Between my wife and I, we make over $250K per year, putting is squarely in the "rich" camp and victims to-be of proposed tax increases. The cost of living is quite high where I live in California, so this amount is not nearly the wealth you might imagine if you live somewhere you can buy a house for $50K. Sure, we are reasonably well-off, but we aren't millionaires.
The first thing you have to realize about the proposed tax increases: politicians talk about taxing millionaires and billionaires, but the reality is the vast number of people they are increasing the taxes on are people like me: relatively well-off, but not really what people consider rich. I like to define rich as "you don't have to work a single day for the rest of your life while enjoying the lifestyle you want". People with boatloads of money, say Warren Buffet or those dreaded Hedge Fund Managers, don't really have taxable income, they get taxed at the capital gains rate of 15%, which nobody is currently proposing to raise. So, those new taxes are going to hit me, but not the demonized millionaires and billionaires.
There is also a proposal to raise the salary limits on social security taxes. Guess who that hits hard: me, but yet again, not those millionaires and billionaires.
I have seen many people argue that people like me can afford to pay higher taxes, that it really wouldn't hurt me that much. That is correct. In a sense. In the sense that I will still keep my house, keep our cars, and still eat well.
However, if you take an extra $10K from me, what happens? Well, that depends on what I was going to do with that money. If I was going to take my family on vacation in Hawaii, well, I can't do that now. Looks like car camping instead. I bet the airlines, the pilots, the flight attendants and everyone else involved would wish I bought those tickets. The people that work for the hotel I would have gone to would like to have my money I am sure. Ditto for the restaurants we would have gone to and the tour operators we would have paid to do fun things.
Now instead I might have sucked that money away into a retirement fund. Those investments I would have made with that money would be financing companies, helping them employ people, as well as enabling me to have a comfortable retirement.
I guess I could just tuck that money away in a bank. Banks don't make money on money parked in a savings account: but because I have that money there, they can now make more loans. I bet the business and individuals getting the loans will make good use of that money.
Or maybe I just make up that $10k shortfall by just spending less. Less eating out. No new TV. Put off some remodeling for a year or two. I bet the people I would have paid for those activities would have liked my money.
In short, taxing me more may or may not decrease my standard of living, but it certainly hurts many other people who will get paid less or even lose their jobs because people richer than them have less disposable income due to higher taxes.
19 comments:
i think i totally agree.
if the government takes your $10k, someone, not you, will spend it on things like what you described. so really, the economy, as a whole, doesn't care. but you sure do. cause you worked hard for you money. and you should be able to keep it.
you make a really good argument for getting rid of the capital gains tax and social security tax and treating *all* income as regular income with progressive brackets. however, previous posts by you seem to oppose that position. so i'm a little confused.
i think many people confuse income and wealth. which is why shoo gets screwed when we stick it to the "rich". shoo has income in the top 1%. but doesn't have net assets in the top 1%. i think the super wealthy are very happy to help sow this confusion.
the us government gets most of its income from paychecks. raising taxes on paychecks isn't going to solve the problem. it's going to mean fewer paychecks. ie less jobs.
on the other hand, the super rich don't get paychecks. we need to find a way to tax the wealthy without taxing paychecks. like shoo's. which is what i've been trying to say for years. and apparently failing.
Imagine a regressive tax----the less you earn, the higher percentage you pay. There would be a real incentive to work harder, be more productive. Able bodied welfare recipients get taxed the most of all..
The whole dynamic of taxing income, not wealth, is exactly why I build stuff. I can end up owning a house through hard work--hard work they can't tax (unless I go to sell it) they can't tax. Guess that's a 'loophole'.
disagree. able bodied welfare recipients would have $0 income. their tax rate could be 1000%. they'd still pay $0 in taxes.
unless you're proposing a negative deduction. ooo. that gives me an evil shiver. ;->
you've kinda caught on to the whole rich man's scam. though imagine it's a multi-national corporation worth billions instead of a cabin ...
For the record: I am not really opposed to a capital gains increase. While there are great arguments for keeping it low, I think those arguments are really the same arguments as for keeping rates low, period. I don't like income taxes at all, in general. But as long as we are going to have them, I can't think of a strong reason why capital gains should be taxed differently than any other income. It is raising the marginal tax rates on icome that I am vehemently opposed to.
But I think flyingvan is onto something. When you tax something, you get less of it. We should tax poverty instead of subsidize it. :P
We just have to re-think tax collection, not just in terms of money. Obviously the poor have little, so you can't take what ain't there. I draw the line at body parts, but you CAN assess people's time, access to bandwidth, anything.
One of the 'lost' basics is you gotta tax behavior you want to discourage. Earning shouldn't be discouraged.
Also I don't understand the "Rich man's scam". If I own no houses, earn money, use that money to buy land and materials and provide the labor and heartache and worry and family sacrifice--now have 4 houses (OK 3.6 or so right now) I have
1) Put my money into materials, taxes and fees, keeping it circulating
2) Greatly increased my family's net worth
3) Provided housing, income tax against rent collected, and driven up the state tax assessed on the property through development
4) Helped secure our future so we're not dependent later on.
I imagine businesses parallel what I'm doing. At what point was the scam committed? I worked hard to create new wealth where none existed before---who have I taken from?
agreed. taxes have three purposes. one of which is to discourage activities we don't want to actually ban. like alcohol. the us government gets most of its tax revenue from paychecks one way or another. so apparently we think jobs are vices too. no wonder there's a shortage.
the rich man's scam is to generate wealth while avoiding paychecks like the plague.
i know people who (re-)build houses every year. they work harder than at a real job. and they make money and pay a low tax rate. no complaint there. the house is worth what? 2x what they paid after costs and labor. good honest work.
the rich guy picks a winner, writes a check, and goes on vacation. some time later the winner is worth 10,000 times what he paid for it. scam1: where exactly is the good honest work? you the worker did it. scam2: it's cheaper to bribe politicians for exemptions than to pay honest taxes. scam3: hide the scam through innumeracy and the psychology of the mark.
some would argue the "work" is researching which companies to invest in. true. employees do that. - but 99% of startups go bust. true. do the math. that's an insignificant cost of doing business. - but they provide a valuable service. absolutely. it's worth 5% maybe 10% of the gdp. not 40%.
if financial services paid honest taxes we'd have a lot more rocket scientist types advancing the state of technology instead of doing multi-variate phase space analyses of stock market trends to make more million$ for the owner. that'd be nice.
Rich guy 'picked a winner'? Isn't it good rich guy was able to identify what business would grow, and risked his cash for profit and growing the GDP?
it's good that there's a large pool of cash available for high risk high reward investments. it's bad that this pool (and profits therefrom) is controlled by a small number of people.
the trick would be to set up a tax system that penalizes billionaire-ness but not millionaire-ness.
Disagree. I don't understand why we want to penalize billionares. I hope to one day be a trillionare, all with wealth I created. Limiting wealth and vilifying those who know how to produce is at the root of our current mess. Government's role should be to encourage the production of wealth, mostly by staying out of the way. Government has made its role, instead, to assure everybody has some money. It's this living beyond our means whether it's the government borrowing or a banana scanner's union rate or free lunches at schools, that's destroying us
true 'nuff.
penalize is the wrong word. money is a resource. just like lumber, labor, and licorice. if i have a monopoly on money, you pay extra for it. we're not going to break this monopoly as long as the idiocracy at the bottom keeps voting for ever expanding social programs and for tax cuts for the rich that are supposed to somehow make them rich too.
You've hit upon the crux of the difference here. Money IS a resource, but unlike lumber and licorice, it's unlimited. Well, it's expandable (as is your other 'l', labor) There really is not this pie we all greedily grab from. The rich are usually the pie makers. We have to encourage all the pie making we can, and the best way to do that is to not tell the pie makers what they gotta do with their pies.
yes and no.
when you "make" money, by selling me a house, money disappears from my bank account and a like amount appears in yours. money moves. it's neither created nor destroyed in this transaction. rich people make money the same way you do: by trading goods and/or services for it. you can't just print a $100 bill. you can't just increase your bank account balance at will. neither can rich people. in almost all cases, money is conserved.
the exception is the federal reserve. which, despite the name and role, is not part of the federal government. unlike you and me, they *do* print money. to keep prices more/less stable. the us economy grows some 1-3% in a typical year. if the fed didn't add cash to the mix then prices would drop by a corresponding 1-3%. the fed asserts people would then hoard money instead of spending it and driving the economy. personally, i think that's a load of hooey. the real reason is it's free money for powerful people. and they're not about to give it it up.
If money only changed hands, the GDP would be the sam as under George Washington. What the Fed is SUPPOSED to do is, when I build a house that didn't exist before thus creating some wealth, print some money to match that wealth. The easiest explanation is, if I dig $10,000 worth of gold out of the ground, the government can print $10,000 and buy it from me. The national wealth has gone up by $10,000. The current mess stems from printing cash to pay debt instead of to match new wealth, at the same time painting the people who know how to produce as the villians.
Nicely stated flyingvan. Some people just can't get it through their heads that wealth is created, not merely changing hands amongst people. Once you truly understand this, this whole argument about rich and poor becomes moot.
yep. printing money to pay debts is really dumb. the federal reserve is actually the hero here. cause they're sitting on $1 trillion cash instead of pushing it into circulation.
anyone who says wealth can't be created is an idiot. flyingvan and i were talking about money. which is not the same as wealth. which is actually a pretty mind bending concept.
not sure where the rich/poor thing is going. seems off topic. maybe make a new post?
pie makers are the good guys. pie makers tend to get rich. and this is a good thing.
however, at some point the pie makers discover that under our current tax system, it's easier to make money than to make pie. and this is a bad thing. because money (for practical purposes) is a zero sum resource. which means that when our former pie maker makes money, someone else loses it.
it's the system that's the villain. not the pie makers. nor even the money traders.
Shoo, I just don't have the time to get around to all blogs like I once did. So it's really nice to stop by and see old friends.
I do think you should just give the $10,000.00 to me. I promise to spend it wisely. And, I won't need to raise my debt ceiling until October (well, maybe late September).
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