IMF strongly suggests countries tax the rich to fix deficit
rawstory.com
rawstory.com
It's funny how many excuses people try to find against such "proposals". You can hear/listen to all kinds of excuses. From "yeah, good luck making them pay their taxes" to "if you tax them they will go to another country". Really? They won't pay their taxes? Jail them. Really? They will go to another country? Let them go then, and forbid them from operating in your country.
It's beyond understanding how such a big part of the "middle class" believes we shouldn't touch the rich.
And, of course, it's also beyond understanding how we have allowed tax heavens to exist. Very funny, for example, to watch Germany go all crazy against private money in Cypriot banks but ignore Switzerland and Luxemburg ones.
What is usually objected to is when someone gets the bright idea that because wealthy people have money, that money should be taken to pay for irresponsible government spending. It's no different than infamous bank robber Willie Sutton. He was asked why he robbed banks and offered as a reply, "Because that's where the money is."
To balance the issue, I like to ask a simple question: what did America get in exchange for doubling the size of its government between 2000 and 2012? (during which population increased by a mere 11%)
Is our economy better off? No, we have the greatest amount of poverty since the great depression (15% U6 unemployment, 46 million on food stamps, etc). Do we have less debt? No, twice as much. Is our military stronger? No, it's worn out, we've lost thousands of good soldiers and our weapons are destroyed, having lost a small war machine in the desert. Is Social Security more solvent? No, it's bleeding red ink now. Is our infrastructure better? No, it's in shockingly horrendous shape. Is our electrical grid, and energy production improved? No, it's collapsing, with black-outs ten times higher compared to 20 years ago. Are we safer, with a hundred billion in added domestic security spending? I'd argue not, that it's mostly security theater. Do we have a higher home ownership rate? No. Do we have less consumer debt? No, more. Is our education system flourishing? No, it's an absolute disaster, from K-12 results, to the trillion dollars in college debt. Do we have more full time jobs? No, seven million less since 2007, and about 92% of the jobs being created over the last year are part-time jobs. Do we have more manufacturing jobs? No. Has the long promised manufacturing boom from cheap natural gas arrived? No. Is Washington DC functioning properly, such that we can trust them to be responsible with our hard earned tax dollars? No. Do we have a lot less people committing welfare fraud? No, SS disability has enrolled millions in just six years that are lying about their inability to work. This list doesn't stop going.
So what did we get for the extra $18 trillion above population growth in spending over 12 years? What did we get for all the debt? Absolutely nothing. So we should just keep spending more? That's going to have an obvious outcome.
That's a valid question. Working from www.usgovernmentspending.com, I found the increase to be about $1.7 trillion. $300 billion is health care, mostly Medicaid; $500 billion from increased defense spending, and $300 billion in transfer payments, including unemployment, food stamps, SSI, and the child tax credit. Inflation accounts for about $500 billion as well.
So to answer your question, "what we got" is that we are able to pay for the increase in medical costs, the increase in the number of people needing assistance, and the War on Terror. With the exception of the military, these increases are mostly in reaction to the changes in the economy, not due to new policies. Hopefully an improving economy will lift incomes and reduce the need for these programs.
Taxes can be an effective tool, but they have to make sense. You can't kill a businesses ability to compete, nor can you remove the incentives to build wealth.
I could easily see any nation trying to implement higher taxes on the rich to also implement a wealth export tax that takes a tremendous portion of their accumulated wealth if they try to jump ship and take it overseas.
> not bringing it to the high-tax country in the first place.
This is the larger concern, but if a society can't survive without the good graces of the lucky rich, it is already their slaves.
Or they can penalize countries who operate tax havens - it's not like tax havens represents a significant amount of either trade or GDP.
In many cases wealth isn't liquid. Wealth exists in the form of securities and assets. If you were to attempt to tax these, there would be absolute chaos - bank runs, stock market crashes, etc..., as everyone tries to liquefy their assets or move to protect them.
You could potentially tax cash savings, but that's not going to change much.
We saw in France a huge uproar over the threat of a 75% tax, thankfully the courts declared it illegal...
Practically speaking, ya, it would be a challenge to make the system fair. But either the rich will pay, or there will eventually be some kind of destructive revolution to bring things back into balance (probably by making everyone poorer).
Then we have business owners and majority share owners and the like, who are rich on paper, yet do not earn significantly more income than most middle class salary earners. Should they be paying out more taxes since they're in some kind of millionaire bracket, even though they're largely devoting their assets to employing people to produce goods and services?
I realize these are over-simplified kinds of generalizations and there are undoubtedly very wealthy people and cash-rich entities that pay little or no income taxes or corporate taxes, thanks to offshoring their assets and other workarounds.
But, I just don't see where all the money is, that's supposedly lying around, waiting to be scooped up by the tax man. In fact, the situation seems to be rather the opposite. Most of the money controlled by the rich in fact is being put to work in companies, and attempting to get at it would probably cause great damage to the economy.
To my (supply sider) mind, a simpler and far more effective choice would be to cut government spending until outflow meets intake (and then go a few hundred billion farther, so that debts can be paid). Among other things, this might have a positive effect on business optimism, and we would experience an uptick in hiring for start-ups and established companies alike.
Bullshit. Not just bullshit, but pernicious bullshit.
Payroll taxes account for the same amount of receipts as income taxes. Payroll taxes are extremely regressive. That's some mighty creative accounting where you ignore half of all tax receipts when talking about tax revenue.
http://www.taxpolicycenter.org/briefing-book/background/numb...
The other side of this coin is that tax dollars at the federal level are a returned IOU, they do nothing to fund the government.
What percentage should they pay? What percentage would be fair? We can't say without specifying the income distribution. If the top 10% earned 95% of the income, then paying only 70% of taxes would be criminally low. This statistic says more about the income distribution than about the tax schedule.
> Most of the money controlled by the rich in fact is being put to work in companies
What data lead you to that conclusion? I see the opposite. Corporate cash holdings as a percentage of assets are way up: the money is just sitting there. The "invention" of crazy investment vehicles like CDO-squareds shows there's too much money chasing not enough legitimate investment opportunities.
> cut government spending until outflow meets intake (and then go a few hundred billion farther, so that debts can be paid). Among other things, this might have a positive effect on business optimism, and we would experience an uptick in hiring for start-ups and established companies alike.
"Cutting government spending" means the government buys less stuff from private firms and individuals. Firms generally do not increase their workforce in response to reduced sales.
The bottom 50% paid 2% of federal income taxes.
I was responding to this IMF report which says, in effect, that more holdings of the rich should be confiscated and redistributed. Arguably, the U.S. already has fairly progressive taxation.
The payroll tax a.k.a. FICA is a slightly different story since, theoretically, we all get that money back eventually.
As I understand it, the government's huge size and credit utilization encroaches on private sector investment and expansion. Simply put, if it didn't soak up $1T/year in loans, that loan money could be invested privately and put to more productive and efficient use.
I didn't know that companies are sitting on cash. It was my impression that money is being put to use no matter how it is stashed, except under a mattress.
I've definitely spent significant portions of my life in the bottom 50% and I definitely paid taxes.
The US government has shown us that tax increases usually go to fund irrelevant wars on other continents or NSA spying. Very little goes to worthy programs like NASA or helping the poor.
While I agree the rich should pay more, I think that we need to really take a good hard look at what that increase in revenue would actually pay for, and see if it's absolutely necessary.
Putin's policies show that "the rich" are no actual threat to government. Why would the IMF bother with this recommendation?