How Much Will Your Taxes Jump?
online.wsj.com
online.wsj.com
Also: I'm trying to figure out what's interactive about this "interactive graphic."
Also: It's amusing to play "guess the profession." Mine: the single mom and the single women are lawyers--senior associates but not partners. The single mom is divorced. In the family of six, the dad is an MD at a bank, but in one of the less cash-cow divisions. The wife is a college educated stay at home mom. The retired couple: the man is a retired NYPD deputy chief, and the woman is a retired teacher. The single woman lives in Manhattan, the single mom lives in a gentrified part of Brooklyn, the retired couple has a nice place in one of the gentrified parts of Harlem, and the family of four lives in Greenwich and the dad commutes down every morning.
But seriously, though, $260k single mom? What alternate universe do the editors live in?
This submission seems to be deliberately misleading. The article itself is far less insulting.
If you're confused, the original headline was along the lines of "WSJ - Out of Touch?". The implication was that with the WSJ saying their idea of a retired person makes $180,000, their single parent of two makes $260,000, etc, the WSJ is out of touch with the common person's actual salary, especially during a recession.
It wasn't meant to read much into >_>
Four children on $650,000, what a horrible life those kids are going to have - those parents look so stressed and tired.
That single person on $230,000 looks pissed off they'll have to contribute a whole $2,900 extra. How horrible for her.
Extremely Low Income: $0 - $23,050
Very Low Income: $23,050 - $38,400
Low Income: $38,400 - $61,450
Moderate Income: $61,450 - $92,150
Middle Income: $92,150 - $192,000
High Income: >= $192,000
Yes, the wealthiest people in the world live in NYC, but the average New Yorker is not substantially wealthier than the average American, by any measure. He is, in fact, poorer, thanks to cost of living. There are census tracts in NYC where the median income is under $10,000.
[1]: http://www.bls.gov/ro2/qcew9310.htm1. Manhattan is 7% of NYC's land area
2. Manhattan (County of New York) is the richest county in NY by per capita income (as opposed to resident income: Manhattan is home to hundreds of thousands of urban poor)
3. the arithmetic average wage is not the same as the median personal income. The average wage in America is around $41k. The median wage is about 28k.
Where are you getting this $28k figure from? BLS[1] more recently stated that the median wage was $758/wk in 2012 Q3 (~$40k/yr).
[1]: http://www.bls.gov/news.release/pdf/wkyeng.pdfMy figure comes from payrolls reported to the Social Security Administration: http://www.ssa.gov/cgi-bin/netcomp.cgi?year=2011
"By definition, 50 percent of wage earners had net compensation less than or equal to the median wage, which is estimated to be $26,965.43 for 2011."
28k was a peak value from a graph that adjusted old dollar values to present dollars. (The SSA data is unadjusted for inflation.)
Urban poverty and inequality are inescapable facts in NYC.
By any measurement, 180k is a hell of a lot of money for two retirees living alone. That's over double the average wages of two working adults. That is quite wealthy, even in NYC. (I just looked it up: median income for a black man over 65 in New York is $14,400 a year. For his female companion, $9,966. These people are earning roughly 8x the median for their demographic.)
Edit: As a local, I'm really, really sick of hearing that the "middle class" in NYC includes 200k households. Because it doesn't. HN posters, such as myself, are privileged individuals. We forget about the veritable sea of average workers underneath us on the income scale.
If you ever need a reminder, hang around a McDonald's in the early morning and watch the number and kind of people that are obviously eating it every day.
That was one of the most shocking things about NYC for me, coming from another country.
These people are 'time poor' too.
Further, griping about the temporary 2% payroll tax expiring? It was done as an aid to a sluggish economy. Things aren't rosy overall, but they are improving a bit.
I don't think it's the raw dollars that matter but what the alternative for those dollars are (aka opportunity cost).
You must have a very low mortgage payment.
Anyway, that seems believable for Austin, TX.
In my case, the going rate of a house similar to mine rent-wise would be about 50% higher than my current mortgage payment.
[1] http://www.investopedia.com/terms/o/owners-equivalent-rent.a...
not only does it assign unrealistic income values, it uses different income brackets AND different deduction possibilities for each scenario. I walk away from this graph with absolutely no knowledge.
This graph is showing there are people out there earning a lot more than you and I, so we need to put our noses to the grindstone, stat!
No more talking about extended vacations, citizen.
Somehow I am just not worried about them.
There are tens of millions living on one tenth of that in this country and even millions living on one 1/20th
I'm really disappointed that the WSJ would lower themselves to that.
Country prosperity and supporting social services are nice concepts but ask any CPA how the average high earner feels about being "business partners" with the govt.
So an honest suggestion - what if there were some small incentives created in govt controlled systems for high earners?
Pay the highest tax rate? Free carpool lane access for the next year.
Nothing insane, but some direct positive benefit in a transaction that overwhelmingly feels negative.
No one is saying that rich people can't afford to pay more taxes. It's not a question of they're going to starve and be out on the streets. The real issue is, approaching 50% taxes (EDIT: state + federal + medicare/medicaid + social security) is in conflict with the American concept of capitalism. The fact of the matter is, there is nothing proportionate about how much you benefit to how much you pay. The more you make, the more you pay to Uncle Sam both as a proportion of your income and as an actual number.
It is not a question of how much can you "afford to give" while remaining well off - I think it's a much more core issue at hand: is someone who makes (to bring this closer to home) $250k as a single individual, perhaps doing freelance software development and consulting, culpable to the tune of $80k out of their salary to help everyone else out?
Yes, it's a moral question. It's a philosophical question. And it's also a legal question: even if they are morally obligated - is it the government's job to enforce that?
Many people I know in that bracket actually give that much or more in very directed donations to non-profit entities (meaning they're no longer in that bracket thanks to tax deductions) because they feel they a) distrust the government to wisely spend their money to solve the problems, b) they should have a say in where their money goes, and c) it is not the government's job to take and redistribute wealth.
As for those that don't make such donations - can you absolutely say they must?
Also remember, these tax hikes are really not targeted at the so-called "filthy rich" that have been the focus of all the ire and angst in recent years by groups such as "Occupy Wall Street" - they just affect the upper middle class. Capital gains taxes are ridiculously lower than income taxes. Your wall street bankers and trust fund babies don't have "income" in the traditional sense. You're not taking this money from people that have invested money and are making more money explicitly not doing anything, these taxes are on the upper class of working citizens.
The biggest targets are small business owners, startups, lawyers, doctors, engineers, and others of their kind. Can you say for an absolute fact that they owe ~40% of their annual income to the government? I can tell you for a fact that the difference between a freelancer in high demand earning $250k/year vs $100k/year is a matter of the hours you work. If you kill yourself to work around the clock to make more money.... you are rewarded with higher taxes. It's not a different class of people that are being taxed higher - it's just people that have worked harder for longer and are, as a result, more well off. This is literally the anti-thesis of core American values: work harder and be, quite frankly, punished for it.
(I'm not saying everyone can automatically make $250k/year by working harder and that if you don't make that much then you are lazy - I'm saying the difference between $50k/year and $350k/year is a matter is a matter of quantity, not type; whereas the difference between $250k/year and $200MM/year is a different beast.)
At the end of the day, people need to decide if you are paying for services provided by the government or if we are asking the upper middle class to subsidize the rest of the country. There's nothing inherently better or worse about one or the other - it's a matter of philosophy. At the end of the day, are our core principles capitalistic or socialistic? There's something to be said for both, and I'm not saying it's wrong to have socialistic taxes such as those that were just recently repealed in France - but if that's the case, we need to own up and admit that is what we want.
It is an exercise in futility to ask to levy taxes on the middle class and above to subsidize the cost of a welfare nation while pretending that is not the case. If that's what you want to do, fine. Nothing in the constitution (despite what your favorite talk show might say) says a thing (explicitly) about capitalism vs socialism one way or the other. It's a democracy and we're free to choose our own path. But let's not do one thing while pretending to be another.
From that perspective, those changes look like much ado about nothing to me. 30% is a long, long way from 50%.
Edit: it's also, other than for the retirees, not very graduated at all. 28% for the 230K earner, 30% for the 650K earners. Personally I would like to see a higher marginal rate bracket, as well as a raise on capital gains, which you mention in your edit, if we're trying to balance the budget. (Side question: are capital gains taxes done progressively at all? Would it make sense to have marginal rates and tax smaller capital gains much less than large ones? Why or why not?)
(Further edit on that note: my personal crazy idea of the moment is to have dramatically higher rates on, say, 500K+ marginal income, but not matchingly high rates on capital gains of that same amount; my idea being to try to encourage higher levels of compensation to be given in forms like equity that would require long-term business success, not just short term profits, to pay off. But I'm not tax lawyer or accountant or whatever, so I'm sure there are problems with that idea...)
You could also throw sales taxes in. This would show how its impact is felt more at certain income levels.
For the most recent year of data, the average American paid 7.2% of income in Federal income tax. Even the Top 1% of income earners only paid 21% and the next 4% paid 14.6% [1]
[1] http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...
I strongly disagree. I think how much money you make is a very good measure of how much you benefit from the existence of government and civilized society.
Take the family of four. The father sends his kids to public school in Connecticut. But he works at an investment bank. He draws his salary from the economic activities of companies he provides M&A advice to. Those companies benefit from having a work force educated at the public expense. Does the father just benefit from the education his own kids receive, or does he benefit from the educations of the workers at each of his clients?
> The biggest targets are small business owners, startups, lawyers, doctors, engineers, and others of their kind. Can you say for an absolute fact that they owe ~40% of their annual income to the government? I can tell you for a fact that the difference between a freelancer in high demand earning $250k/year vs $100k/year is a matter of the hours you work. If you kill yourself to work around the clock to make more money.... you are rewarded with higher taxes.
No, you are rewarded with more money. If I work more and make $250k instead of $100k, I still have $80-90k extra in my pocket. As someone taxed over 40%, I don't think "man, I'm sick of carrying the weight for all these other people." I think: "all these other people ultimately generate the wealth that allows me to live the way I do." There is a point at which I'd be upset and contemplate moving, but we're not near that point.
The fact is that anywhere else I'd want to live has higher taxes. That's the relevant criterion at the end of the day. My dad, an extremely ambitious man, left Bangladesh (taxes around 8% of GDP) for the U.S. (taxes around 26% of GDP) completely unconcerned about the increased taxes. Do I ever think: "man, it'd be great to go back to Bangladesh and pay low taxes!" Of course not. When I tell my wife "hey honey we should move there" it's never to a low tax place like Botswana. It's France, Germany, Canada, etc. Hell, I could save a lot of money and move to Texas but I'm not willing to do that either. Taxes pay for a pleasant civilized society.
Indeed, it's the doctors, lawyers, engineers, etc, who benefit from that the most. We don't have "fuck you" money. We can't go to a low-tax jurisdiction in the middle east and set up a luxurious bubble for ourselves amid the squalor. We live in cities, use public transit, and have to interact with everyone else. We get to live very well in pleasant surroundings as a result of these taxes.
Please explain how a web designer making $250k a year freelancing out of an apartment in NYC is "benefiting" from the government more than a $30k/year individual on welfare.
You asked: "Please explain how a web designer making $250k a year freelancing out of an apartment in NYC is "benefiting" from the government more than a $30k/year individual on welfare."
How do you measure how much someone benefits from the government? Your comment suggests you're looking only at the value of services directly received, but that's not the proper way of computing the total benefit. You have to do a marginal analysis, looking at the incremental benefit as you go from "no government" to "government."
The economic insight here is that your benefit from the existence of government is not a fixed amount valued by the services you utilize directly. Rather, it's a percentage of the incremental gain in wealth that is enabled by the existence of government. And because societies without government basically cannot create more than subsistence-level wealth, that increment is a big number.
That's not a marginal analysis. A marginal analysis would be going from "slightly lower taxes, slightly less government" to "slightly higher taxes, slightly more government".
You seem to want to debate (all by yourself) primitive tribal society vs civilization.
This is not an argument about the desirability or optimality of bigger or smaller government or higher or lower taxes. That should be an empirical fight.
Of course that's not the only operative consideration. There are other clubs that charge different fees, which might be less. You can always move to Club Canada or Club Germany, (or wherever). In a globalized society the "fair" tax rates are limited not by some abstract ethical consideration, but by competition between countries to offer the most pleasant societies for the lowest tax burdens.
From http://www.nationsencyclopedia.com/Africa/Somalia.html: In 1986, tax rates on wages and salaries ranged from 0% to 18.9%. Income from trade and the professions was taxed at rates of up to 35%. Indirect taxes are imposed on imports, exports, mortgages, vehicle registration, sugar, alcohol, and a number of other goods and services. In 2003, Somolia's sales tax rate was 10%.
And you're ignoring the fact that many countries in the world do not charge income tax are quite nice places to live. Bermuda, Monaco, Kuwait and UAE to name a few.
I would strongly disagree that anywhere in the Middle East is a nice place to live (besides Israel), but in any case you're using four very bad examples. None of those places are sustainable societies on their own. Bermuda and Monaco are rent seekers--they are so pleasant because they are tax havens for wealth created elsewhere. Kuwait and UAE don't create any wealth to speak of either--their "GDP" is really just consumption of capital that happened to be under their ground. See: http://www.columbia.edu/~mh2245/papers1/erc01.pdf.
Precisely! Israel has notoriously high taxes: if you're going to make an argument about how high taxes and socialism (literal socialism, as in state-owned companies) are a bad idea, this is one country where you can confidently do this. I (and many Israelis) would agree that Israel could probably benefit from lower taxes, more privatization, and less regulation. Ironically this is why, despite being Jewish and strongly "pro-Israeli", I oppose foreign aid to Israel: it helps prop up an inefficient system in Israel and serves as corporate welfare for US arms manufacturers (I think some of it has explicit provisions that it must be spent with, e.g., Colt or Lockheed-Martin as opposed to IMI or IAI).
Yet, go up to any Ayn Rand fanatic and ask them if they'd prefer to live in UAE/Qatar/Bahrain or in Israel. They'll say they'd prefer Israel as it's a socially liberal, democratic state, that recognized basic individual rights.
Democracy and individual rights require an entire infrastructure of impartial judiciary, tightly scrutinized police, a citizen's army that can defend the borders against immense odds. A socially liberal populace is the end-result of education. None of those things are free.
There are indeed countries that are pleasant on the surface (i.e., are not Somalia), and have very low tax rates without relying on natural resources. Almost always they either a) have high amount of "hidden" inequality (some states in the US, some countries in Asia and Eastern Europe) b) are police states (Singapore) c) are both (Middle East)
I would also say states in the "a" category (with most favorable outcome -- individual rights, inequality of opportunity and income, but equality before the law) also on average have higher tax rates than states in "b" and "c" categories.
I really can't think of any pleasant countries, to tell the truth, that have appreciably lower taxes than the U.S. Hong Kong, Taiwan, and Singapore are all special cases, and I'm not sure their examples are really generalizable.
The Middle Eastern countries (UAE, etc) can't be counted because their wealth comes from selling off their natural capital. Selling off the furniture isn't really "income". Hong Kong and Taiwan are special cases. A lot of their expenditures are heavily subsidized (e.g. defense, by China and the U.S., respectively).
See: See: http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenu...
Sort by the Heritage Foundation column, from lowest to highest. The first country on that list I'd even consider living in is Lithuania. But even then it's not an entirely fair comparison. Countries like Lithuania are subsidized by regional stability propped-up by the defense spending of bigger neighbors. Moreover, the eastern european countries generally don't have the aging problem the U.S. and western european countries have. Then you've got Croatia, South Korea, and the U.S. around 27%. I'd live in any of those places. Going from there up to 35%, you've got some really livable countries: Japan, Switzerland, Australia, Ireland, Canada, New Zealand. If the U.S. eliminated it's deficit entirely based on tax increases (discounting the effects of the recession which we continue to be in) we'd probably only be around Ireland and Australia in terms of taxes.
I am also not using pleasant literally here: as in, places stuffwhitepeoplelike.com crowd like to visit and rave about, but would not chose as a place to settle down with children.
I like US (Bay Area in specific) and am not going anywhere. As far as within the US, I considered Seattle area, Portland area, and Austin as mental exercises, but Bay Area seems to represent the best set of trade offs in terms of what I want.
US could have either lower taxes or same taxes and greater social benefits if excessive military adventures or the drug war were curtailed, however, but the change would probably come gradually.
I am curious as to how Taiwan and Singapore are able to sustain low tax rates despite welfare states, military on active alert, and in Singapore's case, an expansive police state. Would never be able to live in Singapore (I can say that with absolute certainty), slight chance I might consider Taiwan (but probably a "no" too).
Oh come on, this is ridiculous. You know this is not true given US as it is. It may be true of a social democracy in Europe, but this is just not true of the US.
The wealthy web designer in NYC benefits from police protection, public transport he can take everywhere, subsidies and grants his university (whether public or private) has received, the use of eminent domain to build said transport, the use of eminent domain to turn over land to a real estate developer that built his apartment building, and (most obviously!) the Internet (once called ArpaNet) from which he makes his living. After tax, the web designer has far more left over and suffers less anxiety as he isn't living paycheck to paycheck (unless he so wishes).
I don't know New York geography as well, so I'll switch to Bay Area to discuss the $30k/year individual (who, by the way, is not eligible for welfare). First, they likely can't even reside close to an area with public transport and jobs, so they're commuting two hours from, e.g., Stockton or Modesto (having to pay for vehicle maintenance, car insurance, license and registration fees themselves). Yes, they do benefit from the freeways, but the stress involved in driving on the freeway (high traffic, long commute, high risk of accidents) is far greater than the stress involved in taking the New York Metro.
They're far more likely to have an unpleasant experience with police personally (being pulled over, searched, etc...). Their city police forces are also reluctant to pursue anything other than violent crime. After tax, a far higher percentage of their income goes to meet the basic needs, and it usually does not -- they're underinsured, they suffer from obesity (due to eating cheaper, poor quality food: fast food joints and microwaveable mac-n-cheese, etc...), and overall poor health.
I have a lot of sympathy with libertarian views (I voted for Gary Johnson as a protest vote in 2012 elections, actually), but their sympathies are simply misplaced: argue for less welfare for the upper classes (e.g., mandate that new public transportation must cover the poor communities first, oppose use of eminent domain by real estate developers), lower taxes for the poor, higher long term capital gains in place of higher income tax (with some reasonable limitations as not to stunt economic growth), etc...
The wealthy do not mind high income taxes. Simply put, look at their voting patterns: 75% of them vote for Democrats, 25% of them vote for Giuliani/Schwarzenegger Republicans. Neither are "small government" advocates. If they did want lower taxes, they'd immediately have the government's ear: e.g., this is why capital gains remains low.
Sad fact is the government listens to wealthy more so than to the poor. This is why some "progressive" policies (that mostly benefit the wealthy) get implemented quickly and others (that mostly benefit the less well-of) linger. You can argue that in a theoretical society Internet could be built by free enterprise, cities could be built without eminent domain, etc... but we don't live in this society now. Right now, if you're concerned about government handouts, go after people like me instead of your hypothetical "$30k/year individual on welfare".
See also Tyler Cowen's insightful comments on a similar snark-fest: Beware of moral arguments which do not address "At which margin?"*
http://marginalrevolution.com/marginalrevolution/2010/09/doe...
What alternative do you propose?
Rich people tend to want money a lot, as demonstrated by their propensity to work very hard. In contrast, poor people tend to prefer time to money, as demonstrated by their propensity to avoid working and not even look for work. If we transfer money from people who value it to people who don't, that's hardly a good thing.
I'm gobsmacked at this generalization. I seriously don't know what to say. I hope you realize how wrong this is, because I don't really know how to explain it.
Extremely successful people tend to work for passion more than money. A progressive tax system would not lower output in this case. Think Warren Buffet.
There is a swath of upper income folks who can throttle their work to their own personal marginal utility. A lawyer can choose to work for a low pressure firm for a great (not lucrative) salary. An IBanker can choose a less demanding M&A position at an established company for a substantial paycut. A doctor can choose a hospitalist position over private practice (or regulate his/her hours/# patients at their private practice). An entrepreneur can cash out of his first company and choose to not start another company. The restauranteur can be content with launching 2 successful restaurants.
Now the trick is how do you ensure the tax code does not stop these professionals from performing that extra effort. For many 400k a year looks like a striking sum but typically these folks are killing themselves for salaries in that range. Most could easily throttle back to a 200k salaried position.
There are plenty of government services I don't want or need but am forced to pay for, or at least my grandchildren will be forced to pay for (wars, welfare state, war on drugs, etc). It's not right and we need to evolve beyond using such violence.
Let's say I go and swing my fists, but manage to hit your nose. Then, I jump into my car and drive home on a (private owned, presumably) road. Now suppose you're in poverty: how do you pay for police to come and investigate what happened, for the prosecutor to start a trial against me. Suppose I am now assigned to pay you restitution and become indigent: how would I pay to ensure that I am not tortured in prison, appeal my case (I had a nervous tick that forced my arm to swing, so I should not have to pay as high of restitution)?
Protecting your rights from (government or individual) transgressions is a categorical imperative: we must be able to provide to everyone, even if they are fully indigent.
Yet it, absolutely, does not come for free. So we need some kind of taxation (or other income scheme) to ensure the bare minimum.
I would agree that it's unwise to spend it on foreign wars and the war on drugs: so let's first stop having foreign wars and the war on drugs!
However, the wealthier an individual is, the more it costs the government to protect their life, liberty, and property. Think of how much money is spent to keep a square foot of Manhattan safe as opposed to a square foot of Modesto.
I agree that in some cases taxes are inhumane: e.g., I think it's wrong to force pay someone who earns no income to either pay a property tax or sell their property. I also think eminent domain gets abused unfairly.
Yet, categorically, "the right to receive income in currency protected and recognized as result of government force" is an important one -- but one that can be curtailed as to allow enforcement of the more fundamental rights.
You're also ignoring the role even a minimal social safety net plays in reducing coercive power of private employers.
You may want to read what these guys have to say: http://bleedingheartlibertarians.com/, as well as actual classical liberals (see, e.g., Karl Popper's works)
I see the appeal of what you're saying, and I'm indeed concerned with private coercive power; however, explaining the "how" behind a free society is contradictory and presupposes State power. I can't tell you how it would work without the State, the same way I can't tell how an iPhone is made (besides some high-level explanation), or how the process came to be that produced it. I don't know what solutions people will come up with.
I would say, though, how is justice being served now? Is there not police corruption, abuse of power, innocent people thrown in jail (especially for drugs), unjust laws, etc? I would argue that this fair system you speak of does not exist, and would never exist under the State. I'm not saying it would exist in a free society (to err is human), but at least it wouldn't be centralized. At least we'd have third-party options. Maybe there would a financial incentive for you to not incite violence. Perhaps you'd be socially ostracized for your actions. Maybe I'd have to live with my broken nose. Again, not saying that this is the way it would work, only that there are plenty of creative solutions that don't involve a central, coercive agency.
There are a few books here that go into the possible solutions: http://freedomainradio.com/FreeBooks.aspx
Also, for any of this to happen, there must a multi-generational philosophical awakening, in which people would become less violent and more open to peaceful solutions.
You can fight against drug war (and this seems to be catching on) without abandoning the idea of police and judiciary.
Indeed, several high-taxation socialist countries in Europe (and here I'm using socialist literally) have decriminalized many drugs.
I don't see a correlation between this: taxation serves a legitimate purpose of protecting society, yet most drug prohibitions do not. If we de-criminalize drugs and you, say, start your own drug factory (not saying you will): who will protect you if the Zettas decides to move and destroy you as competition?
I do commend you for having the intelectual honesty to advanced anarcho-capitalism (as opposed to "government can tax me to go to war, but taxation is slavery if they use my taxes to provide healthcare"). However, I'll suggest this: if you want to focus on advancing the cause of anarcho-capitalism and small government, focus on drug war, foreign wars, police overreach, etc... first and then start talking about taxation. If you must talk about taxes, first start talking about gross abuses of taxation and eminent domain, e.g., using tax liens to confiscate homes of otherwise poor people and put them in the hands of real-estate developers. You can also talk about how the wealthy don't actually pay very high taxes in reality (long term capital gains vs. income), and so on... but the arguments about how the government is unfairly exploiting the rich to benefit the poor are simply silly.
The wealthy want and actively benefit from big government, so policies that make the government more (not less) responsive to the wealthy, actively hurt your cause.
David D. Friedman is the one anarcho-capitalist I am familiar with, but he mostly makes a consequentialist as opposed to ethical case for anarcho-capitalism (acknowledging the imperfections his system will have).