How Plutocrats Cripple the IRS: You pay more because elites pay less | Hacker News Reader

How Plutocrats Cripple the IRS: You pay more because elites pay less

prospect.org

109 pointsnkurz139 comments

I find it surprising that so many HN users on this thread are rushing to the comments to make the point that the rich do, in fact, pay more than "the rest of us."

Did you not hear about the Panama papers? It should be quite evident that if you are wealthy enough, you can use creative loopholes to pay very little tax. It's also very well known that many big corporations use offshore accounts to pay little/no taxes.

No, I'm not going to cite sources. If you are so living under a rock that you don't know this is a real problem, a source isn't going to help you -- you're just going to start arguing about sources instead of the real, actual issue that should be fucking obvious.

Generally the problem is not that your fellow HN users are living under a rock; it's more that getting good evidence about the problem is hard.

Even the super rich that don't delve in grey area loopholes do pretty well. Warren Buffet explaining the issue: http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-...

Exactly. Percentage tax rates don't mean squat when you're hiding all your income.

Percentages mean almost nothing sometimes. I was running my own business for a while and making many hundreds of thousands - and spending $30,000 in a day didn't mean anything to me. So paying 20% vs 30% vs 50% wouldn't have made any difference in my daily life.

Percentages also don't mean much when you split "rich" vs "middle-class" based on some arbitrary top x% of income. The real difference in the US is between the landed gentry (people who live off their investments) and people who are paid for their labor. That is where many people (like Warren Buffet) see a fundamental unfairness, especially in cases where people who are paid for their labor manage to get it taxed at investment income levels (e.g. carried interest).

It's typical middle-class status quo defending logic. Plantation owners paid more taxes than slaves, and lords paid more taxes than serfs. Lazy slaves.

Are you new here? HN has always been very heavy on the libertarian point of view. Many people here think that John Galt is not getting a fair shake.

You don't pay more. There is an important fact that rarely gets mentioned in the taxation debate (by either side): the U.S. tax system is much more progressive than in similar developed countries: https://www.washingtonpost.com/news/wonk/wp/2013/04/05/ameri.... The top 10% in the U.S. carry much more of the tax burden relative to their share of the income (33.5% of income, but 45% of taxes). In Germany, for example, the top 10% earn 29% of income and pay 31% of taxes.

Middle class people in the United States pay very low taxes. I met a young woman from Germany, who has a typical entry-level desk job at a logistics company. Her tax bill was about 40%, which is level only high-income people here in the U.S. would pay. A typical middle class family eligible for the various deductions pays about 25% in state and federal taxes.

My two cents: A welfare state requires buy in from the population. You can't have a successful one just taxing the rich heavily to pay for middle class benefits like college and expensive old-age care. You need to flatten the tax curve and raise taxes on everyone to pay for services you expect everyone to use. People need to feel like they are getting something from the system, not just being forced to fund it.

You're kind of missing the point. I'm middle class and I'm well aware that compared to Germany or Scandanavian countries, I pay lower taxes. However, the issue is whether you "pay more" than the wealthy people in the US.

So no, I don't "pay more" than people living in a completely different country (how is this even a comparison) but I do pay more, on a percentage basis, than the highest earners in the actual country I live in, which is complete lunacy.

Rayiner's stats explicitly show that the wealthy pay more, on a percentage basis, than the non-wealthy. If the wealthy pay 45% of taxes while earning only 33.5% of income (ratio = 1.34), then simple arithmetic shows that the non-wealthy pay 55% of taxes while earning 66.5% of income (ratio = 0.82).

So no, you don't pay more on a percentage basis. You pay a lot less.

Rayiner's post has numbers that are made up. Here are actual numbers from University of California economist Emmanuel Saez:

https://eml.berkeley.edu/~saez/lecture_saez_chicago14.pdf

The top 10% have 50% of the income, and the top 1% have 22% of it.

Rayiners numbers come directly from income tax returns, which you'd know if you read his source. Where do Saez' numbers come from?

He's certainly doing something nonstandard. From his slides: Caveats: Income concept used is narrower than National Income and focus is solely on pre-tax, pre-transfer income

I'm guessing Rayiner's numbers include taxable wealth transfers while Saez excludes them, but I'm not really sure.

The article conveniently decides to draw the line at 10%, which is well below where income inequality really starts to hockey-stick. People in the 90th percentile have not seen their share of incomes grow in the last 30 years. Indeed, even the 99th percentile hasn't done all that amazing of a job increasing their income share. It is the top 10% of top 1% who have more than doubled their share in the last 30 years.

Actually drawing the line at 10% undermines their case - it's an extremely inconvenient place to draw the line. The US tax system is even more progressive for high earners.

Top 0.1% pay an effective tax rate of 35.7%. The 10th-5th percentile pay 20.3%. The bottom 10% pay 3.1%.

http://www.pgpf.org/budget-basics/how-much-do-americans-pay-...

Based on the graphs herein, the convenient place to draw the graph would have been at about 1%.

I don't know if you intentionally sabotage your own argument by posting links to those sites, or if you really aren't aware of the self-interest behind their reports.

I don't know what argument you are trying to make. You dislike the Brookings Institute (the original source of those #s), therefore the numbers I cited are wrong?

These numbers are picked over to distort the conclusion. They include in total tax burden the estate tax but not the sales tax. That's funny in a "haha I dropped my monocle in my brandy again" sort of way but not in a way that's useful for evaluating tax policy.

Unless you believe the poor are paying 32.6% of their income in sales taxes it won't change the conclusion. (Google suggests the highest sales tax is 9.45% in TN.)

You must be so happy to have discovered that the USA really is as progressive as you always wanted it to be.

Sales tax? I'm not from US but what sales taxes would individuals, particularly poor, be paying? Typically sales taxes are on businesses (where I live, we have value added tax, which is a further development of that, designed to distort the value chains less).

In the US, "sales tax" refers to an additional percentage charge added to the retail prices of goods and services. It's a terrible system, but individuals (poor or otherwise) might pay it for just about everything they buy: clothing, restaurant food, tools, repair services. It's collected by the retailer at the time of sale, who then reports it and passes the amount collected on to the state. Sometimes cities and counties have additional taxes, normally smaller than the state does. There is no federal sales tax.

Depending on locality, combined state and local sales taxes are typically in the 7-10% range, and unlike a VAT are only charged by a retailer who sells to the final user of the product. Business that resell products are exempt (after filling out the proper forms) until they sell to the final consumer. Also unlike a VAT, they are almost always in addition to the posted price --- if an item is marked as $5, you will be charged $5.54 (or some such). Despite the exemptions, sales taxes are generally end up being "regressive", in that the poor tend to pay a greater percentage of their income as sales tax than the rich.

Each state has it's own convoluted laws for what is taxed and what is not. Frequently, "essentials" are untaxed, while most other items are taxed at the same rate, but no two states agree on what is considered an essential. One state might never charge for food items, another might charge only for ready-to-eat food, and another only for food consumed on premises (unless it's cold, a breakfast beverage, or above a certain size). It's a mess, getting it right as a small retailer can be difficult, but the penalties for failing charge and collect the correct tax can be strict.

> Rayiners numbers come directly from income tax returns

Yes, which is a ridiculous argument in a discussion of people lying on their tax returns.

Indeed. The entire argument rests on what you define as income. If you work for a living that's indisputably income and you are going to pay a lot of taxes on it, especially if you are a moderately prosperous professional making something like $200k/year. On the other hand of you are Mitt Romney you don't have "income" you just have fungible assets that mysteriously increase in value and on which you are not taxed.

Coming from income tax returns is a problem, since the income on income tax forms is distorted by tax policy, and the tax on income tax forms is just the income tax, not total taxation (or even total federal taxation), so both the income and, even moreso, the tax shares derived from that source are inaccurate to make claims about the overall progressivity of taxation in the US compared to other countries.

> The top 10% have 50% of the income, and the top 1% have 22% of it.

So? That's about income inequality. That's not the discussion here. The relevant question is: do that 10% or 1% pay a lower, higher, or equal effective tax rate?

If we're discussing the ratio of income to taxes, the number on the numerator seems relevant.

The divide is between those who live off investments and those who work. So since capital gains are taxed at a lower rate than labor, there is some tax rate bias against labored work. Although it is progressive, the capital requirements for entry are high so it is unlikely for low earners be able to benefit from this.

from capital gains wiki: The tax rate on long-term gains was reduced in 1997 via the Taxpayer Relief Act of 1997 from 28% to 20% and again in 2003, via the Jobs and Growth Tax Relief Reconciliation Act of 2003, from 20% to 15% for individuals whose highest tax bracket is 15% or more, or from 10% to 5% for individuals in the lowest two income tax brackets

Those numbers come from an OECD report.

You are also ignoring WEALTH and capital growth that does not generate income.

For example, wealthy people can do 1031 property exchanges - which is non taxable way to sell and buy a replacement property.

A wealthy person can construct corporations that generate lots of tax "losses". For example, Amazon does not make very little in terms of taxable profit. If Jeff Bezos wants to buy a house, he can use his Amazon shares as collateral against a loan that Amazon makes to Jeff to buy the house. Completely legal so long as it is disclosed.

The wealthy make things that are after tax expenses to you and I - a before tax business deduction. Lunch? business deduction. Fancy car? Lease it for a business deduction - better yet have the company lease it. House? Host board meetings and company wine and cheese events in the house - leasing the house to the company at a very generous cost.

No middle class person in the United States "pays more" than an upper class person, unless that person is actually evading taxes and destined for prison. It is simply mathematically impossible due to the AMT.

The ONLY caveat to this long-term capital gains, which makes a wealthy hedge fund manager who is tax efficient about his investment strategy pay approximately the same or a few percentage points less than an upper middle class childless couple that rents. (And there the reasoning is about double taxation and the macroeconomic effects that would have.)

Some on either side of the aisle may spin a yarn about the rich not paying their share, but as always I suggest ignoring the rhetoric, looking at the facts, and doing the math yourself.

I think the LTCG issue is more common in VC and PE. That's not even touching QSBS. I probably disagree with the preferential taxation given to these categories, but I'm definitely willing to change my mind.

Hedge fund managers will rarely pay LTCG on their investments. It's not uncommon for all of their investment gains to be counted as ordinary income. Note that I didn't say realized gains so they'll pay ordinary income tax on gains that haven't even been realized.

You're forgetting Social Security, which is a regressive tax system as it is not taxed on income over ~$118k. You're also forgetting things like Medicare. Both SS and Medicare carry an employer contributed tax, which is a hidden tax on the employee (employers just adjust wages to accommodate the extra taxation).

Finally, within the context of comparison to other nation's benefits structures, you're forgetting health care expenses which are included in most western tax systems.

Health care is also regressive in that it comprises a greater proportion of expense for lower income earners and carries a 'hidden cost' in the form of employer supplemental payments. It's perfectly valid to include these costs when comparing to other nations or to alternative tax & benefits proposals which include expanded health care.

By including or excluding varying costs and expenses, the cost to earnings curves bend dramatically....even with the AMT. The fact is, the answer to this question is not a single acronym. And the discussion can't even legitimately begin until some ground truth on what services and benefits are and/or should be included.

OK, let's look at the facts of carried interest, which is taxed as capital gains, and do the math on that. A hedge fund manager is paid for his labor by his investors - it is quite literally a transfer of money from investors to the manager for a job performed. Why should that labor be only taxaed at 15% when his w2 secretary is taxed at a much greater rate.

The discussion about "rich vs middle class" misses the point if, for example, you only look at the top 10%. The issue is really about the differences between earned and unearned income, and that is where you get this degree of what people believe is fundamentally unfair, like Warren Buffet paying a lower effective tax rate than anyone else that works in his office.

Mitt Romney pays 14% tax. I pay about double his percent rate, on magnitudes less money. The math is simple. Rich people in America don't have to pay their fair share. The system is rigged against the middle class.

Yeah, I'm getting the feeling that the guy who responded to my post thought I meant "more" as in "more dollars". I did not. I meant that I make 1/100th of people who pay 50% of the tax rate I do. I know that they pay more money total, but them having a LOWER tax rate is insane.

I don't agree with you on two accounts:

1. What Germany does is completely irrelevant to the question of whether or not the US middle class is paying more because US plutocrats are cleverly shielding some of their gains from taxation.

2. If you want welfare state acceptance by all remove means testing and have it available to all. That's how it's done in Europe. Often times the public service is superior to anything the private sector can offer so even the rich support it.

> US plutocrats are cleverly shielding some of their gains from taxation

But even after that, they still end up paying a greater proportion of taxes collected than in other countries. That is rayiner's point.

Which only goes to show that the rich in America are far richer than their counterparts in other well-developed countries. In terms of inequality, American ratios are closer to those found in straight-up kleptocracies. When people talk about the bananafication of the republic, this is what they mean.

Do your figures include payroll taxes? Since the typical middle class family pays something like 15% just for that, it seems unlikely that their total tax rate is a mere 25%.

Yes. Just plug numbers into a paycheck calculator: http://www.paycheckcity.com/calculator/salary/result. Say you make $50k with two dependents (a kid and a wife who doesn't work). Your net pay is over $40k in Virginia. Account for the 6% employer-side payroll contribution, and you're at just under 25% tax rate. If you're eligible for typical middle class deductions like the mortgage interest deduction you're well below 25%.

The 40% pay for healthcare, though.

Did you read the article? The article refers to the "The top 0.1 percent" who are "average income of $9.44 million". The article specifically refers to the top 0.1 percent. Why? because in theory they should pay taxes like the top 10 percent, but they don't. Many of top "0.1 percent" use creative tax accounting to avoid paying their share.

[citation needed]

http://www.taxjusticeblog.org/archive/2016/01/obama_policies...

http://ctj.org/ctjreports/who_pays_how_much.php

Your source doesn't support your claim - it doesn't compare effective tax rates of the top 400 taxpayers at all.

A quick google search finds this graph which refutes your claim:

http://www.pgpf.org/sites/default/files/2014_tax_explainer_c...

http://www.pgpf.org/budget-basics/how-much-do-americans-pay-...

Note also that this source includes corporate, estate and payroll taxes as well as income taxes, while your source looks only at income taxes. The top 0.1% pay 35.7% effective tax rate, the top 10% to the top 5% pay 20.3%, and the bottom 10% pay 3.1%.

Once again, the claim isn't about the tax rate, the claim is about the top 0.1% using creative accounting to dodge their tax rate. The sources you provide does not refute that. The parent article is very specific about making the claim that the top 0.1% are dodging their tax rate and getting away with it.

That you can use "creative tax accounting" to avoid paying your share hasn't been true for decades due to the AMT. The onus is really on you to explain what you mean, or cite a source here.

How much is Jeff Bezos's share of Amazon worth? And how much income tax has he paid on it, or will ever pay on it? AMT doesn't touch that, and never will.

If Jeff Bezos never sells, where's the income?

Loans secured using his shares in the company. He can shift the realization of the capital gains to far, far in the future -- see strategy #1: http://www.bloomberg.com/news/articles/2012-04-17/how-to-pay...

Compare the AMT with social security and the top really pay nex to noting in taxes. Donate to charity and you still need to pay every single cent of Soxial Security income tax. Only tax break is to just make more money when it suddenly stops.

You get social security back.

No you don't. It has built in welfare so for example a married couple gets more from Social Security than a single person. Blind from birth? You to can get a social security check.

Remember, there was no investing. Year 0 people got welfare without paying anything in and now wealthy people get to dog a welfare tax by saying it's not our problem.

That's simply not true. The AMT, the extra medicare tax, and the NIIT taxes hit the 1% pretty hard, but when you make an absolute ton of money primarily through corporate ownership, you have a lot more avoidance mechanisms. Consider the famed Mitt Romney IRA (he's not alone - there are thousands of these): http://www.bloomberg.com/news/articles/2014-09-17/how-to-joi... leading to an effective tax rate of sub-14%: http://www.factcheck.org/2012/08/does-romney-pay-a-lower-rat...

There's a curve - up to perhaps $0.5-1m / year, it's not really feasible for most people to structure hyper-cleverly to avoid taxes. But after that, you can start to afford the extra lawyers and accountants (and corporate structures) to cut the rate back down by shifting everything to LTCG and having the corporate side of things cover little things like your private plane. :)

It's not really about being able to "afford lawyers and accountants." It's about our system preferentially taxing investment income on purpose. Some of those lawyers and accounts themselves make millions a year and pay 40%+ in income taxes, and there is little they can do to reduce that number because it's labor income.

You might be surprised - for example, a very-well-compensated trial lawyer can avoid substantial amounts of tax (and convert it into LTCG) by creating an offshore-registered captive insurance company: http://www.jdsupra.com/legalnews/tax-reduction-and-deferral-...

It's expensive to set up & maintain one of those, so it's not worthwhile in the sub-$1m/year regime.

More: http://www.barthattorneys.com/Publications/Captive-Insurance...

"As part of an asset protection plan, captive insurance helps shield your business while working to reduce your insurance costs. It can even help you save up to $1.2 million a year free of income tax. "

(I love the "oh, and by the way, there might be this other little benefit, though we know you're just doing it to reduce insurance costs" tone of that one. :)

> Some of those lawyers and accounts themselves make millions a year and pay 40%+ in income taxes, and there is little they can do to reduce that number because it's labor income.

Lawyers and accountants making that much are generally not doing it all (or even mostly) as what is, for tax purposes, labor income; they are doing it by owning (or co-owning) a firm through which the work is done, taking a much smaller salary as labor income, with the rest being the firms income which, if extracted, is extracted as tax-favored capital income (depending on the particular form of firm and method by which the value is extracted, this could be taxable dividends or LTCG, which are both tax-favored but have different exact tax treatment.)

Add state, local, city and sales taxes and many people have an effective tax rate of 40%-65%. Yet it still doesn't buy an adequate social safety net.

The U.S. middle class pay fairly low taxes but they also get a fairly low level of government services. The cradle to grave system in a country like Germany simply doesn't exist here.

It isn't really our total spending that's out of line, between local, state, and federal government expenditures are comparable, if on the low side, to Western Europe rather it's: 1) we spend wildly disproportionate portions of our budget and economy on the military and 2) we spend a lot more on health and education with less comprehensive coverage and without getting unequivocally better results where we do cover.

Finally, within the middle class, which can be a very broad term, there are big differences. Our tax codes are riddled with distortions designed to further this or that policy goal, as well as varying by geographical region because of our federal system. Two taxpayers with very similar total income and assets can end up paying very different amounts.

Don't forget about 12.4% social security and 2.9% Medicare payroll taxes.

Seems to me that your argument requires measuring the income of high earners, then measuring the taxes they pay.

The behavior discussed involves parties lying about the former number and concealing income, thus making your calculation utterly meaningless is this particular context.

Presumably that detail didn't escape you, hence making this line of argument disingenuous.

This article isn't about what percentage of known income is taxed, it's about enforcement resources for finding concealed or obfuscated income.

Ok, on the one hand, that's a very fair point. The middle class needs to pay taxes too, and a large social state is often funded partially with a broad-based VAT as well as income tax.

On the other hand, you're ignoring an important piece of data: what's the pre-tax distribution of income, both among individuals and between individuals versus companies, in Germany versus the United States? As far as I'm aware, Germany collects more corporate taxes (not sure about the pre-tax income distribution between people and companies there) for the size of its corporate income base, and Germany's pre-tax income inequality is slightly lower (but not by much) than that of the USA.

So, as I understand it, Germany can tax the middle class because the middle class has a bit more money than in the USA, while Germany also taxes companies with both corporate tax and the company portion of VAT (it's mostly passed on to the consumer, but also ensures that some tax is collected on corporate revenues) at effective rates heavier than those of the USA.

To sum up: a social state requires a broad tax base rather than just soaking a tiny population, but the desire to raise a large tax revenue by broadening the tax base has to be balanced against the need to tax people who actually have money to pay. If your income is massively concentrated among a few recipients, then they shouldn't be so surprised that they pay a correspondingly massive share of taxes.

According to http://taxfoundation.org/article/sources-government-revenue-... in 2011 9.4% of the US federal budget came from corporate taxes. In Germany that number was 4.7%.

Ignoring SS is silly. Add it back in and the numbers are dramaticly different.

So, instead, I have to pay "taxes" to plutocrats as insurance premiums. Yeah, that makes sense.

Relevant:

"Chutzpah, according to the traditional definition, is when you murder your mother and father, then plead for mercy from the court on the grounds that you’re an orphan.Something like that is now happening in the tax debate."

http://krugman.blogs.nytimes.com/2011/05/07/federal-tax-chut...

Since 1962, and especially since 1982, the USA tax system has relentlessly reduced the taxes that the rich have to pay. The point is, if you change the tax system, so that all the money goes to the rich, then even with the lower taxes, the rich will end up paying a lot of what taxes are collected, because they have all the money. And that is basically what is happened. But now the rich like to claim "Hey, we are paying 70% of all the taxes!" But of course, their share of all wealth has expanded dramatically, so even with lower taxes, they still end up paying quite a bit.

But of course, all of these taxes are voluntary. They could voluntarily give up their wealth, and donate all of it to charity, and then they would be poor, and they would not have to pay taxes. That they choose not to do this suggests that they mind the taxes less than they would mind being poor.

That's not what the word "voluntary" actually means.

What part of voluntarily giving up their wealth defies the definition of "voluntary?"

"all of these taxes are voluntary"

Is the place where the word in contention here. Just like if I point a gun at your hand and tell you that receiving the bullet is "voluntary" because you can always voluntarily cut off your hand.

That being said, I agree with the concept of taxes, but let's not kid ourselves and call them voluntary.

If you make the choice to interact with the US' economy you implicty agree to give the US a cut for its role in the creation and tending of that economy.

As a U.S. citizen, if I make the choice not to interact with the U.S. economy and move somewhere outside the U.S., I still have to give the government their cut. Only way out is to relinquish U.S. citizenship. No other developed country requires this.

So relinquish your citizenship.

Aside from the fact that there's a hefty fee for that, the US government will not let you relinquish citizenship solely for taxation reasons.

You could make up a reason, but that's stretching even your definition of "voluntary" under the law.

In reality, the US rich pay a higher proportion of taxes relative to income earned than any other OECD country.

http://taxfoundation.org/blog/no-country-leans-upper-income-...

It's true that poorer folks in the US are unproductive and contribute very little to society via market mechanisms (most don't even work). They are in fact a net drain after accounting for taxes and transfers.

I fail to see how the rich continuing to be productive and paying far more than their fair share is "chutzpah".

I'm not the most well versed but it doesn't look like that says anything about "income" that is derived from capital gains. For instance Warren Buffet has remarked that his effective tax rate is actually around 17.4%.

Capital gains is personal income. So yes, it almost certainly does.

Additionally, that figure (much like Warren Buffer) understates what the rich pay - first the corporation they own pays taxes, then they pay taxes again when the profit is distributed to shareholders.

It's a misrepresentation equivalent to claiming that middle class folks don't pay the employer portion of payroll taxes.

>It's true that poorer folks in the US are unproductive and contribute very little to society via market mechanisms (most don't even work)

[citation needed]

http://www.census.gov/content/dam/Census/library/publication...

See table 3. 60% of poor adults (age 18-64) did not work even a single week during the year. 12% worked full time year round.

"You pay more taxes because somebody else pays less" is fundamentally misleading. If the government had to balance its income and expenses, then yes, one person paying less taxes would imply somebody else had to pay more taxes.

But that is not how it works. Not for a government that can borrow at practically zero cost.

The reality is that when somebody else doesn't pay their taxes, it has no bearing on how much you pay. It just causes the treasury to issue incrementally more bonds.

This may seem like a minor point, but it's important in understanding what taxes are really for in a country that issues its own reserve currency: they support the value of the currency by ensuring everybody needs to use it to pay their taxes.

In the short term, yes, but long term, deficits will put an upward pressure on tax revenue, so you'll end up paying more in the end (than you would have if other people paid more taxes).

Only if you are borrowing the money to fund the deficit. Public money (as opposed to bank money) is a legitimate, but ignored, alternative. See https://en.wikipedia.org/wiki/Modern_Monetary_Theory

That would cause inflation, and would cause markets to raise interest rates to account for this one they knew about the policy. Modern monetary theory is very non mainstream, flawed economics. It has a Wikipedia page, but very very few academic proponents. Check out https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory#Criti... if you're interested in reading more criticism of MMT

Mainstream (neoliberal/monetarist) economics has abundant academic proponents and is demonstrably flawed, so I am not sure counting the number of academic proponents is much of an indicator of anything other than what is academically fashionable.

In a similarly patronising way to your comment, I suggest checking out http://bilbo.economicoutlook.net/blog/ if you are interested in reading more criticism of neoliberalism and learning more about MMT than is presented on the wikipedia page.

You keep making assertions, but my original point in posting that reference, is that if your style of argumentation is to make assertions, and then pass the reader off to another source to verify your assertions, then all other things being equal, the source with the most academic backing is going to win. Either you directly argue the point, or you argue by authority. If you argue by authority, academia has the most authority.

> But that is not how it works. Not for a government that can borrow at practically zero cost.

"practically" zero cost is far different from "zero cost". If someone pays less taxes and the government has to issue bonds someone has to buy the bonds, so the government can get money. And who buys the bonds? Those people who have money. Who are those people? Probably those who didn't pay much tax, so they still have much money. And no one buys bonds if he doesn't get something out of it. Even low interests ("practically" zero) are far more than no interest.

Unless the interest on the bonds is lower than inflation.

Not really... budget deficit as a percentage of GDP fluctuates in a century's time between -4% and +4% or so, mostly on the bottom end of the spectrum of course, and with dips down much further in rare economic crises or say a WW2.

So for all intents and purposes, budget deficit rarely dips below 4%, meaning there's a cap on spending and just borrowing printed money is some infinite pool of money that's drawn from to compensate for lower taxes. No, there's a cap, and once it's reached, you either cut spending or raise taxes somewhere else.

So the notion that someone else pays more taxes (or, receives a lower share of the benefits of all the programs that taxes funds), when you pay less, is not fundamentally misleading. It's mostly true, because issuing bonds is a commonplace phenomenon but it's limited. And if it's not limited to a reasonable extent, you'll turn into Zimbabwe.

"Plutocrats, the richest 0.1 percent of Americans, get the most benefit from a weakened IRS. Because they have the money, the lawyers, the lobbyists, the accountants, and the secret campaign funds, they are able to ensure that the IRS won’t have the resources to effectively collect the money they owe to it. "

Since when is generalizing an entire group acceptable?

Also,

How do you explain this?

http://money.cnn.com/2013/03/12/news/economy/rich-taxes/

In 2013:

top 10% paid over 70% of total federal taxes 47% of all Americans pretty much paid nothing in terms of federal taxes

This also doesn't include the multitude of other taxes the rich pay (property taxes, use taxes, gas tax) and the fact that they employ many people that also pay taxes into the system (indirectly paying more into the system).

There are definitely some people using off-shore accounts, but it's not nearly as bleak as this article would like us to believe.

The US also has one of the highest corporate tax rate in the world.

If people are taking the risk and leaving the country with their money, we may need to take a look at our existing tax laws and figure out why they are taking the risk.

Just remember that this is an election year so articles blaming scapegoats come from both sides.

Conservatives blaming immigrants and Liberals blaming the rich.

You are exactly right.

The difference is, immigrants didn't cause any economic depressions.

Wait, is this the same forum that complains about HB1 abuse?

And who disproportionately benefits from that arrangement? Who makes it happen? It's not the immigrants.

I often find myself an outlier in this forum.

What generalisation? The comment is they gain the most, and that they have the ability to exploit it. That's a statement of fact. You could similarly say that men are the most likely to benefit from sexism, and are positioned best ot exploit it due to the historical sexism against women. It's not saying all men are sexist, just that they are the ones likely to benefit.

The article directly talks about your 70% figure, and explains why it's misleading. I also don't get why we should care about the 'fairness' of it. We don't allow people to do anything they want for the benefit of society - that can include not allowing people to hoard money if we want.

As to your latter points, just because they pay a lot doesn't mean they pay enough, and employing people isn't a 'gift' to society - it's something they do to gain benefit themselves. Yes, it's a behaviour we should encourage, but it isn't somehow equivalent to paying tax.

> just because they pay a lot doesn't mean they pay enough

So how do we fairly determine what is 'enough'?

More.

From "them."

Enough that the country isn't constantly running massive deficits, and can afford to invest properly in infrastructure and other needed areas. Which we're clearly not doing right now.

So cut costs and your problem is solved.

That is not compatible with our necessary infrastructure investments, etc.

This presupposes our existing expenses are all necessary.

Through discussions. Debates. Elections. Hooray democracy!

We've been discussing, debating, and voting about taxes and wealth distribution for hundreds of years. If the solution were so simple, wouldn't you expect the problem to be solved by now?

Well, no. This is a problem that will never be solved, because it's not a problem with a single "correct" solution.

Each new generation has to hash it out for ourselves, the kind of society we want to build. The work is never done.

So the OP says what society decides isn't fair, and you say that fairness is decided by society. It seems like there should be a less paradoxical way to reason about this.

Through debate, discussion, weighing up the pros and cons, and testing. We have tested our current set-up, and clearly it doesn't work for a large portion of society - now we alter it.

>> How do you explain this?

How do I explain the top 10% paying over 70% of total federal taxes?

I would wager a guess it has something to do with them having about 70% of the total wealth of the country.

https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite...

This. The OP's particular numbers are -obviously- meaningless without including further context.

If one person had all the money, literally, all the money, and paid any amount on it, be it one cent, or half of the money (either way leaving them with trillions, and everyone else still able to earn nothing), they'd be paying 100% of the taxes. This is an absurd hypothetical, but it demonstrates that the percentage of taxes paid by a particular group tells you nothing by itself.

You're assuming a large overlap between top 10% income and top 10% wealth. I'm not able to find great data on this, with most sources just focusing on one or the other. It seems to me though that many of the wealthiest individuals, including those drawing down retirement savings, probably have low W2 income.

This discrepancy, and people's unwillingness to intellectually engage with it, is what allows the extremely wealthy to be just fine with society demonizing high income people. Once you have stored wealth, you don't care any more because there is no wealth tax (other than property tax and inflation). Taxing high income people into oblivion is what allows the very rich to keep their club small.

Actually no, it's due to the high levels of progressivity of US income taxes relative to other nations.

http://taxfoundation.org/blog/no-country-leans-upper-income-...

> Since when is generalizing an entire group acceptable?

What other kind of generalizing is there?

The "they employ many people" is a purple cod.

You know what a huge percentage of the population does? Participates in the economy, helping other people earn economic rewards, economic rewards that are taxed. That it is advantageous for some people to employ others is not any different in that respect than the fact that people buy goods and services.

I think you'll find the terms of employment may be relevant too.

A lot of employment in the UK has moved from being a job to being a zero-hours "we only pay you if we want you for a day, but you have to be available for us to choose you every day" contract.

Most people would prefer a steady job, but when the playing field is so heavily slanted politically, that kind of job is becoming a middle class luxury.

> Since when is generalizing an entire group acceptable?

Do you know what time it is?

Customer's pay the wages and costs of business - plurocrats reap the profits.

Socially beneficial plutocrats invest in economies, risking their capital to seek reward. Money hoarded is of no value, an economy is powered by the movement of capital.

Corruption of economies by money to escape ones tax burden is antisocial and ultimately short sighted.

The wealth of nations is a functional, fair economy.

Good goverance should keep markets fair & ensure universal access to Justice.

Weak, corruptible governments are anti capitalist, distorting markets by granting monopolies, tax-fixing & denying judicial remedies to the powerless & poor.

Do you not see the discrepancy between a statement about the top 0.1% and your claims about the top 10%?

Here's a counterpoint: How I get harassed by the IRS because Americans hate rich people.

I'm earning a below-average Bay Area income, but as foreigner I have a bank account and an IRA abroad, so I get to file a 30-page paper return that costs > $1K to prepare, in which I pay taxes on foreign income I did not actually earn, and get audited every year. So remember that every $1 spent on the IRS also generates an $X amount in time and money wasted for taxpayers.

This situation is voluntary / self-inflicted - I'd suggest either getting rid of your bank account abroad, or not be a foreigner any more (i.e., leave the US).

Sure it's self inflicted. What if the IRS did this to all US citizens? Then it would still be self inflicted since they can renounce their citizenship. That's not the point.

The IRS does in fact do this to all US citizens with overseas bank accounts too.

For me this is a major deterrent for considering to work in the US. What I hear about NSA surveillance does not bother me that much. What I hear about IRS makes me want to stay away.

I am a European citizen living in the Bay Area and although I like to whine about it, paying taxes is not a big deal.

It is also getting simpler as I now have almost only US assets. I used to have some stocks vested that was awarded when I worked for the same company in the UK. The tax authorities of the two countries decided to split my earnings leaving me with more or less nothing.

Another thing most people say is that US tax gives a lot less back even though we pay about the same as in Europe. This is true, but to some degree this is instead given to you by your employer (like health care).

Yes, but that getting simpler then means having to get rid of property, bank accounts etc outside of US. Things like the puny family estate which I hold dear - high emotional but little financial value, yet large bureaucracy burden.

The worst thing in America is healthcare. Low quality coupled with the highest costs in the world.

Its enough to make me move away.

As first impressions go, the first sentence of OP is pretty bizarre; "For every dollar appropriated to the IRS the public collects more than $4 in taxes."

Missing a couple zeros there? The IRS annual budget is $11.2B and total federal revenue is about $7 trillion.... As far as meaningless stats go that's a factor of 625x, not 4x.

Talk about blowing any credibility from the start!

I think they missed the word extra after every.

Now that would be an interesting stat... So they collect $7 trillion a year, but to collect 1% more ($70B) we would have to pay them 1/4th of that, or $17.5B -- an additional 150% of their current budget.

Hardly seems worth it, aside from the satisfaction of holding all those tax cheats feet to the fire.

Well I guess it all comes down to how you feel about tax cheats.

Given the current state of US tax law it would be a far better to simplify the rules and thus making it easier for the IRS to do its job within its current budget. Everyone recognises this, but given the political constraints it appears to be impossible to do.

So, while I'm sure that the very wealthy ("plutocrats"? Really?) include some people who actively work to defraud the government, I don't think it's mostly that.

Here's the fact: If you have a net worth north of say $20 million, you're going to hire an accountant to do your taxes. Not, like, an H&R Block come down with a box of your documents accountant, a real accountant. That accountant's _job_ is to interact with an incredibly arcane tax code that includes a lot of special cases and exceptions, and come up with the lowest tax burden possible for you. Legally.

Even if you don't super care to shave another 5% off your taxes, your accountant will probably do it for you without your asking. How else would it work? Would an accountant say, "Come use me! I'll increase your tax burden!"? If at the end of the process you feel like giving away more of your wealth, then you can always choose to do that.

I want to point out another angle to this issue.

The US tax system may be okayish but renting system is way too much flawed and is giving undue advantage to the dirty-rich few (read the top 0.1%). There should be some law (e.g. ceiling on land holding act) to restrict the ownership of real estate. Some low enough ceiling on land should be there so that no one be in a position to keep on gaining ever increasing rent revenue and thus keep on putting huge burden on the rest of the society. The tax laws should be accompanied by laws that put hard limits on ownership of real estate.

Else the dirty-rich will soon "own" this entire nation for all "practical" and "important" purposes.

Please present your data on rates of home ownership in the US compared to other industrialized nations. Also, what do you think should be done to encourage home ownership beyond the current scheme of making mortgage interest deductable for primary residences?

Why compare with other nations? Don't you think the USA should show some leadership here?

>>Also, what do you think should be done to encourage home ownership beyond the current scheme of making mortgage interest deductable for primary residences?

This is a good question. First and foremost, make houses affordable. For this to happen in any meaningful manner, the excess houses/spaces owned by people/companies should be freed from their clutches. Another point is the development across the nation must be more evenly distributed across the entire nation as the population grows, this will help lessen the burden on certain areas.

Also, home ownership rate in itself doesn't speak much, what is more significant is how large (i.e. how many tens, hundreds or even thousands of houses) living space is owned by how many individuals/companies and what is the rent-income of these people/companies?

This will show that the rent seeking is already rampant in USA. See this news "The affordable units will range for $950 to $1,492 (£615 to £966), and market-rate units will start at $2,000 (£1,294). Monadnock Development is backing the project." [1].

Why these people (like the Monadnock) should be allowed to own such excessive pieces of land, which they are not using for living themselves or not using for any manufacturing activity?

No one (individual or company) should be allowed to own multiple houses or even "too big" houses/spaces for living/renting.

The dirty-rich owning even the supposedly "public" space is also already happening. See the news about Vinod Khosla [2]. Or see this news about Mark Zukerberg [3].

I understand there are various issues here (e.g. cartels building hotels, in the name of hospitality industry, and using that space to achieve some sort of rent-seeking and/or seeking some sort of leverage through excessive land ownership). But these issues can be tackled through good legislation and enforcement, without harming the interests of the large populations.

[1] http://www.dezeen.com/2015/10/21/narchitects-my-micro-ny-mod...

[2] http://www.theguardian.com/us-news/2016/feb/23/vinod-khosla-...

[3] http://www.mercurynews.com/business/ci_24285169/mark-zuckerb...

Try changing the word rich in your comment for any other group name: black, gay, jew, muslim,..., and what you wrote would be promptly labeled hate speech.

Discussions like these, among many clearly intelligent people, can sometimes get lost in the weeds. What's missing is a basic contextual foundation, without which all the wonky details in world are nearly meaningless. Why discuss AMT, Germany, and tax loopholes without first agreeing on inequality.

Most would agree that in a capitalist system there MUST be some inequality to provide incentive; extreme inequality is unsustainable; an economy (and society) is at it's best when inequality is low; and progressive earnings taxation is in fact the only proven and viable solution to address extreme inequality.

I rarely see this foundation laid here or in "the media". We can bitch and moan about the 0.1%ers and the tax code they've written for us, and it's certainly entertaining. But let's try to agree generally on where we want to go before discussing how to get there and who's going to drive.

In this article, I like that they talk about the plutocrats being the "0.1%" instead of the more common "1%".

The 1% is NOT plutocrats; they are lawyers, doctors, engineers, that pay high sums in taxes.

The 0.1%, instead, starts to become really "interesting". Glad that they used the right percentage amount.

I was very disappointed to see no mention of the fact that the US is one of the only developed nations that taxes companies' offshore profits. The trillions in profits held offshore by American companies is an unintended consequence of an overly complex tax system.

The article does point out how easy is it is make profits appear as though they were earned offshore however.

Anyone else think we'll see "tax havens for the masses" become a thing in the next several years?

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