Tax the Rich?

[bjl584]

I've been hearing this slogan/talking point being thrown out a lot lately in light of the current Wall Street protests. I've been thinking about this, and it seems more of an emotional response than it does a sound economic policy. From what I've seen, there hasn't been much deeper thought put into this than what is on the surface. So today we raise taxes on the rich, and then tomorrow we do.......what?

I agree that the government needs to raise revenue if we are ever going to get a handle on our debt, but how do we do it? Will taxing the "rich" really fix the problem? Will our lovely polititians in Washington use the increase in revenues from taxing the rich to actually pay down our national debt, or will they pork up a bunch of bills and expand the size and scope of government like they usually seem to do?

I say, get rid of the waste, frivilous spending and government expansion first, THEN and only THEN, raise revenue. Until then, stay out of my pocket.

Thoughts?

[disneysteve]

I say, get rid of the waste, frivilous spending and government expansion first, THEN and only THEN, raise revenue.

I agree. Look at the threads on this board. When someone posts that they are having trouble making ends meet or paying their debts, what's the first thing we say? We ask to see the budget so that we can point out places to cut spending. The government needs to do the same.

Have you ever seen the movie "Dave"? There is a great scene in there when Dave is sitting in a cabinet meeting and gets everyone to agree to cut their budgets in order to come up with the money to pay for a program that was going to be slashed due to lack of funding.

Our government wastes BILLIONS of dollars each year on frivolous stuff that would bankrupt any of us if we tried to live that way. It needs to stop. We need to put Suze Orman or Dave Ramsey or some of the regulars here in charge. We'd clean up the mess and "find" billions of spare dollars to pay for things that really matter.

[Scanner]

There's two issues:

ISSUE 1: The Nitty Gritty.

No, taxing the rich will not balance the budget by itself. Hardly even close.

ISSUE 2: The Symbolic

I think there comes a point where "shared sacrifice" makes a difference with "unifying the taxpayor." (country) One of the most attractive features of Cain's 9-9-9 plan is it "unifies the taxpayor" under a uniform code. It's something our country needs.

We all know, it's not in dispute, that the rich have benefited the most since Reagan during periods of economic expansion (although the middle class did have a brief rally under Clinton).

Symbolically, if we are having tough times, the rich should have to pony up some more, since they benefited more.

Will it make a difference? Probably only a little.

But the symbolism restores a little order in a disordered, inefficient system.

Look *in Obama Voice*. . .I don't think it's unreasonable to ask the rich pay a little more.

If you want a good system of balancing the budget, we have one:

The Bowles-Simpson plan which combines tax increases (gas tax) with many budget cuts, entitlements included.

[GREENBACK]

I think both parties have shown incredible fiscal irresponsibility over the last decade. I don't see how keeping more of anyone's money will help as long as they continue to do the same things. Would you help a shopaholic if you provided them with more money? The goverment has a spending problem more than an income problem.

[Scanner]

Again, this has all been hammered out in the Bowles-Simpson Plan.

Not given much press, it was a bipartisan effort to see what could be done to close gap. Led by a Republican and Democrat, they wrangled it out politically and what could and should be cut. The problem is yes, neither party wants to get behind it and tell hte People - "Hey this is it - Tax Increases and Spending Cuts."

Each party doesn't want to endure the pain.

It's not a lengthy read. . .but something you could sort of pick up in an evening:

http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf

I am not sure why Righties feel that loopholes are a good thing, that worming our way through the tax code to escape taxation thanks to accountants and making it more complex is a good thing.

It's not.

[Like2Plan]

Fact check: The wealthy already pay more taxes
link to USAToday article

The 10% of households with the highest incomes pay more than half of all federal taxes. They pay more than 70% of federal income taxes, according to the Congressional Budget Office.

The Tax Policy Center estimates that 46% of households, mostly low- and medium-income households, will pay no federal income taxes this year. Most, however, will pay other taxes, including Social Security payroll taxes.

[JustBill]

It's funny. When I hear "everyone should pay their fair share", I become optimistic, thinking that they're referring to the almost 50% of people that pay no federal income tax, will now be required to "pay their share".

[expo09]

Taxing the rich is something people will never really agree on - the rich will say no and the poor will say yes. It is true that the rich pay more but they earn more so should. The waste issue is a big one, and all governments waste so much it's scary. This should be the first priority. If taxes need to be raise then it has to from those who can best afford it. I live in the UK and our government are always saying that "we're in it together". But most feel that it is the rich bankers who got us into these problems and it is the poorer who are impacted more when cuts are made, as they are the one's with least to spare.

[elessar78]

Five areas comprise the biggest expenditures in the Federal Budget: Medicare (20%) Defense (19%), Unemployment/Welfare/Mandatory Spending (16%), Social Security (13%), and Medicaid (8%). Reining in all the other costs without addressing these three won't make much of a difference.

Unfortunately, to get out of our current situation (like getting out of personal debt) we need a two-fold approach of raising taxes across the board (rich and middle class) AND reduce spending.

As you see, Medicare comprises 1/5 of our expenditures. Expect that to go up with an aging population who probably has not saved enough to offset that cost.

I believe that the reality is that we all want government services but are not willing to pay for them.

[Scanner]

Here is a discussion of class models:

Social class - Wikipedia, the free encyclopedia

I haven't been here in awhile, and not sure if this has been discussed, but how does the forum feel about the "Buffet Rule" vs. the charged "paying your fair share" tenant?

Do you think it fair that a worker pay 35% of his income while a business owner has that distributed in dividends and pays 15%?

Why does it make sense to tax "unearned income" lower (investments) but productivity/earned income higher?

Shouldn't we endeavor as a nation to encourage productivity, rather than passive-sit-around-on-your-butt income?

No wonder the middle class is peeved and going to the OWS protests (count me in). . .you have the poor paying nothing and you have the rich not paying their fair share.

As Ross Perot once said, "Everybody's in the wagon and nobody wants to pull!" Well, first one out of the wagon - rich CEO's. We'll decide what to do with the poor later.

[Like2Plan]

Here is a discussion of class models:
Social class - Wikipedia, the free encyclopedia
I haven't been here in awhile, and not sure if this has been discussed, but how does the forum feel about the "Buffet Rule" vs. the charged "paying your fair share" tenant?
Do you think it fair that a worker pay 35% of his income while a business owner has that distributed in dividends and pays 15%?
Why does it make sense to tax "unearned income" lower (investments) but productivity/earned income higher?
Shouldn't we endeavor as a nation to encourage productivity, rather than passive-sit-around-on-your-butt income?
No wonder the middle class is peeved and going to the OWS protests (count me in). . .you have the poor paying nothing and you have the rich not paying their fair share.
As Ross Perot once said, "Everybody's in the wagon and nobody wants to pull!" Well, first one out of the wagon - rich CEO's. We'll decide what to do with the poor later.

Again, reality check. The rhetoric makes good sound bites, but it is just not true. From the article:

There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. But that's less than 1% of the nearly 237,000 returns with incomes above $1 million.

This year, households making more than $1 million will pay an average 29.1% of their income in federal taxes, including income taxes, payroll taxes and other taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay an average of 15% of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5% of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7%.

The latest IRS figures are a few years older — and limited to federal income taxes — but show much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4% of their income in federal income taxes, according to the IRS.

Those making $100,000 to $125,000 paid on average 9.9% in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3%.

[elessar78]

On some level it's a political move. The "Rich" just don't have the numbers to make their vote matter, so they "fight back" in the way they can by buying influence and media access. You can't raise taxes on the middle class because a) they don't have the surplus income to do so and b) they'll vote you out of office. Can't increase taxes on the poorer segments of the population because it won't matter much.

So if you're rich, by scanner's definitions, those of you that are upper middle class don't try to sneak in there . . . you're just out of luck. You ARE getting penalized for your success (or your parents's success, as the case may be). To counter, the rich appeal to the "sense of fair" and "aspirational values" (one day I'll be rich too and I don't want that to happen to me) that the middle class holds.

Life isn't fair. For either side. Boom and bust cycles have been characteristic of our economy for close to a century now, perhaps longer. Growth and corrections in the economy have occurred in periods of low and high taxation.

The rich in this country have become fantastically wealthy. America has fostered this type of culture that allowed this to happen and the policies have not always been sound but it benefited the "few" financially. What's the next step?

[Like2Plan]

Here is another datapoint from the savings advice board. It was a thread started by Jim_Ohio a couple years ago (reminds me that I miss Jim_Ohio on the board--I hope he is doing well at his new career )

Effective tax rate

[feh]

I am constantly amazed at how the non-rich have been fooled into lobbying for the wealthy. It's baffling.

The large deficits the last 3-4 years have been caused primarily by revenue shortages, not excessive spending. There is a structural deficit in the current tax code; even during good economic times, a deficit will exist because rates are too low.

[bjl584]

I am constantly amazed at how the non-rich have been fooled into lobbying for the wealthy. It's baffling.

The large deficits the last 3-4 years have been caused primarily by revenue shortages, not excessive spending. There is a structural deficit in the current tax code; even during good economic times, a deficit will exist because rates are too low.

I have to disagree. The system may be set up in such a way that causes revenue shortage due to low tax rates, but spending should reflect revenue. If this were taken out of the context of government and applied to an individual, then it would be like saying that I am in debt not because I spend to much. I am in debt because I don't earn enough. The advice that we see time and time again on this board if to live within your means. I also believe government should spend within its means.