After skimming these articles, I am thinking that the Democrats will win over many undecideds with this one loss. I think it will be hard for many poor and middle class folks to understand how it can be right for the wealthy to pay a lower tax rate than themselves. I am wondering if the GOP has won a battle that will make the war much tougher on them. What do you think?
Fox News Buffett Rule
Wiki Buffett Rule
NY Times Buffett Rule
Busn Week Will make it more powerful
CNN Money Only hits 1%
Forbes Buffett Rule
Huff Post Buffett Rule
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42 comments:
I suppose it depends on how effective Republicans are in explaining why rich people should pay lower tax rates than the rest of us.
--Hiram
Seems to me that Republicans should argue that the simple and most deficit-reducing use of the Buffett rule would be that everybody has to pay a higher rate than Buffett does. Problem solved, right?
J. Ewing
I believe the GOP will wise up and pass the Buffet rule. If they're smart they'll do it sooner rather than later.
I do not think the "GOP will wise up"... They will be destroyed by their far Right special interest groups if they cave on this.
Just like why Dayton won't give on any of the common sense reforms that have been placed in front of him. If he does, the far Left groups will destroy him....
It is definitely a very polarized political world right now.
A majority of republicans support the Buffet rule. GOP senators are representing the 1%, which I believe makes our current govt an oligarchy. I think 9 senators in competative races will come around to break the filibuster and pass the bill. The question is how long willl they allow themselves to be beat over the head with this issue. I think it will pass sometime this summer.
It's indefensible except through distortion or simple misinformation. The fact is that few small business owners--the true job creators--are millionaires, and few millionaires are job creators. As well, the question isn't why liberals want to tax the wealthy. The question is why do the wealthy want to impose greater taxes on the middle class?
Sorry, I need to clarify. What's indefensible is voting down the Buffet Rule under the guise of somehow protecting economic growth.
It's also indefensible passing the Buffett rule pretending it does anything for tax fairness or debt reduction.
J. Ewing
Laurie,
Where did you get the "majority" info?
Anon,
I agree that supporting the economy seems like poor rationale.
J,
Of course it helps with debt reduction, unless you think the driven money motivated millionaires will make less because of higher taxes. I don't see that happening.
As for Tax Fairness, it is a matter of perspective as we have discussed before. If taxes are dues to be a citizen, then it is terribly unfair, since everyone should pay the same dues. If taxes are the "Houses Cut" for you being allowed to prosper within this society/country, then it seems very fair.
According to this CNN poll 53% of republicans favor the Buffett rule.
It's funny how $4 billion is peanuts and not worth it to the GOP when it comes to raising taxes, but is a significant savings when it comes to making cuts of this size for various programs.
CNN Poll Link
The link didn't work for me, so I tried it again. It looks like a toss up given the noted 4.5% sampling error. But it is definitely telling.
Well, certainly we all have our different perspectives, but to call taxes "dues for being a citizen" is a pretty strange way of looking at it, because they are no more voluntary than union dues in Minnesota. Even if it were, dues shouldn't be higher because you succeeded and certainly not higher as a percentage.
Besides, the tax code should have nothing to do with what is fair at all. It should be about efficiently raising the revenue required for the essential functions of government. I know that's an archaic concept these days. It doesn't make it wrong.
J. Ewing
That's why I think of them as the "House's Cut". And of course it is more efficient to get the money from those that have it...
Some of our past dialogue. I took me awhile to find it...G2A Entitlement/Gratitude
"the tax code should have nothing to do with what is fair at all. It should be about efficiently raising the revenue required for the essential functions of government."
I do think this morning that how the tax policy is determined falls on a continuum between fairness and efficiency. We have lots of taxes not so much because they are fair but because they can be efficiently collected. Sales, property, and often income taxes, can be easily collected so the government relies on them. Taxing wealth as opposed to income is much more difficult so we don't do it. Progressive taxation strikes many people as unfair, but it works well in terms of efficiency because it taxes people who have money, which is far more effective than taxing people who don't.
--Hiram
Here is what I posted at MN Publius Buffett Seems to fit here also.
Though I support the concept of the Buffett law, I wonder if it is a somewhat pointless political ploy. This link shows that the effective taxes are already incredibly progressive by any definition. See the Avg Eff Tax Rate by Source and Income Quintile graph. And if it ever passes, Lord let's hope they use the little extra money to pay down the debt and not just spend it.
Tax Policy Center
Also from MN Publius
This is from James on the Dem/Rep post. It may fit here also. It was directed toward Dan and myself. "Well it would kind of help if the two of you would bother to acknowledge that the rich saw such a dramatic increase in their wealth by picking the pockets of the rest of us and lowering the amount our wealth and income grew. Unless you two can really come up with a justification for the richest 1% to get a 300+% increase in their wealth while the rest of ours dropped from 100+% to under 25%. Because its not like you two can argue that the rich getting an ever increasing share of the pie has actually benefitted the rest of us."
Here would be my argument. These supposed "Rich" could spend their wealth like a new lottery winner. Yet they exercise self control and invest their wealth. Therefore they have had significant income gains. Just like I have on a much smaller scale. Now how can it be right to tax savers/investors at a higher rate than spenders. Seems like rewarding the wrong behavior.
I wonder if it is a somewhat pointless political ploy.
That really goes to the heart of the matter. People feel that however highly taxed they are in theory, somehow rich people will find a way to shift the burden on to the rest of us.
--Hiram
What a great pie chart. It makes the point that the government takes almost as much in payroll taxes which mainly burden poor and middle class voters, as it does income taxes which mainly burden high income earners.
Yes, Fox News, poor people do pay taxes.
--Hiram
What's always left out is the NET contribution to government. At state level for example, if you have 2 kids in public schools you almost certainly get more than you pay in. Also not counted are business and investment taxes already taken before going to "the wealthy" or even us commoners.
What annoys me most is Dems/DFL will only discuss this at an anecdotal sob story level. If the policy is in fact creating a general distortion, fine let's fix it. It's actually the "Buffet rule" exceptions that create most of those distortions, favors (purchased?) for this group or that local company.
By the way, I think what the calculation in that chart does, and this happens elsewhere, is impute the taxes corporations pay to the people who own them, i.e. shareholders. This not very well understood assumption, really skews our perception. For one thing, if you impute the income of corporations to their shareholders, it also makes sense to impute their wealth. And this is of tremendous value to those shareholders because as I noted earlier we don't tax wealth.
--Hiram
Also not counted are business and investment taxes already taken before going to "the wealthy" or even us commoners.
Actually, in many cases this assumption is made. What doesn't happen is that the corollary assumption isn't made, that is, if the income of a corporation is to be imputed to shareholders, so should the wealth. The wealth is generated tax free.
--Hiram
"That's why I think of them as the "House's Cut". And of course it is more efficient to get the money from those that have it..."
I like the mafia-run casino analogy, but we have a more real-world example that furthers my point. The mafia used to run the "numbers racket"-- a lottery-- and I believe they actually paid out daily. But they paid out something like 90% of what they took in. The "house's cut" was about 10%. Now compare that with any of the state lotteries that have largely replaced the numbers rackets (still kept illegal) and you find out the "house's cut" is more like 50%!
It's the same with taxes. If I was assessed a straight (reasonable) percentage of my income and received back 90% of it in valued services, I would count that as a pretty good deal. But I've done the math, and I can't come up with even 50%.
So here's my proposition. Let's have a flat tax of, say, 10% of DISPOSABLE income. So everything up to the poverty line goes untaxed, and the tax is perfectly progressive after that, with the very richest paying almost 10%, the folks just over the poverty line just a tiny fraction of it. That's not what we have now, where someone who makes twice as much as I do pays something like 4 to 8 times what I do in total dollars. And depending on what they do with the income, they could be paying less. You cannot argue today's tax code is fair, for anybody, because it cannot, in its incomprehensible complexity, be so.
J. Ewing
Only have a minute...
Payroll Tax isn't a "tax" to me. It is Retirement Saving and Insurance premiums, so the poor still aren't paying any traditional taxes that pay the day to day bills.
Sales tax, excise taxes, and property taxes are all examples of regressive taxes paid by low income people. If everyone was paid a living wage then all could pay income tax as well.
Yes, the FICA tax isn't SOLD as a tax, yet it is perhaps the most regressive tax we have in this country, since many states exempt essentials from the sales tax. Unfortunately, it is not a retirement savings plan or insurance plan because you have ZERO claim to that money and in fact it is all spent immediately on collection. You have zero claim because the courts have ruled as such, and Congress can cut or eliminate that benefit any time it wants. (Political suicide, maybe, but beside the point). It is all spent immediately because even if the bond purchased goes into the "trust fund" the DOLLARS go into the general fund and are spent.
It's also why I like the FAIR tax. It does away with the fiction that FICA is anything except a tax, and eliminates that tax for the lowest incomes, yet EVERYBODY pays the FAIR tax, regardless of how little you make! And everybody gets a rebate for that portion of the tax spent on essentials, no matter how much you make. Perfectly progressive and far more "fair" than a flat tax can be.
J. Ewing
Payroll Tax isn't a "tax" to me. It is Retirement Saving and Insurance premiums, so the poor still aren't paying any traditional taxes that pay the day to day bills.
Payroll taxes go into the general fund to pay the general obligations of the federal government. How is that different from any other tax? Are the dollars you pay in payroll taxes any different from the dollars you pay in other taxes? In any meaningful sense does the effect on your personal economic situation in any way depend on which pocket the government happens to put it in? In this case, the same pocket the government puts your income tax?
J. Ewing is right on this. FICA isn't sold as a tax because of the political calculation behind it. But it is indeed a tax just like any other, and a regressive tax to boot.
--Hiram
No way. If you feel people are "entitled" to get retirement, healthcare and unemployment payments out of it. It is certainly an investment.
If not, let's stop paying out all these entitlements and put those savings towards the national debt. I mean those folks that paid in were just paying taxes and we have no future obligation to them. And Lord knows those generations spent us into this hole.
Thanks Heavens !!! We will be out of the debt hole in no time.
The money you pay in payroll taxes doesn't go into a separate fund. And entitlements such as social security come out of the general fund, the same fund that pays for nonentitlements, whatever they might be. There are separate assessments for income and FICA for political reasons, some of which are historical and largely forgotten now. In terms of economics and how government is financed, the distinction is irrelevant.
--hiram
FICA payment is assessed as it is because the entitled benefit is capped. The return on the investment would be really small if they had well to do people contribute on all their earnings.
My life insurance premium also goes to pay bills at NW Mutual, yet my family is still entitled to payment if I run my motor cycle into a tree... Just like these payments and the Gov't.
If you don't think they are an investment that people expect to get back. Goes ask someone who is approaching retirement how they would feel if the program was cancelled.
Darn, they even give you a calculator to figure you out your entitled settlement if you pay in a certain premium... This is as good as my 401K calculator.
Social Security is misunderstood because it seems to be in a lot of people's interest to convey misinformation about it. In any event, what people think has nothing to do where the money goes and from where payments are made.
Your life insurance goes into a specific fund. Your SS payment does not. In theory at least, if your insurance fund is depleted, your payments will stop. Social security has no fund to deplete. It is a general obligation of the federal government for which all of us are responsible.
--Hiram
Wiki Federal Insurance Contributions Act
Sounds like Insurance to me. Though don't get deported or you will likely find an exclusion.
Sorry, John, but hiram is right. The courts have ruled that you have no right to SS, and a few years back they even stopped the fiction of saying "your account." You have no account, only politicians' promises. I think they should be kept, and if I were reforming it, SS promises would be kept for those in or nearing retirement, and gradually phased out over the next 40 years in favor of private market based accounts, which have much higher rates of return. Chile went cold turkey and everybody was better off, as near as I can tell.
And if you crash your cycle at age 64 you get nothing, whereas insurance still pays out. It's not insurance, it's not an investment, and it's not even a good retirement plan. My IRA will pay me a LOT more than SS will, for a lower pay-in. And I have a lot more faith in the US economy than I do in a Congress that can't do basic math.
J. Ewing
I would note that the promises of the federal government, historically at least, with respect to Social Security have been a lot more reliable than those of insurance companies. Insurance companies go broke. The federal government will not. Social Security has assumed a far greater importance generally exactly because so many companies in the private sector have broken past promises, and refused to make promises about the future.
--Hiram
Yet for all this discussion I can not see it as a regressive tax. (ie Liberal perspective)
A person pays money in with the full intent of getting defined personal financial benefits back out. The amount paid in determines the level of benefit.
Still not a traditional tax to me.
"Yet for all this discussion I can not see it as a regressive tax. (ie Liberal perspective)"
It's a regressive because the amount taxed is capped. The richer you are, the less you pay in FICA as a percentage of total income.
"A person pays money in with the full intent of getting defined personal financial benefits back out. The amount paid in determines the level of benefit."
But the benefit isn't related to the amount paid in. As is the case with how most government benefits relate to most taxes.
--Hiram
It's a regressive tax because EVERYBODY pays the same percentage. There is no exemption for the kid making $5.25 per hour, and no way that kid will collect anything in retirement that a good investment portfolio would provide. Yes, I understand the "promise" of SS. And I'll bet there's a pony in there somewhere.
J. Ewing
Definitely progressive then. (ie redistributing wealth to the less fortunate) The folks who have paid in a lot less will get the same max benefit as those who have paid in a lot more...
Then on top of it those who paid in more and saved on the side will get to pay real taxes on the benefit.
John, you seem a bit confused as to how SS works. First, it is a regressive tax (people with a lower income pay a higher percentage of their income). Second, people who pay in more over their working years collect a larger monthly benefit when they retire, (entering two different incomes into the ss calculator show this)
You are right when you refer to it as an insurance program in that it will provide ongoing monthly income to all beneficiaries, even those who collect to past age 100.
To have a comfortable retirement with $ for travel and hobbies will take the IRA investments
So, in conclusion, people need to have both the SS insurance and their own private accounts.
I am lucky enough to not have to pay this at the end of the year. Maybe I'll graph the payback vs investment for the next post.
Again if you are planning to get your money back, how can it be a tax.
Here is someone who I think agrees with you. Though I am not sure if he is a Progressive or a Conservative. Spirit of 76
Beware the evil Princes...
Must be a liberal. Conservatives know that corporations don't PAY taxes, they just charge higher prices or pay lower dividends (which still get taxed as individual income). Conservatives also know that the reason FICA became a bigger share of federal revenue was because of the "saving" of SS back in the 80s. When it looked like the Ponzi scheme would come crashing down, the SS tax was increased to postpone that inevitability until today. So, what would you like to do, make it worse? Or solve the problem by phasing out of the SS scheme before it's too late and the whole thing comes crashing down?
Is there another option?
I am flexible, I am saving and investing like a mad man. If it fails I was supporting the needy. If it succeeds I get some of my investment back. I win either way.
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