Is it bad to be "rich"?

[SparkyJJO]

OK thats a flat tax. Same thing. Thus, what I said is true - the top earners will pay less, the bottom earners will pay more. Although I agree with it in theory, in practice 1. its never gonna happen, and 2. unless the tax rate was extraodinarily high, we would lose tax income. On top of that, I dont see the bottom earners (48% of which pay nothing) getting a 25+% tax increase. In other words, it aint gonna fly.

Its been discussed ad nauseum here...I suggest doing a search. Theres alot of bullshit theads on the subject, but a few gems in there as well.

Compared to as it is now, yes... But the rich would always pay more than the middle or poor, always. Simple math.

And yes, we would lose some tax income. But then I guess we'd have to go through and weed out all the extraneous crap that the tax dollars are wasted on... heck, we need to now anyway.

It just isn't right to have someone who makes 200k in a year pay a higher percentage rate than someone who makes 50k a year. They're already paying 4x as much tax at the same percentage rate, why should they pay 6x the tax on a 4x income increase? They shouldn't.

I say all this as someone who made under 20k last year. So don't try and paint me as just one of those "evil rich guys" who just wants it better for himself. I'm far from being a rich person.

 

[Tom]

Compared to as it is now, yes... But the rich would always pay more than the middle or poor, always. Simple math.

And yes, we would lose tax income. But then I guess we'd have to go through and weed out all the extraneous crap that the tax dollars are wasted on... heck, we need to now anyway.

It just isn't right to have someone who makes 200k in a year pay a higher percentage rate than someone who makes 50k a year. They're already paying 4x as much tax at the same percentage rate, why should they pay 6x the tax on a 4x income increase? They shouldn't.

I say all this as someone who made under 20k last year. So don't try and paint me as just one of those "evil rich guys" who just wants it better for himself. I'm far from being a rich person.

Here's how tax brackets work now..The person who makes 200k pays the same rate as the person who makes 50k, on 50k. They only pay a higher rate on their income that is above the next bracket. They don't pay the higher rate on all their income.

So it's actually perfectly fair, both persons pay the same rate on their income that fits in the same bracket, it's just the lower income person doesn't have any income in the higher bracket.

 

[SparkyJJO]

They pay a higher percentage on that income above that 50K than on that first 50K, right?

How do you call that fair? Seriously? My point still stands. I may have been mistaken on how the brackets work (oops) but still, 10% on the first 50K, then 11% on the 51-100K, then 12% on the 100-150K.. why is that kind of thing fair? It isn't. You're paying more because you make more, and then more on top of that with an increasing percentage rate. It's robbery, not fair taxation.

 

[DanDaManJC]

lol, the only huffing and puffing is coming from you and your types. You can't see past your ideological blinders to see reality. You've provided nothing that shows that they "benefit more" and refuse to see the truth of the "poor"(however you want to define it) don't pay - thus benefit without participation.
But keep running away from reality to live in your little class warfare bubble.

for the sake of everyone else and the lazy (me) you and bowfinger should summarize your arguments in two separate posts . it seems like you two have been referencing the same argument somewhere in this thread through a couple different threads. im serious too.

 

[Brainonska511]

They pay a higher percentage on that income above that 50K than on that first 50K, right?

How do you call that fair? Seriously? My point still stands. I may have been mistaken on how the brackets work (oops) but still, 10% on the first 50K, then 11% on the 51-100K, then 12% on the 100-150K.. why is that kind of thing fair? It isn't. You're paying more because you make more, and then more on top of that with an increasing percentage rate. It's robbery, not fair taxation.

Depends on your definition of what's fair. The point of the progressive tax structure is that it is 'fair' in a marginal utility sense. As your income goes up, the marginal utility of each extra dollar goes down.

Not to say that it is perfect though. People that fall into the top bracket (AMT payers, etc...) are actually getting screwed compared to the super-rich (top 0.1%), who make the bulk of their income on low-taxed capital gains (and other passive income).

 

[SparkyJJO]

Depends on your definition of what's fair. The point of the progressive tax structure is that it is 'fair' in a marginal utility sense. As your income goes up, the marginal utility of each extra dollar goes down.

Not to say that it is perfect though. People that fall into the top bracket (AMT payers, etc...) are actually getting screwed compared to the super-rich (top 0.1%), who make the bulk of their income on low-taxed capital gains (and other passive income).

I don't quite understand your meaning on the first part. Are you saying that because the income is higher, every dollar more isn't "worth" as much to that person, so therefore should be taxed more to bring the perceived "value" of each dollar back to the same as someone making less?

I think I'm missing something. But if that is indeed what you're saying, then that's messed up.

 

[blackangst1]

I don't quite understand your meaning on the first part. Are you saying that because the income is higher, every dollar more isn't "worth" as much to that person, so therefore should be taxed more to bring the perceived "value" of each dollar back to the same as someone making less?

I think I'm missing something. But if that is indeed what you're saying, then that's messed up.

Of course thats what he's saying. Its logical. 100 bucks to Oprah isnt even a drop in the bucket, but to someone on welfare its a goldmine.

And yes, its messed up, but its what we have. the general mentality (as reflected by many opinions on this board) is that the more you have, the more you can give and still have more than most people, so quit bitching.

 

[Brainonska511]

I don't quite understand your meaning on the first part. Are you saying that because the income is higher, every dollar more isn't "worth" as much to that person, so therefore should be taxed more to bring the perceived "value" of each dollar back to the same as someone making less?

I think I'm missing something. But if that is indeed what you're saying, then that's messed up.

Decreasing marginal utility - it's just that as you acquire more of one thing, the more you acquire, the less each individual unit is worth to you because you don't need to use as much of it overall.

Think of workers in a factory. There are 5 stations that need to be operated, so the first 5 workers are very important, but as you add a 6th, 7th, and 8th worker, their labor value in the factory is less because they can't use the stations when the other 5 workers are working. So each additional unit of labor is worth less to the factory owner.

And such, the same idea is somewhat applied in the progressive income tax. The first $x for everyone is taxed at A%. The next set of dollars from $x+1 through $y is taxed at B%, and so on....

 

[SparkyJJO]

OK. But that begs the question - who determines whether each dollar as it increases is worth less or not?

To a point, it is always true. You always pinch pennies more when you only have a few vs a lot. But still, just because that is true, in general, doesn't mean it therefore is right to tax a higher percentage. Especially since you don't know someone's particular financial situation. I may consider a few bucks worth quite a bit (and I do given my income level) but you may see it as not worth that much. Does that give you any right to take more in taxes? No.. but that's what that whole argument is based on.

Taxes should be based on cold, hard numbers. Not perceived value by another person.

 

[DanDaManJC]

OK. But that begs the question - who determines whether each dollar as it increases is worth less or not?

To a point, it is always true. You always pinch pennies more when you only have a few vs a lot. But still, just because that is true, in general, doesn't mean it therefore is right to tax a higher percentage. Especially since you don't know someone's particular financial situation. I may consider a few bucks worth quite a bit (and I do given my income level) but you may see it as not worth that much. Does that give you any right to take more in taxes? No.. but that's what that whole argument is based on.

Taxes should be based on cold, hard numbers. Not perceived value by another person.

Money itself is a completely man made abstraction too, its value is just as unreal as determining the marginal value of dollars based on a person's yearly income. I mean, ask yourself, what defines the value of $1? Who ever decided a chicken is worth 1 gold shekels etc etc etc

Say we look at another extreme example. Say you had a 90% flat tax rate. Someone making 50k/year would have 5k in take home pay. someone making 1mil/year would have 100k/year. would you call it fair that the person making 50k/yr (a completely fair and middle class income --- that is about the average salary of a college grad) should be forced to live in poverty @ 5k/yr while the richer person gets the 100k? I know my example is a bit contrived... but the idea that the same percentage of money has different value to different income levels should be pretty clearly indicated.

 

[Bowfinger]

for the sake of everyone else and the lazy (me) you and bowfinger should summarize your arguments in two separate posts . it seems like you two have been referencing the same argument somewhere in this thread through a couple different threads. im serious too.

OK, if you twist my arm:

You are forcing them to pay for the infrastructure, then claiming that because they have to use the infrastructure they paid for, they must continue to pay for it. The "resources" that gave them that foundation were their own, or those of a previous generation. "Society" does not generate any resources. At best, it can simply pool them together for the common good.

Forcing them? As opposed to what, heading off into the forest and using stone tools to make their own Center for Innovation by hand? You need to get past this fantasy that you or anyone else is self-made. Everything you are and have was built upon those who came before you, using America's extraordinary physical, financial, and educational infrastructure (substituting other countries as appropriate for other people).

We don't see meaningful innovation coming from aboriginal tribes using hand-made stone tools. It comes from people people who leverage the benefits of a developed society to push forward. It comes from people who can take for granted things like electricity, clean water, plentiful safe food, roads, housing, education, banks, merchants, public safety, etc., so they can focus on creating the next big thing instead of scrounging for grubs for dinner.

Even more, turning that idea from a pipe dream into a profitable product demands extensive infrastructure support. One needs facilities, utilities, an adequately-educated workforce, suppliers, service providers, public safety and health, transportation, distributors, investors, a legal system with property & IP rights, ... and customers, all of whom are products of and dependent upon the same incredible physical, financial, and educational infrastructure provided by society. Take it away and no matter how brilliant and ambitious you may be, you're just a smart chimpanzee in a loin cloth.

This was in response to a challenge about how taxes are justified at all, but it also sets the rationale for progressive taxation. In general, the thing that most sets America apart from those third-world countries where people earn a few cents per hour is our extraordinary physical, financial, and educational infrastructure ... greatly funded through taxes. This is what gives us bountiful opportunities to succeed. Given that society invested substantial tax dollars in us so we can succeed, it is only reasonable to expect a return on that investment ... paying taxes. When an investment hits it big, society (an investor) gets a greater return.

Further, as I explain above, moving up the economic ladder requires that we take ever greater advantage of America's infrastructure. With very rare exceptions, the more you make, the more you rely on other people, people who are available to you and able to fill your needs thanks to the same extraordinary infrastructure. Growing a successful business requires a healthy, educated, and reliable work force. It requires transportation and suppliers and distributors. It requires customers who can afford to buy the products and services offered.

In short, the benefits drawn from America's infrastructure compound with greater levels of success, much like compounding interest. It is therefore reasonable for society to expect more back in return. As I suggest above, without our extraordinary infrastructure and opportunities for success, the smartest, most hard-working, most innovative person in America would spend his days foraging for food.

 

[SparkyJJO]

Money itself is a completely man made abstraction too, its value is just as unreal as determining the marginal value of dollars based on a person's yearly income. I mean, ask yourself, what defines the value of $1? Who ever decided a chicken is worth 1 gold shekels etc etc etc

Say we look at another extreme example. Say you had a 90% flat tax rate. Someone making 50k/year would have 5k in take home pay. someone making 1mil/year would have 100k/year. would you call it fair that the person making 50k/yr (a completely fair and middle class income --- that is about the average salary of a college grad) should be forced to live in poverty @ 5k/yr while the richer person gets the 100k? I know my example is a bit contrived... but the idea that the same percentage of money has different value to different income levels should be pretty clearly indicated.

Well of course if you blow things out of proportion like you just did then yeah it sounds totally absurd. But I'm talking REALISTIC numbers, not extremes

 

[DanDaManJC]

Well of course if you blow things out of proportion like you just did then yeah it sounds totally absurd. But I'm talking REALISTIC numbers, not extremes

Well it's always much more illustrative to look at the extremes. Like in math when you look at how the function behaves as it approaches infinity -- especially when considering stability. Obviously there's no infinity in the real world, but it's usually a good approximation.

The math stuff aside, the point is that fundamental inequality is still present if you had say a 10% flat rate.

Going back to the discussion, I thought Brainonska511's reply was spot on so I'll just wrap back around to his marginal value idea. Then of course your reply was that who determines that marginal value.. to which I reply that it'll probably be the same people who determine the value of your dollar. In short, I'm challenging your assertion that the value of money is somehow fixed or absolute -- rather, it's just as fluid as a definition of marginal value would be.

 

[Tom]

They pay a higher percentage on that income above that 50K than on that first 50K, right?

How do you call that fair? Seriously? My point still stands. I may have been mistaken on how the brackets work (oops) but still, 10% on the first 50K, then 11% on the 51-100K, then 12% on the 100-150K.. why is that kind of thing fair? It isn't. You're paying more because you make more, and then more on top of that with an increasing percentage rate. It's robbery, not fair taxation.

It's perfectly fair, everybody pays the same rate on the same income. If the higher brackets are too high it might be a disencentive to earn more, but that isn't a fairness issue.

Do you think sales tax is fair ? Suppose you pay sales tax on an xbox, and I don't buy an xbox. You paid tax and I didn't. Is that unfair ?

It's exactly the same with income. You pay 25% of your income from 100k to 200k and so do I. But I don't have any income between 100k-200k and you do, so you pay tax on it and I don't. But you still have the remaing after tax income and I don't, so if it's fair for you to have the income, it's fair for you to pay the tax.

Suppose everyone paid 100% of their first 50k in taxes. That's simple, it's fair according to your definition. Do you like that plan ? Think it would work ?

 

[SparkyJJO]

It's perfectly fair, everybody pays the same rate on the same income. If the higher brackets are too high it might be a disencentive to earn more, but that isn't a fairness issue.

Do you think sales tax is fair ? Suppose you pay sales tax on an xbox, and I don't buy an xbox. You paid tax and I didn't. Is that unfair ?

No, because I bought it, you didn't. It would be stupid for you to pay tax on something you didn't buy. Though I'm sure the gov't would love it if you did

It's exactly the same with income.

Not quite... you're earning that money, not buying something... but go on:

You pay 25% of your income from 100k to 200k and so do I. But I don't have any income between 100k-200k and you do, so you pay tax on it and I don't. But you still have the remaing after tax income and I don't, so if it's fair for you to have the income, it's fair for you to pay the tax.

Yes, I agree with you. I never said anything different. But I don't see how it is fair that you also increase the tax rate at the same time. How is it fair to earn 1.5x more and pay 2x more tax? It just doesn't jive. Yes, you still have more money in the end regardless, but that's beside the point. Your pay raise is still being cut down in excess of what the raise was. I don't get how that is OK.

Suppose everyone paid 100% of their first 50k in taxes. That's simple, it's fair according to your definition. Do you like that plan ? Think it would work ?

NO!! See my comment above of taking things to extremes

 

[Bateluer]

Do you think people who become "rich" are bad and why?

Not at all. Individuals who become rich through their own means have my great respect. People who inherited wealth . . . not necessarily, depends on how they've used it.

 

[DanDaManJC]

NO!! See my comment above of taking things to extremes

Indeed. But what about the marginal value idea and the fact that the value of money is also subjective?

 

[HGC]

There is a point where you are so rich that you will never be able to productively use your wealth. You are just keeping score. It is just an exorbitantly large number.

The extremely rich do use their wealth productively. They invest the vast majority of it in corporate stocks and bonds. This is the capital that businesses use to provide us with ever better and cheaper services and stuff, creating jobs in the process. They also invest in government bonds which fund our national and local governments. This also puts downward pressure on interest rates.

As a nation, we should define that point (say $100m+) and tax the hell out of it (80%+) until the deficit is erased.

First, tax hikes are never used to deduce deficits. They're always used as an excuse to spend even more. Second, there are so few super rich it would be a drop in the bucket. Third, the economic growth sponsored by investments made by the rich ultimately leads to more revenue than taxing away all their money. Otherwise, why not tax everyone at 100% and have the government spend it all on our behalf?

I think taxing the rich is a popular idea for two main reasons.

It appeals to envy. Hack politicos of both parties exploit this as a campaign strategy.

There are also leftist true believers, like Obama, who are willing to punish the poor with retarded economic growth in service of their higher goal of punishing the rich. Equality is more important than prosperity to these folks.

 

[Tom]

OK. But that begs the question - who determines whether each dollar as it increases is worth less or not?

To a point, it is always true. You always pinch pennies more when you only have a few vs a lot. But still, just because that is true, in general, doesn't mean it therefore is right to tax a higher percentage. Especially since you don't know someone's particular financial situation. I may consider a few bucks worth quite a bit (and I do given my income level) but you may see it as not worth that much. Does that give you any right to take more in taxes? No.. but that's what that whole argument is based on.

Taxes should be based on cold, hard numbers. Not perceived value by another person.

It is based on cold hard numbers. I know math is hard for some people to grasp but really, there is nothing unfair about a graduated income tax, everybody pays exactly the same rate on the same income.

That isn't the "unfair" part of our tax system. The unfair part, and the complicated part, is the bias towards home ownership, marriage, having kids, investing, saving for retirement, saving energy, etc.

I don't oppose all those unfair things, but someone who thinks taxes should be fair should look at that stuff, not tax brackets.

 

[SparkyJJO]

Indeed. But what about the marginal value idea and the fact that the value of money is also subjective?

The idea of taxing based on a subjective point is ridiculous. "Oh you make 100k a year, you really don't care about each dollar as much so we'll increase the taxes on everything over 50k" - What? Who's to say that people care as little as they say they do? Maybe they care a LOT!

It is based on cold hard numbers. I know math is hard for some people to grasp but really, there is nothing unfair about a graduated income tax, everybody pays exactly the same rate on the same income.

I KNOW THAT!

The issue is you're paying an even higher percentage on income you make over a certain amount. Do the math, average it out. The guy making 100K is paying a HIGHER PERCENTAGE of his income OVERALL than the guy making 50K. Sure, you can argue that the first 50K they both pay the same, but what about the second 50K at the increased rate?

D: I give up.

 

[Tom]

The idea of taxing based on a subjective point is ridiculous. "Oh you make 100k a year, you really don't care about each dollar as much so we'll increase the taxes on everything over 50k" - What? Who's to say that people care as little as they say they do? Maybe they care a LOT!



I KNOW THAT!

The issue is you're paying an even higher percentage on income you make over a certain amount. Do the math, average it out. The guy making 100K is paying a HIGHER PERCENTAGE of his income OVERALL than the guy making 50K. Sure, you can argue that the first 50K they both pay the same, but what about the second 50K at the increased rate?

D: I give up.

They both pay the higher rate on the 2nd 50k too.

 

[DanDaManJC]

The idea of taxing based on a subjective point is ridiculous. "Oh you make 100k a year, you really don't care about each dollar as much so we'll increase the taxes on everything over 50k" - What? Who's to say that people care as little as they say they do? Maybe they care a LOT!



I KNOW THAT!

The issue is you're paying an even higher percentage on income you make over a certain amount. Do the math, average it out. The guy making 100K is paying a HIGHER PERCENTAGE of his income OVERALL than the guy making 50K. Sure, you can argue that the first 50K they both pay the same, but what about the second 50K at the increased rate?

D: I give up.

Yeah I see where you're coming from completely... the point you're making is that a flat tax would be completely fair. I see that the rich DO pay more taxes... that even though we have this graduated income tax, the simple fact of the matter is that the rich pay more. So even if the first 50k is taxed the same for everyone, it simply isnt fair that the next 25k... and so on is taxed more.

Let me try again with the marginal stuff. First off, I do concede... that yeah, most rich people WILL value each of their dollars the same way they did when they were poor ---- even in my extreme 90% flat tax rate example. That's probably how they got rich in the first place, most of them worked hard and were smart with their money. Where the argument would still lay though is that I think there could be a convincing, logical argument for this idea that the marginal value of a unit of money decreases as a person's income increases.

In short, in the extreme case of 90% flat tax, even you realized that there is some idea of a marginal value. That the 10% for the rich and middle class men was vastly different. What this immediately tells us is that the perceived value of a unit of cash does not scale linearly with income levels. You'll note that this IS an extreme case -- ie, we're observing this function as it approaches infinity in mathy speak, but what then justifies throwing out the observation that there IS a different marginal value for different income levels? Say at 15% flat tax, the effect would be less pronounced, but it is still there. For the poorer person, that 15% hurts more than the 15% on the richer man. How is that fair?

Another point I wanted to mention is to critique of the idea that taxes should be based on cold hard numbers. The fact is that dollars themselves, and their value, are completely subjective. It's a gross oversimplication, but basically someone said a dollar is worth XXX chickens and everyone ran with the idea because it's easier to trade dollars than chickens. Given the fact the dollar is based on a continually evolving set of markets that are in complete flux... I think it's a bit more palatable to buy into the idea of a marginal value of sorts.

All in all --- I do get what you're saying, even after talking about that, I do see that it IS hard to justify where to draw the line, and in your case you'd rather not have to draw any line. The wiki article on progressive taxation has a great summary of different ideas. http://en.wikipedia.org/wiki/Progressive_tax. It's interesting to note that mr. free market himself (adam smith) advocated progressive taxes using the same marginal value idea.

 

[Bowfinger]

CW said he overlooked this thread, presumably because it had fallen off the front page, so here's a bump for him.

 

[CycloWizard]

people have a right to the fruits of their labor. that doesn't mean they get to keep it after they're dead. Or their heirs. The practice of passing on wealth comes from the tradition of monarchy and lords, it flies in the face of democracy. liberty, and equality. I'm not opposed to it completely, but fairly high estate taxes are justified philosophically.

So you have as much or more of a right to my money after I die than my kids would?

In addition, "money" and it's value doesn't just come from an individual's work, but also from the fact the individual is part of a community. So the "fruit" only partly belongs to the individual.

The money that someone agrees to pay for my product or services belongs to me. Government imposes a surcharge on that via a sales tax, then take an arbitrary amount from me using a variety of other methods. The more valuable my product, the more money I make and the higher fraction of my income the government takes (at least, in principle). Thus, the more valuable my contributions to society, the more society takes from me. If this is to pay to maintain infrastructure that I use to produce, then so be it. However, of the money government now takes from me, only a miniscule amount will be spent on infrastructure, law enforcement, or anything else that benefits me. A very large chunk of it will be mailed away as checks to people who, like me, have access to infrastructure yet produce so little of value that they pay no taxes and are paid by government for their troubles.

 

[Nemesis 1]

No there is nothing wrong with being rich . But can you handle it . With wealth comes responsibility. If you don't get it than its better to be dirt poor for the first 80 years of your eternal life