[blackshoe]

Trinidad, on 2015-January-21, 20:53, said:

Now, I know that you are not into socialist ideas of the rich helping the poor, but I find the idea of taxing the poor to help the rich get richer alien, if not -to use your word- "reprehensible". And I think that some rich, financially successfull people, such as Warren Buffet, agree with me on this.

I'm not into forcing the rich to help the poor, but if the rich want to give to charity, I have no problem at all with that, in fact, I find it a good thing. As for taxing the poor, I do find that reprehensible — especially if it's done "to help the rich get richer". But I doubt you can show that in the US we tax anybody for that purpose.

That Warren Buffet agrees with you doesn't make either of you right.

[kenberg]

ArtK78, on 2015-January-23, 12:21, said:

You might be surprised to find that "those so hopelessly disorganized" comprise a very large segment of the populace. I would guess that a very large majority of the populace does not have records of stock purchases made before 1980.

And as for purchases of other assets other than real estate, don't even go there.

I expect that many, maybe even some on this thread,an support this. We moved about ten years ago, and when I filed my taxes, some stuff had gotten lost in the move. The IRS sent me something saying I owed them some bucks. I realzed my error and after some work I found some documents and replaced others, and then they owed me something. But in addition there was stock I had a few shares in that was based in another country and had done some strange maneuvers that I simply could not grasp. Actually I don't think that the IRS could understand it either. It was truly a small amount and the issue just soret of vanished as I recall. I sent them some sort of proposal to resolve it and I think they never responded, I don't remember.

I asked myself why I was doing this, decided I couldn't explain why, and we now have a professional do it. If the toilet leaks I call Mike the plumber, if I have to file taxes I call Jenny the tax lady. Very relaxing. I filed my first taxes about the same time as I overhauled my first engine on my first car, all long ago, I am happy to stop now. . Car to the Honda dealer, plumbing to Mike, taxes to Jenny.

[mycroft]

no, no, we don't tax the poor so that the rich can get richer. We tax everybody to pay for things the whole populace needs. It's just that recently, more of the taxes, user fees, tolls, ... seem to be flat, and applied equally to the poor (who spend 40-50% of their income on these goods now with extra tax) and the rich (who may spend twice as much, and get taxed twice as much, on those goods - but who spend 10-15% of their income on those required goods like food and roads and...) A lot of this boils down to the diminishing value of the next dollar.

It also seems that the way the rich get money seems to be taxed less strongly than the way the poor do (even if, again, it's more in actual dollar amounts). And that money spent on things the rich use seems to be more ready than when it's spent on things the poor need. Odd, that.

[hrothgar]

blackshoe, on 2015-January-23, 15:21, said:

That Warren Buffet agrees with you doesn't make either of you right.

Maybe, but the fact that Heinlein would agree with you means that you are almost certainly wrong...

[barmar]

mycroft, on 2015-January-23, 16:16, said:

It also seems that the way the rich get money seems to be taxed less strongly than the way the poor do (even if, again, it's more in actual dollar amounts). And that money spent on things the rich use seems to be more ready than when it's spent on things the poor need. Odd, that.

By some theories, this is supposed to be good public policy. It's the whole "trickle down economics" idea: we use tax policy to encourage the rich people to invest, and this improves the economy as a whole. It creates lots of new job openings, which the poor can fill. It's the economic version of "a rising tide lifts all boats".

One problem is that it's like a pyramid scheme. By the time you get to the base of the pyramid, the profits are spread so thin that no one makes anything significant. But the guys near the top reap huge rewards.

[mike777]

I think this thread is discussing 2 separate issues.
1) redistribution
2) reducing inequality of global total wealth or income.

These issues need not be the same.

For example some combination of a wealth tax and closing "gift tax" loophole rules and increasing the rates may or may not increase total tax revenues but they may reduce inequality or reduce the rate of increase or be a first step towards that goal.
---


For redistribution it seems a large negative income tax that is means tested would be a good first step and be more efficient and easier to manage than many other approachs.

Again some of this stuff can be done by your local city, county and states. We don't have to wait on Congress.

[Trinidad]

blackshoe, on 2015-January-23, 15:21, said:

I'm not into forcing the rich to help the poor, but if the rich want to give to charity, I have no problem at all with that, in fact, I find it a good thing. As for taxing the poor, I do find that reprehensible — especially if it's done "to help the rich get richer". But I doubt you can show that in the US we tax anybody for that purpose.

That Warren Buffet agrees with you doesn't make either of you right.

Please do the math, it is not very complicated:

If you buy one loaf of bread, you pay $x. If you buy 100 loafs of bread, you pay $100x.
If you buy one hamburger, you pay $y. If you buy 100 hamburgers, you pay $100y.

If you earn $1000, you pay $z in taxes for the economic infrastructure (roads, money, an army that defends your interests, etc.) that makes it possible for you to earn those $1000. If you earn $100 000, you use 100x more infrastructure and, therefore, pay $100z.

... Except that -according to Warren Buffet, not the dumbest guy around when it comes to money- you pay considerably less, because of the nice loopholes that are available to the wealthy. That simply means that the poor are paying more for their economic infrastructure than the wealthy and the poor are effectively paying part of the infrastructure that makes it possible for the rich to get richer.

Mind you, I don't have any fundamental problem with the rich getting richer. Congratulations to them. But I do have a problem with the poor being forced to pick up part of the tap for the costs associated with making the rich richer. Those costs are supposed to be paid in full by the rich themselves.

Rik

[mike777]

To be fair the math is much more complicated than this. Thus the problem.

If I buy 100 loafs of bread I don't pay 100x
If I buy 100 hamburgers I don't pay 100y

there are loopholes, I get a volume discount.

If I earn 1$ I pay zero in income tax, I am poor. I am poor I don't own a car or a cellphone so I don't pay all sorts of taxes.

If I earn 1B$ then I get all sorts of loopholes and discounts that the poor do not get, they are poor. But I also pay all sorts of taxes tht the poor don't pay.

As I mentioned defining taxable income is hard and very complicated.

Buffett is correct he is using all sorts of "gift tax" loopholes to avoid taxes.
You are correct in that many taxes are "regressive" but the poor the truly poor don't pay many of them, they are poor. Thus something such as a negative income tax may be a first step as a safety net.

[Trinidad]

mike777, on 2015-January-25, 13:45, said:

You are correct in that many taxes are "regressive" but the poor the truly poor don't pay many of them, they are poor. Thus something such as a negative income tax may be a first step as a safety net.

Feel free to replace "the poor" by "the middle class". The middle class in the USA (including the lower middle class) is paying a higher share of the taxes than the rich and thereby forced to facilitate the rich getting richer.

Your argument of a volume discount doesn't count. Unions could pay taxes in volume for their members. I don't think that Uncle Sam would give them a discount.

Rik

[mike777]

blackshoe, on 2015-January-23, 15:21, said:

I'm not into forcing the rich to help the poor, but if the rich want to give to charity, I have no problem at all with that, in fact, I find it a good thing. As for taxing the poor, I do find that reprehensible — especially if it's done "to help the rich get richer". But I doubt you can show that in the US we tax anybody for that purpose.

That Warren Buffet agrees with you doesn't make either of you right.

I think the whole issue of "forcing" the rich to help the poor can get a bit out of context. I am going to assume you don't mind forcing the rich to pay taxes and those taxes will be spent to a large degree to "help" the less rich and poor. You may even believe that the rich have a moral duty to help the poor as many Catholics believe.
----------

Some of these "tax the rich" ideas can be done on a local level where the money raised can be spent on the local level with local input. For example LA county or the state of calif can pass these tax laws to help decrease inequality. If some places in TX or FL keep increasing inequality then they suffer the consquences.

Also as they become more common at a local level it may be easier to pass them on a Federal level.

[barmar]

Trinidad, on 2015-January-25, 13:20, said:

If you earn $1000, you pay $z in taxes for the economic infrastructure (roads, money, an army that defends your interests, etc.) that makes it possible for you to earn those $1000. If you earn $100 000, you use 100x more infrastructure and, therefore, pay $100z.

Things are not nearly so simple. Where do you get the idea that use of infrastructure and other public services is propotional to income?

Do million-dollar homes catch fire 10 times as often as $100K homes? While the value of the fire-fighting service is greater, because it's saving a more valuable home, they cost to the city/town of providing that service is basically the same as for a less expensive home.

A rich person is likely to buy a more expensive car than a poor or middle-class person, but that doesn't mean he drives more, so he doesn't put more wear and tear on the roads.

And of course, rich people don't make any use of public assistance services (e.g. food stamps, homeless shelters, Medicaid).

Meanwhile, the rich own businesses that put other people to work, allowing them to pay taxes. We want to encourage long-term investment in businesses rather than going for the quick buck, which is the public policy reason for the lower rate of capital gains tax versus income tax.

[ArtK78]

barmar, on 2015-January-26, 12:23, said:

Meanwhile, the rich own businesses that put other people to work, allowing them to pay taxes. We want to encourage long-term investment in businesses rather than going for the quick buck, which is the public policy reason for the lower rate of capital gains tax versus income tax.

Actually, no. At least, not entirely.

One of the public policy reasons for taxing capital gains at a lower rate than other income is that capital gains represent many years worth of gain on the value of capital, thus bunching the income in one year - the year of sale. To compensate for the bunching of the income, it is taxed at a lower rate.

[mike777]

Yes and a wealth tax and gift tax might bring in some revenue that an income tax might not since there need not be a sale, indeed there need not even be a gain. I don't know if overall revenue would increase or decrease but the rate of increase in inequality should slow down.

[kenberg]

I am working my way through what I think of various State of the Union proposals. I truly did not understand what was that "And let's close the loopholes that lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth" referred to inheritance taxes, but if I now understand it correctly, that taxes would be paid no capitol gains whether the gain goes to the original holder or to his/her heirs, it seems right. Simplicity is generally good, whether ina tax plan or in a bidding syste. For example, say a person realizes that his remaining life span is not long, a year or two at most. And say he dolds a stock that logically he would sell, where by logically I mean his assessment of the stocks future potential. But as I get the current system, he would have to think "If I sell it now, I have to pay taxes on the previous gains. If I just sit on it, I and my heirs can avoid that tax." So s/he holds the stock for tax reasons, not because of his judgment of the potential of the stock. Not good, imo. So change it. Change it for Warren Buffet and change it for me.

Now there is another proposal that has generated some controversy. I gather (I always have to be hesitant about whether I understand it correctly) parents can now start a colloge fund for their kids that acts something like an IRA. There is a lot of tax sheltering. Accounts already in existence would not be altered, I would hope that they cannot be altered, but new accounts would have less or no tax sheltering. This change is apt to be a tough sell for me. The Washington Post, suggests means testing Maybe, but I think I prefer simply having a cap on the amount to be sheltered. Helping parents send their kids to college seems like a good idea but we can keep this help to a (generous) limit. Setting a limit on the amount, but otherwise making no restrictions, again appeals to my preference for simplicity.

[mike777]

It depends on what your number one goal is. Is it to reduce inequality of total global wealth to some number say the top 10% only have 10% of total wealth rather than 50-80% or some other top goal? For example sending more people to college may not reduce inequality, hence the problem. It seems we send many more people to college today yet as many posters point out inequality is increasing not decreasing.

Confusing goals and priorities lead to confusing tax policies.

[kenberg]

mike777, on 2015-January-26, 16:03, said:

It depends on what your number one goal is. Is it to reduce inequality of total global wealth to some number say the top 10% only have 10% of total wealth rather than 50-80% or some other top goal? For example sending more people to college may not reduce inequality, hence the problem. It seems we send many more people to college today yet as many posters point out inequality is increasing not decreasing.

Confusing goals and priorities lead to confusing tax policies.

Mathematically speaking, it is close to impossible for the top 10% to have only the top 10% of the wealth.


But on the larger point of goals, I agree it is a major issue. E.J. Dionne wrote an interesting piece on this theme.


What I want is for life to work for most people. That's the way I saw the world as I was growing up and I would like it to work as well today as it did then. I think that for many it doesn't. It is worthwhile to keep a very open mind on why this is. I don't think it is all the government's fault, I don't blame the rich for being rich, but I think it is a problem.

[mike777]

kenberg, on 2015-January-26, 17:16, said:

Mathematically speaking, it is close to impossible for the top 10% to have only the top 10% of the wealth.


But on the larger point of goals, I agree it is a major issue. E.J. Dionne wrote an interesting piece on this theme.


What I want is for life to work for most people. That's the way I saw the world as I was growing up and I would like it to work as well today as it did then. I think that for many it doesn't. It is worthwhile to keep a very open mind on why this is. I don't think it is all the government's fault, I don't blame the rich for being rich, but I think it is a problem.

The problem is this is so vague on what it means and how to measure it to be not helpful.

It sounds like some Old Grump complaining how everything wAS BETTER when he was young.

At the very least it comes across as self-loathing of America but it is so vague I guess you could read whatever into it.
----------
---------

As far as this threads topic of inequality I have not noticed any articles on goals, measurable goals on what the inequality should be just that it should be reduced. I do not know what is mathematically possible in a reasonable amount of time.

[kenberg]

I'm sorry that you see it that way, I don't think I am up for trying to convince you otherwise.

[Mbodell]

kenberg, on 2015-January-26, 15:50, said:

Now there is another proposal that has generated some controversy. I gather (I always have to be hesitant about whether I understand it correctly) parents can now start a colloge fund for their kids that acts something like an IRA. There is a lot of tax sheltering. Accounts already in existence would not be altered, I would hope that they cannot be altered, but new accounts would have less or no tax sheltering. This change is apt to be a tough sell for me. The Washington Post, suggests means testing Maybe, but I think I prefer simply having a cap on the amount to be sheltered. Helping parents send their kids to college seems like a good idea but we can keep this help to a (generous) limit. Setting a limit on the amount, but otherwise making no restrictions, again appeals to my preference for simplicity.

Not exactly. The 529 plan would still exist. It lets you save for retirement in a way that shields that investment from taxes from year to year. In 2001 the 529 was changed so that in addition to the year-to-year earnings not needing taxes, that when the money was removed from the 529, there would be no capital gains owed on the gains of the investment. Originally, this capital gains were required. Obama's proposal is to go back to the original way - for money deposited from here on, if you are already in under the old rules, you keep that and your earnings on that principle stays capital gains free, only earnings on new deposits would be effected - and instead give people a much bigger refundable tax credit through the education tax benefits - like the Opportunity tax credit - up to $2,500 of assistance each year for five years (that is in addition to the free 2 years of community college if you maintain a 2.5 gpa). You might think this proposed change is hard on the "middle class", but you'd be wrong because (from various online sites):

Only 3% of families have this sort of plan.
Nearly half of all families who have this plan have incomes above $150,000/year and 80% of the benefit goes to households making more than $250,000 a year.
The typical savings from the capital gains exclusion, total, for families whose income is less than $100,000 a year is less than $600.

The refundable credits are a much, much better way to help get education funding to lower and middle class people. And the 529 still provides a benefit to people for saving for college. It just isn't as giant a benefit as it was after the 2001 changes.

[kenberg]

I can see I have to give the colleg plan more thought. I am not prepared to say yet where I come down on that.


I am also skeptical of the free community college plan. I expect that my reasons for this is not held by many. I would like to see suppor t for young people, and older people as well, who want to prepare for a career. For some, community college could be good. That's for some, not for others. I think we have gone a little "certificate crazy". My guess is that many youn people who spend two years in community college come out two years older and not at all better prepared than they were when they first enrolled to do anything useful . The lack of realism can be stunning. A while back I was gettng my hair cut and the young woman doing the cutting was telling me that he boyfriend was planning to be a doctor. He was going to community college and working at the local hospital in the cafeteria. Right now he was out of school because of grades, but he would soon be going back and become a doctor. This sort of thing is by no means rare. I worry that free tuition couold, for quite a few, be two more years of totally avoiding reality.

To the extent that we can help people become useful well-paid adults, I am fine with the plan. But I worry.