General Question

SoapChef's avatar

What is wrong with taxing the rich?

Asked by SoapChef (2978points) October 7th, 2008

We all know the more money you have the more access you have to tax shelters, loopholes etc.. Especially right now, the middle class(the Republicans worker bees), don’t have anything left to give. What is fair about the rich dodging taxes and the rest of us footing most of the bill? The only way to dig ourselves out of this debt is taxes and we could build some capital fast by forcing the rich to just pay their fair share as well. Oh that and getting the hell out of Iraq. What is it we are spending daily there?

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31 Answers

squirbel's avatar

I can’t even add anything. I agree.

cwilbur's avatar

It’s not about fair, unfortunately.

The rich have the resources to hire lobbyists and make hefty donations to political campaigns. The poor don’t.

kapuerajam's avatar

I don’t know I mean couldent they take a fair chunk of the 4 billion we spend in Iraq in a week.
Yet if they did we would be come like yellow claw

robmandu's avatar

Who pays the most income tax?

> In 2002 the latest year of available data, the top 5 percent of taxpayers paid more than one-half (53.8 percent) of all individual income taxes, but reported roughly one-third (30.6 percent) of income.

> The top 1 percent of taxpayers paid 33.7 percent of all individual income taxes in 2002. This group of taxpayers has paid more than 30 percent of individual income taxes since 1995. Moreover, since 1990 this group’s tax share has grown faster than their income share.

> The share of taxes paid by the bottom 50 percent of taxpayers will fall from 4.1 percent to 3.6 percent.

SoapChef's avatar

@Rob Thanks for the input,. I hope you don’t mind if I do a little verifying on that one. Even with this information, don’t you think it would be so easy for those most fortunate to help resolve so many of the economic woes. Sports figures, Models, Actors, people who would not miss 100 grand or even a million dollars. I am always appreciative to see when they have made a donation to charity, but twenty thousand here and there isn’t going to do it. If all the top wage earners in Hollywood got together and donated one million dollars, imagine what could be accomplished? It would not change their lifestyles one iota, they wouldn’t even miss it. Now the same idea would work with others, big business owners etc., but it would never happen, because of that ugly word, greed.

robmandu's avatar

I agree that more philanthropy by the wealthiest of us – heck by all of us – would be great. And as a matter of fact, the rich do indeed make a ton of charitable contributions all the time.

I’m not, however, a big fan of the government stepping in, taking money away that was rightfully earned, and redistributing that wealth… usually with massive bureaucratic overhead and inefficiencies.

In any case, the numbers from that report I linked above were sourced from the U.S. Treasury, Office of Tax Analysis. It’s apparent and known that the rich in this country do indeed pay more than their fair share, in the name of the progressive good.

SoapChef's avatar

True enough, the wealthiest pay the largest contribution to the total tax amount. The part thats missing however, is that they pay a smaller percentage of their total income in taxes than the middle class. What if there was a 10% flat tax, fabulous! By that standard they are not even paying the 10%. This is what would be fair. The more money you have, the more opportunity you have to protect it with loopholes, shelters etc..

jasongarrett's avatar

I’m all for a flat tax. After all, if 10% is enough for God it should be enough for Uncle Sam.

robmandu's avatar

Yah, I’d be happy with a flat tax, too. That is fair and equitable, by definition.

But I submit you won’t ever see it. Taxation is a particularly effective expression of power. The government, for example, can heavily tax items or activities in order to deprecate their use (like cigarettes, or gas-guzzling cars). Plus it can lower taxes on good things (like hybrid cars, home mortgages, alternative energy) to incentivize their use.

In that respect, it’s not about the wealthy trying to manipulate the system… but the system (i.e. government) trying to manipulate all of us.

tonedef's avatar

I interpreted the call for a “flat tax” to mean a flat income tax. I’d totally support that! Esp. because I’m right beyond the cusp of a 10% increase in income taxes :( If I made $1500 less, I’d make a lot more. Goofy!

flameboi's avatar

Let’s say, I’ve worked all my life so hard that I can’t even recall good memoirs of my early 20’s and now, because of that, I’m rich, taxes are cruel!

SoapChef's avatar

@flame Paying your fair share of taxes is not going to make you un-rich!
Not to belabor my point, but lets remember, in general, people who make the most money, pay less of a percentage of their income in taxes than the average middle class taxpayer.

flameboi's avatar

Is not about the other tax payers, is not about me either, my point is, why the person that works harder (and makes more money) is supposed to pay a bigger tax share?
If you are rich, is not because you found a treasure hidden under a tree…

SoapChef's avatar

@ flame Again, it about making the rich pay the SAME percentage of their income in taxes that I do. NO more, no less.

SoapChef's avatar

@ Flame A lotof times being rich has NOTHING to do with being a hard worker. Vice Versa, there are many people who work their asses off their entire lives and never get a break, epecially when it comes to taxes.

robmandu's avatar

Tax Shelters That Work

So it’s not surprising that the methods for protecting income and keeping the tax man at bay have made a sharp turn toward the fundamental and traditional: charitable giving, forming family partnerships, and, yes, real estate.

Note that one of the acceptable methods of reducing tax burden is through charitable giving. That’s an oft-used “loophole”. I think we should be careful of the assumption that rich people simply hoard their wealth.

dalepetrie's avatar

My problem with stats like “the top x% of all taxpayers paid y% of all taxes is this…”

First off, these figures don’t tell what percentage of all income is made by the top x% of taxpayers. Consider this…the combined wealth of the 400 wealthiest Americans (and remember, there are 300 million people in this country), is equal to the combined wealth of 1/2 of the entire country. In the year 2000, the richest 1% of people worldwide held 40% of all the world’s assets, and the richest 10% held 85% of all the world’s assets. Conversely, the bottom 50% of the world controls 1% of the world’s assets. The top 1% of wage earners make more than the bottom 40%.

Saying that they paid 53.8% of income taxes but reported only 30.6% of all income is also not persuasive to me for a number of reasons. First, because it’s all about what is “reported as income”. Capital gains are not treated like regular income, and the top 1% controlled 42% of all stock and the top 10% controlled 82% of all stock in 1997. There are many carry forwards, write offs, tax shelters and other ways to shield one’s money from taxation and reporting as income that are not available unless you have a lot of money.

MOST importantly however, this does not account for anything but individual income taxes. Take the following example:

Joe makes 10,000 per year. John makes 10,000,000 per year. Joe pays $500 per year in personal income taxes, or 5%. John pays $2,500,000 in personal income taxes or 25%. No one feels sorry for John, he still takes home 7.5 million a year, but he does pay 5 times as much of his income in personal taxes on a relative basis to Joe. But Joe and John both pay property taxes…Joe pays a few hundred bucks a year via his rent, John pays a few thousand. Joe and John both however pay 42 cents a gallon in taxes on fuel…Joe drives fewer miles than John because all he can do is get back and forth to work, while John can travel, but they are paying the same rate. Joe and John both have to pay taxes on various licenses, to drive, to do this and that, etc. Joe and John both pay 7% on everything they buy in stores in sales taxes. John may buy more things so he pays a bit more in taxes on a dollar per dollar basis, but they both pay the same percentage. There are local, state, county and municipal taxes and fees EVERYWHERE around us. And at the end of the day, Joe has spent $4,000 a year of the $10,000 he made paying all those taxes. John makes 1,000 times what Joe makes, but it’s not like he buys 1,000 times as much gas, 1,000 times as many things in the store, etc, or 1,000 times as much in property taxes, car licenses, etc. It’s more, but it’s not 1,000 times more…these things are NOT RELATIVE. So, John maybe spends $500,000 a year on all these taxes, where as Joe spent $3,500. John is now paying $3M on $10M in income, or 30% overall. Joe is paying $4k on $10k, or 40% overall. This type of stat about the rich paying “more than their fair share of taxes” is all a smokescreen.

What happens is, we have this so-called progressive tax structure. But the trickle down Republicans say that it’s not fair that I’m paying 35% of my income while others are paying 10% of theirs. Well, to be fair, they’re paying 35% on every dollar they make over and above a certain threshold. And the more they make, the more opportunities they have to shield it.

If these people who point out the progressive tax structure, and then only show you the side of the equation which shows how much of the tax burden these unfortunate rich people have to bear, were REALLY interested in equity, here’s what they would want.

They would want a tax structure which says, the first $x are excluded from taxation, period. I personally would set that number about 10% above the poverty line, and make that # the minimum wage based on 40 hours a week, because I don’t think anyone willing and able to work full time should have to do so for less than a living wage, but that’s another argument that this invariably leads to, so let’s leave that aside for now. Then, they would say, let’s collect ALL taxes at one level, and distribute them to the states, counties and municipalities based on population. That whole trickle down theory seems to work when they are giving out tax breaks, but when it comes to collection, then NO SIR, that’s a state’s rights issue. We need “smaller” government.

But if you start to cut those top rates, you bring in less money and you have less money for aid to smaller governments. These governments then have to pass taxes along to their citizens and they do so in ways that are not progressive, but are REGRESSIVE like gas taxes, permits/fees, sales taxes, etc. And what happens is ultimately the less you make the larger the percentage that is actually spent on taxes.

A flat tax is an OK concept, but not if you aren’t willing to abolish every other tax, because if you kept all the local taxes and state taxes where they were and implemented a flat tax, the poor would pay an even HIGHER percentage of their income in taxes than do the rich. Essentially, people who want to cut the taxes for the wealthy often obscure the fact that their actual marginal tax rate when all taxes are considered is not equitable. And whereas someone who makes minimum wage can’t even afford to live outside of poverty and STILL is subject to taxes they simply can’t afford, hiking the taxes of someone who is worth more money than he will ever be able to spend in 100 lifetimes is just not all that painful.

So, yes..let’s have a completely flat tax, but exempt the first say $20k of income per person. That income is essential to survive, everything else is extra. Every dollar beyond that is taxed at whatever percentage is necessary to run our country and provide the things to people they can’t provide for themselves (infrastructure, education, etc.). Only disposable income is taxed and all disposable income is taxed equally. But no one who thinks the rich are paying too much in taxes would go for that, because they just want to make the Individual Income Tax equal, and ignore the rest.

SoapChef's avatar

Thanks Dale,
Well said, as usual.

SoapChef's avatar

I don’t know Rob, I just don’t think many people get rich by being overly generous.

squirbel's avatar

DALE! you rox my socks.

dalepetrie's avatar

I saw stats, and I wish I could find them, that showed that the more money you make, the lower percentage of your income you give to charity.

squirbel – high praise indeed!

robmandu's avatar

(sigh) never said they did… just cautioned against making blanket assumptions. Problem I have is government stepping in to make those people give away (that is, the gov’t takes away) what they rightfully earned.

Good to see that, in any case, charitable giving has been on the rise:

grayreason's avatar

Think about it this way, if you suddenly were given a hundred million dollars. What would you do with it. If you say buy/open a business your providing jobs for people (who also pay taxes), providing a service to the community, and then paying all those bills involved with running a business. If you spent it your providing income to a company who then provide that money to their workers in the form of salaries and safe working conditions.

Now lets say that the government suddenly says that instead of paying a reduced tax (for economic growth) you instead decide to tax these people at the normal rate. Death of the American economy and massive reduction in federal tax revenue, since no rich person wants to live in a country in which they are being taxed more.

Lets say that person was you and lets say that you have to pay a 40% tax on that 100 million dollars. Most people would be pissed right now. so now instead of providing all the benefits to society you instead are forced to downsize that plan and hurt the economy and society.

dalepetrie's avatar

apparently grayreason doesn’t realize that some of our richest companies have at times gone several years without paying ANY taxes in years when they’ve made record profits. There may be a 40% top tax rate for companies, and that may be one of the highest in the world. But business have so many tax writeoffs, that they pay either the lowest or second lowest taxes as a percentage of their profits (I think it’s 8% on average). And hey, you’re not going to pay taxes on profits, unless you make FUCKING PROFITS! Hardly going to kill business by taxing profits.

I’m an accountant…I passed the CPA exam. I know well that profits are what’s left over after you pay all your expenses. Taxing profits doesn’t hurt a company or keep it from expanding….taxing profits means the people who run the companies and own them don’t get as much take home pay.

cwilbur's avatar

The problem with a flat tax is simple, though. Suppose, for simple math, we have a 10% flat tax across the board.

The person making $20K a year pays $2K. The person making $20M pays $2M. Fair, right?

Except that the person making $20K is probably struggling to pay rent and feed him or herself, and that $2K can make a huge difference. The person making $20M is probably not struggling with anything, and probably could afford to pay $3M without seriously hurting his ability to find comfortable food, clothing, and shelter.

The marginal value of a dollar decreases when you have many dollars to begin with. This is why people with a lot of money are taxed at a higher rate—they can afford it.

SoapChef's avatar

@cwilbur Re-read Dales answers.

squirbel's avatar

cwilbur is stating it in a short and succinct manner. He knows what dale wrote. :)

SoapChef's avatar

squirbel Thanks for pointing that out. Sometimes reading something twice (or a little slower) gives you a completely different take on it. I guess I felt too, that dale had addressed the problem when he proposed having the first 20k exempt from taxation.

grayreason's avatar

Its quite basic, if you tax the rich they’re just going to pass those taxes back to you in the form of more expensive products and services.

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