Some had argued that allowing taxes to rise would lead to an epidemic of capital flight, but this has failed to take place in the two years since tax rates went up. While I'm not hopeful, it would be nice if economic debates in the coming election year were firmly grounded in empirical evidence. With the increased computer power at our disposal it should be easier to model the impact of policy changes on wealth distribution, economic activity and so on.
Really rich people are suddenly paying quite a bit more in taxes
81–90 of 184 posts
Re: Really rich people are suddenly paying quite a bit more in taxes
#82Earlier quoted context omitted.
That's the problem, too -- it applies equally to necessities and luxuries. Sales taxes are regressive because there is a certain amount of non-discretionary spending everyone has to make, regardless of income, just to live.
Most sales tax proposals include a "universal rebate", which is a fixed monthly amount given to everyone that's intended to cover the tax on necessities.
Certainly there are ways to mitigate the effect, I was just pointing out that the universality of a sales tax isn't all positive.
Re: Really rich people are suddenly paying quite a bit more in taxes
#83Earlier quoted context omitted.
Sure the mortgage deduction exemption is horrendous, but I think income source discrimination is a bigger issue. We have different rates for wages, long-term capital gains, bonus income. Don't even get me started on carried interest. I'd also like to see social security contributions get uncapped. After $118k in income, your average tax rate falls until $189k. Even then, your mean tax rate will still be lower than so…
1) Wages and bonus income aren't taxed differently. 2A) When you take into account corporate taxes, inflation, and risk the difference between tax rates on wages and cap gains aren't as big as you might think. 2B) Many economists argue that there should be no capital gains taxes at all as they create a distortion between consumption and saving behavior. https://en.wikipedia.org/wiki/Optimal_capital_income_taxatio...…
> When you take into account corporate taxes, inflation, and risk the difference between tax rates on wages and cap gains aren't as big as you might think.
This doesn't make any sense. All of these things (with the exception of corporate taxes, which shouldn't exist) are priced into the return of the investment[1] and have nothing to do with taxation.
Why would you take risk into account for purposes of taxation? Should gambling income be taxed at a commensurately lower rate?
[1] More precisely, investments with a lower return are less desirable and their price tends to drop until the return (including risk, inflation, etc) is.
Re: Really rich people are suddenly paying quite a bit more in taxes
#84Earlier quoted context omitted.
It's not a terrible solution. Ideally a flat tax (which pretty much always means a lower rate than high earners pay) simplifies the tax system, and makes high earners less likely to evade taxes. However it doesn't change the fact that really high earners get a lot of their wealth from investments, so in the end they'll still pay a lower total 'rate'. The highest tax burden will still be paid by upper middle-class pro…
Regressive taxes are inherently economically destructive. I'm sorry but its just a terrible idea. You can get a 0 deductions system with a progressive tax system too, it isn't some magical property of a flat tax.
> Regressive taxes are inherently economically destructive.
The current system, in practice, is progressive up to the upper middle class, and regressive after that.
Flat tax rates aren't about taxing the poor (you can still build in income exemptions and most flat tax schemes do), but reducing tax evasion by the rich...
Re: Really rich people are suddenly paying quite a bit more in taxes
#85Earlier quoted context omitted.
> It's not a terrible solution. It's precisely a terrible solution. Yes, taxes are hard, but a solution that punishes the poor (or the not rich) by not recognizing the marginal utility of money is terrible in any form.
> punishes the poor by not recognizing the marginal utility of money What does this have to do with the poor? Are you under the impression your federal tax dollars get redistributed to the poor? Government contractors aren't poor. Do you have any idea what percentage of government proceeds are redistributed to the poor? Do not include social security. That money was taken from them to begin with.
> What does this have to do with the poor?
Look up what regressive means and what marginal utility means; nothing I'm saying has anything to do with how taxes are redistributed. Flat taxes are inherently unfair, they ignore the marginal utility of money; they are regressive.
Re: Really rich people are suddenly paying quite a bit more in taxes
#86Earlier quoted context omitted.
That's the problem, too -- it applies equally to necessities and luxuries. Sales taxes are regressive because there is a certain amount of non-discretionary spending everyone has to make, regardless of income, just to live.
We tried a luxury tax in the 90s. Yachts were more expensive and due to highly elastic demand, the industry plummeted. Companies went under or laid off thousands. But don't worry. Guess who works at yacht manufacturing plants? Not rich people. They weren't hurt, and they were fine with taking their money elsewhere.
Nice straw man. I didn't even mention luxury tax, let alone promote it.
Re: Really rich people are suddenly paying quite a bit more in taxes
#87Good; they should be.
Re: Really rich people are suddenly paying quite a bit more in taxes
#88I'm not a Trump fan, and despite likely tax hits, his proposal of simplifying the tax code (as many have done before him), getting rid of the IRS (yes jobs lost, but really, I got a certified letter owing $0.51 and they were "too busy with this category to answer. click ") would be a positive thing. One short summary of his proposal -- http://www.thepoliticalinsider.com/donald-trump-unveils-his-... I think a pure fla…
Obama also wanted to reduce income tax filing to a single-page affair. Almost all such proposals along these lines founder on the rocks of legislative buy-in. Given Trump's penchant for denouncing other people as idiots and worse, even if he were to be elected I'm skeptical about his ability to get anything substantial done. Sure, some in congress would be intimidated or enthused into working with him, but others would conclude that he would be in place for 8 years at most, whereas government projects and finances typically involve much longer time horizons. I seriously doubt anyone trusts Trump to supervise a rewrite of the Constitution.
Re: Really rich people are suddenly paying quite a bit more in taxes
#89Earlier quoted context omitted.
1) Wages and bonus income aren't taxed differently. 2A) When you take into account corporate taxes, inflation, and risk the difference between tax rates on wages and cap gains aren't as big as you might think. 2B) Many economists argue that there should be no capital gains taxes at all as they create a distortion between consumption and saving behavior. https://en.wikipedia.org/wiki/Optimal_capital_income_taxatio...…
1) It looks like I'm mixing up the California withholding rate with the tax rate. Thanks. 2A) Granted. If I had a magical tax wand, I'd obliterate corporate taxation. 2B) It's an argument I've heard, but I'm more interested in avoiding arbitrage. My preferences might be mistaken. :) 3) If I hold the belief that we shouldn't tax income differently based on its source, Mankiw's argument doesn't have much force. His rea…
1) Yes. This is true and annoying especially if you care about short term cash flow. If you super care about this you can play games with your W4 to cut down your withholding and instead pay quarterly tax payments. Though if you screw up and underpay you'll owe penalties.
2A) Indeed I agree. Though personally I put the chance of this ever happening at precisely zero due to the political optics.
2B) The difficulty of determining what is a capital gain and what is income is, in fact, one of the biggest theoretical arguments against a zero cap gains rate.
Re: Really rich people are suddenly paying quite a bit more in taxes
#90I'm not a Trump fan, and despite likely tax hits, his proposal of simplifying the tax code (as many have done before him), getting rid of the IRS (yes jobs lost, but really, I got a certified letter owing $0.51 and they were "too busy with this category to answer. click ") would be a positive thing. One short summary of his proposal -- http://www.thepoliticalinsider.com/donald-trump-unveils-his-... I think a pure fla…
> I think a pure flat tax would actually be bad for the country implemented immediately It would be bad in any form, it's regressive; marginal utility and all that, taxes should be progressive or they're not a fair burden.
I have a problem when people call tax burdens fair. There are so many ways to define fair its rediculous and has no solid meaning.
Also, on that note, its not logically possible to tax a business alone. Any tax a business pays must by necessity be passed on to consumers, else the company goes out of business. You can get around it by only taxing profits, but then you open the giant loophole of all value that's not profits, like capital, income, tax free expenses, etc. There is no "fair" way to do that makes everyone happier.