Grocery Tax

[Cats Cats Cats]

Well if you want to gift $20k to buffett then go ahead!  And when people make money in the United States through an employer or through stock sales unless there is some sort of off shore shill going on you are at least taxed on that income.  What I am talking about are highly rich people who are frugal with their money never having to pay tax on any of it and then just move it out of the country.  At least when it is taxed when earned you at least get a hit at some of it up front.

[nathanm]

I love it when people use that word.  Like wealthy and successful people won a lottery or something.  It exposes the disdain just under the surface.

99% of the wealthy (people who make over $250,000 a year according to our current admin.) worked very very hard to get to that point.  They built companies, went to school 2,3,or 4 time longer than most of us, or went through the arduous task of pushing new and unique concepts through a sea of detractors.  They worked late nights and got to the office early in the morning.  Success is their reward, but not for a game of chance, because in this country everyone has a chance and a choice.

It has nothing to do with disdain and everything to do with exposing the reality of the situation. More people who do try to make it fail than succeed. Granted, it goes against the mythos of the USA, the only place in the world where you can work hard and get ahead, but that's just how it is. A large part of success is being in the right place at the right time, knowing the right people, or just plain gambling and beating the odds.

It's sad that most people just can't grasp that simple concept.

Hard work is necessary, but you can work your donkey off your entire life and never get anywhere. Not that most people (Buffett excluded) believe that there are other people out there working as hard as them who haven't had the same measure of success. It doesn't fit with the puritanical worldview that everybody gets only what they earned, nothing more, nothing less.

[Gaspar]

It has nothing to do with disdain and everything to do with exposing the reality of the situation. More people who do try to make it fail than succeed. Granted, it goes against the mythos of the USA, the only place in the world where you can work hard and get ahead, but that's just how it is. A large part of success is being in the right place at the right time, knowing the right people, or just plain gambling and beating the odds.

It's sad that most people just can't grasp that simple concept.

Hard work is necessary, but you can work your donkey off your entire life and never get anywhere. Not that most people (Buffett excluded) believe that there are other people out there working as hard as them who haven't had the same measure of success. It doesn't fit with the puritanical worldview that everybody gets only what they earned, nothing more, nothing less.

NO. . . Everyone fails.  Most fail miserably, and more than once.   

Success comes after the failures, and sometimes in between.

You want fair, and all I can say is that fair does not exist.  Never did, never will.  Doesn't give you the right to steal from one person because you were unlucky. The advantage we have, is that people in this country who really "try to make it" succeed more often than they fail, it's just that few people really "try to make it".

[nathanm]

NO. . . Everyone fails.  Most fail miserably, and more than once.   

Success comes after the failures, and sometimes in between.

You want fair, and all I can say is that fair does not exist.  Never did, never will.  Doesn't give you the right to steal from one person because you were unlucky. The advantage we have, is that people in this country who really "try to make it" succeed more often than they fail, it's just that few people really "try to make it".

So basically you're saying that everyone who isn't successful is lazy. Got it.

Perhaps you should stop socializing only with those who have already 'made it.'

Either that, or I should stop socializing with rational people who have 'made it,' and acknowledge that a large part of their success is mere luck and spend more time in the company of those who have made it and refuse to acknowledge that.

Oddly enough, the latter tend to be the ruthless pricks, while the former tend to act like normal people who just happen to have a lot of money.

Note that at no point did I say hard work wasn't a prerequisite (unless you know the right people, of course), only that it is not the only ingredient in success.

[Gaspar]

Simmer down.  All I'm saying is that too much emphasis is put on luck, and virtually no emphasis is ever given to hard work.  Simple as that.

[nathanm]

Simmer down.  All I'm saying is that too much emphasis is put on luck, and virtually no emphasis is ever given to hard work.  Simple as that.

Few, if any, refuse to acknowledge the role of hard work in amassing a fortune. Many, however, refuse to acknowledge the role of luck in that process.

Similarly, few acknowledge the role of a stable government that provides basic infrastructure in that process.

[Cats Cats Cats]

I think the assumption that super rich people would get anywhere close to the taxes they are paying from a consumption tax is very flawed.  Not every person spends it like the people on MTV cribs.  Especially those that didn't hit the lottery.  If bill gates was 10 years younger I doubt he would be as rich ad he is now.  He might be making 200k a year though.

[Chicken Little]

NO. . . Everyone fails.  Most fail miserably, and more than once.   

Success comes after the failures, and sometimes in between.

You want fair, and all I can say is that fair does not exist.  Never did, never will.  Doesn't give you the right to steal from one person because you were unlucky. The advantage we have, is that people in this country who really "try to make it" succeed more often than they fail, it's just that few people really "try to make it".

Who is "stealing"?  As Buffet notes, we need to "do a better job in evening out the field for those who had drawn the unlucky tickets in life".  They call it humanity, and there's room for it in our daily lives, and even in our government.

[Chicken Little]

I think the assumption that super rich people would get anywhere close to the taxes they are paying from a consumption tax is very flawed.  

And I think you're absolutely right.

[USRufnex]

As long as financial success and wealth are exponential, and financial risk is effectively subsidized and socialized under both political parties... progressive taxation is appropriate, especially in time of war.

[Red Arrow]

Those of you that feel a progressive income tax rate is appropriate and desirable, what marginal rates would you propose at what income levels.  Keep it simple for now, no single vs. married, capital gains vs. direct income etc.  A brief thought as to why a particular level, say 50%, is more appropriate than perhaps 40% or 60%.  Just a few percent difference would be insignificant.  Historically, marginal rates have been as high as near 90%.

I could support either a flat rate income tax with a basic deduction for living (Which is actually somewhat of a one step progressive tax for everyone.) or the so called fair tax with prebates for the basic cost of living.  Levels would need to be set to provide the government with the required income.  I don't know exactly where those levels would be.

[nathanm]

Those of you that feel a progressive income tax rate is appropriate and desirable, what marginal rates would you propose at what income levels.  Keep it simple for now, no single vs. married, capital gains vs. direct income etc.  A brief thought as to why a particular level, say 50%, is more appropriate than perhaps 40% or 60%.  Just a few percent difference would be insignificant.  Historically, marginal rates have been as high as near 90%.

Personally, I think amounts over, say (this is pretty arbitrary) $5,000,000 should be taxed punitively to encourage people to invest the excess in productive enterprise or donate it to charity to avoid the tax man from getting it. How exactly that would be implemented I leave to the experts. (Perhaps taxing dividends and capital gains more relative to the corporate income tax to encourage longer term investment and leaving profits in a business would be enough)

I also think that given the history of the income tax, the current top end is pretty darn low (as is the level at which you start paying the top rate). Middle income people are taxed far more than they used to be, while high income people are taxed far less than they used to be.

Originally, the income tax didn't even impact a person making an average wage.

I do think that a national sales tax is pretty enticing from the standpoint of reduced paperwork for most people and increased compliance.

I also think that FICA, as it stands, is very regressive.

[Cats Cats Cats]

Personally, I think amounts over, say (this is pretty arbitrary) $5,000,000 should be taxed punitively to encourage people to invest the excess in productive enterprise or donate it to charity to avoid the tax man from getting it. How exactly that would be implemented I leave to the experts. (Perhaps taxing dividends and capital gains more relative to the corporate income tax to encourage longer term investment and leaving profits in a business would be enough)

I also think that given the history of the income tax, the current top end is pretty darn low (as is the level at which you start paying the top rate). Middle income people are taxed far more than they used to be, while high income people are taxed far less than they used to be.

Originally, the income tax didn't even impact a person making an average wage.

I do think that a national sales tax is pretty enticing from the standpoint of reduced paperwork for most people and increased compliance.

I also think that FICA, as it stands, is very regressive.

FICA.. Yeah, people forget that the 39% bracket isn't going to be paying the 12% FICA tax.  Thus making the 25% bracket adding another 12% for 37% tax rate vs a 39% higher tax rate.  I mean overall the difference between somebody making 110k a year and somebody making 500 million a year % wise isn't going to be that much different.  Throw in a couple million a year in dividends at 15% and you might end up lower.

[cannon_fodder]

Shall we try to refine the issues?

1)  Do we all agree that the current system sucks?

Ignoring if it is too progressive, to regressive, or otherwise . . .  it is to complicate.  Too many loopholes ,extra taxes, disproportional taxes, and subsidies.

2) TO those that disagree with the "Fair Tax" (I realize the absurdity of using that name while debating the issue):

a) Do you disagree with it if the math holds as proponents argue it will? 

That is to say a 23% tax, with a prebate to make it a progressive tax system and eliminate poverty level taxes and cost neutral net wffect (taxes already built in today).  Which would mean you disagree with the math on the idea, not the concept and therefor don't think it will have the desired effect?

b) or do you disagree with the concept as a whole?  If so, what is a better system or what is wrong with it as outlined?
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ON to responses!

3) Chicken Little:

I used Buffet because he was the wealthiest man last year and his effective tax rate is well known.  Not to hold Mr. Buffet out as a conservative or even someone who scams the system to save tax money.  He just plays by the rules and that is what the rules allow.  Thus, he works as a good example.

And I'm not stopping him from paying more taxes.  If he thinks he should be taxed more heavily, there is a box on your income tax return to donate money to Uncle Sam. While I agree with his sentiment on it not being fair for ultra rich to be taxed less than Joe Blow, it is a but disingenuous for him to argue that people should be forced to pay more when he refuses to do so voluntarily.    (Not that I would do any different, of course.  Just sayin')

4) Unlucky

Luck has something to do with various levels of success.  But most people that are really successful are so on the merits.  While Buffet had opportunities at education, no one else who had the same or even better opportunities achieved as much as he did. 

Shaq was lucky enough to have genetics that made him a monster.  He then worked hard to develop basketball skills, not get convicted of rape, and otherwise manage his career well.

And for each one of those examples there is someone who has done well from the bottom.  And there is someone who had every opportunity and screwed it up because they were lazy, pompous, greedy, or some other fatal flaw.

And of course, there are plenty of people who start off at the bottom and don't do anything to change it.  There are those that start off near the top and do just enough to stay there.  There always has been, and always will be those situations under any system (look at the full fledged communists.  Where the ruling party is most hereditary, top level military posts, etc.).   All we can do as a nation is maximize the ability for those that start off lower to pull themselves up, which I believe we do a decent job of.

Mandatory education to the 12th grade.  Free community college in most cities.  Federal Student loans for everyone who applies for them.  Grants for lower income people.  Free rides for minorities.  If a student wants to work hard, there is no reason why someone can't go to college.

NOW, I understand it is unlikely that a kid will do so if their parents don't care and their community is telling them being educated is selling out.  But I am unable to come up with an acceptable solution to those problems at the governmental level.  I think that is the root of perpetual poverty in some communities.

5) Nathan:

FICA is only regressive if you don't consider benefits paid out.   No matter how much you pay in to your FICA, benefits are limited.   Joe Blow paying FICA on $35,000 will get the same benefits as Big Daddy paying on $105,000.   So while Big Daddy isn't taxed FICA on the other $1mil he made that year, he still pays significantly more for the same benefit that Joe Blow did. 

If you pay $12,000 more per year to get the same thing as someone else, I can't really call that regressive.  Clearly Big Daddy's money will be used to subsidize the benefits of Joe Blow and several other people.  The point of FICA is to provide a "safety net" not to subsidize the nation.

(ignoring the entire discussion on ss and medical being totally screwed in this country)

6) Red Arrow / Punitive Taxation:

I despise that concept.

It is not my concern how much money someone makes or what they chose to do with it.  The idea that they should be punished for succeeding is truly offensive to me.   I am not raising an argument against progressive taxation, but simply raising taxes as punishment because in someones judgment the person has been too successful. 
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Overall I struggle with the concept of progressive taxation.  On one token, taxing people more simply because they are more successful is a punishment for being successful.  Everyone has an equal stake in the government and we each have one vote.  Odds are the person making more money is contributing more or has worked harder to get there (not always the case, of course).

HOWEVER, it is also true that a ultra rich person can truly afford to pay a higher percent of earnings.  A working class family paying 25% in taxes will have to give up fairly basic goods and services to afford that.  An NBA star making $5mil a year might have to give up a second Bentley that year.  And there is an argument that the nation has somehow enabled the rich person to do better and thus they OWE everyone else something (not always the case, of course).

Which is why I think I like the fair tax.  if you live the lifestyle of a wealthier person, you will be taxed more.   If you are frugal, buy second hand items, save or invest, you will actually be subsidized by the government.  It is your choice, not on how successful you are or how much you contribute to the economy - but on how lavish a lifestyle you lead.

Add in the transparency and simplicity of the tax structure, and I'm sold.

[Cats Cats Cats]

I start with the basic concept of how do we pay for what we are spending now (and by that I mean 12 years ago).  Being an almost completely consumer driven economy, making it such a draw to hoard all your money isn't going to get us to near the tax revenue or job creation that we need.  When Buffett goes from paying millions a year in taxes to paying $75,000 a year that is going to make a dent.  Why throw more money into business if you don't have anybody to buy what you are selling.  Convert the jobs over to manufacturing export and get more of our business away from shuffling money around and making a profit on it.  Then maybe we will have a strong enough economy to make this work.  Until then, hoarding money = depression.