White House Proposes "Wealthy Tax" 2115
President Obama is proposing a new tax rate for people making over $1m a year. The new rate is part of a larger plan which seeks to bring in $1.5 trillion in new tax revenue and is sure to meet opposition in congress. From the article: "The core of the president's plan totals just more than $2 trillion in deficit reduction over 10 years. It combines the new taxes with $580 billion in cuts to mandatory benefit programs, including $248 billion from Medicare." GOP Rep. Paul Ryan of Wisconsin said, "Class warfare may make for really good politics but it makes for rotten economics."
Tax planning and rich people (Score:2, Interesting)
You know what, maybe start looking if the huge companies pay taxes? For example Google does a insane amount ($60 BILLION) of tax dodging [bloomberg.com].
Honest Question (Score:5, Interesting)
Once the wealth accumulates to the top only, how will the economy survive without spending by the middle and lower classes? Won't a lot of business just shutdown because people don't have money to spend?
Comment removed (Score:2, Interesting)
Re:Tax planning and rich people (Score:5, Interesting)
Then how about we tell the multinationals where to get off and push heavy incentives to actual local businesses, who make up more of the economy than the huge companies and can't hold regions hostage when they throw a tantrum about not getting treated special?
Re:Honest Question (Score:5, Interesting)
I'm more worried that this taxes people on their way to becoming rich.
I'd rather they taxed those who were already rich and living off their savings/company. I'd rather tax those who are sitting on trust funds than those who are aggressively making lots of money, as they are quite likely to be the wealth creators rather than the fat cats doing nothing but sucking money out of the system.
Tax wealth not income, otherwise all you do is keep those who are already rich rich and make it harder for those who are up and coming to get somewhere.
But i doubt you'll get those in power supporting tax on wealth precisely because they know this, it is in their interest to raise the barrier to entry to the upper class.
Class warfare...makes for rotten economics (Score:5, Interesting)
Yes, that's true. However, I wonder why this comment is usually directed at the working classes, when they are the ones upon whom the warfare is being waged. The rich have been conducting class warfare in the US since the Reagan administration, and they are now beginning to reap what they have sown.
I now make more than twice what my father earned at the height of his career in the early 80's, but I have less actual purchasing power. Rotten economics indeed.
Military spending? (Score:5, Interesting)
Might it not be better just to cut say military spending in half? Nobody is going to invade the US, without coming home to a glass parking lot anyway, and all that money is just thrown down a hole. Yes military spending is to an extent recycled back into the economy, but surely we can come up with something more constructive to spend it on if one must spend that money?
The Fruit of Thirty Years (Score:4, Interesting)
For the past thirty years we have held up the image of the put upon rich person who would love to invest in the US but can't because of our terrible tax burden. So the tax code has been modified to take the burden off the most wealthy [our top tax rate used to be 50% now it is 35%]. We did this in hopes that the wealthy would let the rest of the economy have more. This has not happened. In fact, the money has become more concentrated at the top while wages have stagnated at the bottom and in the middle. Instead of investing in industry, the Giant Pool of Money at the Top has bought US debt [we don't owe our soul to the Chinese, we owe it to the wealthy] and, because T-bills have had lousy returns for a decade, the money also went to fuel speculative bubbles [including the global housing bubble].
In this situation, where the top earners [about 5% of the population] have over 85% of the wealth, to whine about horrible confiscatory tax and wave the class warfare banner is beyond absurd. In order to have class war you need to have class, is the GOP saying that we still have class in the democratic United States?
Re:Yeah, class warfare. That's right. (Score:2, Interesting)
The tax rate is 33% on "income." But rich people don't work for a living and make an income. That would be vulgar.
Instead rich people invest their money and get a return on investment. That tax rate is only about 7% once all the deductions are taken into account.
Warren buffet claims that he pays less in taxes than his executive secretary does.
We've needed another tax bracket or two... (Score:5, Interesting)
...for a long time now. IIRC, the 250K top tax bracket dates back to almost the beginning of the income tax system, when 250K was legitimately rich, and the earner of 250K would likely be a millionaire due to cash reserves from earning that kind of money for years.
Nowadays, 250K is still a very, very good income, but inflation has curtailed its spending power significantly. New brackets every so often that account for inflation, or else a periodic adjustment of all brackets for inflation would probably be good for the country.
As far as those who want to argue that "job creators" in the form the of the wealthy wouldn't create jobs if their personal income were taxed higher, the simple solution would be to offer tax breaks for the demonstrable creation of jobs. This mainly would affect small companies where only a handful of people actually own the companies in question, as they could say, "I didn't take $XX salary because instead I reinvested $XX in the company for salaries for workers" with the ability to produce those figures from the payroll books...
Cap Gains vs. Income (Score:5, Interesting)
In that light, creating a new, higher income tax bracket is unlikely to have quite the intended impact that many would like to see: having the ultra-wealthy pay at least as great a percentage of their annual income as taxes as their secretaries, minions, and housekeepers. Much as I prefer a simplified tax code, it seems to me that we may want to instead add this provision: If more than 50% of your adjusted gross income comes from long-term capital gains, then count it as ordinary income, because that's what it is to them.
Yes, some will find ways around that (and goodness knows the ultra-wealthy have tax planners aplenty), but it seems more equitable than what we have currently. Please don't trouble us with the strawman argument of "If the ultra-wealthy have their investments taxed so heavily, then they won't invest." What else are they going to do with all their extra money? Save it at ~0% interest?
Re:Honest Question (Score:4, Interesting)
Increased taxes for high income earners are *not* barricades to becoming rich. It's a recognition of the fact that you don't need $1M to survive.
A family of 4 earning $1M and paying $500k in taxes is still *very* rich. A family of 4 earning $22.5k/year (poverty line) who pays $1k in taxes, is technically *living in poverty* as their net income is below $22.5k. Heck, that family of 4 earning $1M could pay $750K in taxes and still go home with $250k in their pocket.
Once family income exceeds 10x the poverty line, they rest is just gravy. That money gets spent (if its not just horded, as is common) on trips overseas and fancy foreign vehicles that do very little to contribute to domestic jobs. There is a misconception that the rich are job creators. The real job creators are the middle class that can't afford lavish trips abroad or expensive goods manufactured offshore and instead spend their money closer to home.
Re:Ryan is ignorant of economic history (Score:4, Interesting)
That is the other side of the argument - if you raise taxes on high incomes sufficiently, you encourage re-investement and deferral of the income.
Whatchathink, /.ers?
Re:Tax planning and rich people (Score:3, Interesting)
Re:Work hard, become successful, prosper... (Score:2, Interesting)
Yeah, as someone who grew up in a work-class family that managed to climb to the upper middle class/lower upper class (or whatever you want to call it) I'm going to quote my dad (who started his own company which ended up becoming fairly successful): "Sure we worked hard but we were lucky too". That pretty much sums up his views on his own success, he worked hard but he was lucky to be in the right place at the right time with the right idea...
On a personal level I've actually had some issues this experience of upward mobility, I grew up in a working class neighborhood, just about all my old friends are the children of people who worked blue collar jobs, I knew I had to work hard to make anything of myself and despised the idle rich (and according to my dad I did so with good reason) yet these days my dad frequently has to deal with these people and yes, a lot of them truly see themselves as "self-made" even though they really had it easier than my dad (and required less luck since they were born into wealth).
Re:Tax planning and rich people (Score:5, Interesting)
I think that most of Buffet's income is in capital gains which are taxed (inexplicably) at a much lower rate than income. This is such an absurd concept. If a baker sells a loaf of bread, he's taxed on his profits at the income tax rate, but if a trader sells some financial instrument, he's taxed on the proceeds at a much lower rate. The baker (arguably) has contributed more to the economy but is discriminated against, tax wise.
Re:Tax planning and rich people (Score:2, Interesting)
And for some people, it means complaining that their taxes are too low while somehow forgetting they have the option of paying more if they want to.
Actually, if you carefully parse what people like Warren Buffet say, you will realize that he is complaining that other people who earn as much as he does are not paying enough in taxes. The reason that he would like to see the tax on other people who make a lot of money increased is because he makes money off of helping people avoid taxes, if the tax rate on the rich goes up, the demand for that service will go up.
Re:Tax planning and rich people (Score:3, Interesting)
So instead of giving them "reason" to seek tax loopholes, you suggest giving up that tax revenue without a fight?
If the rich seek to exploit tax loopholes, that creates demand for lawyers who exist solely to understand, lobby for and even to create the tax loopholes in the first place. Demand for tax lawyers will make people become tax lawyers; laws of supply and demand you see.
Do you really mean to create even more lawyers?! Talk about unforeseen consequences.
Re:Tax planning and rich people (Score:2, Interesting)
Their fuel costs are not in line with the road damage they do. That again is a place where Mr.Millionaire comes out ahead by stealing from me. My small car does far less road damage but my per mile fuel costs are not lower by that much. Road wear is a function of axle loading and goes up by the 4th power.
I love the way the public schools have created so many kids with this kind of class envy and sense of entitlement.
The trucker contribution of the total dollars going into the federal Highway Trust Fund is equal to 37.7 percent of highway account revenues, which only includes gas taxes, retail taxes, and use/tire taxes. The average annual taxes for a tractor trailer is about $9,000. Add to that state diesel tax, registration fees and weight fees - another $5,000 a year. That's about 35 times the amount of the average passenger car (assuming 25 MPG).
Oh, and without all those trucks moving stuff from where people PRODUCE stuff to your little urban paradise, you would run out of food in less than a week. So, by all means, tax them until nobody will drive them any more - and starve.
Re:Tax planning and rich people (Score:3, Interesting)
You owe society more than society owes you.
Wow, That statement alone scares me more than any other socialist diatribe.
It leads me to think of another just as bad... "All animals are equal, but some animals are more equal than others"
GDP v. Gini (Score:5, Interesting)
GOP Rep. Paul Ryan of Wisconsin said, "Class warfare may make for really good politics but it makes for rotten economics."
Class warfare, in the strict sense of guns and bombs, is -- like all civil war -- bad for the economy. Labor resources spending time shooting at each other, and getting shot, is potential productivity lost. Similarly, spending time on arguments that have no basis in reality is a waste of resources. There is evidence, however, that reducing the Gini (a measure of income disparity -- higher Gini means higher disparity) in the United States would increase the GDP growth rate. Here is one example set of data:
http://beach.traxel.com/img/gdp-gini-4.png [traxel.com]
America's Gini has been rising steadily since the early 1970's (it started before Reagan, because the tax brackets didn't keep up with the rapid inflation resulting from the oil embargo). Our Gini is now high enough to make our PPP (GDP per capita) an outlier. Most nations with our level of income disparity are third world nations. Only Hong Kong and SIngapore -- hybrid economies which mix successful free market economies with the stark poverty resulting from communism -- are in the first world ballpark and have Ginis as high as ours.
One possible reason is this: In any economic system there is an optimal market price to pay for any resource. If that economic system overpays for some resource or class of resources, it will operate less efficiently. There may be systemic biases in place which cause us to pay more for the labor (and/or capital lending) of our wealthy than their labor (and/or capital lending) is worth. Of course the chart above is insufficient to show the causal relationship, but it would explain why our PPP (GDP per capita) growth rate has fallen during the same period that our Gini has been increasing (I have more charts that show the temporal relationship, but they are not yet ready for publication).
If, in fact, the increasing Gini is a cause of falling PPP, then increasing the taxation on upper income brackets would increase the GDP growth rate. If that is the case, and assuming one believes (as I do) that the ideal free market is GDP maximizing, there is only one possible explanation: some degree of progressive taxation actually increases the accuracy of our approximation of the free market, by offsetting a systemic bias.
Disagree? Good, I'd love to see your empirical evidence. Show me the data.
Re:Tax planning and rich people (Score:3, Interesting)
Now, if we compare to the "west" (Canada, U.S., Japan, the E.U., Switzerland, and the Nordic States).
Our Human Development Index is lower than the E.U., our Gini coefficient is higher than the E.U.
Our GDP PPP per capita is quite a bit higher than Europe. This is mostly because the U.S. focuses on squeezing as much productivity as possible out of the population, and because Europe has been reduced to rubble twice in the past century and subjected to a tug-of-war by Russia and the United States a little more than 40 years.
Germany manages a trade surplus, and even in the midst of the financial crisis their deficit is barely 7% of revenues, in 2005 ("the good times") the U.S. deficit was 21% of revenues. Germany's GDP PPP per capita is lower than the U.S. Most European countries target general welfare of the populace over 'productivity'. I'd certainly rather be certain of having a home, medical care, and enough to eat rather than knowing that the rich are getting richer.
By the way - Germany's overall GDP is almost the same as the U.S., despite having a much smaller population, and half the country still recovering from 40 years of communist rule. They also have fewer natural resources and lack direct control over monetary and trade policy.
In other words, we should be doing significantly better, both in terms of welfare and economically, so much for being the greatest country in the world. We got complacent, and decided that we should deregulate as much as possible. Let companies outsource their entire businesses, reduce funding for education, and make no attempt to economically revive unproductive areas like Appalachia. We'd prefer to massively subsidize farms and big businesses to distort the market.
Re:Class warfare? (Score:2, Interesting)
First off, yes you can live on Min wage. I've done it.
Second, no one is forcing students to take out huge loans for college. I made it through college without borrowing anything. (Stupidly running up credit card bills is another matter however.)
Third you need to define the "American Dream" before you can claim how it isn't available for millions of Americans.
Fourth, if you're going to claim that trickle down economics is class warfare, you should back it up with something. Anything.
And that's just my response to your first sad, sad paragraph.
Re:Class warfare? (Score:5, Interesting)
Eating Ramen 3 times a day in a bad part of the neighborhood with no car, etc. etc. is not really "living."
If you ran up CC debt, you *didn't* make it through college without borrowing.
Everyone knows what the American Dream is and that it's unobtainable by the majority (at all, or without major financial consequences), stop being a moron.