10 ms·

Careful. The two articles rely on vastly different cherry-picked definitions of who counts as rich, and neither claim is even remotely true anymore if you use t

by makomk 7y ago

Careful. The two articles rely on vastly different cherry-picked definitions of who counts as rich, and neither claim is even remotely true anymore if you use the other definition. The top 1% are indeed audited at about the same rate as the working poor, but they also pay higher taxes than everyone else. This NYT article on the other hand picks out the top 400, who apparently pay lower taxes but are much more aggressively audited by the IRS than less wealthy people even with the funding cuts limiting their ability to do so. (According to the linked letter from the IRS, they heavily audit roughly the top 20,000 most well-off Americans.)

deleted 7y ago
[deleted]
newen 7y ago
Lower tax rates, not necessarily lower taxes.
- tanderson92 7y ago
  From TFA: > They have constructed a historical database that tracks the tax payments of households at different points along the income spectrum going back to 1913, when the federal income tax began. It may be reading the book for the full detail on methods and results. I plan to.
  - newen 7y ago
    I was saying that the reason the IRS would audit richer people more is because they would pay more taxes even though they might have lower tax rates.
- rc_kas 7y ago
  Lower tax rate is indeed my definition of lower taxes. A lower tax payment is a different thing.
  - koheripbal 7y ago
    The problem is that "tax rate" is an ambiguous term because different kinds of income at taxed at different rates. So, for example, if someone makes most of their money on dividends, then they pay capital gains tax, and it appears like they are unfairly paying a lower rate than everyone else. ...but that's not a fair comparison because it's a different sort of income, with a VASTLY riskier risk profile. Taxing it at the income rate wouldn't make sense. In the past, in the US, capital gains wasn't taxed at all because it was considered double taxation (since the investment was already taxed). ...and in some other countries, there is no tax on capital gains. I've seen people claim that country XYZ has higher tax rates than the US, but then when you look closed, they have zero capital gains taxes.
    - Retric 7y ago
      In the end the real tax rate is simply government spending as a percentage of GDP. Everything else is just shifting around who pays what and when not what the average ends up as. In the US that’s 41.6 percent GDP which is in line with Canada at 42%: https://en.m.wikipedia.org/wiki/Government_spending#As_a_percentage_of_GDP https://en.m.wikipedia.org/wiki/Government_spending#As_a_per... PS: Either lower taxes on capital gains or allowing people to deduct losses is reasonable in the name of risk, but we do both.
      - AnthonyMouse 7y ago
        Really what we should do with capital gains is allow people to deduct losses including inflation, so that we tax the total real value gain at the ordinary rate, and do so when the money is actually divested rather than only moved from one investment security to another (because one of the arguments for lower capital gains rates is that higher rates causes money to be locked into securities the investor wouldn't otherwise continue to hold). Or just use a consumption tax, which is largely the same thing but a lot less complicated.
        ScottBurson 7y ago
        > what we should do with capital gains is allow people to deduct losses including inflation Yes, I've come to this conclusion too. The long-standing argument that capital gains rates should be low is about what happens, for example, if your gain on an investment exactly matches inflation: you'd pay taxes on it, but you haven't made any profit in real dollars. The right fix for that is not to divide your paper gain by some amount before taxing it; it's to subtract the loss due to inflation. In times of low inflation, as we have now, this won't make much difference, but if inflation picks up again at some point, it will make quite a large difference. Of course, such a plan raises the question of exactly what inflation estimator one should use. I'm not enough of an expert to have a strong opinion, but the T-bill rate [0] seems like a reasonable first cut, since it's a good estimator for the risk-free rate of return. Paper gains from holding T-bills would thus not be taxed at all. Whatever the inflation estimator used, the more important (and likely more controversial) aspect of the proposal is that gains beyond that amount be taxed as ordinary income. The argument is one of simple fairness: once the inflation problem is handled, how can one justify doing otherwise? [0] https://www.investopedia.com/terms/t/treasurybill.asp https://www.investopedia.com/terms/t/treasurybill.asp -- Okay, I see there isn't just one rate, since the rate depends on the maturity interval, but we can go with the highest one, which is the one for the 52-week bill. This creates the oddity that holders of shorter-term bills will actually get a tax credit, but it will be small; I think we can live with this.
- godelski 7y ago
  This is a very important point. Tax rates and taxes are very different. We have a marginal tax system so effective rates should be higher for those that make more. Them paying lower tax rates (like Buffet said) is them having more loopholes in the system.
- WheelsAtLarge 7y ago
  True but all of this tax discussion is about perceived fairness. I may pay a few thousand and a billionaire will pay millions in taxes but if the overall tax rate is lower for the billionaire then I'm going to get upset. It's just human nature.
pro8ndi 7y ago
Nah we don’t need to be careful here. The threat of violence is the only blocker to raising taxes. All out war is bad for business. The rich are absolutely not special. And our system does not give on shit about being careful about fairness for the poor. Where are the billion dollar bailouts for average workers? Wall Street however: oh you fucked up? Try again on us! You can point to some carefully contextualized economic math and I can point to Greenspan saying in 1997 wage stagnation is keeping people in jobs which is good for business. They know and have for years what they’re doing at a policy level. They’re benefiting the rich. Shove careful up your backside. We don’t owe them servicing debt their profits foist on us. Tbh I don’t feel any obligation to support “careful” politically. Let the elite play the same game of “where is my next meal coming from?” roulette. Stay home, figure it out with your neighbors.
jellicle 7y ago
> The top 1% are indeed audited at about the same rate as the working poor, but they also pay higher taxes than everyone else. But they don't. That's the point. Your conventional wisdom is wrong. The USA has a large number of regressive taxes, which tax the poor more heavily than the rich. These have been steadily expanded. And it has one, only one, progressive tax - the federal (not state) income tax - which has been steadily made less progressive in recent years to the point where overall taxation is at best flat and more likely slightly regressive.
- kevinwang 7y ago
  The actual article contains charts that seem to support the claim that the top 1% pay higher taxes
  - zzzeek 7y ago
    barely, and the point of the chart is that over the past 70 years the gap has gone from being being very progressive to almost flat or regressive based on income level.
  - dv_dt 7y ago
    I think there is a key language ambiguity here. Whatever your position on what the rich should pay, there is a question of what is being paid as a proportional rate of total income, vs what is being paid in absolute terms. Confounding that difference are also issues of income tax rate, vs capital gains rates and wealth vs income. The wealthy pay in absolute terms, more dollars, but they pay a lower rate than others.
    - joshuamorton 7y ago
      No, according to this article, the 1% continue to pay a larger percent of their income. It is only once you move into the 1% of the 1% that the rate again decreases.
      - mistermann 7y ago
AnthonyMouse 7y ago
> The two articles rely on vastly different cherry-picked definitions of who counts as rich, and neither claim is even remotely true anymore if you use the other definition. One of the most important things to understand about tax discussions is that there are two broad classes of "rich" -- high paid salaried employees vs. wealthy investors. When you see claims like "the top 20% of people pay most of the taxes", that's mostly the high paid salaried employees. Cardiologists making six figure salaries pay high tax rates, and there are a lot of doctors and lawyers and engineers in the population, so they pay most of the taxes. When you see claims about rich people paying low tax rates, that's corporations and wealthy investors hiring accountants to minimize their taxable income. The distinction is really important because it means the problem isn't marginal rates, it's the complexity of the tax code which allows people with large fortunes to game the system. A simple VAT with some kind of dividend/UBI to make it more progressive would eliminate most of those games. It would also mean that individuals wouldn't have to file tax returns at all, which would save hundreds of millions of man hours every year.
- Joeri 7y ago
  The rich spend a smaller share of their income, so a VAT scheme would in practice produce a regressive taxation scheme, with the lowest incomes paying relatively the most, because they have to spend all of their income.
  - Forbo 7y ago
    What about a flat transactional tax that occurs any time money changes hands? I found this not too long ago and have been enamored with the idea: http://apttax.com/execsummary.php http://apttax.com/execsummary.php
    - Forbo 7y ago
      Fuck me, right? Would be nice to know why this is seemingly such a shitty idea, but guess I'll never hear why.
      - 7y ago

by makomk 7y ago

deleted 7y ago

[deleted]

newen 7y ago

Lower tax rates, not necessarily lower taxes.

tanderson92 7y ago
From TFA: > They have constructed a historical database that tracks the tax payments of households at different points along the income spectrum going back to 1913, when the federal income tax began. It may be reading the book for the full detail on methods and results. I plan to.
- newen 7y ago
  I was saying that the reason the IRS would audit richer people more is because they would pay more taxes even though they might have lower tax rates.
rc_kas 7y ago
Lower tax rate is indeed my definition of lower taxes. A lower tax payment is a different thing.
- koheripbal 7y ago
  The problem is that "tax rate" is an ambiguous term because different kinds of income at taxed at different rates. So, for example, if someone makes most of their money on dividends, then they pay capital gains tax, and it appears like they are unfairly paying a lower rate than everyone else. ...but that's not a fair comparison because it's a different sort of income, with a VASTLY riskier risk profile. Taxing it at the income rate wouldn't make sense. In the past, in the US, capital gains wasn't taxed at all because it was considered double taxation (since the investment was already taxed). ...and in some other countries, there is no tax on capital gains. I've seen people claim that country XYZ has higher tax rates than the US, but then when you look closed, they have zero capital gains taxes.
  - Retric 7y ago
    In the end the real tax rate is simply government spending as a percentage of GDP. Everything else is just shifting around who pays what and when not what the average ends up as. In the US that’s 41.6 percent GDP which is in line with Canada at 42%: https://en.m.wikipedia.org/wiki/Government_spending#As_a_percentage_of_GDP https://en.m.wikipedia.org/wiki/Government_spending#As_a_per... PS: Either lower taxes on capital gains or allowing people to deduct losses is reasonable in the name of risk, but we do both.
    - AnthonyMouse 7y ago
      Really what we should do with capital gains is allow people to deduct losses including inflation, so that we tax the total real value gain at the ordinary rate, and do so when the money is actually divested rather than only moved from one investment security to another (because one of the arguments for lower capital gains rates is that higher rates causes money to be locked into securities the investor wouldn't otherwise continue to hold). Or just use a consumption tax, which is largely the same thing but a lot less complicated.
      - ScottBurson 7y ago
        > what we should do with capital gains is allow people to deduct losses including inflation Yes, I've come to this conclusion too. The long-standing argument that capital gains rates should be low is about what happens, for example, if your gain on an investment exactly matches inflation: you'd pay taxes on it, but you haven't made any profit in real dollars. The right fix for that is not to divide your paper gain by some amount before taxing it; it's to subtract the loss due to inflation. In times of low inflation, as we have now, this won't make much difference, but if inflation picks up again at some point, it will make quite a large difference. Of course, such a plan raises the question of exactly what inflation estimator one should use. I'm not enough of an expert to have a strong opinion, but the T-bill rate [0] seems like a reasonable first cut, since it's a good estimator for the risk-free rate of return. Paper gains from holding T-bills would thus not be taxed at all. Whatever the inflation estimator used, the more important (and likely more controversial) aspect of the proposal is that gains beyond that amount be taxed as ordinary income. The argument is one of simple fairness: once the inflation problem is handled, how can one justify doing otherwise? [0] https://www.investopedia.com/terms/t/treasurybill.asp https://www.investopedia.com/terms/t/treasurybill.asp -- Okay, I see there isn't just one rate, since the rate depends on the maturity interval, but we can go with the highest one, which is the one for the 52-week bill. This creates the oddity that holders of shorter-term bills will actually get a tax credit, but it will be small; I think we can live with this.
godelski 7y ago
This is a very important point. Tax rates and taxes are very different. We have a marginal tax system so effective rates should be higher for those that make more. Them paying lower tax rates (like Buffet said) is them having more loopholes in the system.
WheelsAtLarge 7y ago
True but all of this tax discussion is about perceived fairness. I may pay a few thousand and a billionaire will pay millions in taxes but if the overall tax rate is lower for the billionaire then I'm going to get upset. It's just human nature.

pro8ndi 7y ago

Nah we don’t need to be careful here. The threat of violence is the only blocker to raising taxes. All out war is bad for business. The rich are absolutely not special. And our system does not give on shit about being careful about fairness for the poor. Where are the billion dollar bailouts for average workers? Wall Street however: oh you fucked up? Try again on us! You can point to some carefully contextualized economic math and I can point to Greenspan saying in 1997 wage stagnation is keeping people in jobs which is good for business. They know and have for years what they’re doing at a policy level. They’re benefiting the rich. Shove careful up your backside. We don’t owe them servicing debt their profits foist on us. Tbh I don’t feel any obligation to support “careful” politically. Let the elite play the same game of “where is my next meal coming from?” roulette. Stay home, figure it out with your neighbors.

jellicle 7y ago

> The top 1% are indeed audited at about the same rate as the working poor, but they also pay higher taxes than everyone else. But they don't. That's the point. Your conventional wisdom is wrong. The USA has a large number of regressive taxes, which tax the poor more heavily than the rich. These have been steadily expanded. And it has one, only one, progressive tax - the federal (not state) income tax - which has been steadily made less progressive in recent years to the point where overall taxation is at best flat and more likely slightly regressive.

kevinwang 7y ago
The actual article contains charts that seem to support the claim that the top 1% pay higher taxes
- zzzeek 7y ago
  barely, and the point of the chart is that over the past 70 years the gap has gone from being being very progressive to almost flat or regressive based on income level.
- dv_dt 7y ago
  I think there is a key language ambiguity here. Whatever your position on what the rich should pay, there is a question of what is being paid as a proportional rate of total income, vs what is being paid in absolute terms. Confounding that difference are also issues of income tax rate, vs capital gains rates and wealth vs income. The wealthy pay in absolute terms, more dollars, but they pay a lower rate than others.
  - joshuamorton 7y ago
    No, according to this article, the 1% continue to pay a larger percent of their income. It is only once you move into the 1% of the 1% that the rate again decreases.
    - mistermann 7y ago

AnthonyMouse 7y ago

> The two articles rely on vastly different cherry-picked definitions of who counts as rich, and neither claim is even remotely true anymore if you use the other definition. One of the most important things to understand about tax discussions is that there are two broad classes of "rich" -- high paid salaried employees vs. wealthy investors. When you see claims like "the top 20% of people pay most of the taxes", that's mostly the high paid salaried employees. Cardiologists making six figure salaries pay high tax rates, and there are a lot of doctors and lawyers and engineers in the population, so they pay most of the taxes. When you see claims about rich people paying low tax rates, that's corporations and wealthy investors hiring accountants to minimize their taxable income. The distinction is really important because it means the problem isn't marginal rates, it's the complexity of the tax code which allows people with large fortunes to game the system. A simple VAT with some kind of dividend/UBI to make it more progressive would eliminate most of those games. It would also mean that individuals wouldn't have to file tax returns at all, which would save hundreds of millions of man hours every year.

Joeri 7y ago
The rich spend a smaller share of their income, so a VAT scheme would in practice produce a regressive taxation scheme, with the lowest incomes paying relatively the most, because they have to spend all of their income.
- Forbo 7y ago
  What about a flat transactional tax that occurs any time money changes hands? I found this not too long ago and have been enamored with the idea: http://apttax.com/execsummary.php http://apttax.com/execsummary.php
  - Forbo 7y ago
    Fuck me, right? Would be nice to know why this is seemingly such a shitty idea, but guess I'll never hear why.
    - 7y ago