Aside from a philosophical objection to a "soak the rich" mentality, I wonder how much revenue there is to be raised from raising taxes on the super rich?
Originally, the income tax was only supposed to hit the top few percent of incomes -- it was purely a "soak the rich" idea. But it didn't raise a lot of money, and once the principle had been established the confiscatory rates crept downward -- or, rather, raced downward.
I do like the idea of getting rid of loopholes a la the Reagan reform of 86. I prefer this plan by Ramesh Ponnuru though:
[i] THE PLAN
The centerpiece of the plan would be a massive expansion of the tax credit for children. Currently $1,000, it would grow to $5,000 per child. It would keep growing over time, tracking the growth in wages. It would be available to all parents no matter how much they earn, with the limit being the amount they pay in income and payroll taxes.
The second big feature of the plan would be to replace the standard deduction with a tax credit worth $1,500 for adult individuals and $3,000 for couples that can be used to offset income taxes. (These too would rise with wages.)
All itemized deductions, other than those for mortgage interest and charitable donations, would be scrapped. So would the tax credits for daycare and adoption, which would be folded into the new, big child tax credit. (Parents who take the new child credit would not be able to take the earned income credit as well.) The alternative minimum tax for individuals would go, too. And the plan would get rid of the separate tax schedule for ?heads of household?: Single parents would file as singles.
The separate tax rates for capital gains would be abolished. Capital gains would be taxed as income, but half of net long-term capital gains would be excluded. Estates would be taxed the same way as capital gains, but with a $1 million exemption per filer. Dividends would be taxed once, either as individual income or corporate income.
The six individual income-tax rates would be replaced with two: a 15 percent rate and a 30 percent rate. The brackets would be set so as to end the marriage penalty and to raise as much money as the current tax code. The corporate tax rate would be set at 30 percent, too, with accelerated write-offs for corporate investments.
This plan would help families, promote economic growth, and simplify the tax code. It would bring tax rates down and reduce their number. It would cut taxes on saving and investment. It would eliminate the alternative minimum tax, which forces many people to prepare two tax returns and pay the bigger one. It would cut the number of deductions and phase-outs. It would end the federal tax code?s bias against private and parochial schools (by ending the deduction for state and local taxes).
The result would be a tax code very similar to the one we had right after the last big tax reform, in 1986, but with two differences. Tax rates would be slightly higher, and the treatment of investment would be better.[/i]
Daggone it, you just had to go and get someone whose opinion I respect to blow up one of my core beliefs. Now I have some serious thinking to do. I do think however that it is merely a case of balance. Perhaps taxes aren't high enough, but I am still rather confident that Europe is WAY too taxed.
The solution still lies in limited gov't and cutting spending BIG, but that obviously isn't going to happen. The fact is that if you cannot support something through indirect taxation then it needn't be supported.
The rich will always pay more in taxes when we speak in absolute terms but as a percentage of their income they seem to pay less (according to WB's little experiement). We are speaking of the super wealthy only though. This is the top 2% of individual incomes in the country.
The argument of how much revenue would be brought in is irrelevent since the rich are not paying their fair share anyway. A few percentage points on 1 - 2 trillion dollars is still plenty of money considering we pay $7 billion a week in interest to overseas banks.
If we consider the fact that the IRS collected one trillin in taxes for fy 2000 we might assume this is about 30% of the total income brought in--which is roughly $3 trillion. If we further consider that 80% of that income belongs to the top 2% income bracket (which is prabably a very conservative estimate)--this equates to $33 billion dollars for every percentage point not paid in taxes--that's alot of bombs.
We should just do away with income tax and go to a graduated VAT tax. The government could adjust rates on consumer goods based on need vs. luxury--this would include investments. Since the average American seems to spend more than they make this would be an incentive to save or at least live on a balanced budget.
I also beleive the US gov't should be required by law to bring down the national deficit as this is currently the greatest threat to inflation. I base this on the fact that monetary policy is controlled by the fed and is thus under some sort of control. Inflation only hurts the poor and middle class.
Actually, this highlights another point that should be considered -- we aren't really talking about taxing the wealthy -- we're talking about taxing the highest incomes in a given year. This likely correlates with the wealthy, but what it ends up being is a tax on productivity -- if you produce a top income in a given year, you would be subject to higher tax rates (i.e. it's not a "Paris Hilton" tax on the idle inheritors of wealth).
You're trying to steal a base here by implanting your own concept -- you want "fair share" to be the same percentage of income. One could easily make the argument that "fair share" should be defined in terms of government services used, or some other definition.
Thus you seem to be arguing that we should take from the rich as a moral imperative - a point on which I would definitely disagree.
The key, to me, is whether enough money would be raised to justify the tax on productivity -- and then the separate consideration of whether that money would be used properly (which, for Stein, would mean for deficit reduction rather than pork-barrel spending or for handing out new benefits willy nilly)
I highly dislike the VAT because I want the taxes paid to be very visible -- people should see how much they are paying each time money is taken from them. It's too bad we don't have to write checks to Uncle Sugar with each paycheck, rather than having withholding. (It's also too bad we vote in November rather than on April 16).
Inflation is just a stealth form of taxation -- the government is just spending the money now instead of later. Though I agree that inflation is particularly insidious, especially with regard to its effect on the incentive to save.
This argument still doesn't convince me.
What are we considereing gov't services? Are roads and infrastucture services? The owners of industry get away with free lunch everyday because they are the largest users of government sevices. Companies use roads to transport their goods free of charge. These companines don't pay anymore for the roads even though they use them more than business commuters. Companies are allowed to profit at the expense of the tax payer in this regard.
This is only one example but I'm sure you can think of many other instances where this is true.
We can talk about pollution. We can talk about the use of natural resources. These are all services that tax payers pay for indirectly.
Ah, now you've switched tacks though, and are trying to tease out a difference between corporations and individuals. The argument that corporations should pay a higher tax to account for their externalities is an interesting one, and one that might even make sense depending on the industry -- it wouldn't make sense to make Goldman Sachs pay for transportation/pollution externalities, for example, versus a trucking company.
I'm merely talking about the concept of "fair share," and how it's not a definition that's widely agreed upon. You can argue for one definition or another, but my point was you were stealing a base in the argument by embedding a certain definition in your statement.
Ok, I see your point but corporations are owned and individuals do profit from the success of these corporations. Some more so than others. Individuals should be treated the same in regards to the taxes they pay.
I was simply trying to point out that Joe Schmoe should pay the same rate as Warren Buffet weather Joe Schmoe relies on certain government services that Warren Buffet does not--the free clinic for example. The cost of Joe Schmoes trip to the free clinic to get his STD checked out is miniscule in comparison to the cost of maintaining roads to transport goods.
Interesting article BB. I'd be interested to know the actual fraction he pays vs those of his employees. I mean, we could all have alot of fun with some theorycraft here, but some hard figures would be good to have.
Republicans have been holding the majority until recently, and yet we have had no tax reform whatsoever. It seems like everyone, on both sides of the isle, understands that the AMT is ludicrous. Yet it remains without adjustment.
Taxes are something people bitch about, but since no one can seem to agree on what the "best" system would be, no one in congress is going to stick his neck out and really push for anything, thus risking alienating his consituents.
Like it or not, our current system is not well suited to dramatic change, even vis-a-vis overwhelmingly obvious inefficiencies or hobbling systems.
Nothing will change until it is not only broken, but bleeding so much that the mess must be cleaned up.