8 ms·

Because politicians sell progressive income taxes as a way to screw the rich, when it actually just screws the upper middle class, since the actual rich don't h

by cgore 9y ago

Because politicians sell progressive income taxes as a way to screw the rich, when it actually just screws the upper middle class, since the actual rich don't have jobs to tax the income from.

TheAdamAndChe 9y ago
There are many people making over $200,000/yr. With 20 years of investing $150,000 of that, it's incredibly easy to have over $6.5 million. I don't see why it can't be a two-pronged approach with both higher income taxes and wealth taxes. It's what was done in the 1950's, and there was still plenty of wealth then.
- toomuchtodo 9y ago
  > It's what was done in the 1950's, and there was still plenty of wealth then. That time period was one of great prosperity that won't be repeated. Market returns were higher; most of the low hanging fruit has been plucked, and you can expect ~5% in equities returns. Its going to take far more capital now to get the same returns your grandparents had, which is why you see capital chasing returns across the world. https://www.cnbc.com/2017/05/07/get-ready-for-dramatically-lower-stock-market-returns-over-the-next-decade.html https://www.cnbc.com/2017/05/07/get-ready-for-dramatically-l... "The leaders of Vanguard Group, overseers of some $4 trillion in client assets, have been advising investors to expect a typical 60 percent stocks/40 percent bonds portfolio to deliver two- to- three percentage points less in nominal annual returns than its long-term norm. (Since 1926, such an asset mix has returned better than 8.5 percent annualized.)" "Other forecasts are even less generous. Research Affiliates, a quantitative and "smart beta" fund manager, projects that U.S. stocks might only offer one percent a year for the next decade, after inflation. This is based largely on the so-called Shiller P/E, a ratio of the S&P 500 index to its trailing ten-year average earnings, which is now above 29 and higher than any period aside from the run-up to the 1929 and 2000 market peaks." "And with risk-free 10-year government debt yielding a skimpy 2.3 percent in the U.S. and far less elsewhere, all other financial assets have repriced for skimpier future returns as well."
  - TheAdamAndChe 9y ago
    Then why not try to structure our economy so that the lower and middle classes have more money to spend? It seems like that would be a pretty good way to get the economy moving more since giving poorer people money increases the velocity of money considerably[1]. [1] https://en.wikipedia.org/wiki/Velocity_of_money https://en.wikipedia.org/wiki/Velocity_of_money
    - toomuchtodo 9y ago
      I agree entirely.
    - danudey 9y ago
      That's definitely the case, but the goal of modern politics and the top 1% is to accrue wealth, not generate it. Giving the middle classes more money to spend is great for the economy but it only accomplishes their goals if all that money ends up in their portfolios or assets, which means that eventually it all has to trickle up to the top.
    - prostoalex 9y ago
      Because that concept only works in an idyllic small town dominated by sole proprietors. The example they provide > Farmer spends $50 on tractor repair from mechanic. Mechanic buys $40 of corn from farmer. Mechanic spends $10 on barn cats from farmer. does not involve stuff made abroad, massive corporations with economies of scale eliminating the middleman, or foreign-owned entities. Most of that velocity will end up in China invested into another skyscraper ghost town, a massive infrastructure project or a cryptocurrency mining farm.
      - TheAdamAndChe 9y ago
        Then what do you recommend should be done? Because it should be obvious to most that increasing inequality, record-breaking corporate profits combined with a decreasing quality of life for most Americans outside of large cities is leading to a destabilization of our political system.
- et2o 9y ago
  Investing 100% of your post-tax income for 20 years is easy? (Which would get you to three million by the way)
  - TheAdamAndChe 9y ago
    I'm saying there are plenty of people making $200k post-tax. Also, 7% annual returns combined with an additional $150k/yr would lead to having $6.5 million like I said.
    - dionidium 9y ago
      Fewer than 5% of U.S. households [0] (or about 1.5% of working-age people [1]) bring in $200k per year. This is a big country, so I guess that's still "plenty of people," but it's not ordinary. [0] https://statisticalatlas.com/United-States/Household-Income https://statisticalatlas.com/United-States/Household-Income [1] https://www.quora.com/How-many-people-earn-200-000+-per-year-in-the-USA https://www.quora.com/How-many-people-earn-200-000+-per-year...
    - ak217 9y ago
      To make $200K post-tax, you need to make at least $260K pre-tax. In the US, that puts you almost exactly at the boundary of the 1%. I suppose this is a matter of your definition of "plenty of people".
      - TheAdamAndChe 9y ago
        1% of 300 million is still 3 million people. That's a lot of people making a lot of money.
      - clort 9y ago
        There will be well over a million of the 1%ers by my reckoning (google says 122 million taxpayers), which is plenty by some reckoning..
- URSpider94 9y ago
  You can't save $150k a year if you make $200k per year. Your taxes on that income will be over $50k alone. And, even if they are small, you will have some expenses for food, shelter, clothing and transportation - and in most places to hold down a 200k job, you're going to need to half-decent wardrobe.
URSpider94 9y ago
It's not the progressive tax structure that's the problem, it's the fact that cap gains are taxed at a much lower rate than other forms of income.
- walshemj 9y ago
  That's to encourage money to be invested and also to compensate for the risks.
  - inthewoods 9y ago
    Yes and we've seen the outcome - top 1% benefits too much, and results in too much concentration of wealth (along with other structural issues).
    - theodorton 9y ago
      And the problem with raising taxes on capital gains will be investors moving their holdings to other countries to reduce their taxes. So long as the taxes on capital gains are kept at a comparable rate across countries, this isn't a problem.
      - inthewoods 9y ago
        I don't think that's a given - there are plenty of countries with lower capital gain taxes, yet we don't see mass money moving to these countries. Source: https://taxfoundation.org/capital-gains-rate-country-2011-oecd/ https://taxfoundation.org/capital-gains-rate-country-2011-oe...
    - walshemj 9y ago
      If there is no difference between income and capital taxation people wont invest in companies. And companies wont last with out access to capital trust me I have chaired share holder meetings caused by lack of capital
      - 9y ago
jgalt212 9y ago
Amen, brother. This is why I saw Hilary and Obama as a false flag Democrats. Raise the marginal rates and screw the upper middle class (who basically carry this country) and let their billionaire friends keep their loopholes and lower rates on investment income.
- wil421 9y ago
  Democratic or Republican, no difference at the highest levels. They will always support the people in power which are the 1%. I've seen the song and dance for a while now and hoped Obama was different. Promise enough to get elected and hope they forget about the promises after. Trump is literally doing to same thing. NAFTA and NATO are obsolete, oh wait now that I'm in office I didn't mean what I said. They're important.
fulafel 9y ago
The Obama tax hikes were largely aimed at high capital incomes, though the accompanying high pay tax hikes was hardly "screwing the voters" either. See http://money.cnn.com/2015/01/30/pf/taxes/obama-taxes-rich/index.html http://money.cnn.com/2015/01/30/pf/taxes/obama-taxes-rich/in...
- guelo 9y ago
  Pretty sure the proposed taxes in the article you linked to did not pass. The only major tax change Obama was able to get through was the Obamacare related 3.8% Net Investment Income Tax.
  - fulafel 9y ago
    I stand corrected. Still, "politicians" tried to DTRT.
ringaroundthetx 9y ago
and it works because the politicians are pandering to the massive amount of people in the working class who are subject to income taxes exclusively, and don't understand the parallel tax systems
nemo44x 9y ago
Then add a progressive tax to investment income such as dividends, bond interest and proceeds. I don't know why we have a flat tax on investment income but a progressive tax on labor. The easy, and fair fix, is to progressively tax investment income.
- prostoalex 9y ago
  The biggest players in the bond market are either exempt (they're a pension fund, a 401(k), a foreign entity, a university endowment, a charitable organization, a church or other kind of non-profit) or pass-through (mutual fund, ETF). I recommend Ken Fisher's "Debunkery" which covers a lot of economic what-ifs with hard data. Capital gains tax rates and treatment varied widely throughout the US history, yet collected revenues did not.

by cgore 9y ago

Because politicians sell progressive income taxes as a way to screw the rich, when it actually just screws the upper middle class, since the actual rich don't have jobs to tax the income from.

TheAdamAndChe 9y ago

There are many people making over $200,000/yr. With 20 years of investing $150,000 of that, it's incredibly easy to have over $6.5 million. I don't see why it can't be a two-pronged approach with both higher income taxes and wealth taxes. It's what was done in the 1950's, and there was still plenty of wealth then.

toomuchtodo 9y ago
> It's what was done in the 1950's, and there was still plenty of wealth then. That time period was one of great prosperity that won't be repeated. Market returns were higher; most of the low hanging fruit has been plucked, and you can expect ~5% in equities returns. Its going to take far more capital now to get the same returns your grandparents had, which is why you see capital chasing returns across the world. https://www.cnbc.com/2017/05/07/get-ready-for-dramatically-lower-stock-market-returns-over-the-next-decade.html https://www.cnbc.com/2017/05/07/get-ready-for-dramatically-l... "The leaders of Vanguard Group, overseers of some $4 trillion in client assets, have been advising investors to expect a typical 60 percent stocks/40 percent bonds portfolio to deliver two- to- three percentage points less in nominal annual returns than its long-term norm. (Since 1926, such an asset mix has returned better than 8.5 percent annualized.)" "Other forecasts are even less generous. Research Affiliates, a quantitative and "smart beta" fund manager, projects that U.S. stocks might only offer one percent a year for the next decade, after inflation. This is based largely on the so-called Shiller P/E, a ratio of the S&P 500 index to its trailing ten-year average earnings, which is now above 29 and higher than any period aside from the run-up to the 1929 and 2000 market peaks." "And with risk-free 10-year government debt yielding a skimpy 2.3 percent in the U.S. and far less elsewhere, all other financial assets have repriced for skimpier future returns as well."
- TheAdamAndChe 9y ago
  Then why not try to structure our economy so that the lower and middle classes have more money to spend? It seems like that would be a pretty good way to get the economy moving more since giving poorer people money increases the velocity of money considerably[1]. [1] https://en.wikipedia.org/wiki/Velocity_of_money https://en.wikipedia.org/wiki/Velocity_of_money
  - toomuchtodo 9y ago
    I agree entirely.
  - danudey 9y ago
    That's definitely the case, but the goal of modern politics and the top 1% is to accrue wealth, not generate it. Giving the middle classes more money to spend is great for the economy but it only accomplishes their goals if all that money ends up in their portfolios or assets, which means that eventually it all has to trickle up to the top.
  - prostoalex 9y ago
    Because that concept only works in an idyllic small town dominated by sole proprietors. The example they provide > Farmer spends $50 on tractor repair from mechanic. Mechanic buys $40 of corn from farmer. Mechanic spends $10 on barn cats from farmer. does not involve stuff made abroad, massive corporations with economies of scale eliminating the middleman, or foreign-owned entities. Most of that velocity will end up in China invested into another skyscraper ghost town, a massive infrastructure project or a cryptocurrency mining farm.
    - TheAdamAndChe 9y ago
      Then what do you recommend should be done? Because it should be obvious to most that increasing inequality, record-breaking corporate profits combined with a decreasing quality of life for most Americans outside of large cities is leading to a destabilization of our political system.
et2o 9y ago
Investing 100% of your post-tax income for 20 years is easy? (Which would get you to three million by the way)
- TheAdamAndChe 9y ago
  I'm saying there are plenty of people making $200k post-tax. Also, 7% annual returns combined with an additional $150k/yr would lead to having $6.5 million like I said.
  - dionidium 9y ago
    Fewer than 5% of U.S. households [0] (or about 1.5% of working-age people [1]) bring in $200k per year. This is a big country, so I guess that's still "plenty of people," but it's not ordinary. [0] https://statisticalatlas.com/United-States/Household-Income https://statisticalatlas.com/United-States/Household-Income [1] https://www.quora.com/How-many-people-earn-200-000+-per-year-in-the-USA https://www.quora.com/How-many-people-earn-200-000+-per-year...
  - ak217 9y ago
    To make $200K post-tax, you need to make at least $260K pre-tax. In the US, that puts you almost exactly at the boundary of the 1%. I suppose this is a matter of your definition of "plenty of people".
    - TheAdamAndChe 9y ago
      1% of 300 million is still 3 million people. That's a lot of people making a lot of money.
    - clort 9y ago
      There will be well over a million of the 1%ers by my reckoning (google says 122 million taxpayers), which is plenty by some reckoning..
URSpider94 9y ago
You can't save $150k a year if you make $200k per year. Your taxes on that income will be over $50k alone. And, even if they are small, you will have some expenses for food, shelter, clothing and transportation - and in most places to hold down a 200k job, you're going to need to half-decent wardrobe.

URSpider94 9y ago

It's not the progressive tax structure that's the problem, it's the fact that cap gains are taxed at a much lower rate than other forms of income.

walshemj 9y ago
That's to encourage money to be invested and also to compensate for the risks.
- inthewoods 9y ago
  Yes and we've seen the outcome - top 1% benefits too much, and results in too much concentration of wealth (along with other structural issues).
  - theodorton 9y ago
    And the problem with raising taxes on capital gains will be investors moving their holdings to other countries to reduce their taxes. So long as the taxes on capital gains are kept at a comparable rate across countries, this isn't a problem.
    - inthewoods 9y ago
      I don't think that's a given - there are plenty of countries with lower capital gain taxes, yet we don't see mass money moving to these countries. Source: https://taxfoundation.org/capital-gains-rate-country-2011-oecd/ https://taxfoundation.org/capital-gains-rate-country-2011-oe...
  - walshemj 9y ago
    If there is no difference between income and capital taxation people wont invest in companies. And companies wont last with out access to capital trust me I have chaired share holder meetings caused by lack of capital
    - 9y ago

jgalt212 9y ago

Amen, brother. This is why I saw Hilary and Obama as a false flag Democrats. Raise the marginal rates and screw the upper middle class (who basically carry this country) and let their billionaire friends keep their loopholes and lower rates on investment income.

wil421 9y ago
Democratic or Republican, no difference at the highest levels. They will always support the people in power which are the 1%. I've seen the song and dance for a while now and hoped Obama was different. Promise enough to get elected and hope they forget about the promises after. Trump is literally doing to same thing. NAFTA and NATO are obsolete, oh wait now that I'm in office I didn't mean what I said. They're important.

fulafel 9y ago

The Obama tax hikes were largely aimed at high capital incomes, though the accompanying high pay tax hikes was hardly "screwing the voters" either. See http://money.cnn.com/2015/01/30/pf/taxes/obama-taxes-rich/index.html http://money.cnn.com/2015/01/30/pf/taxes/obama-taxes-rich/in...

guelo 9y ago
Pretty sure the proposed taxes in the article you linked to did not pass. The only major tax change Obama was able to get through was the Obamacare related 3.8% Net Investment Income Tax.
- fulafel 9y ago
  I stand corrected. Still, "politicians" tried to DTRT.

ringaroundthetx 9y ago

and it works because the politicians are pandering to the massive amount of people in the working class who are subject to income taxes exclusively, and don't understand the parallel tax systems

nemo44x 9y ago

Then add a progressive tax to investment income such as dividends, bond interest and proceeds. I don't know why we have a flat tax on investment income but a progressive tax on labor. The easy, and fair fix, is to progressively tax investment income.

prostoalex 9y ago
The biggest players in the bond market are either exempt (they're a pension fund, a 401(k), a foreign entity, a university endowment, a charitable organization, a church or other kind of non-profit) or pass-through (mutual fund, ETF). I recommend Ken Fisher's "Debunkery" which covers a lot of economic what-ifs with hard data. Capital gains tax rates and treatment varied widely throughout the US history, yet collected revenues did not.