T Nation

Tax Rates

EXCERPT:

[i]The 2005 total effective federal tax rate as a percentage of the 1979 rate:

* Top Quintile = 101.2%
* Fourth Quintile = 85.0%
* Middle Quintile = 76.8%
* Second Quintile = 60.1%
* Bottom Quintile = 14.3%

Rather than populist outcry over “tax cuts for the wealthy,” maybe we need to look at the whole package of consequences that come from tax policy. Is the final objective really to have all taxes paid by the top 1% of society?[/i]

Under current rates the top quartile of earners pays 86% of federal income taxes. What sort of stake do the bottom quartiles have in society or government, other than to enforce income redistribution?

I hear ya. The problem is that a good chunk of “the masses” is clouded by the desire to simply punish the rich. I don’t think that they understand (and / or care) that - per sensitivity analysis data - the Treasury actually collects more money when rates are lower (to a point). I don’t think that they understand (and / or care) that setting up a framework so that the rich get richer - even if a small percentage of them actually ARE arrogant SOBs figuratively living atop the hill - still raises the tide for everyone and minimizes poverty.

No, a lot of the folks to whom populist rhetoric appeals are uneducated and driven by a thirst to punish the rich. More WASPs in the business world, though, than their favorite NFL athlete.

And speaking of CEO pay, I’ve never heard of so many people that care how owners choose to compensate their employees. Some people speak as though these companies are public property in their outcry re: how they choose to pay their top employees. If the owner of a Quizno’s wants to pay his manager $300,000 / year, what do I care? It’s HIS PROPERTY, and these CEOs are hired hands for property that shareholders own. (and very rarely is someone complaining about CEOs’ extravagant pay actually an owner themselves)

I believe in the flat tax, but I’m not totally behind these little incremental tax cuts. It’s a see-saw battle where any small progress can be reversed when the next administration comes in.

Rather than a little bit here and there, I think the Republican party needs to focus on a big push, flat income tax rate, reduce the size and scope of the federal government to focus on its core functions. Stop living beyond our means, stop waiting for the government to fix everything and stop trying to make rich people pay for it all and start expecting everyone to stand up like adults and take care of themselves and their communities.

I think the Republican party is losing steam because it’s old lines of “taxes=bad, big government=bad” is worn out. The government serves essential functions, and we the people have to pay for those functions in some way. I think educating the people on what those essential functions are and the fairness of the 15% flat tax rate is the only way to make it happen.

[quote]BostonBarrister wrote:
Under current rates the top quartile of earners pays 86% of federal income taxes.[/quote]

Even if you had a flat tax rate, the top quartile would still pay the largest share of taxes.

That 86% doesn’t mean much unless we also know how much wealth the top quartile controls.

For a simple example, let’s image we have a population of 4 and a flat tax rate of 10%. “A” earns 100$/year, B gets 1,000$, C has 10,000$ and D 100,000$.

In that particular scenario, the govt. collects 11,110$ every year, of which 10,000$ come from D. He thus pays 90% of the taxes by himself, but he’s not being subjected to an unfair rate, as everyone is paying 10%.

[quote]pookie wrote:
BostonBarrister wrote:
Under current rates the top quartile of earners pays 86% of federal income taxes.

Even if you had a flat tax rate, the top quartile would still pay the largest share of taxes.

That 86% doesn’t mean much unless we also know how much wealth the top quartile controls.

For a simple example, let’s image we have a population of 4 and a flat tax rate of 10%. “A” earns 100$/year, B gets 1,000$, C has 10,000$ and D 100,000$.

In that particular scenario, the govt. collects 11,110$ every year, of which 10,000$ come from D. He thus pays 90% of the taxes by himself, but he’s not being subjected to an unfair rate, as everyone is paying 10%.
[/quote]
I just don’t understand why some one who makes such a large amount of money should necessarily be subjected to such a hefty sum. Why should the top 25% of tax payers pay 86% of the costs for roads, for example?

[quote]LIFTICVSMAXIMVS wrote:
pookie wrote:
BostonBarrister wrote:
Under current rates the top quartile of earners pays 86% of federal income taxes.

Even if you had a flat tax rate, the top quartile would still pay the largest share of taxes.

That 86% doesn’t mean much unless we also know how much wealth the top quartile controls.

For a simple example, let’s image we have a population of 4 and a flat tax rate of 10%. “A” earns 100$/year, B gets 1,000$, C has 10,000$ and D 100,000$.

In that particular scenario, the govt. collects 11,110$ every year, of which 10,000$ come from D. He thus pays 90% of the taxes by himself, but he’s not being subjected to an unfair rate, as everyone is paying 10%.

I just don’t understand why some one who makes such a large amount of money should necessarily be subjected to such a hefty sum. Why should the top 25% of tax payers pay 86% of the costs for roads, for example?[/quote]

That all depends. If they make 86% of the money it might be a fair rate. If they make 99% of the money it may be too light. If they make 50% of the money it may be too heavy. Of course these numbers should be fudged around a bit to account for costs of living.

[quote]LIFTICVSMAXIMVS wrote:
I just don’t understand why some one who makes such a large amount of money should necessarily be subjected to such a hefty sum. Why should the top 25% of tax payers pay 86% of the costs for roads, for example?[/quote]

Because the top 25% of tax payers also control close (if not more than) 86% of the wealth available to be taxed.

Going back to my example above, what to you think would be a fair tax amount for D who makes 100,000$ a year? And for A who only makes 100$ a year?

This doesn’t really get to your point though, because you seem to be arguing for a “net worth” tax as opposed to an income tax.

[quote]pookie wrote:
Going back to my example above, what to you think would be a fair tax amount for D who makes 100,000$ a year? And for A who only makes 100$ a year?

[/quote]
But income isn’t wealth. Income is payment rendered for a service or labor. Only property and capital can be considered wealth as they are the productive means. If productivity is taxed too heavily it ceases to be productive and hence it no longer creates wealth.

[quote]LIFTICVSMAXIMVS wrote:
pookie wrote:
Going back to my example above, what to you think would be a fair tax amount for D who makes 100,000$ a year? And for A who only makes 100$ a year?

But income isn’t wealth. Income is payment rendered for a service or labor. Only property and capital can be considered wealth as they are the productive means. If productivity is taxed too heavily it ceases to be productive and hence it no longer creates wealth.[/quote]

Sure it does. It only shifts into a black market.

[quote]LIFTICVSMAXIMVS wrote:
pookie wrote:
Going back to my example above, what to you think would be a fair tax amount for D who makes 100,000$ a year? And for A who only makes 100$ a year?

But income isn’t wealth. Income is payment rendered for a service or labor. Only property and capital can be considered wealth as they are the productive means. If productivity is taxed too heavily it ceases to be productive and hence it no longer creates wealth.[/quote]

Once the payment is received it becomes wealth.