In Just Keep Raising Taxes, Moose broached the subject that Liberals are happy to pay more in taxes to give everyone tax payer funded healthcare. In MP CBO Projections, Paul brought a very similar idea up.
"Yeah, liberals can be as adamant about our values as anyone else, don't expect us to apologize for that, but when other people fail our test as decent human beings and good citizens, we still want them to be well, and have health care, and security, and prosperity, even if we have to help pay for it." Paul
"Who is we in "even if we have to help pay for it." I am guessing that few of the commenters here are in tax brackets we are talking about. So what you are really saying is We still want them to be well, and have health care, and security, and prosperity, even if "the successful" have to help pay for it." G2A
Yeah. That's exactly what I'm saying. Was I unclear about that?" Paul
Now there is a lot more over on MP, however this is the important concept that I want to discuss:
- So the Total Governem\ent Spend is ~7 Trillion Dollars
- And there are about 320 million people in the country
- So the spend per citizen is about $21,875 per citizen
- My point is that people in the 10% and 15% tax brackets are likely just paying their fair share government cost.
- The reality as Hiram often says, the successful folks are paying our country's bills because they have the money to do so.
- So the reality is that the middle class folks kind of pay their own way, and the successful people pay their share of the government spend, the share for the unsuccessful and they pay for most of the welfare, medicare, etc.
Now I am okay with the wealthy paying more since they have benefited more from being in our great country. However the idea of Paul saying that "we" are willing to pay more is fraudulent. I am pretty sure he would freak if we raised taxes on the middle class so that it could be given to the poor.
So who is this "WE" that Moose and Paul feel should be more generous?
Is it themselves? Or do they want rob Peter? Thoughts?
Along those lines, "I" wanted to help some struggling people in the West Metro. So "I and the Mrs" wrote a check to PRISM last week. I always wonder what folks like Moose, Paul, etc do to actually help the unsuccessful folks. I mean other than sit on a blog saying that "someone" should be a better Christian and do something...
39 comments:
While paying more taxes is not my favorite thing, it's obviously not the sort of thing I have a reflexive reaction to. The fact that some wealthy people fight so hard against tax increases that would have no discernible effect on their lifestyle is something I don't fully understand.
--Hiram
Is my lack of horror at the prospect of paying more in taxes a question of generosity? Does my attitude toward government come from the same place that causes me to over tip when I am in a good mood and feeling flush? Should it? Is government just another form of cute waitress?
I think the answer is generally not for a number of reasons. I often view my relationship with the government as transnational. I don't view paying for schools or highways as an instance of generosity just as I don't view buying a bag of groceries that way. This is not to say that others can't view their relationship with government as one as characterized by generosity, I just don't know what the point of viewing it that way might be.
I have heard forms of the argument that advocating increases in taxes or redistributing the tax burden is a form of generosity. It isn't. It's just a question of making policy, of trying to find the best way for taxes to work, whatever that might mean.
--Hiram
Concerning the "We". Is that a function of how polarized our nation has become? I watch a lot of news and what is striking to me is the unanimity of the opposition toward Donald Trump. And these folks are all pretty well off. They all understand that if Trump lost, a president would have been elected who would have wanted to tax them more.
I don't watch Fox News directly anymore. I cut my cable, and the services I now have don't include Fox for some reason. But I do see a fair share of their reporting through tweets and elsewhere on the internet. And what I find surprising is the extent they actually underestimate the extent of media opposition to Trump. Their complaints about anti Trump bias are sort of like arguing that the problem with tidal waves is that they are right. When every news anchor calls Trump a liar in so many words, when every news story says he is fibbing in the first paragraph of a story, when late night network hosts demand his resignation 4 out of 5 shows a week, the issue goes way beyond bias.
--Hiram
Warren Buffett calls ObamaCare repeal bill ‘Relief for the Rich Act’
I am pretty sure if I was one of the rich I would not object to paying the progressive tax rate in our country. About 1-2 times a year I buy a power ball ticket when the prize is hundreds of millions of $. Our talk of winning is what charities the foundation we create would support, after the govt takes a large chunk of the $. No, I would not be inclined to give more to the govt as it would be fun to give millions away myself.
You seem aligned with Buffet. He says the rich should pay more to the government while avoiding taxes through giving to charity.
If I was rich and gave generously to charities my motivation would not be to avoid taxes. I would be doing it to help people around the world and I am sure I would also give some money for conservation. I think people's basic needs are met fairly well in the USA, though I think I could give some money to aid the homeless which is an unmet need in too many cases. btw giving $ to charity to avoid taxes is a dumb strategy as just paying the taxes would cost you less $.
You seem aligned with Buffet. He says the rich should pay more to the government while avoiding taxes through giving to charity.
Generally that isn't a problem. It's the difference between following rules, and questioning what the rules might be. I may disagree with the placement of the traffic light at the end of the street, but it is my practice to obey it. Similarly, I don't view the filling out of my tax forms as some sort of exercise in public policy making. It's full of things I have policy agreements with but the tax return isn't the place to raise those issues. When doing taxes, I follow the law, and the policy agreements I take up with my Congressman.
==Hiram
Same old question though.
If this group named "we" wants to pay more in taxes why don't they?
I am pretty sure there are many in the we group who strive to take every possible exemption, deduction and credit legally available to them. All the while expressing displeasure that the government is not collecting more.
Of course some conservatives are no better. They complain about government spending while taking advantage of every program they are entitled to.
But that makes more sense to me because they think they paid too much and want some back.
Whereas the "we" who think government is a good place to spend more... well they puzzle me.
Two things: Guys like Buffett want OTHER rich folks (and a whole lot of people making less) to pay more in taxes, but when he had a chance to give most of his $30 Billion fortune to the government, he dumped it into the Gates Foundation and took the tax write-off. And, like everybody else I know that objects to raising taxes, he believed that he could do "charity" better than could a vast, uncaring and grossly inefficient federal bureaucracy.
John Kerry wanted higher taxes, too, but when Massachusetts raised the top rate and made it voluntary, he didn't contribute. And he moved his boat to Rhode Island to avoid taxes on that. Mark Dayton keeps his trust fund in South Dakota. Conservatives give several times the amount to charity as do liberals, and STILL pay the same in taxes. I seriously doubt liberals, certainly as a group, can claim the moral high ground here, in any fashion.
taking a $100,000 from a rich person won't impact their life at all, whereas increasing my taxes by $1,000 would impact the type and length of vacation I take. I deserve a nice vacation each year. Besides I think liberals are much more against tax cuts rather than pro raising taxes a lot further. I
also, I, for one, don't take every deduction available to me. For example I pay a bit more in taxes rather than create a flex spending account to pay my medical bills.
There is nothing wrong, however, with paying only what you owe. I think liberals just want fair progressive taxes and vote for leaders who want the same thing.
On a sort of related not, I found this K. Drum post interesting:
Donald Trump Has Finally Done Something: He’s Increased the Deficit By a Trillion Dollars
and this is only in anticipation of the GOP tax cut.
Laurie, you've read me here advocating the FAIR tax. It is like the flat tax, in that it excludes income below (some arbitrary number like the poverty line) from taxes and is "perfectly progressive" above that point. That is, if you make $1K above poverty, you pay$250 in taxes. If you make $1000K above poverty, you pay $250,000 in taxes. BUT, your total tax rate in the first case (assuming a 25,000 exclusion) would <1% and in the latter case just under 25%. Progressive (and numbers approx. to make it easy), but the FAIR tax is better because it is based on consumption, not income, savings and investment are automatically excluded, and it is "price neutral" to the consumer and "revenue neutral" to the government.
Ideally we would have a flat tax, where everybody pays exactly the same $21,000, on the theory that everybody benefits equally from police, fire, roads, schools, national defense, etc. That is unrealistic. If government spent far less it might be moreso, but I am happy with the notion of an exclusion and then a flat PERCENTAGE tax. Bur right now somebody making ten times as much doesn't pay ten times the dollars. Depending on the data points, they may pay at ten times the RATE. Sure, putting the exclusion in there means rates vary markedly as you go up the income scale, but the rate is the same for everybody. We simply tax "disposable income" rather than all income. It seems fair, sensible, and not REGRESSIVE, unlike the current tax system.
Illinois is a great example of thinking that raising taxes solves the problem. The problem isn't revenue, it's too much spending. When they raise taxes, revenues LEAVE the state, and now they are facing having their bond ratings degraded to "junk."
Ideally we would have a flat tax, where everybody pays exactly the same $21,000, on the theory that everybody benefits equally from police, fire, roads, schools, national defense, etc.
How interested would you be in having a child if you knew that you would be responsible for the kid's 21 thousand dollar tax debt each year? Along with the diapers?
--Hiram
If this group named "we" wants to pay more in taxes why don't they?
Because the law doesn't require them to.
When I go to the store and buy bananas, I pay the price the store charges. As it happens, I would be willing to pay more but I don't. Why shouldn't I? Why shouldn't what I pay for bananas be what they are worth to me, as opposed to the price charged by the store?
--Hiram
First I assume people would be very interested in smaller government if they actually had to pay the $21k each year.
Second, I have never heard of "we" recommending that the grocery store should charge more for their products and services.
Usually the American consumers demand more and better for less, government seems to be the exception.
Likely because the "we" is shopping with someone else's money.
I have never heard of "we" recommending that the grocery store should charge more for their products and services.
Do you think pricing is something grocery stores don't give a lot of thought to? It is the case that it doesn't occur to grocery stores would pay more than the listed prices for the things they sell. But then I am not sure why it's argued that people should pay more in taxes than they are required to. It's an argument that isn't intuitively obvious.
==Hiram
Here is a simple solution: Allow government to "price" its services and allow people to pay taxes according to what they wish to "buy." They will have a monopoly on things like national defense and foreign policy, Congress and federal courts, so I would expect everybody to "buy" those at the price offered. Other things, people might prefer government not do at all and taxes would go, IMHO, WAY down.
Allow government to "price" its services and allow people to pay taxes according to what they wish to "buy." T
I don't want to pay for schools, roads and national defense. Can I get my money back?
--Hiram
The one issue that I have the biggest fundamental disagreement with John is over how much to tax and who pays and at what level of govt.
If I was in charge starting with current taxes as a baseline I would tax a little bit more at the federal level, and the extra tax revenue would be paid by rich people. When I start thinking about what I'd like to spend the extra money on the amt of extra revenue I would like to raise grows. I'd like to fix Obama care by increasing subsidies for some people, I like to offer more federal aid for students to attend college, I'd like to give cities some money to better serve the homeless, and we need to spend more on infrastructure, which would include help fixing up run down schools.
So starting with our current baseline whose taxes would you cut, John, and where would you decrease spending? Would you cut taxes a little or a lot? I know you would prefer to shift spending to the states but ignore that piece and answer the question more generally about overall spending?
This question is not only for John, it is for anyone else who would like to add their tax and spend priorities. What adjustments would you make from our current system . I know Jerry wants to make a complete radical overhaul by switching to a flat tax. You could play along, Jerry, and share your views for more minor adjustments. Pretend you have to compromise.
Laurie, I will be more than happy to compromise with you. How about we leave taxes right where they are, and reducing spending (say to the point of a balanced budget)? Remember we have a huge deficit and an even bigger national debt. A child born today owes something like $300,000 to make good on our debt and "unfunded liabilities." Where is a kid that age going to find that kind of money?
Here are some ideas: I don't think we need to continue funding for the federal tea tasting board. We can stop all except basic research on the issue of climate change because anything else is folly that accomplishes nothing. We need to get rid of Obamacare because the country as a whole spent less money before it became law. We don't want to get wrapped around the axle on who "wins" and who "loses" in these things, but only on total cost and effective outcomes. And according to research, those on Medicaid have the same health outcomes as those who are uninsured, so there is a HUGE cut that could be made without making any difference in results, but let's settle for making it smaller and more efficient by, say, block granting it to the states for a while. Let's consolidate the 98 means-tested welfare programs into a single "negative income tax" that includes deductions for counseling, job training and other services. Maybe make charitable contributions a tax CREDIT rather than a deduction, and watch private charity step in to deliver those services. Eliminating the deficit would quit adding to the debt, and therefore we could start reducing interest payments, assuming that the lower taxes and increased capital available produced economic growth. Let's have more enforcement to prevent fraud in SS, Medicare, disability. Let's fix the VA. Let's go back to the notion of education reform that requires "failing schools" to go out of business. Let's put the banks back in charge of student loans. Get rid of most of Dodd-Frank so small business can start. Turn Medicare into a "premium support" system, since that and Medicaid are the two biggest drivers of the deficit. (SS is the third.)
AND... if we could get to a FAIR tax (which includes automatic Social Security reform), our economy would "take off" and add to total revenues that could be spent. With more efficient and efficacious spending, we could start to pay down that national debt.
if we could get to a FAIR tax (which includes automatic Social Security reform), our economy would "take off" and add to total revenues that could be spent.
FAIR tax is the one that imposes a 23 percent sales tax on everything? How much more stuff are you going to buy if it's 23 percent more expensive?
==Hiram
The "trick" of the FAIR tax is that, by eliminating all of the taxes hidden in the cost of production, the product is "price neutral" to the consumer, while making the federal tax "take" glaringly obvious so it cannot be continually raised (and it won't be necessary, with a growing economy). Second-hand merchandise is exempt, as are gifts to charity.
Not only that, it saves most of the current $400 Billion in compliance costs, and cuts out 75% of the special interest lobbying in Washington.
"price neutral"
Something that raises the price 23 percent isn't price neutral. The impact of taxes is related to the fact that it is a tax, not that it may or may not visible.
How will manufacturers compete with foreign imports not subject to the tax? What will be effect in creating black and gray markets?
--Hiram
Hiram needs to do more study on the FAIR tax. Something "that raises the price 23% isn't price neutral." Therefore, if the FAIR tax is price neutral it isn't raising the price. The FAIR tax eliminates all other taxes, so all along the supply chain, the sale price did NOT have to cover all the taxes. It is like a VAT tax in reverse, and only applies at the final retail sale.
And the beauty of that is that foreign manufacturers selling here pay the tax, while US manufacturers selling overseas do not-- a HUGE improvement in our competitive advantage.
Black markets will easily be found, since it is a lot easier to police a million or so retail outlets than it is 100 million taxpayers. And I'm not sure what a "gray market" is, but remember that second-hand goods aren't taxed. And on the other hand, drug dealers and illegal aliens will all be paying the tax, which they aren't now, and there won't be any of the thousands upon thousands of "loopholes" as in the current tax code.
Black markets will easily be found, since it is a lot easier to police a million or so retail outlets than it is 100 million taxpayers
But is that a good thing? With so many goods pouring into the country, with black markets literally everywhere, how can law enforcement keep up? And there is also the grey market issue, the sale of goods to which the 23 percent tax doesn't apply.
This all reminds me of prohibition. Something we also have to think about is the corrupting effect of tax imposed price differential on consumer goods. Every cop will be the target of a bribe. Every politician will be the target of "campaign contributions", which will never, ever, generate evidence of collusion.
--Hiram
Something to bear in mind about FAIR taxes, is that many of it's advocates, also view taxation generally as a form of theft. Without going into the merits of that particular view, it does follow logically (for you logic fans out there) that refusing to collect taxes which taxes which are a form of theft, is a moral thing to do. Given that quite plausible attitude, how can we assume that such taxes will ever be collected to the extent needed to provide funding for necessary functions of government?
--Hiram
Hiram, I think you are looking for problems where there are none. Retail sales taxes are one of the easiest to collect, because the only thing the tax collector must know is the price of the thing you buy, and they include it in the price at checkout. You would be hard pressed to get a business license and then report no tax receipts-- it would automatically trigger investigation.
And I think people are FAR more likely to pay a tax that is the exact same rate for everybody, that is right out front and essentially the ONLY federal tax you pay, and that doesn't increase the cost of your goods and services. And it only punishes the rich to the extent of their conspicuous consumption. The guy next door that plows his "obscene profits" back into his business or socks it away for his old age is going to pay about the same as everybody else, like you, living a similar lifestyle. But yachts, Ferraris and mansions are going to cost you a lot in taxes.
Retail sales taxes are one of the easiest to collect,
It's also the easiest kind of sales to create a black market. Imagine, you can make a 23% profit margin on literally everything.
--Hiram
HOW? Tell me how you create a reasonable business model for a black market? Where are you going to acquire the goods where you do not have to pay sales tax, and how are you going to operate without a business license? If you do, what is the incentive for even one customer to turn you in for the HUGE reward? If you buy retail, you pay the tax, but of course are free to sell second-hand by paying no tax at all.
Tell me how you create a reasonable business model for a black market?
Presumably massive amounts of goods we smuggled in from Canada. It's what we saw in prohibition. And really the whole economy would get structured around a single tax. That's why we have more than one tax.
Under a FAIR tax, my tax bill would be reduced to next to nothing. I have to ask, what have I done in my life to merit such special treatment? Why is fair for others to shoulder the bill for the stuff I have beneitted from?
--Hiram
Consider a house.
Under a FAIR tax when you buy a house, the price will be 23 percent higher to pay for the taxes. In addition, you will no longer get a deduction for interest from the mortgage loan, which will result in another huge tax bump.
What will be the impact on home sales? What will be the impact of shifting the tax burden from people like me whose houses are paid for, to young families just starting out. Young families, who by the way, are already buying a ton of stuff that is also taxed at the 23 percent tax rate?
--Hiram
"Under a FAIR tax when you buy a house, the price will be 23 percent higher to pay for the taxes. In addition, you will no longer get a deduction for interest from the mortgage loan, which will result in another huge tax bump."
No worries there. Special interests will take care of those provisions in no time flat -- or they will kill the bill to prevent it from happening in the first place.
More misinformation. When you buy a house, if it is previously owned, there is ZERO tax on it. The tax was paid by the first owner. Now if you buy a new house, the builder and all of the craftsmen paid ZERO taxes on the labor and materials that went into the house, so the price of the house is 23% lower than it would otherwise be. THEN they tack on the 23% sales tax and you pay exactly what you would have paid for the house otherwise-- price neutral.
You are correct, you will no longer get a deduction for mortgage interest. On the other hand you are not paying ANY taxes on your income-- you take home 100% of your nominal pay, so you get the "deduction" by not having paid the income tax in the first place.
The "impact of shifting the tax burden" should not be a concern. So long as everybody pays the tax at the same rate, you should have no complaints about fairness. And those who want to live extravagantly will pay a lot more DOLLARS in taxes, so you actually have control over how much tax you pay. Instead of buying a new Lexus, buy a slightly used Ford Escort. Or get the Lexus, your choice.
When you buy a house, if it is previously owned, there is ZERO tax on it.
So new houses will cost 23 percent more than the same house previously used? How much sense does it make to place such an extreme burden on the building of a house. Isn't that what generates economic activity? All those building jobs created?
the FAIR tax provides an enormous incentive to create tax free, secondary markets. What it calls for is a restructuring of our economy allowing the reuse of goods. I will leave to others to explain why do it.
The tax was paid by the first owner.
"The "impact of shifting the tax burden" should not be a concern."
If it doesn't matter, why do it?
--Hiram
So does that mean the tax will be paid retrospectively. All current owners of houses will be sent a bill for 23 percent of the agreed to purchase price?
Is it willful misunderstanding? When the first owner bought the house (back in 1996), the price he paid included all the taxes that got "rolled up" into the price. Taxes were paid on the house. When the next buyer buys the house, he does NOT pay the tax-- the taxes are a one-time, RETAIL tax. If somebody buys a house built AFTER the FAIR tax becomes law, there were NO taxes paid on all the labor and materials that went into the house, but the buyer pays that 23% at closing, and the price ends up, tax included, the same as it would otherwise be. There is no advantage, price-wise or tax-wise, to buy a new house or a used house, it's just a matter of preference.
Now at the risk of getting into the weeds, you should know that there is an "existing inventory" exception to the tax. If a house is half-built, say, on the effective day, all the materials and labor up to that point are not taxed at the time of sale, since they were already taxed under the old system. Essentially the same as buying half a "used house."
If somebody buys a house built AFTER the FAIR tax becomes law, there were NO taxes paid on all the labor and materials that went into the house, but the buyer pays that 23% at closing, and the price ends up, tax included, the same as it would otherwise be.
But won't the asking price be 23% lower? Won't the seller have to eat the taxes? Wouldn't it make more sense for the seller to buy and flip one of the existing houses, something he can do tax free?
--HIram
Technically, yes, the "asking price" ("shelf price" in the usual context) would be 23% lower, but since the builder cannot sell the house without collecting the tax, the price is the same before and after the tax becomes law. The only difference here is that the buyer will clearly see the tax enumerated on his bill, which he does not under the current system.
House flippers have a similar economic. If I buy an existing house with the intent to sell rather than occupy it, I pay no tax on the house and all the labor and material I use to fix it up are tax free, but I must charge the new buyer sales tax on all that extra labor and material. If I buy the used house and fix it up for me to live in, I will pay sales tax on all the labor and material at that point. It is an "end user," one-time retail sales tax. Businesses pay no tax on the materials they build into the product, but they DO pay sales tax on the items they consume running their business, like pencils and computers.
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