Raising Taxes

[NobleSavage]

I grew up in a conservative Republican family. When I lost my religion the social conservatism evaporated. Then I slowly moved to economic liberalism (in the colloquial sense; not classic liberalism). Now I'd say I'm a militant moderate.

On the topic of raising taxes (assume it's on the correct group of people in your mind), I against it. First, we scale back the stupidity and if we accomplish that then we can raise taxes. Before you say X president or Y congress did that, is doing that, or did the opposite, I mean this in a universal sense. Even if the tax increase was appropriated for ONLY a good cause, I'll bet dollars to donuts that part of it will get channeled into paying for someone's militaristic or law enforcement hard on.

 

[maxparrish]

Taxes are patriotic. (Joe Biden)

 

[arkirk]

Taxes are patriotic. (Joe Biden)

If you really mean it, Max, write the congress and ask them if maybe you can help out with a little more money. Taxes are perhaps the best way to redistribute the hoarded funds of the IDLE RICH. If they wish to dominate the economic system then they need to keep it running...hiring enough, building enough, producing enough and seeing to it the help can pay for the shit you make. An economy is a sub system in nature. It is society's method of coping with the physical reality in which it exists. The money grubbers and the money snatchers do things that tend to interfere with proper distribution of goods...including money.

 

[Medicine Man]

Taxes are patriotic. (Joe Biden)​

....If you expect to live in a civilized society.​

The Estate Tax​

BILL MOYERS: Conservatives call it the death tax. Lawyers call it the estate tax. I grew up hearing it called the inheritance tax. And therein lies a story of wealth and power.

After a 10-year campaign hatched by a small group of wealthy families, Congress repealed the tax in the year 2000. Their crusade climaxed with a PR campaign that made it seem the estate tax was about to kill off the family farm.

The law repealing the tax was delivered to the White House on a bright red tractor but President Bill Clinton wasn't buying. He vetoed the bill and the estate tax continued. No sooner had George W. Bush reached the White House, however, than he made repeal of the tax a big priority and Congress of course was happy to oblige. The day after he signed its repeal the President was out in Iowa talking about it.

But the story doesn't end there. There's a campaign to restore the inheritance tax. And it's being led, believe it or not, by some of the country's richest people including Bill Gates, Sr., the patriarch of the Gates family who heads the Bill and Melinda Gates Foundation, and Chuck Collins, an heir to the Oscar Meyer fortune who founded the organization called Responsible Wealth.

Bill Gates Sr.: It's just such a fair tax. I mean, it's just such an opportune, appropriate time to have repaid from the people who have benefitted more than anyone else from the circumstances that this country makes available, from the conditions that make it possible to become....

There's nowhere else in the world, nowhere else in the world, that people can accrue the kind of fortunes that happen here. And that's because of the kind of country we have.

And the kind of country we have is a function of the taxes that we pay to provide security, we have a stable market, you can predict next week will be pretty much like the week before.

We have the most immense investment being made by our government in advancing businesses by supporting the enormous research industry that's going on in this country. And it's that piece of government expenditure that which has everything to do with the health and robustness of our economy.

Chuck Collins: We believe that people who accumulate great wealth also have been lucky, have had the benefit of growing up and living in the United States, and have benefitted from this enormous public investment.

One of our leaders in Responsible Wealth was standing next to President Clinton when he vetoed the repeal of the estate tax and he said, look, I grew up in New York City, I went to public schools and public libraries and museums. Someone else paid for those.

I went to a college; someone else paid for that. I went into the technology field, a whole infrastructure that had been built with public investment that someone else had paid for. I started a company and I hired professional people who had been trained through a subsidized education system. And I made $40 million. And you're telling me society doesn't have a claim on my wealth?

Responsible Wealth​

 

[NobleSavage]

Medicine Man, if you said anything important I wouldn't know. You are the first person I've ever blocked. Nothing personal, but your formatting makes my eyes bleed. I'm only pointing this out because I started the thread.

 

[KeepTalking]

Medicine Man, if you said anything important I wouldn't know. You are the first person I've ever blocked. Nothing personal, but your formatting makes my eyes bleed. I'm only pointing this out because I started the thread.

And he has even toned down the formatting quite a bit. This most recent post only had a few places with blue fonts, and no red at all. Other than that, there are two links with large font sizes in the post, but he does seem to be learning.

 

[Rhea]

I believe that ALL INCOME whether earned by labor, by investment, by financial dealings or by inheritance, ALL INCOME should be taxed. And it should be taxed progressively such that the more you make, the harder it is to make it. Not by a lot, just by a little. Because if ALL INCOME, no matter how you get it, is taxed as income, then the civilization we build will be a stable one.

There is no "way of earning" that is somehow more honorable and hence less taxable than others. The data is unambiguous that tax breaks for non-labor income does not result in advantages for the overall economy. It gets hoarded. Let's stop encouraging that and just make it neutral. Not a flat tax, because that harms the economy, too. A progressive tax that only taxes that which is above subsistence, and increases the further you get from subsistence.

 

[Medicine Man]

Medicine Man, if you said anything important I wouldn't know. You are the first person I've ever blocked. Nothing personal, but your formatting makes my eyes bleed. I'm only pointing this out because I started the thread.

 

[Wiploc]

Medicine Man, if you said anything important I wouldn't know. You are the first person I've ever blocked. Nothing personal, but your formatting makes my eyes bleed. I'm only pointing this out because I started the thread.

Great idea! I'm doing it too.

 

[EricK]

I believe that ALL INCOME whether earned by labor, by investment, by financial dealings or by inheritance, ALL INCOME should be taxed. And it should be taxed progressively such that the more you make, the harder it is to make it. Not by a lot, just by a little. Because if ALL INCOME, no matter how you get it, is taxed as income, then the civilization we build will be a stable one.

There is no "way of earning" that is somehow more honorable and hence less taxable than others. The data is unambiguous that tax breaks for non-labor income does not result in advantages for the overall economy. It gets hoarded. Let's stop encouraging that and just make it neutral. Not a flat tax, because that harms the economy, too. A progressive tax that only taxes that which is above subsistence, and increases the further you get from subsistence.

While taxing all income equally no matter the source sounds fair, it doesn't work mathematically. Here's a simplified example:
Scenario 1: No taxes
I earn $100 in period 1 and buy 2 widgets at $50 each
I earn $100 in period 2 and buy 2 widgets at $50 each

You earn $100 in period 1 and invest the money and quit your job
Your investment gets a return of 100%, so earns $100 in period 2. You cash in the $200 and buy 4 widgets

We have both had income of $200 and got 4 widgets.

Scenario 2: exactly the same behaviours from each of us but with 50% income tax
I earn $100 in period 1, pay $50 in tax and buy 1 widget with the remainder
I earn $100 in period 2, pay $50 in tax and buy 1 widget with the remainder

You earn $100 in period 1, pay $50 in tax, invest the remainder and quit your job
Your investment gets a return of 100%, so earns $50 in period 2
You currently have $100 but haven't yet paid any taxes on your investment returns.

According to your post, you think you should pay 50% tax on the $50 your investment made thus leaving you with $75. Now you can only buy 1.5 widgets whereas I managed to buy 2

In order to get the same 2 widgets as I did, we would need a 0% tax rate on investment returns (because the money you invested had already been taxed, so you have already lost the growth you would have made on the portion of your income which had been taxed).

Or to look at it another way, if you have the same rate of tax on all forms of income, then you are favouring labour-derived income over investment returns.

 

[SimpleDon]

I grew up in a conservative Republican family. When I lost my religion the social conservatism evaporated. Then I slowly moved to economic liberalism (in the colloquial sense; not classic liberalism). Now I'd say I'm a militant moderate.

On the topic of raising taxes (assume it's on the correct group of people in your mind), I against it. First, we scale back the stupidity and if we accomplish that then we can raise taxes. Before you say X president or Y congress did that, is doing that, or did the opposite, I mean this in a universal sense. Even if the tax increase was appropriated for ONLY a good cause, I'll bet dollars to donuts that part of it will get channeled into paying for someone's militaristic or law enforcement hard on.

You don't feel that the military or law enforcement are valid areas for government expenditures? I would disagree.

Do I believe that the government spends too much money on the military and law enforcement? I would agree.

Probably half of the defense budget is a corporate welfare/jobs program that is a stunning waste of resources and productive capacity.

And there is much to dislike about our system of law enforcement. In 1980 we had a civil society with little crime and about 300,000 people in our prisons. After thirty five years of certainty about how to reign in crime by getting tough on it we now have more than two million people in prison and many more criminals, if not crimes, which have fallen only in ratio to demographics, that is, fewer young males, not in any apparent response to getting tough on crime. In fact, the entire getting tough on crime seems to be nothing more than the new Jim Crow when you look at the demographics of the 1.7 million prisoners we have added since 1980.

And we tolerate a huge and inefficient law enforcement establishment with twice as many police per capita as the next largest police state, Germany, and more than 17,000 different agencies doing the exact same thing, enforcing the law.

But that is my opinion. The opinions of the majority of the people supports the new Jim Crow that imprisons so many minorities, the hugely inefficient police establishment and the corporate welfare/jobs program that masquerades as national defense. I don't know why they do, it seems to be based on irrational levels of fear, but they do. I still have to pay my taxes to support these things even if I disagree with them. Everybody does.

 

[SimpleDon]

Taxes are patriotic. (Joe Biden)

Taxes aren't so much patriotic as they are the cost that has to be paid to have a modern society. Even the most irrational idealists among us concede that we need a government, even if it is only to "enforce contracts." Of course, we need a government for much more than just that, but since everyone agrees that a government is needed, the only open questions are how much do we need and what form should it take?

Taxes are the price of having a government. We have an economic system based on having to pay for the things that we need (as well as getting paid for the things that we provide.) Why is a government any different?

 

[maxparrish]

Medicine Man, if you said anything important I wouldn't know. You are the first person I've ever blocked. Nothing personal, but your formatting makes my eyes bleed. I'm only pointing this out because I started the thread.

I'm considering doing the same. Perhaps someone of greater authority will suggest that his 'yelling' style of tabloid formatting conveys an impression of an immature personae that detracts from whatever point is trying to make. As such, I don't bother to read his rantings and may also join you.

 

[laughing dog]

I believe that ALL INCOME whether earned by labor, by investment, by financial dealings or by inheritance, ALL INCOME should be taxed. And it should be taxed progressively such that the more you make, the harder it is to make it. Not by a lot, just by a little. Because if ALL INCOME, no matter how you get it, is taxed as income, then the civilization we build will be a stable one.

There is no "way of earning" that is somehow more honorable and hence less taxable than others. The data is unambiguous that tax breaks for non-labor income does not result in advantages for the overall economy. It gets hoarded. Let's stop encouraging that and just make it neutral. Not a flat tax, because that harms the economy, too. A progressive tax that only taxes that which is above subsistence, and increases the further you get from subsistence.

While taxing all income equally no matter the source sounds fair, it doesn't work mathematically. Here's a simplified example:
Scenario 1: No taxes
I earn $100 in period 1 and buy 2 widgets at $50 each
I earn $100 in period 2 and buy 2 widgets at $50 each

You earn $100 in period 1 and invest the money and quit your job
Your investment gets a return of 100%, so earns $100 in period 2. You cash in the $200 and buy 4 widgets

We have both had income of $200 and got 4 widgets.

Scenario 2: exactly the same behaviours from each of us but with 50% income tax
I earn $100 in period 1, pay $50 in tax and buy 1 widget with the remainder
I earn $100 in period 2, pay $50 in tax and buy 1 widget with the remainder

You earn $100 in period 1, pay $50 in tax, invest the remainder and quit your job
Your investment gets a return of 100%, so earns $50 in period 2
You currently have $100 but haven't yet paid any taxes on your investment returns.

According to your post, you think you should pay 50% tax on the $50 your investment made thus leaving you with $75. Now you can only buy 1.5 widgets whereas I managed to buy 2

In order to get the same 2 widgets as I did, we would need a 0% tax rate on investment returns (because the money you invested had already been taxed, so you have already lost the growth you would have made on the portion of your income which had been taxed).

Or to look at it another way, if you have the same rate of tax on all forms of income, then you are favouring labour-derived income over investment returns.

In essence, you are proposing a tax on consumption not income. It is true that taxing spending instead of income equalizes the present value of consumption spending. And if that is the ultimate goal, then your argument is convincing. However, that is not the ultimate goal, then your argument is not as convincing.

 

[Alcoholic Actuary]

I believe that ALL INCOME whether earned by labor, by investment, by financial dealings or by inheritance, ALL INCOME should be taxed. And it should be taxed progressively such that the more you make, the harder it is to make it. Not by a lot, just by a little. Because if ALL INCOME, no matter how you get it, is taxed as income, then the civilization we build will be a stable one.

There is no "way of earning" that is somehow more honorable and hence less taxable than others. The data is unambiguous that tax breaks for non-labor income does not result in advantages for the overall economy. It gets hoarded. Let's stop encouraging that and just make it neutral. Not a flat tax, because that harms the economy, too. A progressive tax that only taxes that which is above subsistence, and increases the further you get from subsistence.

While taxing all income equally no matter the source sounds fair, it doesn't work mathematically. Here's a simplified example:
Scenario 1: No taxes
I earn $100 in period 1 and buy 2 widgets at $50 each
I earn $100 in period 2 and buy 2 widgets at $50 each

You earn $100 in period 1 and invest the money and quit your job
Your investment gets a return of 100%, so earns $100 in period 2. You cash in the $200 and buy 4 widgets

We have both had income of $200 and got 4 widgets.

Scenario 2: exactly the same behaviours from each of us but with 50% income tax
I earn $100 in period 1, pay $50 in tax and buy 1 widget with the remainder
I earn $100 in period 2, pay $50 in tax and buy 1 widget with the remainder

You earn $100 in period 1, pay $50 in tax, invest the remainder and quit your job
Your investment gets a return of 100%, so earns $50 in period 2
You currently have $100 but haven't yet paid any taxes on your investment returns.

According to your post, you think you should pay 50% tax on the $50 your investment made thus leaving you with $75. Now you can only buy 1.5 widgets whereas I managed to buy 2

In order to get the same 2 widgets as I did, we would need a 0% tax rate on investment returns (because the money you invested had already been taxed, so you have already lost the growth you would have made on the portion of your income which had been taxed).

Or to look at it another way, if you have the same rate of tax on all forms of income, then you are favouring labour-derived income over investment returns.

Nicely demonstrated.

However, what if we looked at the same scenario (at a 50% tax rate) over a 4 year period instead of 2? If my calculations are correct, the investor buys 4.5 widgets whereas the laborer buys only 4 - and the divide widens with each year thereafter. At 10 years the investor buys 256.5 widgets vs the 10 bought by the laborer.

aa

 

[Axulus]

I believe that ALL INCOME whether earned by labor, by investment, by financial dealings or by inheritance, ALL INCOME should be taxed. And it should be taxed progressively such that the more you make, the harder it is to make it. Not by a lot, just by a little. Because if ALL INCOME, no matter how you get it, is taxed as income, then the civilization we build will be a stable one.

There is no "way of earning" that is somehow more honorable and hence less taxable than others. The data is unambiguous that tax breaks for non-labor income does not result in advantages for the overall economy. It gets hoarded. Let's stop encouraging that and just make it neutral. Not a flat tax, because that harms the economy, too. A progressive tax that only taxes that which is above subsistence, and increases the further you get from subsistence.

"Hoarding it" is a net positive for the economy - it means it is available for capital investment in the country, which increases economic productivity, an essential factor for rising wages and living standards.

It is the spending of it that is a drain on the economy. It uses up resources for the benefit of the spender, resources that could otherwise be used for other purposes.

 

[maxparrish]

Taxes are patriotic. (Joe Biden)

Taxes aren't so much patriotic as they are the cost that has to be paid to have a modern society. Even the most irrational idealists among us concede that we need a government, even if it is only to "enforce contracts." Of course, we need a government for much more than just that, but since everyone agrees that a government is needed, the only open questions are how much do we need and what form should it take?

Taxes are the price of having a government. We have an economic system based on having to pay for the things that we need (as well as getting paid for the things that we provide.) Why is a government any different?

As you might imagine, I was being sarcastic. I agree, taxes are not patriotic; taxes are the inevitable price of having a necessary but evil government (although in theory one might have government commercialization of all it's services).

 

[EricK]

While taxing all income equally no matter the source sounds fair, it doesn't work mathematically. Here's a simplified example:
Scenario 1: No taxes
I earn $100 in period 1 and buy 2 widgets at $50 each
I earn $100 in period 2 and buy 2 widgets at $50 each

You earn $100 in period 1 and invest the money and quit your job
Your investment gets a return of 100%, so earns $100 in period 2. You cash in the $200 and buy 4 widgets

We have both had income of $200 and got 4 widgets.

Scenario 2: exactly the same behaviours from each of us but with 50% income tax
I earn $100 in period 1, pay $50 in tax and buy 1 widget with the remainder
I earn $100 in period 2, pay $50 in tax and buy 1 widget with the remainder

You earn $100 in period 1, pay $50 in tax, invest the remainder and quit your job
Your investment gets a return of 100%, so earns $50 in period 2
You currently have $100 but haven't yet paid any taxes on your investment returns.

According to your post, you think you should pay 50% tax on the $50 your investment made thus leaving you with $75. Now you can only buy 1.5 widgets whereas I managed to buy 2

In order to get the same 2 widgets as I did, we would need a 0% tax rate on investment returns (because the money you invested had already been taxed, so you have already lost the growth you would have made on the portion of your income which had been taxed).

Or to look at it another way, if you have the same rate of tax on all forms of income, then you are favouring labour-derived income over investment returns.

Nicely demonstrated.

However, what if we looked at the same scenario (at a 50% tax rate) over a 4 year period instead of 2? If my calculations are correct, the investor buys 4.5 widgets whereas the laborer buys only 4 - and the divide widens with each year thereafter. At 10 years the investor buys 256.5 widgets vs the 10 bought by the laborer.

aa

That is true, of course, but is it relevant? I chose the figures to give two people who were in the same position after 2 periods at 0% tax, and showed they were no longer in the same position if there was equal tax on all kinds of income.

At 0% tax, these people would no longer be in the same position after 4 periods or 10 periods, and the investor would be drawing ahead exponentially - so it is no surprise that that would also happen at 50% tax.

But suppose we adjusted the returns on investment so that the person who works for 1 period and invests for 3 in the 0% scenario has earned exactly the same amount after 4 periods as the person working each period to earn the money. If we tax income at 50%, then the "worker" ends up with half of what he had. To match this the investor who is taxed 50% of his first period's earnings still needs 0% tax on investment return to end up with half of what he had in the first scenario.

 

[maxparrish]

Nicely demonstrated.

However, what if we looked at the same scenario (at a 50% tax rate) over a 4 year period instead of 2? If my calculations are correct, the investor buys 4.5 widgets whereas the laborer buys only 4 - and the divide widens with each year thereafter. At 10 years the investor buys 256.5 widgets vs the 10 bought by the laborer.

aa

That is true, of course, but is it relevant? I chose the figures to give two people who were in the same position after 2 periods at 0% tax, and showed they were no longer in the same position if there was equal tax on all kinds of income.

At 0% tax, these people would no longer be in the same position after 4 periods or 10 periods, and the investor would be drawing ahead exponentially - so it is no surprise that that would also happen at 50% tax.

But suppose we adjusted the returns on investment so that the person who works for 1 period and invests for 3 in the 0% scenario has earned exactly the same amount after 4 periods as the person working each period to earn the money. If we tax income at 50%, then the "worker" ends up with half of what he had. To match this the investor who is taxed 50% of his first period's earnings still needs 0% tax on investment return to end up with half of what he had in the first scenario.

Excellent demonstration and followup. A nice heuristic.

 

[laughing dog]

Nicely demonstrated.

However, what if we looked at the same scenario (at a 50% tax rate) over a 4 year period instead of 2? If my calculations are correct, the investor buys 4.5 widgets whereas the laborer buys only 4 - and the divide widens with each year thereafter. At 10 years the investor buys 256.5 widgets vs the 10 bought by the laborer.

aa

That is true, of course, but is it relevant? I chose the figures to give two people who were in the same position after 2 periods at 0% tax, and showed they were no longer in the same position if there was equal tax on all kinds of income.

It is relevant because it shows your result does not hold for different holding periods.

[
At 0% tax, these people would no longer be in the same position after 4 periods or 10 periods, and the investor would be drawing ahead exponentially - so it is no surprise that that would also happen at 50% tax.

But suppose we adjusted the returns on investment so that the person who works for 1 period and invests for 3 in the 0% scenario has earned exactly the same amount after 4 periods as the person working each period to earn the money. If we tax income at 50%, then the "worker" ends up with half of what he had. To match this the investor who is taxed 50% of his first period's earnings still needs 0% tax on investment return to end up with half of what he had in the first scenario.

And that result is different at 2 periods or 12 periods.

The overall lesson is that there really is no tax scheme that either always achieves the desired outcomes or that is unaminously viewed as fair.