Why doesn't the tax system take into account that there are millionaires and billionaires?

Discussion in 'Budget & Taxes' started by wgabrie, Aug 20, 2019.

  1. Meta777

    Meta777 Moderator Staff Member

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    What did you mean then when you mentioned means earlier?
    Also, what should the rate be in your opinion, approximately?
     
  2. vman12

    vman12 Well-Known Member Past Donor

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    Income level.

    I don't know what that rate should be.

    Perhaps if people had some skin in the game instead of getting back more than they paid, they'd be a little more civic minded about where our tax money goes.
     
  3. Meta777

    Meta777 Moderator Staff Member

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    Income level?...
    How would that play into your flat rate system?

    Perhaps, but its hard to say exactly how effective the system would be without having a little more to go on.
     
  4. vman12

    vman12 Well-Known Member Past Donor

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    A percentage of your total income.

    I haven't designed a full fledged system, but it should be as simple as possible, with as few exceptions as possible. Steve Forbes has written quite a bit on this.

    Such a system puts everyone on equal footing, and with an equal contribution of their monetary wealth into such a system.

    Funny how everything is about "equality" until it comes time to pay.

    The only thing I would add to such a system, is the ability to put a portion of your tax dollars to a project of your choice.

    That would also encourage more civic engagement, I believe.
     
    Last edited: Aug 22, 2019
  5. Meta777

    Meta777 Moderator Staff Member

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    Ah OK, interesting. Though I think that last part would actually make your system quite a bit more complicated.
    Still, as long as they didn't drastically increase taxes on the blue-collar working class or further explode the deficit,
    as many proposals these days seem to do, I think either of the two ideas mentioned in this thread so far could work.
    But as they say, the devil is always in the details...

    -Meta
     
  6. vman12

    vman12 Well-Known Member Past Donor

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    It wouldn't have to necessarily be more complicated for anyone but politicians.

    It would force the people in government to address issues the people actually want fixed.

    Yes, the details are always the sticky part.
     
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  7. Meta777

    Meta777 Moderator Staff Member

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    What sort of effect would this set up have on the deficit?
     
  8. wgabrie

    wgabrie Well-Known Member Donor

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    I don't know.
     
  9. Wildjoker5

    Wildjoker5 Well-Known Member

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    Oh? Hollywood liberal elites and sports stars are Trumps friends? Little FYI, CEOs employ people and have thousands of people paid while contributing to society with new products. Celebrities and Athletes are just entertainment, and employ no one other than their own staff and entourage. Highest paid CEO, earns $43 million/year. That would land them #25 in the athlete list, and #72 with celebrities. Plus, I don't think Trump started or stopped the tax brackets where they sit, pretty sure they've been there even through Obama's reign. So your "orange man bad" bias is showing.
     
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  10. Meta777

    Meta777 Moderator Staff Member

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    Then how can we be sure that what you proposed would be a net positive for us and not a net negative???
     
  11. wgabrie

    wgabrie Well-Known Member Donor

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    That would require knowing how many US taxpayers are in each income bracket. Not the current income brackets but the ones that I thought up. It would also be a progressive tax that counts income from lowest to highest bracket in steps.
     
  12. Robert Urbanek

    Robert Urbanek Active Member

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    "Just entertainment" employs a lot of people. Haven't you noticed those really long list of credits at the end of every new movie?
     
  13. FreshAir

    FreshAir Well-Known Member Past Donor

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    no one should pay any taxes on income earned under the poverty limit, rich or poor.. any dollars earned over that, you start paying taxes on
     
    Last edited: Aug 25, 2019
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  14. Mr_Truth

    Mr_Truth Well-Known Member

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    Worse still is the tax system's allowance of overseas tax shelters. This benefits the wealthy welfare elites exclusively. Thus, while you and all else pay taxes to finance wars overseas, the rich don't pay a cent.
     
  15. Meta777

    Meta777 Moderator Staff Member

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    So what made you pick the particular tax brackets you did?
    What exactly were the numbers based on?

    Of course,...for any analysis, we are limited by the data that's available to us.
    Luckily, the data on tax payers and income brackets isn't actually all that bad (though I'd prefer more be in pdf).
    I believe it wouldn't take too much to interpret the below info to calculate the implications of your proposal.

    Data from 2016:
    Code:
              MinIncome   IncomeGroups   NumberFams  AvgIncome    Households  HHAveInc  HHMinInc
    
    Top 100%  $0          Bottom 20%     33,466,060  $8,582       24,900,000  $15,600   $0
    Top 80%   $17,110     Top 80-60%     35,078,883  $18,318      26,100,000  $33,300   $23,000
    Top 60%   $28,790     Top 60-40%     33,734,864  $32,622      25,100,000  $59,300   $38,700
    Top 40%   $43,080     Top 40-20%     33,600,462  $53,086      25,000,000  $96,500   $57,900
    Top 20%   $66,290     Top 20-10%     16,800,231  $81,472      12,500,000  $148,100  $89,100
    
    Code:
    Top 10%   $124,380    Top 10-5%      8,482,250   $147,109
    Top 5%    $179,490    Top 5-1%       6,785,800   $252,441
    Top 1%    $430,860    Top 1-0.5%     848,225     $515,505
    Top .5%   $652,630    Top 0.5-0.1%   678,580     $993,509
    Top .1%   $1,874,500  Top 0.1-0.01%  152,681     $3,502,210
    Top .01%  $9,642,000  Top 0.01%      16,965      $28,263,177
    
    Hopefully that all formatted OK...
    Note: Average Income for Top 1% of families as a unified group is $1,252,995
    Number of families in the unified Top 1% group is 1,696,451

    First table was derived from CBO data. Second is from a Quarterly Journal of Economics analysis. Due to the way the two sources average and round things the numbers don't line up perfectly, but they should be close enough to give us a general sense about how your proposal would impact things.

    The third table below lists out current effective federal tax rates.
    Code:
              TaxRate  IncomeGroups
    
    Top 100%  1.7%     Bottom 20%
    Top 80%   9.4%     Top 80-60%
    Top 60%   13.9%    Top 60-40%
    Top 40%   17.9%    Top 40-20%
    Top 20%   21.2%    Top 20-10%
    Top 10%   23.6%    Top 10-5%
    Top 5%    26.8%    Top 5-1%
    Top 1%    33.3%    Top 1%
    
    https://www.cbo.gov/system/files/2019-07/55413-CBO-supplemental-data.xlsx
    https://eml.berkeley.edu/~saez/TabFig2016.xls (Table0)(2nd tab in file)

    It'll take a few more calculations to do it, but I think the above ought to be enough
    to get us into the ballpark of what your amended tax brackets would mean overall.

    -Meta
     
  16. wgabrie

    wgabrie Well-Known Member Donor

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    A while ago I ran across a news article that said that people making $100,000 or more are moving ahead and leaving the lower-income classes behind. So I decided that with that being the case, as well as wages stagnating for decades, that the tax rate should start at the $100,000 income bracket.

    I also ran across some data, a while ago, that said that tax rates used to be 7%. :) So I thought I'd start there. Of course, the first income bracket being poor, and my not wanting there to be a tax on them, I cut out the first 7% and left it at 0%.

    The second bracket is from $100,001 to $1,000,000. I wanted there to be a tax break for everyone in the middle class to include up to a million dollars of income.

    As you may have noticed the tax rate goes up by a multiple of 7 in each of my brackets. That's mainly because I have not decided on a final rate. I just wanted there to be several tax brackets to include millionaires and billionaires.
     
  17. bringiton

    bringiton Well-Known Member

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    More to the point, why should income be a basis of taxation at all? The two most fundamental and widely accepted principles of sound taxation policy are "beneficiary pay" and "ability to pay." Neither is strongly associated with income. Ability to pay is by definition conferred by assets or net worth, not income, and benefit is conferred by value of privileges owned.
     
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  18. Robert Urbanek

    Robert Urbanek Active Member

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    That would seem to be an argument for larger estate taxes.
     
  19. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I question whether your math works out.
    Have you done some basic calculations to get an idea what the tax rate would have to be on everyone above $400,000 if those earning less than $100,000 were exempt from taxes?
     
    Last edited: Sep 5, 2019
  20. bringiton

    bringiton Well-Known Member

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    It would certainly be better than taxing earned income, but estate taxes are too easy to dodge.
     
  21. wgabrie

    wgabrie Well-Known Member Donor

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    I did a quick calculation using Meta777's data. Here's a preliminary try using my original values
    ;

    upload_2019-9-5_19-51-14.png

    So, $800-Billion tax income at my original rates. I know that's far and away too small to deal with the $4 trillion dollars in spending. It won't work.
     
  22. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Estate taxes sort of violate the fairness rule. First of all, the money has already been taxed. Why should that money be taxed once again if it is the wealthy person's child who spends the money instead of the wealthy person who earned it?
     
    Last edited: Sep 6, 2019
  23. Robert Urbanek

    Robert Urbanek Active Member

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    Well, like you said the wealthy child may have done nothing to earn the money, and thus is undeserving of the wealth. If they did do something for their parents, then that inheritance should be considered as earned income. As money goes through the system, it is taxed repeatedly anyway. Your wages are taxed as income, then that money is taxed again for sales taxes or property taxes.

    Since the government prints and coins the money, the government can decide who gets it. Render unto Caesar . . .
     
  24. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    That's a poor argument. The government still taxes exchanges even if no money was involved. (i.e. If I trade you gold coins for you fixing my fence, the same tax has to still be paid)

    If I'm a wealthy person and have earned money and paid taxes in it, don't I have just as much right to give my money away for someone else to spend as I do to spend it myself?
    If a rich person wants to buy something for his son instead of himself, are you going to argue it should be taxed more??
     
    Last edited: Sep 6, 2019
  25. wgabrie

    wgabrie Well-Known Member Donor

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    Something's wrong. I can't get more than 1Trillion in income tax at current tax bracket levels:
    upload_2019-9-6_18-40-2.png
     

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