What Could Raising Taxes on the 1% Do? Surprising Amounts
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This is naive on two counts. You can't raise taxes without affecting people's behaviour. If someone's tax burden goes from 35% to 45%, they'll put more effort into avoiding taxes, and you're not going to see the increase that the obvious calculation says you will.
But let's ignore that for now. The highest number here is $276 billion. That's a bit less than 10% of the $3 trillion tax receipts collected in 2014. https://en.wikipedia.org/wiki/United_States_federal_budget#M...
That's a significant amount, but it's not really earth shattering unless you can use it effectively. And if you can use it effectively, you probably could have used the previous $3t effectively as well.
In reality, when you collect an extra $X billion, you don't get to go "oh great, we can spend $Y billion of that on paying for college tuition, $Z billion on a child tax credit, and the rest can reduce the national debt". What actually happens is the same thing that happened to the rest of your money. It goes to the military, it goes to subsidies for entrenched interests, it goes to pork barrels, and a fraction of it goes to actually improving things.
What could an extra $276 billion do? Surprisingly little.
> I trust wealthy individuals to invest that extra 10% into efforts that benefit society much more than I trust the government.
Those wealthy individuals can, in general, be trusted to do things that benefit themselves. Corruption be as it may, the government is still in the business of the greater good, however imperfect.
Not only do removing tuition fees or enacting universal healthcare remove systemic inequalities, they actually make everyone wealthier. We will have a stronger economy if we take care of the social infrastructure we need. These measures lead to growth.
Imagine a world where a startup entrepreneur doesn't have to be terrified of their health insurance status - it's the same one where a working class family isn't bankrupted by illness. Imagine a more highly educated workforce with more potential hires domestically - it's the same one where a high school graduate can afford to be the first person in their family to get an education. The things that help the poorest in society help all of us. Even if you don't care about what happens to poorer members of your community, you can rest easy in the knowledge that these things benefit you. Social infrastructure works.
The only detrimental effect this would have is that the very richest people don't get to keep quite as much money, on the face of it. But they would make more money overall.
I would like to see a fairer America, where more people have opportunities, and fewer people are living harsh poverty conditions. It's exciting to see these topics finally get the air time they deserve.
If your goal is truly to see fewer people living in harsh poverty conditions, an absolutely noble goal, let the free market be. Capitalism will (and has, see the extreme poverty figures) bring far more people out of poverty than any bureaucrat could ever hope to.
I don't believe progressive taxation is discriminatory. The more you earn, the more the marginal utility of each additional dollar you earn is reduced. Progressive taxation recognizes this, and therefore eases survival burdens on lower income workers - who are necessary for any capitalist economy to function - while continuing to allow higher earners to become wealthy. It's a good system.
Depends on what you mean by "work"--this is what things looked like in the late 1800s, early 1900s, in the US. Conditions for workers were bad enough that it led to the union movement, federal workplace regulation, etc.
For most people, you'd have a hard time saying it "worked", but for the handful of people who got rich during that time, sure, it "worked".
As far as growth being stronger with higher tax rates, I assume you're talking about post ww2 era? If so, then I think that was probably more to do with the fact that the rest of the world was destroyed rather than due to our tax code.
And it was a short lived thing, by the mid-late '50s things were sputtering, and the top tax rate was 91% ("We like Ike?"). JFK-LBJ reduced that to 77% (https://en.wikipedia.org/wiki/Revenue_Act_of_1964) to great economic effects (unfortunately, the increased tax revenues were not so much that LBJ couldn't do a guns and butter budget that almost bankrupted the nation, leading to a decade and a half of malaise).
Life is better with worker safety regulations, child labor regulations, overtime regulations, regulations on being fired (which we in the US generally don't have), and so on.
The goal of "let the free market be" is what made life brutal for scores of workers throughout the first part of the industrial revolution--we moved away from that all with good cause.
Very good point on commerce relative to raising the quality of life around the world.
I don't know why so many people give the state the benefit of the doubt when they mistrust corporations so much. I'm inclined to mistrust both, but at least a corporation has to compete to survive. The state has a monopoly, that's one of the reasons it is so dangerous. Never forget that most of the worst atrocities ever committed in human history were done by governments. Hitler was an elected official and all that.
The goal has got to be to keep as much power for the individual as possible. The is in part done by keeping the state out of most contacts between two parties.
Anyone can do this, too, and everyone should. Ultimately, anyone who relinquishes their political power this way gets what they deserve--to have others make their decisions for them.
I trust the state because I'm a part of it.
I have no specific reason to trust corporations, but I certainly don't trust any corporation that wants to engage in policy-making; that is something that should be reserved for the people, not business organizations.
They're both competing to survive, it's just that the incentive structures are slightly different. Corporations are trying to make as much profit as possible, and political parties are trying to get a majority of votes.
In theory, a democratic government should be more trusted to satisfy the desires of the people, because it doesn't weight those desires based on wealth. In practice, many democracies are dysfunctional which vastly weakens the incentive structure.
Countries choose what they wish to pay for. Canada's choices are different than their southern neighbor.
But it won't. After generations of people like you persecuting those who make more money than you, they've learned to dodge the ever higher taxes you would levy against them for the crime of being good at business.
Even if the laws were passed to raise taxes on the 1%, they'd find a loophole.
I'm not saying we should or should not raise taxes on 1%'ers. But we should keep in mind that there is no free lunch. What we do has unintended consequences that we should keep in mind.
Money is supposed to be fungible, and the free market is supposed to allocate capital optimally. In any other case where we taxed one kind of thing at 30% and another at 15%, people would be crying foul about this crazy taxation regime that was distorting the market.
If you start taxing investments more, it's not like the rich will suddenly stop investing. You should hear Warren Buffet talk about this. No rich person is going to go like "Well... I could make money on this, but not going to do it because the state is going to tax it..." This is something that happens only in abstract economic models, not in the real world.
In fact, if you raise taxes rich people may be incentivized to work harder to find better investments with higher gains.
Utter bullshit, which has been reflected in actual US investment history since the Capital Strike of 1937. The perception of fairness goes both ways, you know.
Not to mention reflected in my father's (and others') economic behavior as the Reagan tax rate cuts took effect, and they put much less effort into sheltering income from very high tax rates (generally, something with a net vector sum of zero) and focused more on just, you know, running good businesses.
Then there's the minor detail that a tax increase can turn a profitable investment into a loss. The constant chaos of changing tax rates, or at least serious proposals to do so, also changes the nature of investments, for example favoring quick gains before the government might ruin it.
And if Hillary Clinton was serious about any of this, she would return donations from all of these people.
I would be in favor of this proposal if it could be demonstrated that college costs could actually stay somewhat stable (i.e. not increase faster than inflation) for even a relatively short period of time. Otherwise the cost of this could spiral out of control in short order.
How does one separate the politics from the rest?
Raising tax is one part of the people getting what they need. The other questions that are just as important are how to provide services as cost effectively as possible and is it worth the loss of investment in the economy. Also maybe is existing investment channeled effectively by the existing tax structures.
But the reality is capital flees whenever a country tries to impose higher taxes.
The solution is a global taxing regime - something that Thomas Picketty advocated.
Taxes fundamentally is an business expense - and likes all business expenses companies will try to reduce it as much as they can - naturally due to the freedom of the market - companies that do not have to pay higher taxes will produce cheaper goods while maintaining quality and destroying their competition.
Its a prisoner's dilemma problem. With countries playing off each other to welcome businesses in their countries - the UK, US, etc.
The solution is for all countries to co-operate and create a global system to keep a close eye on the flow of capital. A change in america might actually lead to it, since america is good at bullying other countries to get its way.
Btw the same thing happened with China - its not that the Chinese are somehow inherently more capable - its just that they did not have the same level of obligation to their workers - health, pension, etc - as industrialized nations.
This is why its important to create a even and common playing field before talking about the "magic of the free market".
I see paying a high taxes as a privilege since I still get to keep much more then less fortunate, less talented, or lazier people. I say this as someone who is living in Europe, where I'm paying almost 50% of my income to taxes.
But it also really bothers me that it's just so arbitrary. I can't imagine the arrogance necessary to think that you know how much to tax a certain segment of society relative to another.
"Fairly" is begging the question.
"Discriminatory" isn't necessarily a bad thing, and needs to be further refined if it's going to be meaningful. Progressive taxation (in isolation) does not discriminate between people. It discriminates between dollars. My first dollar is taxed the same as your first dollar; my ten thousandth dollar is taxed the same as your ten thousandth dollar; my millionth dollar is taxed the same as your millionth dollar. It is true that my millionth dollar is taxed differently from my first dollar, and that is discrimination between dollars, but generally people don't hold "equal treatment of dollars" as a moral principle.
"I can't imagine the arrogance necessary to think that you know how much to tax a certain segment of society relative to another."
Roughly the same arrogance necessary to think you know how much to tax in the first place, or really any other decision making on that level.
The part that you're missing is that progressive tax is still regressive in terms of marginal utility of the taxed income. People look at percentages or dollar amounts when what we should look at is the utility of that dollar.
If I am paid $50,000 a year, let's say I get taxed around 30% (including the plethora of other gas/sales/alcohol/property/SS/medicare taxes I pay). That means I lose $15,000 a year. After rent, food, clothing, and life's other expenses, I have maybe $10,000 a year in disposable income.
Think about that - I get taxed more than I have available in disposable income. That extra $15,000 I pay is a SHIT LOAD to me. It means drastically different lifestyle changes. It means living somewhere clean and safe versus living in a crime ridden shithole. Paying for kid's college in only a few years. Being able to actually afford private health insurance. The value of $15,000 to me is thousands of times more valuable than $10,000,000 a year to someone making $20,000,000 a year. That's one less mega yacht, per year, for someone like that. You are not taking much of value from them when they already have everything.
And despite that, you still think it's unfair? Quit getting caught up in dollars if you want to discuss fairness. Look at the value of what you take from people.
Just tell the 1% that if they want the government to provide them security from the marauding masses (we're getting there), they need to pay up their fair share.
Unless, of course, you think more government spending is better than more private economic activity. As an extreme on what this sort of thing can lead to, see the 1937 capital strike (https://en.wikipedia.org/wiki/Capital_strike). At the other end, see the economic growth from JFK's and Reagan's tax rate cuts.
As for fair share, 1/3 is not enough? Its not like they're getting proportionate protection from the "marauding masses" for the money they're paying; in fact, the powers that be seem to have no problems with SEIU etc. direct action against their homes. Self-help is where that's at, which might have something to do with the unprecedented US civilian purchases of guns and ammo, continuing to this day (and with Hillary! now calling for mass confiscations...).
1/3 would probably be enough, but they're paying ~1/5.
Now, if you want to talk about corporate taxes, that's a somewhat different story. Corporations owe their existence to the State (whether they should exist or not is a separate question) and since they derive benefits from the special status granted to them by the State, I can see a reasoned argument that they should pay for that special status. Of course there are potential, negative, unintended consequences to raising corporate taxes, but the concept is more palatable than the individual income tax (which needs to be completely eliminated).
If you really are an island with no interaction with the outside world, fair enough. But then you have other problems.
That's irrelevant. It's robbery because your agency, your ability to choose is being taken from you. As a thought experiment, ask yourself this:
What if you were on your way to a local orphanage to give your last $100 to the orphanage, and halfway there, a robber with a gun steps from an alleyway, puts a gun in your face, and demands your money... then, after he gives it to you, he proceeds to the same orphanage and hands the money to them.
Would you still say you were robbed? The same end was achieved, so you really weren't, right? But yet, almost everybody will intuitively find something wrong about this scenario. That "wrongness" is the issue.
In this analogy, you are the roommate who stopped paying rent, won't leave and keeps ranting about Hayek. There is no man with a gun.
No I'm not. No matter what I do, the government will try to tax any income I earn. By and large, they don't recognize any attempt to simply "drop out". And that's especially true if one remains within the "lines drawn on a map and labeled as the United States". But why should lines drawn on a map by dead men affect my rights? By what standard can we say that the dead have the right to bind the living, or the not-even-born-yet?
No, this "leave society" thing is a complete red-herring and has nothing to do with the discussion at hand.
In this analogy, you are the roommate who stopped paying rent, won't leave and keeps ranting about Hayek. There is no man with a gun.
You can't "stop paying rent" because of the "man with the gun"! Or do you not think that if you stop paying "your" taxes the IRS won't eventually send "men with guns" (police) to arrest you?
Almost any opportunity for an income in the US exists because of the society its tax dollars prop up. To reap the benefits of society and not pay into it despite the available avenues of contribution would be leeching.
> By and large, they don't recognize any attempt to simply "drop out". And that's especially true if one remains within the "lines drawn on a map and labeled as the United States".
Look harder. People drop out all the time. There are communities of people like that, not paying taxes, living "off the land" (squatting, growing some food and relying on society for everything else) all over the US.
The government can't tax what isn't earned, recorded or under your name.
>You can't "stop paying rent" because of the "man with the gun"! Or do you not think that if you stop paying "your" taxes the IRS won't eventually send "men with guns" (police) to arrest you?
They'll eventually garnish your wages, freeze your funds, file a tax lien and slew of other inconvenient things after giving you fair warning and opportunity to pay back taxes. It takes deliberate fraud or willful evasion to end up behind bars. The only men with guns you will encounter will be the bailiffs in tax court.
Please leave the hyperbole where it belongs. There is no man with a gun forcing you to pay taxes.
Property is a fiction made reality by government. Society agrees to let individuals have exclusive access to particular resources based on a system of rules. One of those rules is that people pay taxes. It is not "theft", because it's part of the property system. I could just as well insist the car in your drive is "mine" and call it "theft" when you try to drive it.
Presumably you have absolutely no issue with the government putting guns in other people's faces to stop them using "your" stuff. So don't complain when they try to stop you hoarding "their" stuff.
If you would prefer a different set of rules, then you're free to try and enforce them yourself.
That's close, but you're missing an essential point. To the extent that we can speak about "society" in an general sense, it would be more accurate to say that "society agrees to help you defend your property rights if you play by their rules". That doesn't mean that property is a fiction that requires government or society. And by the same token, there's no reason you couldn't construct a system where everybody helps everybody else defend their property simply in terms of "mutual aid". Taxation is not an inherent property of all systems for defending property. In fact, I will continue to argue that taxation is inherently inimical to the idea of property.
Are there penalties for not providing this "mutual aid"? If so, you're just describing a highly localised tax system.
EDIT: And if not, I think you might find your system struggles in the presence of noticeable inequality. (Why should we protect the rich guy's stuff?)
> Taxation is not an inherent property of all systems for defending property.
Of course not, but it is a feature of pretty much all existing such systems.
>In fact, I will continue to argue that taxation is inherently inimical to the idea of property.
I believe a property system will inevitably trend towards inequality over time, because those with more money have more power, and thus greater opportunity to earn more money. Inequality makes the system less efficient at utility generation, because it diverts production towards more marginal utility improvements. In order to avoid this, you need some system of wealth redistribution.
Just such a system existed in the English common law, and from what I've read in the early days of America: https://en.wikipedia.org/wiki/Hue_and_cry