Tax Cuts and Lies
Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
* The first four men (the poorest) would pay nothing
* The fifth would pay $1
* The sixth would pay $3
* The seventh $7
* The eighth $12
* The ninth $18
* The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." So now dinner for the ten only cost $80.
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his "fair share?" The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being "paid" to eat their meal.
They decided to reduce each man's bill by roughly the same amount, and they proceeded to work out the amounts each should pay. And so:
The fifth man, like the first four, now paid nothing (100% savings)
The sixth now paid $2 instead of $3 (33% savings)
The seventh now paid $5 instead of $7 (28% savings)
The eighth now paid $9 instead of $12 (25% savings)
The ninth now paid $14 instead of $18 (22% savings)
The tenth now paid $49 instead $59 (16% savings)
Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth. "But he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than me!"
"That's true!" shouted the seventh man. "Why should he get $10 back when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. There are lots of good restaurants in Europe and the Caribbean.
David R. Kamerschen, Ph.D
Distinguished Professor of Economics
University of Georgia
-----------------------------------
Sorry for not quoting this, but it had to be copied and pasted so it already had some formatting issues that I had to correct.
I wanted to post it since it so perfectly shows how people take most tax cuts of any nature and lie about them in a fundimentally dishonest manner. When you automatically pay more in a progressive system, any cut is going to benefit disproportionately since you are PAYING disproportionately. I don't understand why people can't just be honest about that instead of lying and claiming that someone is attempting to screw someone over when they already pay no taxes in most cases.
Even more amazing is that with things like the Earned Income Tax Credit, we literally do have people who are "paid to eat." They receive back the credit, even if they have paid in no taxes. It reduces their tax burder to beyond zero and gives back money not paid in.
Some my question is, when you have a progressive tax system, how can any sort of cut NOT effect the rich disproportionately. If you can't answer that, you should at least be honest and admit that you basically never want taxes cut ever.
The federal government is spending an average of $8500 per person this year. That means a family of four (which I happen to have by the way) is having approximately $34,000 worth of money spent on them. We could argue whether my family needs bombs, bullets, roads, WIC, Social Security, or whatever. However the point is that I certainly didn't pay in $34,000 in federal taxes. The lights stayed on, the water gets treated when it leavse and arrives when the faucet is turned on etc.
So many "eat" for little or free and still complain. I find it amazing and with fat full bellies, they only thing they can seem to do is point a finger and assign blame.
Nick
* The first four men (the poorest) would pay nothing
* The fifth would pay $1
* The sixth would pay $3
* The seventh $7
* The eighth $12
* The ninth $18
* The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." So now dinner for the ten only cost $80.
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his "fair share?" The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being "paid" to eat their meal.
They decided to reduce each man's bill by roughly the same amount, and they proceeded to work out the amounts each should pay. And so:
The fifth man, like the first four, now paid nothing (100% savings)
The sixth now paid $2 instead of $3 (33% savings)
The seventh now paid $5 instead of $7 (28% savings)
The eighth now paid $9 instead of $12 (25% savings)
The ninth now paid $14 instead of $18 (22% savings)
The tenth now paid $49 instead $59 (16% savings)
Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth. "But he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than me!"
"That's true!" shouted the seventh man. "Why should he get $10 back when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. There are lots of good restaurants in Europe and the Caribbean.
David R. Kamerschen, Ph.D
Distinguished Professor of Economics
University of Georgia
-----------------------------------
Sorry for not quoting this, but it had to be copied and pasted so it already had some formatting issues that I had to correct.
I wanted to post it since it so perfectly shows how people take most tax cuts of any nature and lie about them in a fundimentally dishonest manner. When you automatically pay more in a progressive system, any cut is going to benefit disproportionately since you are PAYING disproportionately. I don't understand why people can't just be honest about that instead of lying and claiming that someone is attempting to screw someone over when they already pay no taxes in most cases.
Even more amazing is that with things like the Earned Income Tax Credit, we literally do have people who are "paid to eat." They receive back the credit, even if they have paid in no taxes. It reduces their tax burder to beyond zero and gives back money not paid in.
Some my question is, when you have a progressive tax system, how can any sort of cut NOT effect the rich disproportionately. If you can't answer that, you should at least be honest and admit that you basically never want taxes cut ever.
The federal government is spending an average of $8500 per person this year. That means a family of four (which I happen to have by the way) is having approximately $34,000 worth of money spent on them. We could argue whether my family needs bombs, bullets, roads, WIC, Social Security, or whatever. However the point is that I certainly didn't pay in $34,000 in federal taxes. The lights stayed on, the water gets treated when it leavse and arrives when the faucet is turned on etc.
So many "eat" for little or free and still complain. I find it amazing and with fat full bellies, they only thing they can seem to do is point a finger and assign blame.
Nick
Comments
Recently, however, I've come to think that their is some rational behind a progressive tax that extends beyond the "tax the rich because they can afford it" mentality.
If America is really the land of opportunity, where any hardworking person can raise themselves out of poverty to become rich then one can really consider a progressive tax system to be akin to an investment loan. Give the poor more money so they can get educated, start businesses, and become rich, then recover the cost of the loan by taxing them more when they are rich.
Also, there would seem to be some logic behind preventing the formation of a ruling class that owns everything, reducing everyone else to serfdom.
Check out this excellent passage from this week's Newsweek cover story:
The blather from both sides obscures the real, but largely hidden, agenda behind the Bush tax cuts. Bush has been open about each item he wants: lowering taxes on capital income, such as dividends and capital gains; creating two big new income-sheltering investment plans; eliminating the estate tax. But he's not been at all forthcoming about the ultimate effect of his program. If Bush gets what he wants, the income tax will become a misnomer?it will really be a salary tax. Almost all income taxes would come from paychecks?80 percent of income for most families, less than half for the top 1 percent. Meanwhile taxpayers receiving dividends, interest and capital gains, known collectively as investment income, would have a much lighter burden than salary earners?or maybe none at all. And here's the topper. In the name of preserving family farms and keeping small businesses in the family, Bush would eliminate the estate tax and create a new class of landed aristocrats who could inherit billions tax-free, invest the money, watch it compound tax-free and hand it down tax-free to their heirs.
By drastically favoring investment income over salary, fees and other "earned income," Bush would make it harder for people who start out with nothing to earn their way up the economic ladder, because they'd pay full taxes on almost everything they make, but he'd shower rewards on people who have already made it to the top rungs.
Originally posted by Nordstrodamus
Ok, I read about half of it, but I think I got the gist. I used to be against a progressive tax system and, frankly, I would still gladly scrap the income tax in favor a far more efficient system like a national sales tax.
Recently, however, I've come to think that their is some rational behind a progressive tax that extends beyond the "tax the rich because they can afford it" mentality.
If America is really the land of opportunity, where any hardworking person can raise themselves out of poverty to become rich then one can really consider a progressive tax system to be akin to an investment loan. Give the poor more money so they can get educated, start businesses, and become rich, then recover the cost of the loan by taxing them more when they are rich.
Also, there would seem to be some logic behind preventing the formation of a ruling class that owns everything, reducing everyone else to serfdom.
I don't believe the article was arguing against a progressive tax system. Rather I think it was showing how any cut in taxes is going to give more back in pure dollars to those who pay the most in in pure dollars. When looked at in percentages or any other measure, the lack of true benefit is revealed.
An extreme example. You earn $10,000 a year and pay $1 in taxes. I earn a million dollars and pay half in taxes. ($500,000)
A tax cut is passed that gives you tax relief by removing your obligation. You save $1. It gives me a $2 tax cut and my obligation is still $499,998. I was given "twice" the tax relief you were in pure dollars. People could claim that all the tax cuts went to the rich, etc.
But how can they remove a larger obligation from someone who has little or no obligation. How can you benefit to a greater degree when you owe to no degree?
Nick
Originally posted by trumptman
it so perfectly shows how people take most tax cuts of any nature and lie about them in a fundimentally dishonest manner.
I agree.
Although perhaps a more accurate analogy would have noted the fact that all of the men at the table are not being fed equally to begin with. The totality of the meal for the poorest men may perhaps consist of a few scraps of bread and a glass of water. Then as you move progressively up the list, each man who pays more of the bill is given a disproportionally larger amount of the food. Finally, the richest gentleman is afforded access not only to an excessively opulent spread of the finest gourmet foods imaginable, but is being served strawberries and whipped cream from out of the buttock cleavage of a beautiful, enormous-breasted, nubile teenage girl. He lifts his face out from between her legs, dripping with cream and vaginal fluids, points across the table and cries, "Hey! That guy's not paying his fair share! It's so unfair to me! Why should I have to pay for his bread and water?! I EARN my money, dammit!!"
The proprietor of the establishment concurs, and declares that he will be lowering the price of the meal substantially. Consequently, the restaurant will be unable to provide as much free bread and water as before and the poorer patrons will just have to tough it out.
etc.
Of course, all of this completely ignores the question of what these men actually do for a living and what justification they have for their claims to wealth in the first place. It's all a hell of a lot more complicated than what the "distinguished" professor would have us believe.
Originally posted by trumptman
A tax cut is passed that gives you tax relief by removing your obligation. You save $1. It gives me a $2 tax cut and my obligation is still $499,998. I was given "twice" the tax relief you were in pure dollars. People could claim that all the tax cuts went to the rich, etc.
It is one of the most common political tactics (on both sides) to artfully employ percentages, factors, and real numbers so as to make the most dramatic impact. It must be effective since it's used so much, but I, for one, take your point.
Originally posted by trumptman
But how can they remove a larger obligation from someone who has little or no obligation. How can you benefit to a greater degree when you owe to no degree?
I guess it comes down to what we consider the obligation to be. As I illustrated earlier, if we view a progressive tax system as akin to an investment in the poor so they may become rich, then the rich are obligated to repay that loan while the poor are not.
In such a view it is no more offensive for the poor to receive more than their actual tax contributions than it is for someone to receive more than their income in the form of a loan while they are starting a business.
The only offensive thing is if there is no return on the investment, due to government waste or improper priorities.
Originally posted by ShawnJ
I've really enjoyed your posts, Nordstodamus.
Check out this excellent passage from this week's Newsweek cover story:
That is honestly the most wrong headed conclusion I have perhaps ever read. That author must know literally nothing about money.
Take this part...
By drastically favoring investment income over salary, fees and other "earned income," Bush would make it harder for people who start out with nothing to earn their way up the economic ladder, because they'd pay full taxes on almost everything they make, but he'd shower rewards on people who have already made it to the top rungs.
A couple of points, you can buy stocks at any age with just about any dollar amount. You can start a business with next to nothing. You don't have to be at a certain age or make a certain amount to begin investing in yourself. You know just like those guys we know Woz, Jobs, Gate, Dell, etc.
Likewise this statement...
Meanwhile taxpayers receiving dividends, interest and capital gains, known collectively as investment income, would have a much lighter burden than salary earners?or maybe none at all.
is totally misleading because often these investments are funded with AFTER-TAX dollars. You've paid the tax when you earned it. You take what you have earned and INVEST it instead of consuming and just spending it. Your investment MAY or MAY NOT, bring about a return. That return is yet again taxed, thankfully, at a lower rate.
Now personalize this for a second. Shawn think of how many people on here have student loans. They get to deduct that interest from their taxable income which lowers their tax burden. They invested in themselves and we reward it by allowing them to pay back the loans with pre-tax dollars. Imagine if they had to earn the money, pay taxes on it, and then finally attempt to pay back their loan. They had to pay to go to school, pay to borrow the money (interest), and pay the money back with salary that they earn.
The fact that we allow that interest to be deducted isn't a terrible means of allowing the rich to screw over the poor.
I'll give a personal example myself. I own houses obviously that I rent out. I had to buy those houses with after-tax dollars from my income. I've already paid the tax on those dollars. So I buy and manage the property. The people who rent get to rent a house for at or near what they would have paid for mortgaging it, but without having to lay the 10-20% down for a mortgage, or pay the very large closing costs. This is very beneficial to them since it would likely be about 5 years in most markets before they could recover those costs. They might not want to live there that long, might be saving for their own home and not want an apartment, etc.
When I someday sell that home, after having bought it with after-tax dollars, after maintaining and managing it for all those years. I will be taxed on the gain in the appreciation of the house. If I bought it at say $200,000 with $40,000 down ($40,000 in after-tax dollars that I likely already had to make $60k and have taken $20k in taxes to get) and say 10 years later I sell it for $300,000, I am taxed on the gain.
I bought it for 200k, and it went to 300k, so that is a gain of 100k. This gain is taxed at 20%(capital gains) which means I get 80k after taxes. Of course I had to maintain, mangage, save up to purchase, etc. a house for 10 years to get it. Also there was no guarantee I was going to get it. Real Estate values can slump. A bad tenant can cost you thousands in both repairs and legal bills, etc.
But the point really is, if there is no incentive, why invest at all? I could just take my money and spend it. Not enough housing available, oh well. Pay more to buy short term and feel good that you "stuck it to" the rich.
The saddest and most idiotic thing about the author's comments is that when you treat investment and income as exactly the same, you discourage investment since it has risk. The only "risk" associated with holding a job is that you might lose it. Otherwise you work your hours, you get your check, you go home. If investment were treated exactly as income, no one would invest. The easiest way to insure you are poor, or middle class, and that you will stay that way, is to get you to rely on an income and never invest.
Nick
Originally posted by trumptman
A couple of points, you can buy stocks at any age with just about any dollar amount. You can start a business with next to nothing. You don't have to be at a certain age or make a certain amount to begin investing in yourself. You know just like those guys we know Woz, Jobs, Gate, Dell, etc.
Ah, I think someone here once covered the phenomena of fundamental attribution error. I presume that must be what's in effect here. The poor must be essentially lazy for not taking advantage of the boundless opportunities available to them. Those foolish poor using their money to pay for food, rent, and children when they should be investing.
Regarding Woz, Jobs, Gates, and Dell... I don't recall what financial background Woz and Jobs came from, but I'm pretty sure Gates and Dell came from fairly well off families. Also, as we all know, Jobs and Woz are geniuses, which is a condition we are not all blessed with.
Originally posted by trumptman
But the point really is, if there is no incentive, why invest at all? I could just take my money and spend it. Not enough housing available, oh well. Pay more to buy short term and feel good that you "stuck it to" the rich.
I get that overly taxing investments would deter investment, but clearly the presence of capital gains tax didn't deter investment in the last decade at least. Also, I've yet to see a one to one correspondence, the simple reality seems to be as long as there is some advantage to invest, people will invest.
Originally posted by trumptman
The saddest and most idiotic thing about the author's comments is that when you treat investment and income as exactly the same, you discourage investment since it has risk. The only "risk" associated with holding a job is that you might lose it. Otherwise you work your hours, you get your check, you go home. If investment were treated exactly as income, no one would invest. The easiest way to insure you are poor, or middle class, and that you will stay that way, is to get you to rely on an income and never invest.
Ok, I'm honestly not getting this. Somehow, money earned by putting one's physical life, family life, or mental life at risk by actually working should be taxed, but money earned by putting one's money at risk should not?
Finally, returning to my loan analogy, it is no less reasonable to expect the rich to repay the loan given to them (in the form of lower taxes when they were poor) by taxing dividends than it is to tax income. Given that rich, almost by definition, means not having to work for a wage it would be extremely silly not to tax dividends as that would be the only route by which to recover the loan.
Originally posted by tonton
No one looks at the tax cuts in terms of dollar amounts as opposed to percentages. That would be idiotic. Unfortunatley, the tax relief still favors the rich by a huge amount in terms of percentages. The rich got a much higher percentage decrease in their taxes than the poor did. Thank GOD Bush didn't get the tax cut he wanted.
Try again...
Tax Cut
Nick
Originally posted by a_greer
I think we should do away with withholding, if everyone had to write the IRS a check every quarter as the rich do, tax cuts would not be asked for, they would be DEMANDED.
I agree. Actually, that's also why I like the national sales tax. If everyone had to pay 25% on everything they bought and they saw the costs of taxes on a daily basis, they would pay even more attention to it.
fact is that alcohol and cigarette taxes screw the poor more than anything else. then throw in the lotteries and other optional taxes and it turns out poor people pay a LOT in taxes, but ones they don't have to if they didn't want to.
dunno why but i always find it ironic when those who are supposed to be defending the poor vote to raise sin taxes.
Originally posted by alcimedes
of course, this is only off of income taxes, not all taxes.
fact is that alcohol and cigarette taxes screw the poor more than anything else. then throw in the lotteries and other optional taxes and it turns out poor people pay a LOT in taxes, but ones they don't have to if they didn't want to.
dunno why but i always find it ironic when those who are supposed to be defending the poor vote to raise sin taxes.
uuuumm....no one makes the poor smoke and drink, like it or not, it is a choice and many rich people smoke and drink too.
knowing the odds of the lottery, it is a dua that you are throwing away money and i think even the poor know that,
and isnt it ironic that the 500% cigarette tax is used for anti smokeing campeigns? use the money you have to dry up your revinue, bad buseness 101
Originally posted by alcimedes
of course, this is only off of income taxes, not all taxes.
fact is that alcohol and cigarette taxes screw the poor more than anything else. then throw in the lotteries and other optional taxes and it turns out poor people pay a LOT in taxes, but ones they don't have to if they didn't want to.
dunno why but i always find it ironic when those who are supposed to be defending the poor vote to raise sin taxes.
Exactly... just like raising the sales tax, these are regressive taxes, and take a much bigger bite out of the working poor, since the vast majority of their income goes to purchasing things, as opposed to the "rich" who can save, invest, and only get taxed once on their money.
Originally posted by a_greer
[B]uuuumm....no one makes the poor smoke and drink, like it or not, it is a choice and many rich people smoke and drink too.
Yes, and they spend at least 10 times the disposable income as a percentage, as does a "rich" person, to do the same thing. But the taxes on smoking and drinking come out to a much lower percentage of disposable income, for a rich person, than for a poor person.
Unless you think rich people spend at least 10 times as much on their smoking and drinking.....
So, you would say, only rich people deserve to smoke and drink??? Hmmm..
Originally posted by a_greer
uuuumm....no one makes the poor smoke and drink, like it or not, it is a choice and many rich people smoke and drink too.
knowing the odds of the lottery, it is a dua that you are throwing away money and i think even the poor know that,
and isnt it ironic that the 500% cigarette tax is used for anti smokeing campeigns? use the money you have to dry up your revinue, bad buseness 101
Correct, however poor people tend to have bad education. Bad education then leads to smoking and drinking.
Originally posted by Josef K.
I agree.
Although perhaps a more accurate analogy would have noted the fact that all of the men at the table are not being fed equally to begin with. The totality of the meal for the poorest men may perhaps consist of a few scraps of bread and a glass of water. Then as you move progressively up the list, each man who pays more of the bill is given a disproportionally larger amount of the food. Finally, the richest gentleman is afforded access not only to an excessively opulent spread of the finest gourmet foods imaginable, but is being served strawberries and whipped cream from out of the buttock cleavage of a beautiful, enormous-breasted, nubile teenage girl. He lifts his face out from between her legs, dripping with cream and vaginal fluids, points across the table and cries, "Hey! That guy's not paying his fair share! It's so unfair to me! Why should I have to pay for his bread and water?! I EARN my money, dammit!!"
The proprietor of the establishment concurs, and declares that he will be lowering the price of the meal substantially. Consequently, the restaurant will be unable to provide as much free bread and water as before and the poorer patrons will just have to tough it out.
etc.
Of course, all of this completely ignores the question of what these men actually do for a living and what justification they have for their claims to wealth in the first place. It's all a hell of a lot more complicated than what the "distinguished" professor would have us believe.
The only thing wrong with your analogy is that it doesn't represent the truth. It is obvious income redistribution occurs through our taxation system. Claiming the poor "meal" is scraps when they clear get much, much more than they put in is just a total fallacy.
The thing that makes it even more laughable are things like the earned income tax credit and child tax credit where you get money back, even if you have paid nothing in. The "poor" person ends up with $5000+ cash for a poor family of 4 for doing nothing more than existing. They really are paid to eat.
Nick
Originally posted by Nordstrodamus
Please excuse me, ShawnJ, if I'm speaking out of turn but I'm really am trying to understand this post by trumpetman.
Ah, I think someone here once covered the phenomena of fundamental attribution error. I presume that must be what's in effect here. The poor must be essentially lazy for not taking advantage of the boundless opportunities available to them. Those foolish poor using their money to pay for food, rent, and children when they should be investing.
No one said a word about lazy. Financial intelligence is something you can acquire at any age and begin practicing with good results at any age. Most of the rich are self-made. Finally most people don't study money or finances at all. They just do what they saw their parents do. It is like claiming fat kids have to be fat because their parents were. Getting education about nutrition and good eating habits can begin at any age. The same is true for finances.
Regarding Woz, Jobs, Gates, and Dell... I don't recall what financial background Woz and Jobs came from, but I'm pretty sure Gates and Dell came from fairly well off families. Also, as we all know, Jobs and Woz are geniuses, which is a condition we are not all blessed with.
It doesn't matter their background because their wealth has far exceeded it. We are talking about self made BILLIONAIRES, in almost every instance. People who have joined the Fotune 500 with a couple decades. The type of upward mobility people claim is often impossible. Gates for example was worth $100 billion a few years ago. He is worth around $50 billion now. He could be at the top and drop off within a generation. Who knows?
Finally the only one I would consider a genius out of any of them is Woz. The rest are just busines smart and apply a philosophy relentlessly.
I get that overly taxing investments would deter investment, but clearly the presence of capital gains tax didn't deter investment in the last decade at least. Also, I've yet to see a one to one correspondence, the simple reality seems to be as long as there is some advantage to invest, people will invest.
But people are suggesting that there SHOULDN'T be an advantage to investing. They are saying it should be treated the same as income. Finally the capital gains tax was lowered, not eliminated. The last bit is of course that people can invest at any time, but they just won't take the money out of their investments until the tax advantages are right, or they will take it out and move it to somewhere where they don't have to pay taxes on it. As the story made note, they simply don't have to show up for dinner.
Amazingly people won't consider this with the rich, and don't consider how it hurts the poor. The history of all taxation is that it starts with the rich, there isn't enough revenue for the program growth or the rich avoid the tax (move away) and then the tax burden begins shifting down the income chain. Property taxes, and income taxes all started as taxes on the super-rich top 1%. They certainly aren't that now.
Ok, I'm honestly not getting this. Somehow, money earned by putting one's physical life, family life, or mental life at risk by actually working should be taxed, but money earned by putting one's money at risk should not?
I did address this at length. It is because to do the investing takes after tax dollars. It has already been taxed once for everyone. With investing it is taxed a second and even a third time.
Example
Ron is middle class/poor. He and his wife earn $14,000 working part time at Walmart. They are in the 10% bracket but after being given their standard deductions, plus the deduction for their children, they have no taxable income. Since they are poor, they get the Earned Income Tax Credit and Child Tax Credit for two children. The owe nothing and receive a check for $5000 from the government.
Stu is considered wealthy by the government. He and his wife earned $160,000. They are in the 30% bracket which means they pay about $20,000 in taxes after deductions. They take some of their after tax income and invest it in the stock market. The stock goes up 40% and they sell. From that after tax investment is taxed at 20%. While they owned the stock, it paid them a dividend from the company profits. The company had to pay taxes on the profits. The company then takes what is left of the profits and pays it out as a dividend. Stu and his family pay 15% tax on this dividend. Rememeber the money was taxed as profit by the company, and as a dividend to Stu.
The rich are hardly getting away with murder here. You can claim that Stu and wife are not rich, but their income puts them in the top 5% of all earners. Even if you don't consider them rich, the point is that our government does. You can also see that in addition to not getting any money back like Ron, Stu and his wife were actually taxed three times. The dividend was taxed twice. The stock buy and sell was taxed twice.
That is why it is dishonest to claim that investment income is the same as salary. It is already being taxed multiple times.
Finally, returning to my loan analogy, it is no less reasonable to expect the rich to repay the loan given to them (in the form of lower taxes when they were poor) by taxing dividends than it is to tax income. Given that rich, almost by definition, means not having to work for a wage it would be extremely silly not to tax dividends as that would be the only route by which to recover the loan.
This is a flawed analogy. It assumes we work for the government instead of the government working for us. Lower taxes are a loan to be repaid? You are essentually saying that because the government was LESS intrusive and actually got out of the way long enough for you to live and start your life, that you should repay that lack of intrusiveness later. I really don't think that is the philosophy our founding fathers had in mind.
Nick
Originally posted by Argento
Correct, however poor people tend to have bad education. Bad education then leads to smoking and drinking.
How much education do you really need to know that smoking and drinking are bad for you? All education would do is give you facts to argue what you should already know. Most alcohol doesn't taste good until the taste is "acquired" via repeated exposure. Most smoking smells like absolute crap.
Finally I've worked at many poor schools. It isn't the education that is bad in almost all instances. Rather it is that not all people nor all cultures value education to the same degree.
Nick