This is a long post, but if you're concerned about tax rates in the U.S. (on either
side of the spectrum), then read on...
Like a growing number of Americans, I think enacting a modest tax increase on
the wealthiest Americans is a necessary means of paying off the U.S. deficit. I am
also not convinced that tax increases on the very wealthiest Americans would (at
the worst) do any more damage to the economy (in terms of “crushing jobs&rdquo😉 than
would a slew of brazen government agency spending cuts. So, in deciding to look
beyond the wads of statistics indicating that the Bush tax cuts have ballooned the
deficit and not deflated the unemployment rate, I thought I’d run some of my own
rudimentary calculations on some basic tax code changes to see how “devastating”
a few tweaks would be for “small (😛) business owners.”
A few notes. I ran these calculations quickly, so if anyone wants to double-check
me, feel free to, but I’m not going to post every calculation I made since RHP
doesn’t have the best formatting options. These statistics apply only to
federal-level personal income taxes for individuals. In other words, they do not
account for other means of taxation, especially including joint-filing for income
taxes, corporate tax rates, corporate tax deductions, individual income tax
deductions, etc., many of which I realize also should be considered in any sort
of tax code overhaul. Finally, I found the 2010 rates on Wikipedia, and I rounded
the brackets to make the math a bit neater and cleaner.
Again, to be fair, I’m not a tax expert. So if I made some glaring mistake, or
failed to specify some other obvious exclusion, let me know, and I’ll try to fix it.
Ultimately I’m just trying to spur some debate about an issue that nobody really
seems to want to talk about, especially on the right.
___
2010 rates:
10%: $0-$10,000
15%: $10,001-$35,000
25%: $35,001-$80,000
28%: $80,001-$170,000
33%: $170,001-$370,000
35%: $370,001+
___
My hypothetical rates (which are frankly far, far more conservative than many
Democratic proposals in existence, including those previously floated during the
government shutdown debate last Christmas, which included multiple brackets in
the 45%+ range) which my instinct tells me would be dismissed out-of-hand by
Republicans in Congress:
10%: $0-$10,000
15%: $10,001-$35,000
25%: $35,001-$80,000
28%: $80,001-$170,000
33%: $170,001-$370,000
35%: $370,001-$1,000,000
36%: $1M-$10M
37%: $10M-$100M
38%: $100M-$1B
39%: $1B-$10B
40%: $10B+
___
Now for some definitions:
Individual = hypothetical individual’s income before taxes
2010 taxes = income tax dollars paid under 2010 rates
My rate = income tax dollars paid under my rate
Difference = “2010 taxes” – “My rate”
Absolute = absolute average rate difference; i.e., the average amount
increase per dollar each individual would pay in total
Relative = relative average rate increase; i.e., 1 - (“My rate” / “2010 taxes&rdquo😉
___
And the calculations:
(Individual---2010 taxes---My rate---Difference---Absolute---Relative)
$5M---$1,727,700---$1,767,700---$40,000---0.008---0.023
$50M---$17,477,700---$18,367,700---$890,000---0.018---0.051
$500M---$174,977,700---$188,867,700---$13,890,000---0.028---0.079
$5B---$1,749,977,700---$1,938,867,700---$188,890,000---0.038---0.11
___
Again, I think to consider the people who would fall into these brackets as
the “small business owners” of America is absurd, but I ran the numbers for them,
anyway. Note that under my system, tax rates would be unchanged for everybody
making up to $1,000,000. And, even for that poor, helpless soul making
$5,000,000 in personal income, my system would ask him to pay
approximately 80 cents more in taxes for every $100 of income than would the
2010 system, when you average out the rates of all the brackets.
So, all of that said, is something like this really unreasonable to ask from
millionaires and multi-millionaires/billionaires? I for one wouldn’t think it
unreasonable to ask for even more progressive rates at the top, but I assume
that’s futile logic considering the composition of the House currently. Still, with the
"super-committee" debate imminent, I would hope some sort of modest rate
adjustment like this would go up for consideration.
Originally posted by wittywonkaI still messed up the mathematical definition of the relative tax rate increase...
Relative = relative average rate increase; i.e., 1 - (“My rate” / “2010 taxes&rdquo😉
It should read:
Relative = relative average rate increase; i.e., ("My rate" / "2010 taxes" ) - 1
Originally posted by wittywonkaOne mistake is that tax rates are marginal, that is the higher rate only applies to that income that exceeds the margin.
I still messed up the mathematical definition of the relative tax rate increase...
It should read:
Relative = relative average rate increase; i.e., ("My rate" / "2010 taxes" ) - 1
The other and probably more important failing is that a static analysis is never very accurate. During the first 7.5 years of Bush's Presidency, I suspect that revenues did not drop off much from the tax rate cuts for all groups. Tax revenues from the reduced capital gains rate resulted in big revenue increases. The losses in Federal revenue at present result from a serious drop off of employment and other economic activity. Highly productive people are still paying the lion's share of the taxes, and increasing that share will only serve to discourage their productivity.
Lower rates tend to encourage the economic activity being taxed. Higher rates tend to discourage that activity. Therefore rate increases never produce revenue increases projected, because there is some reluctance to pay the higher rates and some avoidance.
Lower rates in like manner don't result in straight line revenue losses.
Originally posted by normbenign1) I know what marginal rates are, and my calculations were done based on marginal rates. Mathematically, though, the average net rate an individual pays approaches the rate of the top bracket as the person's income extends further and further into that top bracket.
One mistake is that tax rates are marginal, that is the higher rate only applies to that income that exceeds the margin.
The other and probably more important failing is that a static analysis is never very accurate. During the first 7.5 years of Bush's Presidency, I suspect that revenues did not drop off much from the tax rate cuts for all groups. T ...[text shortened]... d some avoidance.
Lower rates in like manner don't result in straight line revenue losses.
2) Increasing the money flow in the economy to increase the amount of taxable income is all well and good, but do you really expect multi-millionaires to be investing constantly into the economy? Again, I'm not talking about corporate tax rates; I'm talking about personal tax rates.
3) Ultimately, my point is: even if you're really going to complain that increasing the personal tax rate on a millionaire will disincentivize investment and job growth, are you really concerned that asking an individual to pay between $0.50 and $1.50 more in taxes per $100 of income (as hypothetically posited in my example) is an unreasonable means of trying to pay down the deficit, as opposed solely to cutting spending programs that affect the middle class disproportionately?
Originally posted by wittywonka"do you really expect multi-millionaires to be investing constantly into the economy?"
1) I know what marginal rates are, and my calculations were done based on marginal rates. Mathematically, though, the average net rate an individual pays approaches the rate of the top bracket as the person's income extends further and further into that top bracket.
2) Increasing the money flow in the economy to increase the amount of taxable income i ...[text shortened]... opposed solely to cutting spending programs that affect the middle class disproportionately?
Most assuredly, they will invest whatever they don't spend on consumption, especially if taxes on investment income remain non punitive. The higher the rates on investment income, the fewer people will invest domestically.
The kicker is that people making in excess of $250k aren't usually multimillionaires yet. The people that are can afford to redirect their investments to where taxation is less punitive. They don't need that income to maintain life style.
Ultimately, the notion that tax increases can fix our financial woes is the same as the idea that a drunk or gambling addict can fix his problems by getting a better job. With an addict, no amount of income will suffice. Our government is addicted to spending, and it is both parties, not one or the other. An old bumper sticker rings true. "If we send it they'll spend it".
We already disproportionately rely on the more productive to support our government, and those supporting it, get little of the benefits. The good deeds that government can do are infinite, but resources will always be limited. The basis for our prosperity is individualism and private property, that is the right to earn, keep and dispose of those earnings as we individually see fit.
The notion that higher earners ought to pay more is despicable. Even with flat tax rates they would pay substantially more, but as our code has evolved, we have nearly half who pay nothing or get tax refunds, and the other half who pay the bills.
Originally posted by normbenign"Disproportionately" is a very relative term. Do you really expect that multi-millionaires would prefer Medicare and Medicaid benefits over the private coverage plans they can afford for themselves? Do you really expect that multi-millionaires would prefer their children receive public educations--particularly in poorer states with fewer education resources--over elite private preparatory educations?
We already disproportionately rely on the more productive to support our government, and those supporting it, get little of the benefits.
Originally posted by wittywonkaI don't expect any of those things. Notice that I said that even with flat tax rates, the people with higher incomes would pay substantially more, but the lower groups would have "skin in the game".
"Disproportionately" is a very relative term. Do you really expect that multi-millionaires would prefer Medicare and Medicaid benefits over the private coverage plans they can afford for themselves? Do you really expect that multi-millionaires would prefer their children receive public educations--particularly in poorer states with fewer education resources--over elite private preparatory educations?
Many poor, inner city people would like their kids out of failing public educational systems. A couple of decades ago I worked in a blue collar suburb as a track and cross country coach. Kids were still graduating from the schools, but most weren't qualified to enter the local community college, or the work force, never mind an elite university.
Disproportionately simply means that wealthy or just upper middle class taxpayers are footing the bill for stuff they are less likely to utilize. It is dishonest and immoral to sell benefits as "free" because some unknown person is the payor.
Originally posted by normbenignWhy is it dishonest and immoral if it works and those footing the bill actually benefit from the system? How would the "rich" hire people if they are dying in the gutter and/or they are criminals and/or they have no education or productive skills? Do you see the rich massively fleeing Northern Europe because their system is so "dishonest and immoral"?
I don't expect any of those things. Notice that I said that even with flat tax rates, the people with higher incomes would pay substantially more, but the lower groups would have "skin in the game".
Many poor, inner city people would like their kids out of failing public educational systems. A couple of decades ago I worked in a blue collar suburb ...[text shortened]... dishonest and immoral to sell benefits as "free" because some unknown person is the payor.
Originally posted by KazetNagorraYou can test the morality and honesty of it by making it voluntary.
Why is it dishonest and immoral if it works and those footing the bill actually benefit from the system? How would the "rich" hire people if they are dying in the gutter and/or they are criminals and/or they have no education or productive skills? Do you see the rich massively fleeing Northern Europe because their system is so "dishonest and immoral"?
Originally posted by kbear1kIt's hard to figure out what Wajoma stands for, since he refuses to answer most queries that go into the specifics or pragmatic applications of his ideology. His positions vary from anarchism, which he usually advocates while denying he does so, to absurdly oppressive government policies, like when he argued in favour of banning all forms of pollution by law.
"Libertarians are not anarchists."
What exactly do libertarians stand for? (Since many seem to stand for selfishness.)
Originally posted by kbear1kAnd you'd like to ban selfishness? I don't have a problem with people acting in their own self interest to be sure, it is entirely their business, it's no crime, there should be no laws against, much to the consternation of some terminal busy bodies around here.
"Libertarians are not anarchists."
What exactly do libertarians stand for? (Since many seem to stand for selfishness.)
No, libertarianism makes no comment on selfishness, at the core of libertarianism is the non-initiation of force principle i.e. every human has the right to live their life free from force threats of force and fraud, the proviso is that you respect those same rights in others, and this is the sole roll of the state i.e. essentially to protect you from me, and me from you. And legal drugs.
Of course I have never said that all forms of pollution should be banned by law, it is in the nature of some posters here to misrepresent others, at times this misrepresentation reaches the level of down right lies, KN has found something to play with, he likes to play with it much as a baby who has discovered doodee in their nappy for the first time.