General Question

cletrans2col's avatar

What do the liberals here consider a fair tax on the rich?

Asked by cletrans2col (2385points) May 31st, 2009

I always here from President Obama and other liberals that the rich should pay their “fair share” Well, what is that?

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26 Answers

gailcalled's avatar

(“hear”).

Define “rich,” please. A man with no feet thinks that the man with no shoes is rich.

Ivan's avatar

Nope, it’s “here”

PupnTaco's avatar

@Ivan I always here [sic] from President Obama

Ivan's avatar

LOL, didn’t catch the one in the comments. I thought we were looking at the one in the question. My bad.

cookieman's avatar

I’m no tax or accounting expert, but I always assumed the percentage system is most fair.

I don’t understand the need for tax brackets.

I’m hoping someone smarter than me can elaborate

FLUTH3R's avatar

I think rich is very hard to define. With Obama’s inflating policies what we think of “rich” now won’t be so rich.

“If everyone in the world had a Million dollars, even the bums on my street, is a millionaire still rich??” – Me
Remember after WWI (or was it WWII) it took a barrel full of German money just to buy a loaf of break.

Kind of off topic.

Anyway though I will tell you if you want to tax me for makeing over $250,000 a high precentags I will either
A) Shelter my tax (what small business owners do)
B) Dump my money into another country’s economy (What the corperations do).

Although the corperations, and The Man, is evil, he is a necessary evil. We do NOT want to give our corperations up to other countrys. They are able to provide us the benifits of economies of large scale production.

I don’t think that answered your question though. Just thigs to think about :)

cwilbur's avatar

@cprevite: When you have $10, an additional dollar makes a huge difference to your net worth. When you have $10,000,000, an additional dollar doesn’t make a huge difference at all. So because as you accumulate more money, each additional dollar is worth less, the government takes more as you make more.

That’s the theory behind progressive taxation.

augustlan's avatar

I’d like to see a flat percentage tax on income over and above that which is required to live decently, no taxes at all on income under that amount, and NO LOOPHOLES. I’m sure there must be some reason that can’t work, but I’ll be damned if I understand it!

mammal's avatar

maybe the richest 10% should pay 90% or something along those lines

dalepetrie's avatar

Here is what I think would be a fair tax system:

Question 1 – How many people live in your household. See chart 1 to determine your deduction (that number would be about 15% over the established poverty threshhold).

Question 2 – How much money did you and all household members earn last year?

At this point, you subtract the number from chart 1 from the number in question 2. This is your “taxable income”.

Question 3 – Multiply your taxable income by a set percentage…everyone uses the same percentage, and that number is set each year and is based on how much money the government needs to bring in to pay for all the things for which it should own responsibility.

Now you have the amount of tax you should pay. From that you need to take a number from chart 2, that basically is an estimate of how much an average household of that size pays in the form of all taxes collected by states, cities, counties, etc. for things like gas taxes, sales taxes, property taxes, etc. You should get a tax credit for taxes paid basically on necessities of life.

You subtract that number from your tax liability, again same deduction for everyone, and viola, you have your actual annual tax liability.

Question 4, how much tax was withheld? Subtract that # from your liability, if the remainder is positive, you owe that much in taxes and if it’s negative you get a refund.

It would take the average American 10 minutes to do his taxes, it would cut down on the ability to cheat, it would eliminate the need for the bureaucracy that is the IRS, and it would ensure that taxes were fair, and that everyone got to make $x before they paid ANY taxes of any kind, and that essentially, all taxes collected would be collected only on “excess” income, i.e. income over and above what you’d need to survive, and that the tax amount was the same for every person.

That would be fair. There are a number of ways it could work, but what I don’t like is constantly cutting taxes at the Federal level for the wealthy, so that overall a person making $10k a year is paying 40% of his income to taxes and the person making $10m is paying 10% because of all the tax shelters they can afford and because the local taxes which make up the majority of that 40% borne by the poor don’t hit them as hard as a percentage of their income.

YARNLADY's avatar

I’m in favor of a flat tax for all, depending on the size of the family, with no deductions for any other purpose.

Judi's avatar

closing a few of the loopholes that have given the very rich ways to pay little or no tax at all.

cookieman's avatar

@cwilbur: Thank you for the explanation.

wundayatta's avatar

According to the World Taxpayer’s Association, the highest marginal tax rate* in the world belongs to Denmark at 63%. The highest rate in the US, by comparison, is 36%. Only Japan has a lower rate from among the industrialized nations they provide data for. For the average worker, Denmark’s rate is 44% and the US rate is 27%. Again, this is next to the lowest rate among these nations.

From Taxmaster’s Official Site, the numbers show that the US already has one of the more progressive income tax systems in the world. The richest 30% of the population pay 65% of all income taxes; the middle 40% pay 28% of all taxes; and the poorest 30% pays only 7% or so of all federal taxes.

Personally, I’d have no problem with a 50% marginal rate for the richest in this country. However, even bumping that rate up just a little would generate significantly more income for the country, and the rich would hardly notice. I’d like to see a tax that can’t be avoided with off-shore accounts and the like.

* Highest Marginal Rate means the rate on the greatest income the person makes. We all pay 15% on our first income; 27% on the middle level income; and 36 percent on all other income. The 36% rate applies only to income over that taxed at the 27% rate. The 27% rate applies only to income above that taxed at the 15% rate.

cwilbur's avatar

@augustlan, @YARNLADY: The reason the flat tax isn’t popular is twofold. The people considering the benefits to the high-income end of the spectrum don’t like it because it has fewer loopholes; the people considering benefits to the low-income end of the spectrum don’t like it because it doesn’t have the potential to take nearly as much from the rich as a progressive tax system does.

I’d like to see fewer loopholes, too, but I also think it’s reasonable to tax higher amounts of income at a higher rate. For instance—

From 0 to twice the poverty limit, per person in the household: no tax.

On income above 2x the poverty limit, but below 4x, 10% tax.

On income above 4x the poverty limit, but below 10x, 25% tax.

On income above 10x the poverty limit, but below 20x, 40% tax.

On income above 20x the poverty limit, but below 40x, 50% tax.

On income above 40x the poverty limit, 60% tax.

This would only add one additional step to @dalepetrie‘s simplified tax plan, but it would result in a lot more income.

I’d also like to see some sorts of tax loopholes continue—I like tax-deferred savings and tax deductions for charitable contributions, and I think those are both good. Some of the other deductions, like the deduction for dependent minor children, would go away but be replaced by the fact that this tax scheme is calculated per household rather than per person. Of course, you’d get some wrangling over what makes a household….

Judi's avatar

And loopholes can sometimes be legitimate business expenses. You wine and dine a client, buy materials for jobs, (then it gets a little harder…) Take top clients or top producing employees on lavish trips…. and everywhere in between.

galileogirl's avatar

We could go back to the St. Ronald era when the top rate was 50% on earnings over $162,000 or even better the halcyon days of President Eisenhower when it was 92% on earnings over $400,000. lol
http://www.truthandpolitics.org/top-rates.php

critter1982's avatar

Personally, I would like to see the “fair tax” incorporated.

Poser's avatar

Rich people are rich because they have learned how to keep their money. They don’t spend it on worthless crap they can’t afford and they hire financial professionals to keep it out of the government’s hands. Non-rich people do the same thing when they go to H&R Block to find every deduction they’re eligible for. The “loopholes” are there for the poor as well as the rich. The difference is that the rich educate themselves about them. That’s how they stay rich.

dalepetrie's avatar

@Poser – many of those loopholes that are supposedly open to anyone have to do with things like capital gains taxes, wherein if you roll your investments in a certain way, you can escape taxes on money you earned through investment activity. Since the things which one would have to invest in for them to be able to utilize such a loophole are unaffordable to a person who needs to use every penny to eat and keep a roof over their heads, that’s a falacious argument at best.

galileogirl's avatar

@Poser You are absoltely right. I am not rich because I hadn’t learned to keep my $256/mo take home pay from my 1st job. I blew it on $100 rent and $30 bus pass. The other $126 I spent on non-essentials like electricity, laundry, underwear, one pair of shoes at a time and groceries.

It took me 35 years before I reached a point where I only had myself to support, all my education costs were paid and I had saved up enough money to buy a car. For the past 5 years I have been able to live a very thrifty life, saving over 25% of my teaching takehome pay and have managed to bank about $60,000.

I guess if I work another 50 years, I might become a millionaire!

cookieman's avatar

@galileogirl: Did you really need the underwear?

galileogirl's avatar

@cprevite Not any more Whoo-hoo(high kick)

critter1982's avatar

Quote: ”In a free market economy, the larger an investment is, the higher its rate of return. This is due to both economies of scale and the increased range of investment opportunities. In addition to these purely economic realities, those who control great amounts of capital within a society, generally participate more directly in shaping government policy, often in ways that further maximize their wealth. Thus, it is a natural fact that the wealthiest in a society will, on average, become even disproportionately wealthier over time. It can be argued to avoid long term political instability a society must avoid this natural stratification toward an ever richer aristocracy or moneyed class, and an ever larger working class.

Those who favor a progressive tax have no qualms with the rich making more, but if the poor are getting poorer it’s not really good for society as a whole. Wealth itself is power and a progressive tax is a small check on that power. Our tax system does not make the wealthy poor, nor does it make the poor rich. It simply calls on them to provide more revenue than the poor person who does not have the wealth or power that the richer person has.

Squatch347's avatar

Many of the posters here seem to have missed an underlying question that should govern how they answer.

What is the purpose of taxation?

If it is to provide for common goods and services, a flat tax would seem to be the warranted conclusion (a consumption based tax would also be within the logical ball park).

If it is to generate revenue for government programs, be them social or otherwise, a lower marginal tax rate across the board would seem to make the most sense given where we likely are on the Lafer Curve.

A progressive tax rate would seem to arise from a desire to either moot income (or wealth) inequality. I’m not sure why that is a noble goal, but it does seem to be the logical driver of that type of tax structure.

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