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The rich currently pay effective income taxes at a lower rate than the middle class, thanks to their close association with corporations and much of their gains

The rich currently pay effective income taxes at a lower rate than the middle class, thanks to their close association with corporations and much of their gains being stock related. Taxes on the rich are just recovering from all-time lows in the Bush years. So stop acting as if the rich are being bled dry or pushed to a limit. They avoid taxes using offshore strategies because they can, not because they're in dire straights. And they are succeeding in paying lower rates than anyone else. Meanwhile, one of the major parties of the country wants to cut estate and upper end income taxes even more, and raise them on the middle and poor. The fight isn't happening at the rich's doorsteps, it's happening at the doorsteps of the middle and poor, pushed there by the rich.

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twblalock 10y ago
> So stop acting as if the rich are being bled dry or pushed to a limit. I never said they were being bled dry. I said they already pay most of the taxes, and it seems unjustifiable to ask them for even more, while at the same time demonizing them for not paying their "fair share" -- as if paying more than half of the taxes isn't already a major contribution. Their ability to pay is not relevant to my argument.
- enraged_camel 10y ago
  Fair is in the eye of the beholder. But the only reason the rich pay so much in nominal taxes is because their incomes (which are directly and strongly correlated with their wealth) are so ridiculously high. Keep in mind that just because Bob is paying a million dollars in taxes and Julia is paying ten dollars in taxes does not mean the system is unfair towards Bob. Especially if Bob should actually be paying three million dollars in taxes, but has used creative accounting practices and tax avoidance schemes to reduce his tax burden.
  - twblalock 10y ago
    > Especially if Bob should actually be paying three million dollars in taxes, but has used creative accounting practices and tax avoidance schemes to reduce his tax burden. If the accounting schemes and tax avoidance schemes are legal according to the tax code, then they are what determine what he should pay. The amount someone should pay is the amount he or she is legally required to pay. The tax laws are the only standard by which the amount of taxes someone should pay can be determined.
    - deathcakes 10y ago
      And of course tax law has been the same since the dawn of time, there can be no argument to brook with the idea that it currently does not work. Morals musn't enter this argument, it would muddy the waters too much.
    - enraged_camel 10y ago
      I thought we were talking about fairness, not legality. They are different concepts that are only sometimes related.
      - hueving 10y ago
        If we're just talking about 'fairness' in the non legal sense, why is it that taxes should be income-based anyway?
    - toomuchtodo 10y ago
      Agree! Which is why it's time to vote for an increase in taxes on the highest marginal income bands. And then, the law being the law, those taxes will be paid.
  - gozur88 10y ago
    >Keep in mind that just because Bob is paying a million dollars in taxes and Julia is paying ten dollars in taxes does not mean the system is unfair towards Bob. Yes it does. The reason Bob pays more has nothing to do with fairness. Bob has money the government can take without his permission and Julia doesn't. That's the long and the short of it.
- deathcakes 10y ago
  I would have to disagree almost entirely - their ability to pay is why they are being asked to. This much is basic economics, I should have thought. Someone who has no more to give cannot, and there is little point asking. Most of the wealth == most of the taxes. This is justified in a basic arithmetical sense.
  - twblalock 10y ago
    > Most of the wealth == most of the taxes. This is justified in a basic arithmetical sense. No, most of the income == most of the taxes, and that is the situation we are already in. My point is that it's hard to justify asking for even more money from the group of people who already pay more than half of the taxes.
    - eli 10y ago
      I think I could justify it just fine.
      - twblalock 10y ago
        > I think I could justify it just fine. Do it, then. Don't just post worthless snark.
        eli 10y ago
        Taxes on the wealthy are at historic lows and wealth inequality at historic highs at a time when we have many important but underfunded programs that would benefit all of us. What's the argument against it? That it isn't "fair"? That rich people will stop trying to earn more money? I don't find that to be credible.
        twblalock 10y ago
        There are several arguments against it: If you depend on a small number of people for the majority of tax revenue, you will end up with unstable revenue. Look what happened to California's tax revenue during the 2008 recession. It dropped because the small number of rich people who pay more than half of the taxes got hit pretty hard by the recession. Besides, do we really want to live in a society where only a small group of people has a financial stake in the funding of the government? Voters would probably be a bit more informed if they had some skin in the game. We really don't want to live in a society where the majority of voters will always approve spending increases because they know their taxes won't increase, and the cost of the increase will be borne by the top few percent. That will get us a runaway train of government spending.
- mixmastamyk 10y ago
  Hmm, you didn't address his point about corporate loopholes and capital gains, which I thought was the more interesting part of the argument.
todd8 10y ago
I don't believe this is true. I'd be happy to change my mind with some evidence. See [1]. [1] http://www.pgpf.org/chart-archive/0008_tax-system http://www.pgpf.org/chart-archive/0008_tax-system
charlesdm 10y ago
Tax avoidance is mostly happening because tax rates are seen as too high by the rich. Paying 40% tax on $50,000 is different to paying 40% tax on $10m. Past a certain point, setting up an avoidance mechanic (if one exists for the investment you want to make) will be cheaper than actually paying the default tax rate. Avoidance can never be stopped, because it's mostly structuring transactions in legally allowed but clever ways and you can't stop that (or you would block normal, legal transactions as well). Say I have $10m I want to invest in an international company. If I do it in the most obvious way, by capitalising an entity, I might get a 30% return on my money after 3 years after paying all taxes. Alternatively, I can structure it in a different way, and make 50% in 3 years, because I end up paying less tax. The difference is an extra $2m on $10m. If the amount to set up a structure/attorney fees/possibly litigation fees < "normal" tax to pay -> avoid. The only real solution is to lower rates across the board by getting rid of most deductions. If you remove the incentive to avoid, it'll be less worthwhile to avoid, and most people will stop doing it. How much people would put in an effort to avoid taxes, if the actual tax rate was, say 10%?
- dpark 10y ago
  > Paying 40% tax on $50,000 is different to paying 40% tax on $10m. You're right. It's way different to charge 40% on $50k, because the person making 50k probably can't make ends meet if you charge them 40% tax. The person making $10MM has no such trouble.
  - deleted 10y ago
    [deleted]
  - charlesdm 10y ago
    I'm not saying it's right, I'm just saying how it is and that it's a problem that is very hard to fix. For wealthy people, tax is just another expense to push as close to zero as possible.
    - dpark 10y ago
      I completely agree that it's a hard problem. I don't think there's a fix that involves lowering the tax burden on the wealthy, though. You can dump more taxes on the middle class and effectively reduce the level of avoidance but I don't think that's a net gain for society. I think it would actually be a huge loss.
refurb 10y ago
The rich currently pay effective income taxes at a lower rate than the middle class That's not true at all.[1] For those making $50K-$100K, 87% have less than a 15% effective tax rate. For those making $200K or more, Only 14% pay less than a 15% tax rate with 84% paying more than 15%. Here is another set of data.[2] Effective tax rates are strongly associated with higher incomes. [1]http://www.taxpolicycenter.org/statistics/effective-tax-rate-size-income http://www.taxpolicycenter.org/statistics/effective-tax-rate... [2]http://taxfoundation.org/blog/chart-day-effective-tax-rates-income-category http://taxfoundation.org/blog/chart-day-effective-tax-rates-...

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twblalock 10y ago

> So stop acting as if the rich are being bled dry or pushed to a limit. I never said they were being bled dry. I said they already pay most of the taxes, and it seems unjustifiable to ask them for even more, while at the same time demonizing them for not paying their "fair share" -- as if paying more than half of the taxes isn't already a major contribution. Their ability to pay is not relevant to my argument.

enraged_camel 10y ago
Fair is in the eye of the beholder. But the only reason the rich pay so much in nominal taxes is because their incomes (which are directly and strongly correlated with their wealth) are so ridiculously high. Keep in mind that just because Bob is paying a million dollars in taxes and Julia is paying ten dollars in taxes does not mean the system is unfair towards Bob. Especially if Bob should actually be paying three million dollars in taxes, but has used creative accounting practices and tax avoidance schemes to reduce his tax burden.
- twblalock 10y ago
  > Especially if Bob should actually be paying three million dollars in taxes, but has used creative accounting practices and tax avoidance schemes to reduce his tax burden. If the accounting schemes and tax avoidance schemes are legal according to the tax code, then they are what determine what he should pay. The amount someone should pay is the amount he or she is legally required to pay. The tax laws are the only standard by which the amount of taxes someone should pay can be determined.
  - deathcakes 10y ago
    And of course tax law has been the same since the dawn of time, there can be no argument to brook with the idea that it currently does not work. Morals musn't enter this argument, it would muddy the waters too much.
  - enraged_camel 10y ago
    I thought we were talking about fairness, not legality. They are different concepts that are only sometimes related.
    - hueving 10y ago
      If we're just talking about 'fairness' in the non legal sense, why is it that taxes should be income-based anyway?
  - toomuchtodo 10y ago
    Agree! Which is why it's time to vote for an increase in taxes on the highest marginal income bands. And then, the law being the law, those taxes will be paid.
- gozur88 10y ago
  >Keep in mind that just because Bob is paying a million dollars in taxes and Julia is paying ten dollars in taxes does not mean the system is unfair towards Bob. Yes it does. The reason Bob pays more has nothing to do with fairness. Bob has money the government can take without his permission and Julia doesn't. That's the long and the short of it.
deathcakes 10y ago
I would have to disagree almost entirely - their ability to pay is why they are being asked to. This much is basic economics, I should have thought. Someone who has no more to give cannot, and there is little point asking. Most of the wealth == most of the taxes. This is justified in a basic arithmetical sense.
- twblalock 10y ago
  > Most of the wealth == most of the taxes. This is justified in a basic arithmetical sense. No, most of the income == most of the taxes, and that is the situation we are already in. My point is that it's hard to justify asking for even more money from the group of people who already pay more than half of the taxes.
  - eli 10y ago
    I think I could justify it just fine.
    - twblalock 10y ago
      > I think I could justify it just fine. Do it, then. Don't just post worthless snark.
      - eli 10y ago
        Taxes on the wealthy are at historic lows and wealth inequality at historic highs at a time when we have many important but underfunded programs that would benefit all of us. What's the argument against it? That it isn't "fair"? That rich people will stop trying to earn more money? I don't find that to be credible.
        twblalock 10y ago
        There are several arguments against it: If you depend on a small number of people for the majority of tax revenue, you will end up with unstable revenue. Look what happened to California's tax revenue during the 2008 recession. It dropped because the small number of rich people who pay more than half of the taxes got hit pretty hard by the recession. Besides, do we really want to live in a society where only a small group of people has a financial stake in the funding of the government? Voters would probably be a bit more informed if they had some skin in the game. We really don't want to live in a society where the majority of voters will always approve spending increases because they know their taxes won't increase, and the cost of the increase will be borne by the top few percent. That will get us a runaway train of government spending.
mixmastamyk 10y ago
Hmm, you didn't address his point about corporate loopholes and capital gains, which I thought was the more interesting part of the argument.

todd8 10y ago

I don't believe this is true. I'd be happy to change my mind with some evidence. See [1]. [1] http://www.pgpf.org/chart-archive/0008_tax-system http://www.pgpf.org/chart-archive/0008_tax-system

charlesdm 10y ago

Tax avoidance is mostly happening because tax rates are seen as too high by the rich. Paying 40% tax on $50,000 is different to paying 40% tax on $10m. Past a certain point, setting up an avoidance mechanic (if one exists for the investment you want to make) will be cheaper than actually paying the default tax rate. Avoidance can never be stopped, because it's mostly structuring transactions in legally allowed but clever ways and you can't stop that (or you would block normal, legal transactions as well). Say I have $10m I want to invest in an international company. If I do it in the most obvious way, by capitalising an entity, I might get a 30% return on my money after 3 years after paying all taxes. Alternatively, I can structure it in a different way, and make 50% in 3 years, because I end up paying less tax. The difference is an extra $2m on $10m. If the amount to set up a structure/attorney fees/possibly litigation fees < "normal" tax to pay -> avoid. The only real solution is to lower rates across the board by getting rid of most deductions. If you remove the incentive to avoid, it'll be less worthwhile to avoid, and most people will stop doing it. How much people would put in an effort to avoid taxes, if the actual tax rate was, say 10%?

dpark 10y ago
> Paying 40% tax on $50,000 is different to paying 40% tax on $10m. You're right. It's way different to charge 40% on $50k, because the person making 50k probably can't make ends meet if you charge them 40% tax. The person making $10MM has no such trouble.
- deleted 10y ago
  [deleted]
- charlesdm 10y ago
  I'm not saying it's right, I'm just saying how it is and that it's a problem that is very hard to fix. For wealthy people, tax is just another expense to push as close to zero as possible.
  - dpark 10y ago
    I completely agree that it's a hard problem. I don't think there's a fix that involves lowering the tax burden on the wealthy, though. You can dump more taxes on the middle class and effectively reduce the level of avoidance but I don't think that's a net gain for society. I think it would actually be a huge loss.

refurb 10y ago

The rich currently pay effective income taxes at a lower rate than the middle class That's not true at all.[1] For those making $50K-$100K, 87% have less than a 15% effective tax rate. For those making $200K or more, Only 14% pay less than a 15% tax rate with 84% paying more than 15%. Here is another set of data.[2] Effective tax rates are strongly associated with higher incomes. [1]http://www.taxpolicycenter.org/statistics/effective-tax-rate-size-income http://www.taxpolicycenter.org/statistics/effective-tax-rate... [2]http://taxfoundation.org/blog/chart-day-effective-tax-rates-income-category http://taxfoundation.org/blog/chart-day-effective-tax-rates-...