sort of dent in the federal debt or the federal deficit. Even if you taxed them at 100% it wouldn’t be enough.