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10 Reasons Not to Tax the Rich. And Why They're All Bad
We hear them all the time, the reasons for unrestricted capitalism, minimal government, lower taxes for the rich. So often that many Americans start to believe them. But the facts and common sense reveal good reasons NOT to NOT tax the rich.
(1) The rich deserve what they earn because of hard work and initiative.
They use other people's money to create assets that don't exist and then bet on them to fail. It seems like twisted humor, but it's real, all part of the murky world of derivatives and credit default swaps. Those who make the most money avoid taxes by calling their income "carried interest" instead of income.
Others not directly involved in financial chicanery still make out well. The stock market has grown 7 times faster than America's GDP since 1981, and two-thirds of the country's stocks are owned by the wealthiest 1% of Americans. That's not enough for some CEOs, though. For many of them it's 'legal' to backdate their stock options to a time in the past when the price was higher.
(2) It's not fair to "soak the rich."
It's been just the opposite for the past 30 years.
Based on Internal Revenue Service figures, if the average middle-income family had just maintained its share of America's productivity held in 1980, it would be making $10,000 more per year ($45,000 instead of $35,000). Some estimates are much higher, up to $30,000 more per year based on Bureau of Labor statistics.
In 1980 the richest 1% got one out of every fifteen income dollars. Thanks to tax cuts and deregulation, they now get THREE out of every fifteen dollars. They already had a big slice of pie, then they cut a second piece, and then a THIRD piece.
Meanwhile, every U.S. taxpayer contributes about $600 a year to pay for the tax cuts that give $34,000 a year to each of the wealthiest 1% of Americans. And now a trillion dollars of public money is used to bail out the failing banking system
(3) "Spreading the wealth" and "redistribution" are other names for socialism.
Not socialism, but social responsibility. Taxes support public infrastructure, including roads, bridges, water treatment systems, railroads. Public money is used to invest in research and development for science and technology.
Much of the tax burden disproportionately benefits the rich: property laws protect private property and capital investment; trade pacts and national defense policies are designed to protect wealth. Bill Gates, Sr. explains, "The government that protects their business activities...that's what creates capital and enables net worth to increase."
(4) The great wealth of the rich stimulates the economy.
Low-income earners have a higher "Marginal Propensity to Consume," which means that they spend a greater percentage of their overall income on consumption. High-income earners, on the other hand, will save more. The very rich in our country have put much of their money into mansions, yachts, jewels, and art.
An analysis by the Congressional Budget Service ranked 11 strategies to create jobs and stimulate the economy. Cutting taxes for the rich was ranked lowest.
The top 500 non-financial companies are currently holding $2 trillion in cash that could be used to create jobs and stimulate new business.
(5) Large incomes provide incentive for success.
Some hedge fund managers 'earned' enough money in one year to pay the salaries of every police officer, firefighter, and public school teacher in Chicago. A system that allows one man to divert the salaries of 50,000 public workers to his own pockets has gone well beyond "incentive-based."
Reputable studies show that life expectancy and 'happiness' increase very little after a certain threshold is reached. That threshold is about $75,000 per family.
(6) The very rich pay it back through taxes.
They pay less than 23% of their incomes in federal income tax. If state and local taxes, social security tax, and excise taxes are included, the lowest-earning half of America pays 24% of their incomes in taxes, almost as much as the richest 1%.
The top tax rate has gone from 90% in 1960, to 70% in 1972, to 50% in 1984 50, to 40% in 1996, to 35% in 2008. But much of billionaires' earnings is subject to only a 15% tax because of a loophole that allows hedge fund income not to be called income.
Furthermore, about 500 people a year renounce their U.S. citizenship and repatriate themselves to countries such as Belize and the Cayman Islands to avoid taxes entirely.
(7) The very rich lost massive parts of their fortunes in the recession.
They lost money, but no more, percentage-wise, than average mid-level earners. Wealth data from the Census Bureau and the Federal Reserve show that the richest households have INCREASED their median incomes relative to other earners since 2006.
(8) "Income mobility" shows that the poor can get rich, and vice versa.
This argument relies on a 2007 U.S. Treasury Department report about income mobility that states "Among those with the very highest incomes in 1996 - the top 1/100 of 1 percent - only 25 percent remained in this group in 2005." But nearly 9 out of 10 of those in the top 1% remained in the top quintile of earners over those ten years. They may have dropped out of the most elite 1% group, but they remained close. The apple doesn't fall far from the tree.
(9) The rich support worthwhile causes.
According to the Chronicle of Philanthropy, the wealthy "give their biggest donations" to colleges, hospitals, and cultural organizations and "rarely make large gifts to social-service groups, grass-roots organizations, or nonprofit groups that focus on the poor or minorities."
And as noted by former Secretary of Labor Robert Reich, hundreds of millions of dollars are being contributed to congressional and state election races. Especially since the Supreme Court ruled against limits on corporate contributions.
(10) Inequality is necessary to sustain a healthy and productive society.
This may be the worst reason of them all. Not only is it not necessary, but it's dangerous: Richard Wilkinson and Kate Pickett have documented the numerous studies that correlate inequality with shorter life expectancies, increased disease and health problems, and even higher murder rates.
The statistics clearly indicate that rates of illness in an unequal society are higher at all levels of income, even for the very wealthy.
- Posted in
80 Comments so far
Show AllMost of these reasons are redundant. Number 3 is the one that really matters. Anything that can be tagged as socialism (or "social responsibility", or "social" anything at all) is an inherently evil intrusion on the "rugged individualism" of U.S. capitalist enterprise.
Of course, it's a different story when the accumulated misbegotten wealth of any of those "rugged individual" incorporated persons is at stake. At that point their sustenance becomes a matter of protecting "U.S. interests" which, as we all know, is a patriotic duty and in no way related to any pinko commie socialist support for the commonweal of the peasantry.
The old rallying cry obviously needs some minor updating: Workers of the world, INCORPORATE! You too can make yourselves "too big to fail" and thus eligible for consideration (non-socialist, of course) as a "U.S. interest" worthy of a few tax breaks of your own.
Who knows? The U.S. government might even be persuaded to deploy its military forces actually to promote, protect and defend your wellbeing for a change. But don't count on it. You might be inclined to identify some real terrorist enemies for targetting.
__
P.S.: I'm not exactly kidding. Why not create a real "USA Incorporated" responsible to its shareholders with an appropriate corporate charter of its own? It wouldn't be that difficult. Nor, with some minor diversions of current expenditures for private profits, would it be beyond the means of most Americans to buy into. You might thus be able to buy back some part of your own government's "representative" activities with "supreme" judicial support to boot. It's a lead pipe cinch based on results to date in the "greatest democracy on earth" that your votes alone won't do it and, let's face it, French-style rebellion just ain't in the cards. High time to "think outside the box", as the saying goes, and employ some Judo tactics based on the opponent's own offensive methods.
I kind of like your "USA, Inc." idea -- so that regular workers could potentially enjoy some of the same perks and deference that corporate America currently enjoys from the courts and from Congress.
However, how do you envision that would work? For example, how would it differ from a workers' union? And if it's open to all Americans, how do you keep such an organization from being hi-jacked by (for example) Tea-Partiers, fundamentalist religious groups, and others nefariously funded by wealthy corporate interests?
Good questions. I'm really not sure, but the corporate charter would require some very careful thought. In current circumstances, it would almost be akin to writing a new and updated U.S. Constitution with the objective of actually making it work in accordance with the popular "of, by and for the people" mythology.
Basically, however, its mainly a matter of recognizing and accepting the current realities of "corporate personhood" (at least temporarily) as the key to much influence and control over governance in general and making those realities work for us rather than against us somehow. In other words, one must inevitably use whatever actually works at present to reshape the future. It must surely be obvious by now that merely clinging to the futile mechanisms of a purely fictional "democracy" ain't gonna do it.
American People Hire High-Powered Lobbyist To Push Interests In Congress
http://www.theonion.com/articles/american-people-hire-highpowered-lobbyist-to-push,18204/
From that article: "The 310-million-member group said it will rely on Weldon's considerable clout to ensure its concerns are taken into account ..."
Well, it's a start. Would obviously have a better chance than any attempts by individual "constituents" of the plebian variety. I suspect, however, that Weldon's monetary requirements for the effort may quickly exceed his own $795 an hour honorarium.
The article is from the Onion.
In case you are not familiar with it, The Onion is a satirical paper, nothing in it is actually factual, tho often it can be quite true.
the June 10 issue, which I had lying around has the top headline:
"Massive Flow of Bullshit Continues to Gush From BP Headquarters" - and underneath that is "Obama to Make Reassuring Eye Contact With Every Last American."
So, in order to clean up the corrupt capitalistic system, the commoners should out bid the capitalists for the liars', killers', and thieve's services. In other words, become the detestable scum.
No thanks.
I've never heard anyone state number 10.
Oh, I have. It is essentially just classism.
"Oh, I have."
From anybody prominent? Seriously, this is the first I ever heard it.
It might be more familiar if you've heard of "Gods and Clods." If not for the inequalities, who would do the so called "dirty jobs" and other similar musings.
South Park cartoon charcters don't count. Anyone else?
John Andrews, former Colorado state senate president, has often made this his mantra. Nothing new.
Thanks, what specifically has he said that shows he subscribes to post 10?
Regarding question 10 - http://www.amazon.com/Spirit-Level-Equality-Societies-Stronger/dp/1608190366
Carefully done research!
I believe number 10 is a straw-man argument of sorts, but 9 might have been too few for the writer, and the counter-argument to 10 is valid.
Regarding question 10 - I would suggest this reading- it's nicely done research!!
http://www.amazon.com/Spirit-Level-Equality-Societies-Stronger/dp/1608190366
Just to put some basic information on the record for discussion, the attached data are from the IRS:
Table 1
Summary of Federal Individual Income Tax Data, 2008
(Updated October 2010)
group's
# of returns, share of total tax paid, average tax rate
Top 1%
1,399,606, 38.02%, 23.27%
Top 5%
6,998,029, 58.72%, 20.70%
Top 10%
13,996,058, 69.94%, 18.71%
Top 25%
34,990,145, 86.34%, 15.68%
Top 50%
69,980,290, 97.30%, 13.65%
Bottom 50%
69,980,290, 2.70%, 2.59%
Source: Internal Revenue Service
http://www.taxfoundation.org/news/show/250.html
Thank you.
Fortunately, the rest of us can read: "If state and local taxes, social security tax, and excise taxes are included, the lowest-earning half of America pays 24% of their incomes in taxes, almost as much as the richest 1%."
The relevant # is 70million at the bottom. They don't pay a lot of taxes nor do they always have food on their plate or a roof over their head.
But they do pay a substantial chunk of every penny of their meager income into Social Security.
thats cos they underachieve, its their own fault, stop treating poor as victims, people can pull themselves up & succees if u morons didnt stop propping them up as victims
For someone who writes poorly, you have no business blaming the poor for anything.
Achievement is relative. By definition, no matter HOW skilled and competent people are, half of them "underachieve".
Who else would there to be to fill all those service jobs if everyone did the sort of work, and had the sort of success, that the uber-wealthy do? You couldn't buy ANYTHING, because no one would work in manufacturing, shipping, wholesale, or retail. Managers would have no one to manage, which means no work for them, which means no employment for them.
Of course, most of the income of the top 1-5 percent is capital gains. When you look at total income, you get a much lower effective tax rate.
Buchheit sez: (In No. 5) "A system that allows one man to divert the salaries of 50,000 public workers to his own pockets has gone well beyond 'incentive-based.'"
***
No, no.
That sludge-fund manager merely needs to recalibrate his "incentive" to amass the salaries of 75,000 public workers.
He failed to explain how any money was "diverted". Is he trying to say those public workers weren't paid?
Stop, already.
You're a decent enough propagandist, but you're not obtuse.
Then you can explain how funds were "diverted"? Were the public employees not paid? Answer the question please or don't post.
When they were fired because city and state governments couldn't afford to pay them as they had too many unfunded mandates.
"When they were fired "
Keeping in mind the original point of the author, what specific firings are you talking about, and how did that relate to fees collected by Wall Street money managers?
The ordinary workers pockets were "filled" with their pay; however the rich delved into their pockets and "diverted" the money into their own. "The top tax rate has gone from 90% in 1960, to 70% in 1972, to 50% in 1984 50, to 40% in 1996, to 35% in 2008. But much of billionaires' earnings is subject to only a 15% tax because of a loophole that allows hedge fund income not to be called income.
"Furthermore, about 500 people a year renounce their U.S. citizenship and repatriate themselves to countries such as Belize and the Cayman Islands to avoid taxes entirely."
The percentage of plebeian income paid into social welfare for the rich is the diversion.
"The ordinary workers pockets were "filled" with their pay; however the rich delved into their pockets and "diverted" the money into their own. "
Yes, I already understand how the many of the far left residents here think that "the rich" are thieves, without ever providing support for that position. Likewise, you will be unable to support what you have written here with a specific mechanism and specific historic examples. I'll check back though just in case.
Jakenewton: The author failed because he assumes there's a fixed pie and if someone got 50,000X she must have taken it from some other people as opposed to having grown the pie by the 50,000 she received. If you believe that people are capable of growing the pie through their own industry, creativity, etc., it's very hard also to be 100% in favor of income redistribution because, if we deprive people of the incentive to grow the pie through their own industry and creativity, we all suffer.
"The author failed because he assumes there's a fixed pie "
Maybe so.
The people the author is talking about are in a finance sector that recently, 2006, pulled in 40% of all U.S. profits. This despite the fact they don't make anything. Well, it turns out, they make bubbles that get them rich as they inflate, then pop on other people during foreclosure. You're one of the few people I know who considers predation 'creative'.
Well, why do people just keep giving them money? That's ridiculous!
Reason 11: It gives them more "power" as individuals to do what they want with their money.
With enough money in their pockets, they can easily see to it that government gets its spending all wrong and rewards the wealthy/corporate elite while persecuting small businesses and farmers along with slashing social programs.
P.S.: I had come up with this reason after I had a conversation with jakenewton on taxes and spending from an earlier topic on this site.
I will stand shoulder to shoulder with you in opposition to any case past or future where politicians have received bribes.
Taxes *always* reduce the spending power of those taxed. By definition. Always.
jake newton the republican operative!!
what an idiotic statement
lets have no government services what so ever
or have them paid for by the private sector??? of course that would be a tax
sorry
guess we just have to have no taxes what so ever and no government
in the anarchy that follows we will be much like somalia is today , ruled by warlords and their thugs
guess when the warlords come to take all your stuff, you can tell them that taking your stuff is like a tax and they are not allowed to do it
"what an idiotic statement"
You will please explain then exactly how taking money from someone in the form of taxes does not always reduce their power to spend money.
Not always.
If we consider tariffs to be a tax on imported goods, the tariff *increases* the spending power of the those in affected (domestic) sector. For example, if Good A from the USA costs $5 to produce and the same good costs $1 to produce and export from another country, a tariff of $5 on the other country's exports will make the American good less costly to consumers. As a result, the American producers will sell their goods at $5 and have $5 of spending potential that would not have had otherwise (if the tax/tariff were not imposed, then consumers would likely purchase the foreign good, and the American producers would be have that $5 of spending potential.
I was referring to income tax. That is a direct reduction in the fruits of one's labor, no matter the income level.
Your tariff example is flawed. It seems to assume that the US company would not change it's behaviour in the face of the tariff. The favoritism means they don't have to worry about the competition, and they may very well then cut corners in quality in order to increase profits further.
So, I guess I agree with you, we should abolish income tax entirely, but what to replace it with..? I know lets ramp up capital gains taxes and the inheritance tax to 50%
Let those with a firm belief in capitalism pay the taxes so those who earn income by working don't have to worry about it.
"So, I guess I agree with you, we should abolish income tax entirely,"
I never said we should.
"inheritance tax "
This ones weird, I don't see why inheritance is any different from other transactions that are taxed. I am unsure of the argument that it's money taxed twice.
"Let those with a firm belief in capitalism pay the taxes so those who earn income by working don't have to worry about it."
Why aren't these the same people in many cases?
Fair enough. Income tax usually reduces spending power. There are cases, at least here in Ontario where income tax increases spending power in one sector: health. Ontario tax payers pay a 'health premium' to fund their individual health care expenses. A typcial middle-income person will pay anywhere from $600-$1000 for the year, which covers the vast majority of medical expenses. The tax (or premium, if you use the Ontario Liberals' spin), even if $1000, increases spending power because the alternative (private health insurance for the same range of medical services) is far more expensive than $1000, per year.
That said, firms can't easily change behaviour in the face of foreign competition. Wages may be set by the state or by contract (i.e. collective bargaining). The taxes paid on inputs can not be averted, and if changed, the change can take time -- which may be insufficient to keep the business competitive. The firm can cut corners, but in many sectors this isn't possible without changing the product (i.e. changing the per cent composition of 'orange juice' in concentrated fruit drink might render the finished product to be considered a 'drink' rather than a 'juice', which in turn affects the price that consumers are willing to pay -- people tend to be willing to pay more for juice than for drinks).
" firms can't easily change behaviour in the face of foreign competition."
But the tariff *reduces* that competition, making it easier.
"I will stand shoulder to shoulder with you in opposition to any case past or future where politicians have received bribes."
Provided always, of course, that you at your sole discretion get to define the terminological distinctions. I'll gladly make the same deal in reverse, but it would be mighty hard on the political populace.
Whatever dude.