3 ms·

If rich people payed tax at the same rate as ordinary people, we'd be living in the same system without harmful extremes of inequality.

TaylorAlexander 6y ago
But they don’t pay tax at the same rate, because once they get wealthy they buy enough influence to tip the scales in their favor. Which is why I advocate for more collectively owned firms. Then wealth goes directly to the people rather than going to a rich CEO and shareholders and then the government and then eventually maybe the people.
barry-cotter 6y ago
This isn’t true. To take the US tax system as an example it’s much more progressive than the flat tax starter you’re describing, where all income is taxed at the same rate. This does not stop inequality. > In 2016, the bottom 50 percent of taxpayers—those with adjusted gross incomes (AGI) below $40,078—earned 11.6 percent of total AGI. However, this group of taxpayers paid just 3 percent of all income taxes in 2016. > In contrast, the top 1 percent of all taxpayers (taxpayers with AGI of $480,804 and above), earned 19.7 percent of all AGI in 2016, and paid 37.3 percent of all federal income taxes. The top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined, who paid 30.5 percent of all income taxes. https://taxfoundation.org/america-progressive-tax-system/ https://taxfoundation.org/america-progressive-tax-system/
- AlphaSite 6y ago
  I don't think everyone paying the same income tax is what people usually advocate for, but everyone actually paying the full share of the tax. I think a flat 20% above a certain rate is probably the most 'fair', but what needs to change is remove most loopholes that exist now. So everyone above a certain income level pays the same proportion of their income. Of course the tax base ends up really top heavy, if you earn most of the income, you pay most of the tax. That seems fair to me.
- iso1210 6y ago
  In a 2007 interview, Buffett explained that he took a survey of his employees and compared their tax rates to his. All told, he found that while he paid a total tax rate of 17.7%, the average tax rate for people in his office was 32.9%. .... So why is it that Buffett himself doesn't pay more tax? It's because the bulk of his income comes from dividends and long-term capital gains, which are taxed at a much lower rate than ordinary income. https://www.fool.com/taxes/2020/09/25/why-does-billionaire-warren-buffett-pay-a-lower-ta/ https://www.fool.com/taxes/2020/09/25/why-does-billionaire-w...
  - heurist 6y ago
    Supposedly if dividends and capital gains were taxed at the same rate as personal income, capital would just go to countries where it's taxed at a lower rate. Supposedly.
- deleted 6y ago
  [deleted]
- wombatmobile 6y ago
  > it’s much more progressive than the flat tax starter you’re describing No, "flat tax" is not what I'm describing or advocating. Did you know that Warren Buffet paid a total tax rate of 17.7%, whilst the average tax rate for ordinary American office workers in his office was 32.9%?
pmiller2 6y ago
Nope. Marginal propensity to spend kills that out of the gate. Poor people save a much smaller proportion of their income than rich people, on average. Since rich people are rich (meaning that percentage is out of a bigger pie than the poor person's), and their savings rates are higher than poor people, you just multiply that out and see that rich people will get richer much faster than poor people. This doesn't take into account taxes, however, which means that we're assuming a 0% flat tax rate. But, you see, what happens is that if you start imposing a positive taxation rate, then all that changes in the preceding argument is the definition of who is "rich" and who is "poor." The general trend is all that matters. One actual limitation to point out is that this argument doesn't take investment into account. Over long enough time periods, all major asset classes have a positive expected return, so, it doesn't matter precisely what people invest in. What does matter is how much they have to invest, and how long "long enough" time periods are. IIRC, for the stock market, "long enough" means 15 years or so. Since this is much shorter than a single human lifetime, you see that all someone who is rich enough to invest has to do is just keep shovelling money into their brokerage account, and it will pay off eventually. Poor people don't even get to that point. The hows and whys of that are myriad, so I won't even get into that. Just imagine that, instead of calling them "poor people," we call them "economically fragile" people. Then, what you start to realize is that a small bump in the road, like, say, an unexpected car repair, can really devastate an economically fragile person's finances. And, because economically fragile people don't have a lot of money coming in, their expenses are pretty low. That means that even if they follow standard personal finance advice and try to accumulate a 6 month emergency fund, a car repair costs what a car repair costs, so it's going to eat a much larger chunk of that emergency fund for the economically fragile person than the non-economically fragile person. Oh, and, because economic fragility is relative (meaning if you, and everybody else have 1 quatloo each and I have 10 quatloos, I'm still as "rich" overall as if everybody had 10 quatloos each, and I had 100), that means starting poor and getting rich takes a long, long time, and may not ever happen. TL;DR: A completely flat tax rate for all citizens implies that the rich will get richer, and the poor will stay fairly poor. https://en.wikipedia.org/wiki/Marginal_propensity_to_consume https://en.wikipedia.org/wiki/Marginal_propensity_to_consume
- iso1210 6y ago

TaylorAlexander 6y ago

But they don’t pay tax at the same rate, because once they get wealthy they buy enough influence to tip the scales in their favor. Which is why I advocate for more collectively owned firms. Then wealth goes directly to the people rather than going to a rich CEO and shareholders and then the government and then eventually maybe the people.

barry-cotter 6y ago

This isn’t true. To take the US tax system as an example it’s much more progressive than the flat tax starter you’re describing, where all income is taxed at the same rate. This does not stop inequality. > In 2016, the bottom 50 percent of taxpayers—those with adjusted gross incomes (AGI) below $40,078—earned 11.6 percent of total AGI. However, this group of taxpayers paid just 3 percent of all income taxes in 2016. > In contrast, the top 1 percent of all taxpayers (taxpayers with AGI of $480,804 and above), earned 19.7 percent of all AGI in 2016, and paid 37.3 percent of all federal income taxes. The top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined, who paid 30.5 percent of all income taxes. https://taxfoundation.org/america-progressive-tax-system/ https://taxfoundation.org/america-progressive-tax-system/

AlphaSite 6y ago
I don't think everyone paying the same income tax is what people usually advocate for, but everyone actually paying the full share of the tax. I think a flat 20% above a certain rate is probably the most 'fair', but what needs to change is remove most loopholes that exist now. So everyone above a certain income level pays the same proportion of their income. Of course the tax base ends up really top heavy, if you earn most of the income, you pay most of the tax. That seems fair to me.
iso1210 6y ago
In a 2007 interview, Buffett explained that he took a survey of his employees and compared their tax rates to his. All told, he found that while he paid a total tax rate of 17.7%, the average tax rate for people in his office was 32.9%. .... So why is it that Buffett himself doesn't pay more tax? It's because the bulk of his income comes from dividends and long-term capital gains, which are taxed at a much lower rate than ordinary income. https://www.fool.com/taxes/2020/09/25/why-does-billionaire-warren-buffett-pay-a-lower-ta/ https://www.fool.com/taxes/2020/09/25/why-does-billionaire-w...
- heurist 6y ago
  Supposedly if dividends and capital gains were taxed at the same rate as personal income, capital would just go to countries where it's taxed at a lower rate. Supposedly.
deleted 6y ago
[deleted]
wombatmobile 6y ago
> it’s much more progressive than the flat tax starter you’re describing No, "flat tax" is not what I'm describing or advocating. Did you know that Warren Buffet paid a total tax rate of 17.7%, whilst the average tax rate for ordinary American office workers in his office was 32.9%?

pmiller2 6y ago

Nope. Marginal propensity to spend kills that out of the gate. Poor people save a much smaller proportion of their income than rich people, on average. Since rich people are rich (meaning that percentage is out of a bigger pie than the poor person's), and their savings rates are higher than poor people, you just multiply that out and see that rich people will get richer much faster than poor people. This doesn't take into account taxes, however, which means that we're assuming a 0% flat tax rate. But, you see, what happens is that if you start imposing a positive taxation rate, then all that changes in the preceding argument is the definition of who is "rich" and who is "poor." The general trend is all that matters. One actual limitation to point out is that this argument doesn't take investment into account. Over long enough time periods, all major asset classes have a positive expected return, so, it doesn't matter precisely what people invest in. What does matter is how much they have to invest, and how long "long enough" time periods are. IIRC, for the stock market, "long enough" means 15 years or so. Since this is much shorter than a single human lifetime, you see that all someone who is rich enough to invest has to do is just keep shovelling money into their brokerage account, and it will pay off eventually. Poor people don't even get to that point. The hows and whys of that are myriad, so I won't even get into that. Just imagine that, instead of calling them "poor people," we call them "economically fragile" people. Then, what you start to realize is that a small bump in the road, like, say, an unexpected car repair, can really devastate an economically fragile person's finances. And, because economically fragile people don't have a lot of money coming in, their expenses are pretty low. That means that even if they follow standard personal finance advice and try to accumulate a 6 month emergency fund, a car repair costs what a car repair costs, so it's going to eat a much larger chunk of that emergency fund for the economically fragile person than the non-economically fragile person. Oh, and, because economic fragility is relative (meaning if you, and everybody else have 1 quatloo each and I have 10 quatloos, I'm still as "rich" overall as if everybody had 10 quatloos each, and I had 100), that means starting poor and getting rich takes a long, long time, and may not ever happen. TL;DR: A completely flat tax rate for all citizens implies that the rich will get richer, and the poor will stay fairly poor. https://en.wikipedia.org/wiki/Marginal_propensity_to_consume https://en.wikipedia.org/wiki/Marginal_propensity_to_consume

iso1210 6y ago