Today, Senator McCain revealed his solution to the American economic crisis– a capital gains tax cut. A tax cut for millionaires, in other words, the same thing Herbert Hoover tried in 1929.
Unfortunately, only one percent of Americans are millionaires (3 million out of 300 million). Last July, Robert Reich explained that what we’re facing isn’t a normal economic downturn. The problem is that most Americans can no longer maintain their standard of living (emphasis added):
The basic reality is this: For most Americans, earnings have not kept up with the cost of living. This is not a new phenomenon but it has finally caught up with the pocketbooks of average people. If you look at the earnings of non-government workers, especially the hourly workers who comprise 80 percent of the workforce, you’ll find they are barely higher than they were in the mid-1970s, adjusted for inflation. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago. Per-person productivity has grown considerably since then, but most Americans have not reaped the benefits of those productivity gains. They’ve gone largely to the top.
…This underlying earnings problem has been masked for years as middle- and lower-income Americans found means to live beyond their paychecks. But they have now run out of such coping mechanisms. As I’ve noted elsewhere, the first coping mechanism was to send more women into paid work. Most women streamed into the work force in the 1970s less because new professional opportunities opened up to them than because they had to prop up family incomes. The percentage of American working mothers with school-age children has almost doubled since 1970 — to more than 70 percent. But there’s a limit to how many mothers can maintain paying jobs.
So Americans turned to a second way of spending beyond their hourly wages. They worked more hours. The typical American now works more each year than he or she did three decades ago. Americans became veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.
But there’s also a limit to how many hours Americans can put into work, so Americans turned to a third coping mechanism. They began to borrow. With housing prices rising briskly through the 1990s and even faster from 2002 to 2006, they turned their homes into piggy banks by refinancing home mortgages and taking out home-equity loans. But this third strategy also had a built-in limit. And now, with the bursting of the housing bubble, the piggy banks are closing. Americans are reaching the end of their ability to borrow and lenders have reached the end of their capacity to lend. Credit-card debt, meanwhile, has reached dangerous proportions. Banks are now pulling back.
As a result, typical Americans have run out of coping mechanisms to keep up their standard of living. That means there’s not enough purchasing power in the economy to buy all the goods and services it’s producing. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth.
Barack Obama: “I ask you to believe”
Yesterday, Barack Obama gave a great speech on the economy in Toledo, Ohio. The whole thing is worth reading, it’s full of specific proposals to help the middle class get through hard times. Yet, as always, Obama is full of optimism:
This country and the dream it represents are being tested in a way that we haven’t seen in nearly a century. And future generations will judge ours by how we respond to this test. Will they say that this was a time when America lost its way and its purpose? When we allowed our own petty differences and broken politics to plunge this country into a dark and painful recession?
Or will they say that this was another one of those moments when America overcame? When we battled back from adversity by recognizing that common stake that we have in each other’s success?
This is one of those moments. I realize you’re cynical and fed up with politics. I understand that you’re disappointed and even angry with your leaders. You have every right to be. But despite all of this, I ask of you what’s been asked of the American people in times of trial and turmoil throughout our history. I ask you to believe – to believe in yourselves, in each other, and in the future we can build together.
The 2008 election is starting to look like a major political realignment. Two years ago, who would have thought we’d be electing a black President and nationalizing the banks?
UPDATE: Matt Ygesias has some numbers to illustrate how little McCain’s tax cuts would do to stimulate the economy.
UPDATE: Pat Garofalo of the Center for American Progress explains how McCain’s idea encourages the wealthiest Americans to pull capital out of the markets to reap a windfall tax advantage. The opposite of what he says it would do.
#1 by Don - October 17th, 2008 at 13:08
Bob,
I don’t think it’s unfair to tax people more when they can afford to pay more. It goes back to the social contract I described before. When you can pay more, you do. When you can’t, you don’t.
#2 by Bob S. - October 17th, 2008 at 13:25
Don,
I think the current system makes sense but is not fair. I do think that it makes sense to tax all income.
This is part of the problem as I see it. Other people get to decide who can afford to pay more, not the person making that money. You don’t know that person’s situation or activities but are saying solely based on income, it’s all right for the government to extort additional money.
How about the people making $100K but are providing support for aged parents, have medical problems, helping out other family members? Not all of that is deductible but is definitely part of the social contract.
The is a limit on the amount of money a person can donate to charity and write off their taxes, which decreases as income levels rise. Should a person be able to direct his or her money to the cause of their choice?
The fundamental philosophy that I’ve seen from the liberals on this board is that “income inequality” is wrong and that people should be forced to give up “extra” income to reduce that inequality.
People should be allowed to decide where to spend their money, not other people in the form a majority vote.
#3 by Don - October 17th, 2008 at 13:56
“People should be allowed to decide where to spend their money, not other people in the form a majority vote.”
Isn’t the end result of this theory a society in which no one pays taxes and nothing gets done? If everyone got to decide, on an individual basis, where to spend their own money, do you really think the stuff that fosters and maintains a stable, healthy, productive, safe and prosperous society would get done? It wouldn’t be long before collectives would start forming in order to get stuff done, ostensibly because no one could, or would, do it on their own.
This is the beauty of representative democracy. We give our money to others hoping and trusting that they will do what is best for society as a whole, which in turn benefits us personally. When they violate that trust, we vote them out.
#4 by Bob S. - October 17th, 2008 at 14:07
Don,
Just to add on, I want to make sure you understand that I feel taxation is appropriate. There are things that the government is supposed to do and paying taxes to insure those items are accomplished is acceptable.
What I question is the acceptability of taking additional money, over and above what is needed to those items and providing that money to people to reduce the “income inequality”.
A blog I read had a great point; my money is a representation of my time, energy and effort. When that money is taken from me, it is the same as forcing me to work that much more time.
X number of dollars is represented as Y number hours of my life.
So when forced by the government to pay additional money to someone who hasn’t earned that money, it’s literally forcing a person to be a slave for that person. Isn’t that what we call it when someone is forced to work for another person without receiving a wage for that work; slavery?
The person making a lower wage probably is hard working, earns their income, contributes to society and deserves respect, but shouldn’t it be an individual choice on who to support?
As many as there are of people deserving assistance, there are also some that should be allowed to fully face the consequences of their choices.
Most people didn’t want to bail out the banks and other financial institutions because of their poor choices, but are perfectly willing to bail out individuals regardless of their poor choices or how many times they’ve made those choices.
This is what I mean when I talk about it being fair; the forced labor for other people with the money being partitioned by others.
Who should have control of a person’s money; the government or that person?
LOL – I must have been composing this as you were composing your reply to me Don.
#5 by Bob S. - October 17th, 2008 at 14:20
Don,
Another way to look at the tax system. Mostly Cajun’s explanation can be found here
#6 by jdberger - October 17th, 2008 at 14:23
Bob – by electing our current representatives, we elect how to tax ourselves. Majority (or in some cases supermajority) vote is the only rational way to do it. Some things that taxes contribute toward provide an outsized benefit to the populace.
Public Schools
Prisons
Defense spending
Law enforcement
Fire
Infrastructure maintainance
I agree that the top rate is way too high. I also agree that the folks on the lowest rungs should pay something…
But, the poor in some ways actually do pay more, as a proportion of their income, taxes. Sales taxes are flat.
#7 by Bob S. - October 17th, 2008 at 14:39
JD,
You are correct, I’ve tried to limit my opposition to the tax increases and the redistribution of wealth. I’ve not always expressly said that.
Sales taxes are flat, but the basic necessities are usually exempt from sales taxes.
The system has been twisted for so long that we can no longer effectively control spending by who we elect; gerrymandering, campaign contribution and speech laws.
Also the 17th amendment has contributed to this problem, the Senators must pander to the majority of the people instead of really being able to check the power of the Representatives on issues the majority of the people like at the time.
Alexis de Tocqueville put it best “The American Republic will endure, until politicians realize they can bribe the people with their own money.”
#8 by Don - October 17th, 2008 at 14:48
“What I question is the acceptability of taking additional money, over and above what is needed to those items and providing that money to people to reduce the ‘income inequality’.”
Okay Bob, I think I get where you’re coming from now. You don’t like welfare and you don’t like it when liberals talk about reducing “income inequality”. If the real, and only, reason for progressive taxation was to reduce income equality then I’d probably agree with you. But income inequality is just a symptom. I don’t really care if the rich get richer as long as it’s not at the expense of what is best for society as a whole. $10 trillion debts, $500 billion deficits and paying for wars on credit don’t exactly seem like a benefit to society to me. Rich people were doing just fine under the Clinton era tax brackets and we actually had more money coming in than going out.
I see providing welfare to those who really need it as a responsibility for all of us. It’s a price we pay for living in a relatively stable, healthy, prosperous society. How welfare is administered and what kind of welfare is given is certainly up for debate, but I truly believe that the luckiest among us have an obligation to help others when needed. The government doesn’t steal from us in order to provide welfare; the government is us. And we have decided that certain types of welfare are not only necessary, but are fair and appropriate to be provided by the government (i.e. “us”). If enough of us thought as you do then welfare would probably go away based on who we voted into office.
#9 by Don - October 17th, 2008 at 14:53
Hey Bob,
I really like your last post (2:39 p.m.) You’re right, things are out of control with respect to our true ability to actually choose our representatives.
I’m curious, how much wealth is actually being redistributed? How much actually gets taken from rich people and given to poor people in the form of direct welfare?
#10 by JFarmer - October 17th, 2008 at 14:56
Don:
Extremely well put. This is the argument I have been trying, unsuccessfully, to make to Bob vis-a-vis the social contract theory. Unfortunately, Bob will have none of it.
#11 by Bob S. - October 17th, 2008 at 15:05
Don,
Look at the history of any government program, once established how many have “accomplished the job” and then closed down. I do feel that we should provide some support but the way the system has been managed and continues to grow shows that the approach we’ve been doing isn’t working.
The natural instinct for any government is to ever increase it’s scope. Look at how the welfare system has dramatically expanded since the Great Depression.
Welfare payments have increased, both in how much is paid and how many is paid and is actually now contributing to the problems it was supposed to cure.
For example why should women get married when they get pregnant, they can replace the husband with a government check. Net results, more single moms needing welfare to support children.
The war on poverty was supposed to get rid of it; now we have poor people with cell phones, cable tv, two cars, etc.
And on and on, the system is out of control; people are voting themselves money out of the treasury. One of the reasons we are running deficits is the ever increasing amount of the budget going to entitlements. Over half the federal budget goes for entitlement spending, tell me we really need to spend that much to help people avoiding starving to death?
The increased taxes proposed, recommended and endorsed here aren’t going to pay off the debt or increase military spending but to fulfill someones idea of an fair income.
It is difficult to vote people out of office when every is trying to get those in office to give them more money. Think about the fact that currently 38% of the population pays NO INCOME TAX and many of those actually get back additional money. This doesn’t count for other forms of money taken from other individuals; housing assistance, food stamps, etc aren’t calculated as part of income.
Who is going to vote to shut off the tap providing them with free money?
#12 by Bob S. - October 17th, 2008 at 15:11
Don,
Here is the link to where I found this information
The top 1% of income earners pay 39.4% of all the income taxes
Next 2 to 5% pays 20.3%
6 to 10% pays 10.6%
11 – 25% pays 15.7 percent
Top 25% of the income earners pay 86% of all the income taxes paid in the country. Isn’t that progressive enough?
To continue the 26 – 50% of the income earners pay only 10.9% of the taxes and the bottom 50%….fully half the people paying income taxes only pays 3.1%
How much more regressive should it be? Read the comments, some of the people here are saying that still isn’t enough.
#13 by Richard Warnick - October 17th, 2008 at 15:23
Bob S.– You are right, the big taxes are paid by the big earners. If we are going to recover from the Bush administration’s serial catastrophes and doubling the National Debt from $5 trillion to $10 trillion, we’ll have to raise big money. You’re not going to get it from low-income people!
John McCain says he’s going to balance the budget in four years while at the same time doubling Bush’s tax cuts for the rich. How? Spending freeze– except for the wars, of course. I’d like to know how that is supposed to work, especially during an economic crisis that demands increases in domestic spending.
#14 by Don - October 17th, 2008 at 15:33
Yes, I’ve seen those figures (or something similar) many times. That’s not evidence of actual wealth transfer is it? It’s more evidence of just how much more money rich people make than middle-class and poor people. How much is actually taken from rich people and given, illegitimately in your mind, to poor people?
I don’t consider taxes used for legitimate purposes as wealth transfer, do you? Of course, I’m guessing we probably disagree on what constitutes a “legitimate purpose” as well, but that’s why we elect people to represent us.
#15 by Bob S. - October 17th, 2008 at 17:48
Richard & Don,
Yes, it is evidence of the wealth transfer. 50% of the budget is going to programs that transfer wealth. The 2008 Federal Budget was 2.9 Trillion dollars, 50% of that is 1.45 Trillion dollars. If the top 25% is paying 86% of the taxes…guess who isn’t paying but recieving…the bottom portion of the income tax.
There is another way to get out of the deficit….stop spending. Let’s cut the entitlements and pay off the debt.
Cutting taxes will increase domestic spending, if the people have the money they will spend it. Or invest it into companies that will spend it. The government is transferring it after putting it through an incredibly inefficient process. Let the money be used to make more money that will in turn be spent.
What do you consider legitimate purposes Don? I’ve already stated that defense, law enforcement, customs, roads, etc are legitimate.
Anyone who wants to still wants to transfer wealth can, the only thing stopping them is themselves. That is one of the biggest complaints that I have. People on this board don’t want to transfer their wealth, they want to transfer my wealth also. Shouldn’t people advocating transferring the wealth first live their principles?
How many people are doing that before they use the government guns to take more of my money?
#16 by Cliff Lyon - October 17th, 2008 at 18:35
Bob S.
The wealthiest 2o% own over 90% of the wealth in this country and have for the past 20 years. If you break it down, the top 25% (your number SHOULD be paying OVER 90% of the taxes right?
Also, could you expand on the ridiculous claim that “50% of the budget is going to programs that transfer wealth.?”
http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
#17 by Bob S. - October 17th, 2008 at 19:14
Okay Cliff,
Since you didn’t get enough the last time we went through this, I’ll run through it again going as slowly as I can.
Let’s start with a definition of entitlement programs:
Got that? A program that guarantees a certain level of benefits, it doesn’t say if the person puts in a certain amount they get that amount back.
So how much of the budget is spent on entitlement programs: Let’s go back a few years to show that I”m not being biased. Let’s use 1997 under Bill Clinton
Has it changed, not much. Here are the words of Congressman Randy Forbes April 2008
Only 1/3 of the budget not going to Entitlement spending.
62% of the budget is for Entitlement programs….approximately 21% for Social Security, another 21% for Medicare and Medicaid.
Care to claim those programs aren’t wealth transfers?
#18 by JFarmer - October 17th, 2008 at 20:04
Bob:
Gee, and all the time I have been contributing to SS I thought I was working and contributing to SS through wages from such work – after all, regardless of my employer, the sum was taken from my paycheck. And now you are telling me that the SS I expect to receive a few years from now is wealth transfer. Shucks!
In all seriousness, Bob, I am comforted in knowing that the percentage of folks in this country who think like you – at least on economic terms – is a minority and shrinking.
#19 by Bob S. - October 17th, 2008 at 20:22
JFarmer,
Yes, it is wealth transfer because you will get back more then you put in. It’s been a Ponzi scheme from the beginning. I thought everyone know the basics of how Social Security worked.
Social Security also includes disability, payment to surviving spouses, unemployment due to sickness & illness, etc.
Social Security taxes also covers disability payments,
#20 by JFarmer - October 17th, 2008 at 20:37
Bob:
You (and/or jd) have challenged Cliff and others on this blog to voluntarily pay more in taxes if we think the tax rates should be higher.
My question to you is: will you be voluntarily refusing your SS check when that time comes because it is an entitlement to which you do not deserve (see, for example, your comment above)?
I also wonder: have you have instructed your wife to refuse all SS benefits that might come her way upon your untimely death (a situation I hope does not occur) because such would be an entitlement to which she does not deserve?
Yes or no should do the trick.
#21 by Cliff Lyon - October 17th, 2008 at 20:50
Yes or no Bob. Can YOU answer a question straight up?
#22 by Cliff Lyon - October 17th, 2008 at 20:53
Bob,
Have you ever played Monopoly? Someone always ends up with all the money right?
Then what happens? No more rents, no one can afford you hotels, its no fun. Nobody wants to play anymore.
You have to re-distribute wealth or the game over.
Can you grasp that simple concept?
You act as if you just discovered entitlement programs. Fact is they’ve been around a long time now and served us well. Without them, we would be a third world country. Entitlement programs are MUCH bigger in other countries, other countries with a higher standard of living. More healthy better educated people who are kicking our asses.
Wake the fuck up you ignorant redneck. Sorry, I didn’t mean that. Yes I did. No I didn’t. Hmmm. Let me thing about it.
#23 by Bob S. - October 17th, 2008 at 22:02
Albert/Cliff,
Short answer is that I’ll accept Social Security and would not tell my wife to refuse and survivor benefits.
Long answer is that I don’t expect those benefits to be available to me or my wife. The system is broken and has been for a very long time. By the time I retire the system will be bankrupt. If something that should happen before that point, I’ll accept the benefits.
I’ve do not expect to have those benefits so I’m not planning on them, not for retirement, not for disability, not for survivor benefits. Nothing.
Cliff that may be the problem, real life isn’t a game and it isn’t a zero sum game. The failure to understand that may be the foundation of the problems. I may not have degrees in philosophy, international relations or belly gazing like you do, but I can tell the difference between a board game and real life.
Other countries have better entitlement programs at the cost of considerable higher tax burdens. What is the tax burden in other countries?
France- 41. to 50%
Italy 35 to 45%
Sweden 42 to 48%
UK 27 to 33.5%
US 12 to 29%
Yep, let’s emulate the rest of the world and take approximately 1/3 to 1/2 of all the money individuals make…what that is really fair!
I don’t care if you think I’ve suddenly discovered entitlements; although you can’t remember us discussing this months ago. Maybe it was the fact that you got your ass handed to you in that discussion that caused you to block it out.
Call me names all you want, the simple fact is my points are valid, factual, backed up with evidence and constitute a view point that is different from yours. Try to minimize my view point if you want to Cliff, the not everyone believes that it is acceptable to take more and more money from those who are making higher incomes and give it to those that aren’t making as much.
That is the wealth re-distribution that I’m opposed to and I’ve repeatedly stated that during this thread…maybe a reading comprehension program would be beneficial to you.
#24 by Don - October 18th, 2008 at 11:01
Bob,
It’s an interesting concept that you have about entitlement programs being a transfer of wealth, especially considering the taxes that pay for entitlement programs are flat and not subject to income deductions or exemptions (at least not on the low end in the case of Social Security). True, the money current wage earners put in is given to current retirees in the form of benefits, so technically, I guess it is a transfer of dollars. But those retirees did the same thing while they were working. Similarly, future earners will do the same thing when we are retired and receiving benefits. This is another example of the social contract. It’s not really a transfer a wealth from rich to poor but rather generation to generation. I assumed we were talking about transferring wealth from rich to poor.
#25 by JFarmer - October 18th, 2008 at 11:11
Bob:
Pretty much makes you a hypocrite – it’s bad to “transfer wealth” unless the wealth is being transferred into the pockets of you or your family.
You are a great American, Bob!
#26 by Cliff Lyon - October 18th, 2008 at 11:53
Bob S is not interested in understanding the economics of taxation. He is only interested in validating is anger.
A more accurate question would be; why are you so angry about the idea of a rich country supporting the WHOLE community?
I think he is afraid of poverty. I don’t hear him bitching about corporate subsidies, and handouts. I don’t him quoting facts like 40% of profitable companies pay no taxes at all.
#27 by Bob S. - October 18th, 2008 at 11:59
Cliff,
The only reason you don’t hear is you won’t shut your mouth long enough to listen.
#28 by Cliff Lyon - October 18th, 2008 at 12:47
Bob, I have listened to you. You have nothing to offer me. Listening to you is like listening to a child learn to speak and figure out the world around them for the first time.
I don’t have time for that. I remember a time when you would only talk about guns. Then you decided to instruct us all about economics.
What next Bob. What will you decide to teach us next?
#29 by Don - October 18th, 2008 at 12:59
Bob,
I’m just reading through some of the comments from others yesterday that I was only able to skim and in response to Jenni’s Ellie/Sarah scenario you said this:
“You didn’t show that Sarah suffered any because Ellie was making more. Double the amount Ellie makes and Sarah still pays the same amount of taxes, right?”
I think Jenni did show that Sarah is suffering, not necessarily because Ellie is making more, but because Ellie and Sarah are paying the same percentage in taxes, ostensibly so that the government can balance its books. In a progressive tax system which excluded subsistence income from taxation Sarah’s income tax bill would be zero rather than $3000. Are you really trying to say that Sarah is better off, or at least not suffering, when she is paying $3000 of her income in taxes just so Ellie doesn’t have to?
#30 by Bob S. - October 18th, 2008 at 15:24
Don,
The comment was that the rich are getting richer at the expense of everyone else, right?
If Ellie Elite doubled her salary, does that harm Sarah? No, she pays the same. Jenni’s example used a flat tax something that I advocate.
Put in deductions or credits, let’s call it 20,000. Sarah pays 15% on 10,000 1,500 but Ellie Elite’s only goes down to 12,000. Double Ellie’s salary to 200,000 and her taxes rise to 2,700 (180,000 taxable because of the deduction). Now that Ellie’s is getting rich is it at the expense of Sarah? Has Sarah’s taxes changed at all? No
How is Ellie not having to pay taxes? In Jenni’s example both pay a fair fixed flat rate of taxes. In reality, Ellie’s tax rate goes up to 28% while Sarah’s stays the same.
Sarah isn’t harmed by paying a portion of her income into taxes, that is part of the social compact, right? Shouldn’t people have to pay into the system, become part of it, have ownership of the system?
Sarah pays taxes for the roads she drives on, so does Ellie. Sarah pays a portion of the defense budget, Ellie does too and a large amount then Sarah does. Progressive taxes increases both the raw amount and the percentage.
If you were paying more for the something, wouldn’t you expect better service then the person paying less? That is one of the problems with progressive taxation, it gives a sense of entitlement to those paying more, much more. Remember the bottom 38% of the population pays no income taxes at all. Let’s make it a flat percentage rate that everyone pays. It would then allow everyone to be equal in relative terms.
What I get out of this line:
Because Ellie can afford to pay her taxes and Sarah’s taxes, Ellie should be forced to do that. Is that what you are saying?
Isn’t it everyone’s responsibility to their taxes?
#31 by Bob S. - October 18th, 2008 at 15:31
JFarmer,
Wrong!
It makes me a potential hypocrite, unlike some on this board that are real hypocrites. I haven’t taken a dime of that money that formed the basis of your question yet.
But read this carefully; those people on this board who are calling for higher taxes so there can be greater wealth transfer and are not living their principles are being hypocritical!!
I answered your question honestly. The system is set up to make those payments, those wealth transfers currently, so if something happened to me Yes they should take the benefits.
Am I working to change the system, yes. Would it be upset if my family didn’t get those benefits…a little because I’ve already paid into the system some. I would like to get that portion back if something happened.
How about those calling for greater forced wealth redistribution? Are you living those principles before you use the government’s guns to take more money out of my pocket?
#32 by James Farmer - October 18th, 2008 at 16:13
Bob:
You need to review the definition of a hypocrite!!
#33 by Joe The Plumber - October 18th, 2008 at 17:49
Bob S,
So whats your damage? “So if something happened to me Yes they (my family) should take the benefits. ”
If WHAT happened? If you suddenly got poor but healthy, sick and wiped out by medical bills.
Under what condition Bob would you want govenment help..and how much.
To call you a hypocrite is an understatement…jr.
#34 by Bob S. - October 18th, 2008 at 18:05
Call me what you want, we are all hypocrites to a degree.
I’m being honest. Can Joe the Plumber, JFarmer, Cliff and others say the same thing?
I’m not advocating increasing the taxes of the wealthy so even more money can be transferred. That is how all these got started, remember?
If tomorrow Social Security went away, I wouldn’t mind. I’ve tried to set up my finances so that my family won’t need money from the government. If there is any money left for us when that time comes around.
Call me names if you want, but I’ve been fairly consistent in my positions. We should not raise taxes in order to reduce the “income inequality”.
I notice not a single person advocating reducing the “income inequality” is doing more on a direct personal financial level then what the law requires or have I missed someone’s saying otherwise?
How many of people advocating reducing the income inequality are giving their money to the government, bringing their income level down to what they think everyone should have?
There is a saying in the bible about a splinter in someone else’s eye but a plank in yours. I’ll admit that if taking the benefits based on the money that I’ve paid in makes me a hypocrite so be it. I haven’t taken any money yet. Can those that advocate reducing the income inequality say they have lived up to their principles?
#35 by JFarmer - October 18th, 2008 at 18:17
Hmmm. I guess it’s all about you, Bob, now, isn’t it?
Good for you to prepare for the future tanking of SS, should such occur – you are certainly not alone in this regard. But on the other hand: How about your parents? Are they collecting, or did they collect SS? How about your neighbors that paid into the system all their lives? Do you call them welfare recipients for collecting SS? What would you do were the unthinkable occur and, due to illness, your retirement savings were wiped out, leaving your family without money to live on? Will it be ok to accept SS benefits then?
Bob, for someone who often speaks intelligently, you are drooling over yourself now!
#36 by Don - October 18th, 2008 at 18:20
Bob,
It has nothing to do with how much Ellie is making. It has to do with how much Sarah is paying in taxes just so Ellie can be richer, even though she can afford to pay more.
For example, using Jenni’s assumptions, Sarah is paying $3000 and Ellie is paying $150k in taxes. Lets also assume we have a balanced and lean budget (all cuts/efficiencies have been realized). If we implement a $20k exemption/deduction to alleviate taxes on subsistence levels of income then Sarah now pays nothing and Ellie pays $147k. Unfortunately we have a $6k shortfall. If we implement a progressive tax where Ellie pays 15% on the first 100k and 25% on everything else, then she now pays $235k. Ellie’s increased tax burden (which she can easily afford) helps alleviate a much greater burden (in terms of real life) on about 27 Sarahs and we can still balance our budget. If we revert back to the flat tax with no exemption/deduction then Ellie gets richer at the expense of those 27 Sarahs.
Like it or not, that’s how the system works. Luckily, more people agree with the philosophy that when you can afford to pay more you should pay more. I think even most of the Ellies in the world agree because they realize that having a bunch of Sarahs out there who can’t afford the basic necessities just to live is not going to be good for anybody.
#37 by Bob S. - October 18th, 2008 at 19:19
Don,
I don’t understand this at all:
How is Sarah’s taxes helping Ellie be richer? Answer, they are not. Ellie isn’t eligible for the benefits that Sarah is, Ellie isn’t using more resources then Sarah. Ellie isn’t getting any more border security, military defense.
Sarah’s money isn’t going to Ellie. Both people’s money is going to pay for entitlements and mandatory spending.
Just because they both pay taxes doesn’t mean that Sarah is enabling Ellie to make more money.
Using the numbers Jenni listed Sarah-$30K & Ellie $100K, also the current tax rates and your 20K deduction
Sarah making 30K gross and taxable income of 20K will pay federal taxes of $1,108.75. The taxes represent 11.09% of total income of $10,000.00, so the average tax rate is 11.09%
Ellie making $100K gross and taxable income of $80K will pay federal taxes of $16,510.75. The taxes represent 20.64% of total income of $80,000.00, so the average tax rate is 20.64%.
Ellie’s tax rate is nearly double that of Sarah’s. Note that not one cent of Sarah’s moeny goes to Ellie, but probably some of Ellie’s money will go to Sarah, right?
If Ellie works harder and she earns $200K, still with only $20k deduction, she will pay federal taxes of $45,468.25 ontaxable income of $180,000.00. Your taxes represent 25.26% of your total income of $180,000.00, so your average tax rate is 25.26%.
Ellie’s tax rate goes up to 25% but her taxes more then doubles on only an income that doubles. Now how much money did Sarah loose? Not a single cent.
There are two ways the government can balance the budget, increase revenue and cut spending.
Does each person have a responsibility to help pay for the functions of government, yes or no?
The people making more are already paying more….show me where they aren’t paying more.
The question that I keep asking is should the people making more be required to pay more that is sent to those making less — the definition of income redistribution.
What I keep reading on this blog is yes, that is perfectly acceptable to have people getting money from those who are more successful only because those that are making more can afford to give them money.
Sorry Don, but your math was way off and you haven’t shown that anyone is getting richer at the expense of someone else.
#38 by Don - October 18th, 2008 at 19:57
Bob,
It’s simple. Assuming government revenue stays constant (maybe this is the point you are missing), with a flat tax Ellie is richer, Sarah is poorer. With a progressive tax and a subsistence level income exemption Ellie is less rich and Sarah is less poor. I don’t know how else to explain it.
BTW, Jenni’s numbers were $1 million for Ellie and $20k for Sarah.
#39 by Don - October 18th, 2008 at 20:19
Bob,
My math is way off? You don’t seem to understand the problem Jenni presented.
Also, you have a really weird way of figuring effective tax rate. Why would you not count exempted income? If Ellie is making $100k (your number) and $20k is exempt, she still has a total income of $100k, right? Using your federal taxes owed number of $16,510.75 her effective tax rate is 16.51075% (not 20.64%).
The problem we’re discussing has nothing to do with how much money Ellie makes. It has to do with whether or not we cut Ellie’s taxes and, if so, how are we going to make up the difference to balance the budget. Yes, spending can be cut. But assuming it’s not, revenue is going to have to be increased somewhere else. In your dream world scenario of implementing a flat tax with no exempt income that revenue is going to come right out of the pockets of people who currently pay little to no taxes (because for the most part they can’t afford to). I know you think that’s fair; I don’t.
#40 by JFarmer - October 18th, 2008 at 20:20
Yes, Bob! The answer is yes!! A necessary incident to the infrastructure where people make more – and that allows people to make more – is that some will fall behind. Those who fall behind must be taken care of, at least at subsistence level. It’s really that simple, Bob.
Geesh, Bob. What happened during your life to make you so angry and bitter??
PS. So, I ask you again, do you run around calling your neighbors who receive social security checks welfare cheats – or, to use your words, wealth transfer recipients?
PPS. McCain takes a SS check every month. We don’t hear you calling him a welfare cheat, do we?
PPSS. You are so buried up to your neck in hypocrisy, Bob!!
#41 by Bob S. - October 19th, 2008 at 04:32
Don,
Jenni’s statement was
I see this as being twisted to make it the assumption that government spending must stay constant and that “rich” people should have the highest burden in paying the taxes.
The government spending doesn’t work that way and shouldn’t. Government spending is and should be based on how much it expects to receive.
If the economy was growing, would you expect government spending to stay the same or go up because people are making more money, thus are paying more taxes?
The same way if the economy is weakening and people/businesses are making less, should taxes increase to keep government spending the same? No.
If I work less hours, make less money; I can’t keep spending the same amount as before.
Here is the rub, Ellie isn’t richer, she started off with 1 million or 100K and sent some to the government. All that has changed is the amount she gets to keep, it was her money to begin with, right?
Come on, be serious here and tell me that isn’t the case. Is the money Ellie’s to begin with or not? If she made it, she already has that amount. Whether she sends in a single dollar or 300 hundred thousand, it how much she has left. So Ellie hasn’t gotten richer at the expense of Sarah, just kept more of what she made.
Would you turn it around. If Ellie’s income dropped in half, from $1 million to $500, 000, would you expect those making less to have to contribute more to make up for the loose or would you expect the government to cut spending?
This is the point, you don’t think people should have to pay taxes until a certain point. Fine, that is the way it is. I’ve been arguing that the rich aren’t getting richer at the expense of those making less. The income taxes don’t decrease for the lower income levels because those making more aren’t paying 50% or 90%. If the tax rates did go up to those levels, government spending would increase, not tax rates decrease.
#42 by Bob S. - October 19th, 2008 at 04:47
JFarmer,
Are you saying that the system allow only some people to make more money? That the system doesn’t allow those making less money then the rich to make more?
The system allows everyone to make more or are you saying the system should tell people how much they are allowed to make?
Do you want to have the government setting wages, salaries, bonuses?
How about Tiger Woods, should the government step in and say that “Tiger, you’ve already won 10 tournaments this year, stop playing so someone else can win”?
Gee, I thought we were already doing that. The argument has been and will continue to be at what level should the government theft by taxation be increased to reduce not starvation, but to reduce the income inequality. Remember how the argument started, I’ll remind you again. I think it is wrong for the government to increase taxes to reduce the income inequality.
We already have a system in place, at the tax levels that we have, that takes care of people at the subsistence levels. That isn’t good enough for some people on this board. The argument is the rich are making more money then some people think is right. That is a personal opinion on those people’s part.
So, my argument has been and continues to be this; shouldn’t those people who believe income inequality is a problem be contributing their excessive money before using the government to take even more money from the ‘wealthy”?
Calling me names, attacking my honesty is just a distraction to this issue. Have fun doing it, it doesn’t matter to me.
Some people will fall behind? Behind what the average income, the national consensus on how people should live? Why not have everyone give the government all the money and let the government tell people how much they deserve or don’t deserve? Is that the answer?
Maybe the government can also build houses to make sure that everyone has the amount of housing that they “deserve”?
This idea that I’m reading here sounds familar.
#43 by James Farmer - October 19th, 2008 at 08:45
Bob:
You have already conceded that a pure free market system is doomed to fail and that some socialistic aspects must be included for a successful economy, as is the case with the US economy. Accordingly, your observation of Marxist overtones is both correct and encouraging.
PS. What’s with the “calling me names” thing? The names (or terms) you are being referred – e.g., hypocrite – are based in fact, not ad hominem distraction. Your entire argument on this subject sits on two sides of the fence – e.g., social security is bad for the economy, but you’ll gladly accept it when the check arrives in the mail!
#44 by Bob S. - October 19th, 2008 at 10:36
James,
That is the problem, I’ve never made the argument that social security is bad for the economy. Show me anywhere I’ve said that.
What I have said, repeatedly is that is it not fair to expect others to pay more because they make more. It may be that people are willing to do that as part of the social contract but it isn’t fair.
I’ve also stated, repeatedly, that it isn’t fair to increase the amount of taxes, note that word, increase so that an arbitrary point of income equality can be reached. That is using the government guns to force everyone to agree to your philosophy. It is not a voluntary decision.
I’ve also stated repeatedly that if people want a Marxist society, nothing is stopping them from voluntarily living it, right? I’ve stated that it is hypocritical for those people who want a marxist society not to be living their principles before they take more money out of my pocket or others.
Social Security isn’t bad for the economy, but too much welfare is bad for society. Please note what I said….not that welfare is bad for society, but too much is bad.
I was accused by James Farmer of making this all about me and the point is valid. The problem with welfare is it creates a society of what others do for me.
Shouldn’t everyone be responsible for their own finances? Their own planning for retirement, for unemployment, for disability?
Now, greater numbers of people are being told not only to depend temporarily for food, shelter but even a basic level of income.
Think about that, that not only as a society should we make sure that everyone has shelter, food, medical care but that we OWE them a certain level of income. I argue that we don’t owe anyone a level of income. Should we choose to help them achieve that, it should be voluntary.
And if people feel it is right to guarantee a certain level of income, who should provide it? I who don’t agree with that philosophy or should those that advocate provide that income?
#45 by Don - October 19th, 2008 at 14:21
Bob,
You’re conflating arguments. The simple point I made was that under your dream scenario of a flat tax where every dollar of earned income is taxed at the same percentage for everyone, compared to today, rich people would be richer and poor people would be poorer.
Now, if you want to argue about government spending, deficits, national debt, entitlements, etc. then that’s another discussion altogether. But as far as how implementing a flat tax would affect people at both ends of the income spectrum, relative to each other, I think I’ve laid it out quite plainly.
#46 by Bob S. - October 19th, 2008 at 14:45
Don,
Do the people have a right to keep the money they make?
Do the people who make less have a right to the money the wealthy make?
#47 by Don - October 19th, 2008 at 15:11
“We already have a system in place, at the tax levels that we have, that takes care of people at the subsistence levels. That isn’t good enough for some people on this board.”
What isn’t good enough is that the system doesn’t seem to be capable of paying its bills. I want to cut wasteful spending. I want to root out inefficiencies and get rid of programs that don’t work. I want the government to stop inappropriate “pork barrel” spending. I want entitlement programs to be reformed so that they work more efficiently yet still provide the benefits that people deserve and have been promised. It’s funny, these seem to be the same types of priorities that Barack Obama has regarding the federal budget.
“The argument is the rich are making more money then some people think is right.”
Who is making this argument? I haven’t seen it.
I don’t care how much money anyone makes. What I care about is if top marginal tax rates are cut, are we going to start having $500 billion dollar budget deficits with no end in sight? What I care about is if we will have a $10 trillion dollar national debt to pass on to my children. What I care about is having an asshole for a president who couldn’t care less about spending while giving profligate tax cuts in the middle of implementing a war of choice and great folly.
“…shouldn’t those people who believe income inequality is a problem be contributing their excessive money before using the government to take even more money from the ‘wealthy’?”
We are the government Bob. We, as a people, believe in a system where when you can pay more, you do, and when you can’t, you don’t. I understand that when some people get rich (or maybe they’ve always been rich) they get selfish and they don’t think it’s “fair” that the government “steals” so much from them, while “stealing” little to nothing from those who can’t afford it. I hope someday to be “rich”. I hope I don’t become that person.
#48 by Cliff Lyon - October 19th, 2008 at 15:34
Bob S,
You asked “do people have a right to keep the money they make?” The answer (except for labor wages) is no.
I’m guessing you’ve never owned or run a business.
Example. YOU do not have the right to run YOUR products over OUR roads and not pay taxes. You do not have the right to save money in a FICA backed account but not pay taxes on the interest.
Got it?
#49 by Bob S. - October 19th, 2008 at 16:45
Cliff,
I’ll reply in greater detail later, but I want to make sure I’m clear on what you are saying.
If I didn’t the money with my labor, I have no right to keep any or all of it?
Say I’m gifted or inherit 10K, invest it well, sell the investment for 50K, do I have a right to any of that money?
#50 by jdberger - October 19th, 2008 at 23:51
Jim/Nephi/Albert….
I can only answer the first question. Yes.
And for the record, I’ve encouraged everyone I know that has a planned retirement where they won’t need the money that they’ve banked with SS to do the same.
When I was poor, I didn’t pursue food stamps. I didn’t pursue government programs that would give me a discount on transportation. I didn’t take handouts. I simply made due with less. I didn’t then. I won’t now.
Do you gentlemen have the courage of your convictions?
#51 by jdberger - October 20th, 2008 at 00:00
Cliff. I hate to burst your bubble, but economics isn’t a Parker Bros. game.
Wealth isn’t a zero sum game.
There isn’t a finite amount of wealth.
There never was.
So, stop calling people names. Sit, listen (quietly) for a while. Learn something. Relax. Drink some wine. Repress that urge to retch all that anger through your keyboard. Relax. Enlighten yourself.