Higher Taxes Don’t Cause Millionaires to Flee Their Homes
bloomberg.com
bloomberg.com
I do have an issue with the wealthiest people sheltering their money from taxation. This is the 1%. These people (at least the 0.01%) might just move for tax reasons.
The 2-5% top earners actually do seem to pay a lot of taxes (at least in the US and Canada).
I don't know exactly what the top 5% earn, but some cursory research suggests around $250k annually in North America. As someone who has been near there, yes, I paid a lot in taxes. But I also had spare money to defer some of those taxes.
My experience in Canada has been different than my experience in the US. In Canada, over about 120k in salary you start paying a bit more than you would in the US. About 43% or so on everything over 90k. (Please don't rip my numbers, I'm not a tax accountant and just want to make a point).
So we have a lot of people who appear to be doing pretty well, and join the rest of the middle in basically supporting the government programs for everyone else in the country to enjoy.
But these people are getting more than a 3rd of their income taken in taxes. At 200k per year for a family (look, I'm not asking you to feel sorry for them) that's a big hit.
But if you have $10m in assets in the bank, no mortgage, and are bring in 600k per year you might actually be getting taxed close to the person in the first example. But you are left with A LOT MORE money after taxes. And this is the issue for me.
There are a lot of irrational beliefs that come at least in large part from the Republican party; they tell people there is endless waste in the govt and they shouldn't have to pay anything - and rich people should pay always less than they pay now and someday you might be rich so isn't it a good idea to have them pay less taxes.
I'm fortunate to be a well off software engineer, and the state needs to tax people like me more. I would willing pay lots more in taxes if they could build out the freaking light rail quickly, and get gig ethernet to my house (the last thing is less important :-)).
Within all of those areas there is lavish spending, expensive inflated contracts for services and goods, nepotism, etc it goes on and one. And it's worth breaking down all of them. You can trace the money back to items purchased and wages paid. So it's it's not helpful to just call out one area of spending as waste when either we have good auditing on it or we don't.
Taxes become a more delicate subject as you get older and realize that the salary you're making now is pretty much it for life. You'll get cost of living raises but its not like being young where there's nothing but upwards growth AND the tax refund system is very generous with you. Every tax raise then becomes a decrease in your lifestyle, quality of life, retirement, etc. The recent Chicago property tax means one less vacation for my family. We're expected to get 5-10 of these sized tax raises by the time I retire simply to catch up to pension spending deals signed decades ago. This is something to have legitimate outrage over.
Meanwhile Chicago is losing population, so yes maybe the ultra-rich don't move, but regular lower/middle class people certainly do due to taxes and cost of living increases:
Chicago area has greatest population decline of any U.S. city in 2015
http://wgntv.com/2016/03/25/chicago-area-has-greatest-popula...
Also, the top 1% a very significant portion of federal income taxes:
> The top-earning 1 percent of Americans will pay nearly half of the federal income taxes for 2014, the largest share in at least three years, according to a study.
> According to a projection from the non-partisan Tax Policy Center, the top 1 percent of Americans will pay 45.7 percent of the individual income taxes in 2014—up from 43 percent in 2013 and 40 percent in 2012 (the oldest period available).
> The bottom 80 percent of Americans are expected to pay 15 percent of all federal income taxes in 2014, according to the study. The bottom 60 percent are expected to pay less than 2 percent of federal income taxes. [2]
> In 1979, the top one percenters earned 8.9 percent of pretax income and paid 18 percent of federal income taxes. In 2011, the top 1 percent earned 14.6 percent of income and paid 25.4 percent in 2011 of federal income taxes.
I believe the mis-perception of the wealthy not paying anything is linguistics. For instance, since most tax revenue comes from the wealthy, any apparent decrease in overall tax rates greatly impacts the wealthy and is said to "cost" money. So as a thought experiment, suppose taxes went up to 5% and back down immediately to their current levels. The ladder move would have been said to be "costing the American people $X billion."
[0] https://www.cbo.gov/publication/49910
[1] http://www.usgovernmentrevenue.com/total_revenue_2014USrn
[2] http://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-fede...
Your sources say that only 28% of tax revenue falls into the category of SS/MC. That's hardly "most".
These taxes are both levied independent of Federal taxes and are handled differently. They are both payroll taxes, so they are only paid on wages, not income from investments. Additionally Social Security tax is capped and Medicare is regressive (rate goes down as wages increases).
So, while the top 1% are contribute a significant portion of income tax revenue, they don't contribute nearly as much to social welfare (which is by design).
The tax structure is complicated in the US and is hard to tease out who pays for what programs, even leaving aside "fairness". But I think that's another point of criticism that makes Americans skeptical of the prudence of their tax dollars.
> Social Security: Last year, 24 percent of the budget, or $888 billion, paid for Social Security, which provided monthly retirement benefits averaging $1,342 to 40 million retired workers in December 2015. Social Security also provided benefits to 2.3 million spouses and children of retired workers, 6.1 million surviving children and spouses of deceased workers, and 10.8 million disabled workers and their eligible dependents in December 2015.
> Medicare, Medicaid, CHIP, and marketplace subsidies: Four health insurance programs — Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and Affordable Care Act (ACA) marketplace subsidies — together accounted for 25 percent of the budget in 2015, or $938 billion. Nearly two-thirds of this amount, or $546 billion, went to Medicare, which provides health coverage to around 55 million people who are over age 65 or have disabilities. The rest of this category funds Medicaid, CHIP, and ACA subsidy and exchange costs. In a typical month, Medicaid and CHIP provide health care or long-term care to about 72 million low-income children, parents, elderly people, and people with disabilities. (Both Medicaid and CHIP require matching payments from the states.) In 2015, 8 million of the 11 million people enrolled in health insurance exchanges received ACA subsidies, at an estimated cost of about $28 billion.
http://www.cbpp.org/research/federal-budget/policy-basics-wh...
Well, what do you propose for solving that issue? Because those who believe public spending and taxation should be more limited also believe that there's no simple fix for the accountability issues that stem from monopolized state control over certain industries.
As long as there is free speech, a right to vote and enough information to hold decision makers accountable, people can change the system both by getting into positions of power and by voting them in or out of power. There's no simple fix, there will never be a simple fix, significant changes will likely take decades.
That said, governments have a mandate and a goal to improve society. When positions of power are held by people that have neither the mandate nor the accountability to do that job - as is generally the case with businesses and wealthy influencers - then a change in power is much harder to accomplish and you easily end up on the way to centralized control and censorship.
Screw the revolution. Screw the every-man-for-himself mindset. Just give me lots of data so we can do the accounting ourselves. Oh yeah, and enough education for everyone to figure out how to analyze those bits.
Then, when those who believe public spending and taxation should be more limited get to try, let them give us the same detailed data and make it better.
Government forcibly takes money from hardworking people to spend on things that politicians think are good for us.
I am pretty sure if you donate your money to education, infra and other things it will be more efficient use of that money than you giving it to politicians.
The biggest reason why I will not pay taxes is because it increases the size of government. War on Drugs, Wars in foreign countries, Civil Forfeiture and other horrible things that government is doing is simply because our government has far more money than it needs.
Reducing government revenue is the best way to kill/starve this beast.
If I asked you if its okay for a citizen to do this you would obviously say no, now replace "citizen" with IRS swat team (yes these exist) and some how the answer should be that this is some how 100% okay?
Yep. Because governments are instituted among men and derive their just powers from the consent of the governed. There are clear mechanisms for relinquishing certain freedoms (i.e., the freedom to keep all your money) through representative government.
If you don't like taxes, get 'em repealed through the way we repeal taxes. If you don't like the way the government collects taxes, we have a way to change that too.
When the three wolves vote to eat the sheep, the sheep is also 100% responsible because didn't you know? You signed this thing at birth that agreed to such a possible outcome!
You could have, and you still can, move to a different country where the laws are more favourable to your views.
Your comparison to wolves and sheep is not apt -- the "violence" of taxation is only as punishment for reaping the benefits of previous payers and not abiding by the rules the common voters agreed on. You are under no obligation to reap those benefits -- in fact, society is perfectly happy to give them to you for free (albeit minimally) in the form of welfare, and charities are satisfied with giving you free food and shelter should you find the system of commerce and taxation too burdensome.
That you are not afforded the extended benefits gained by common taxation at your pleasure and rate without yourself contributing is not theft in the most basic sense; it's more like an obtuse mischaracterization. It makes an interesting civics thought experiment, but nothing more.
Threatening someone with violence is not, by any stretch of the English language, theft by definition. Nor is theft, by definition, locking someone in a cell, without their consent, for not paying [something]. This is an ideological abuse of language, by which you're attempting to strike an equivalence among separate things that are not equal to further an agenda, and its associated ideological underpinnings, by way of distorting language.
We have a government here in the US that is established by, and draws its authority from, the consent of the governed. We have established a federal, constitutional republic, through which we realize our collective will by way of our duly elected representatives. When we do not like the outcome, we ought to elect different representatives, or push for different agendas. There's a great many things our representatives do that I don't agree with, but I don't pick and choose which laws I am going to abide by. I especially denounce the childish, shortsighted, selfish, and wholly ideological rejection of the validity of paying one's fair share of taxes as an obligation of citizenship—especially when one chooses to continue enjoying the benefits of citizenship.
Fidelity to the law is a virtue and obligation of citizenship[1], and cherry picking what laws one will faithfully follow shows a clear insincerity for participating in and pursuing a lawful and just society.
[1]: With reasonable, defensible exceptions made for valid civil disobedience, of course. I have yet to encounter a single convincing argument for refusing to pay taxes that fits this exception—it's always ideological blustering.
As for citizenship and participation I don't see what so virtuous about submitting to the violence of the state and perceiving it as necessary to government when applied to taxes, I respect laws which do not infringe upon my own rights.
I don't volunteer my money, when someone tells me they are going to force me to pay money by some means that is theft. It doesn't matter if its you or an entity which I supposedly in some contract with, a contract which I never signed
I said nothing to suggest you or anyone else should submit to state violence. There is a serious difference between fidelity to the rule of law, the granting of a monopoly on lawful violence in the hands of a state to execute its laws, and submitting to the violence of a state. If you're going to label every action of the state in the pursuance of upholding and executing laws passed by the People's duly elected representatives as violence, we aren't likely to get anywhere.
If you only respect laws that do not infringe upon your rights, that's awfully selfish and childish. Do you want the state and its laws to infringe only upon others rights, then? If not, are you suggesting the state should only enact and execute laws which infringe on no one's rights? I ask because the whole basis of societies, and the entities through which humanity governs those societies, is that everyone, to lesser or greater degrees, has their freedom curtailed. Now, at least within liberal, democratic states, the alleged goal is to define and protect rights as inviolable, whereas liberties and freedoms may be reasonably limited and/or infringed upon where necessary to carve out and protect the greatest possible liberty/freedom for all.
If you think it's possible to have laws that do not infringe upon anyone's liberty/freedom, I'm really curious what kind of laws you envision could fall in this category. If you think taxes violate your defined and protected rights, I'm curious which rights enumerated in the Constitution are violated by taxes.
Obviously, we don't want governments trampling the rights of its citizens. However, there is no legally defined or protected right to pay zero taxes in any liberal, democratic state I know of since they began forming centuries ago.
Theft is taking from someone that which they already posses. Not being given something is not the same as being stolen from. The money "taken" from your check was never yours; that the government discloses a particular amount (and calculates it as a percentage) is incidental.
If you choose to with-hold your taxes that you'll owe later, that's something you agree to individually at your own discretion, of course.
You signed up to be taxed when you took a job in the United States. The 13th Amendment abolished involuntary servitude except as punishment for a crime, so if you're being worked and taxed against your own volition, please consult your nearest civil rights attorney, because you've got a solid case.
>As for citizenship and participation I don't see what so virtuous about submitting to the violence of the state and perceiving it as necessary to government when applied to taxes, I respect laws which do not infringe upon my own rights
Your particular ability to see the virtue in taxation has no bearing on the legal definition of theft. Nor does your particular feelings toward laws impart any special sovereignty in relation to them.
>a contract which I never signed
Every single transaction you make with the government, from sales tax to social security tax to Obamacare penalty, is the outcome of an individual agreement (a 'contract') you enter into with various parties. Again, if you so chose, you could live off of the auspices of charity and pay zero tax. Or, you could even work a little and receive negative tax!
You don't like the system in place. That's clear. But false equivocation makes for a specious argument.
Taxes: "A financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state to fund various public expenditures."
Taxes pay for services that you use directly or indirectly. With theft, you receive no service, directly or indirectly.
Shit by any name stinks the same.
No, with theft you receive nothing for the taking of your wealth. With taxes, you receive something in return, A Modern and Civil Society.
If you don't like paying taxes, move to Somalia, not paying taxes seems to be working really well for them.
Private philantropy does not work for maintaining infrastructure.
A lot of countries have tax rates much higher than the US, but they don't do the whole War on Drugs thing or Civil Forfeiture. This argument has no logical connection whatsoever.
This is the same argument as "if you don't like it, move". Just because one is part of a system does not make the person's criticisms of the system invalid.
> Private philantropy does not work for maintaining infrastructure.
You should read some Coase [0]. The Lighthouse in Economics is a different take on public goods and shows that private lighthouses, often considered the model public good, did exist in England prior to public investments. It's difficult to imagine a system that doesn't exist, but I don't think all progress and development would simply cease without centralized control from government.
> A lot of countries have tax rates much higher than the US, but they don't do the whole War on Drugs thing or Civil Forfeiture. This argument has no logical connection whatsoever.
Not OP, but I think the war on drugs and civil forfeiture has to do more with state control over the personal affairs and finances of denizens. With strong centralized powers with a great power of the purse, the incentive grows to exert more control over people. It may not be expressed specifically in those terms, but it does exist and is prevalent in many very centralized societies.
[0] https://courses.cit.cornell.edu/econ335/out/lighthouse.pdf
Need to get over that soon. I heard writing is therapeutic.
Fine. However, that is a personal decision of yours. Other people make other decisions.
> When taxes build schools and infrastructure and provide policing and social support it's a good thing. When taxes are misused (military industrial complex perhaps) that's an issue with the system of government, not taxes.
Why not do it with sandwiches? The government collects 500 dollars from you in taxes and gives a 5-dollar sandwich in return. From now on, taxes are necessary, because how else would we get hold of sandwiches?
> I do have an issue with the wealthiest people sheltering their money from taxation.
If it were your money, I would understand. It isn't your money. You insist that other people should make decisions as you like them to. Why? And why not the other way around?
> But you are left with A LOT MORE money after taxes. And this is the issue for me.
Again, it is not YOUR money. It is THEIRS. You cannot impose your opinion of what is right and wrong onto others. I could perfectly do the same, and insist that you must adopt MY views on right and wrong.
You could say that your view is backed by government violence, but as you know, violence is not something particularly complex to orchestrate. In fact, it is trivially easily matched. Nowadays we have got people incessantly bombing other people exactly over this kind of problems. Your desire to impose your beliefs onto others, will inevitably turn out to be very costly, because people like you are doing that in too many areas and to too many people.
Ultimately, what you believe to be right or wrong will no longer matter. Sooner or later, it will only be what you are willing to risk your life and die for that will matter.
A more interesting angle would be to track productivity and financial returns of the elites under multiple tax schemes.
If you have $20m in the bank and are living off of investment income, in a way it makes sense. You want the highest return, for the least effort and risk required. Taxes eat into that.
Exactly; that leaves none of the fun being in actually spending it.
Going WAY off-topic now, I split the very wealthy into two groups. Rich people, and poor people who happen to have money.
Rich people think differently. They've got a whole lot of money, and now they can stop worrying about that and get on with doing things. Bill Gates deciding to team up with Rotary International et al and see if we can't finally kill Polio stone cold dead with the extra help of all this money that seems to be cluttering up his bank account. This is the action of a rich man.
Poor people with money have the same concerns and same aims as they did when they didn't have money. They just buy a more expensive watch, a more expensive car, move their social status group to be around other similarly wealthy people and signal at each other, keep thinking about making more money.
Then, you could easily "chainify" the concept: A -> C1 -> C2 -> C3 -> B
Now you turn C1 into a reservoir. It does not pay out to A, because A prefers to save his revenue inside C1. Therefore, A never gets taxed on income that remains in C1.
Also, whenever reasonable, C2 and C3 pay for A's spending. That money does not hit A either, and not even C1. Therefore, A actually needs little actual money to be paid out to him. His expenses are taken care of by C2,C3, ..., while his savings are held up in the C1 reservoir.
Even though B could pay millions for A's services, in terms of taxation, A makes almost no money at all. The money remains legally stuck in the C chain. Even though A is a real person, the C chain is not. It is a chain of virtual persons: "incorporations". They used to exist only on paper. These days they only exist on a computer screen.
Moving nodes in the chain to another state or to countries, pretty much amounts to just updating a field in a database. Depending on what you fill out in that database field, you pay more or less tax. Hence, the reason why they consistently fill out the cheapest choices on the screen.
In other words, there is never a valid reason to pay income tax for a "chainified" income stream. Therefore, income tax is in reality not a tax on income but on the inability to "chainify" income.
Even if you aren't wealthy it is a great idea to have such a setup for ones home and other assets that you would wish to leave for others when you die. As it is in a trust you can buy pass a lot of taxes.
1. Huston 9% 2. LA 8% 3. NY 7% 4. D.C. 5. Boston 6. Chicago 7. Sf 6%
The real impact of taxation of Millionaires would be between "what is" v/s "what could have been". Should the financial capital of the world NY be third on that list ?