The New Republic

I say stick it to those wealthy lucky duckies.

- liberalref

June 5, 2012 at 2:51pm

Taxes are the dues you pay to live in a civilized society. Wealthy dead-beats are cruising on the efforts of the rest of us. Hey, if you want to balance the budget, but can't (or shouldn't, or don't want to) cut spending because that would raise unemployment, let's raise taxes on those who do have an income. At this time of historically low tax-rates, I would think it would not really impact productivity, much though the dead-beats will howl about it. I've never understood how "raising taxes causes recessions" EVER became common knowledge. Sure, I understand the Supply-Side arguments against it, but since when have Supply-Side arguments become main-stream?

- AllanL5

June 5, 2012 at 4:34pm

Plus, it sounds to me from your arguments that eliminating the favoritism toward Capital Gains taxation would also be a good start.

- AllanL5

June 5, 2012 at 4:35pm

Osborne tried the charity tax thing - he got battered with sick kids and cancer victims. Why can't we have a progressive tax on charities? Surely, a million to a kids hospital is worth more of a tax deduction than some of the cultural charity/fevered-ego's hobby scams out there?

- IggyPop

June 5, 2012 at 4:36pm

Ah, Iggy, you're around. I made a brief reference to your good self over on the "Visiting Greece" thread.

- ironyroad

June 5, 2012 at 6:50pm

Alas, more proof that dems intently focus on that which doesn't matter. Always. This is 0.5% of ALL 200K earners avoid all income tax. Could there be any smaller problem to worry about. So, if you earn $300K, and your $500K house burns down and you take a $500K loss, then congrats, you avoid all tax. If you take your life savings of $400,000 and put it into a new business, and two years later that business goes broke, then congrats, you avoid all tax. If your insurance company tells you they will not pay for an experimental medical procedure, and you and spend $140K to have that procedure done, and you earn $200K that year, then congrats, you have avoided all taxes for the year. And how freaking greedy can someone be if they want to give THEIR entire year salary to a charity instead of the government. Seriously, instead of wringing your hands this tiny handful of folks that for some bizarre and very exceptional life circumstance have avoided taxes...worry about something that actually matters. It makes you petty and envious. And if you could convince people that their taxes woudln't just go to lavish pensions and parties in suites in Vegas, then perhaps they might be agreeable to paying more taxes. I routinely vote for higher taxes in local elections. But pay the federal government more so that federal unions can skim a bit off and then pass it back to the state? No thanks. Too wasteful.. Step #1 to increasing taxes: Convince the tax payers they are getting a good deal.

- seattleeng

June 5, 2012 at 9:04pm

I have to disagree with most of this post because I believe that tax collection should be tied to ability to pay. To have large amounts of wealth off the table because of a rate of 15% on long term cap gains and dividends, means someone else has to strain financially to pick up the slack, including future generations, or we have to give up being globally competitive. Therefore, deductions do not bother me. Sub chapter S corporations have a value and you can fix the payroll tax issue in other ways.

- Nusholtz

June 5, 2012 at 9:18pm

Oh heaven forbid enviousness of the rich! It is so unseemly!

- Sophia

June 5, 2012 at 10:49pm

seattleeng, I know some people who had incomes of over $200k and paid no federal income (or payroll) tax, and they don't fall into any of your sympathy story categories. Is it your contention that they should be paying no federal income tax? "Step #1 to increasing taxes: Convince the tax payers they are getting a good deal." Well, I'd say a good step is convincing the tax payers that the system is fair. But hey, I know that's just crazy talk.... "worry about something that actually matters" I'd say fairness actually matters to most people (and helps with compliance), but maybe I'm mistaken.

- dsimon

June 6, 2012 at 12:22am

Maybe travel on the interstate highway should be made dependent upon ability to pay. What about that?

- ironyroad

June 6, 2012 at 2:26am

DSimon, did they do it legally? If so, they had to have losses to offset the gains. What were those losses? Or, perhaps they had $3M in investment income that went into tax-free bonds? You know, those things sanctioned/encouraged by the government? (note the report considered expanded income which includes tax-free muni bonds as part of the income). My guess is that if someone went 5 years without paying a dime in taxes while earning over $200K in regular income, then IRS would descend on them like buzzards on a carcass. Every alarm bell in the audit computer should be going off. Irony, travel on the interstate highway should be covered by the gas tax. And if there isn't enough there, then raise the gas tax.

- seattleeng

June 6, 2012 at 3:33am

I don't think this issue has the political legs that some people may think it has. Trying to advantage uninformed populist envy has its own hazards. The truth is the IRS will happily go scorched earth on anybody they deem to be outside of legal boundaries of taxation law. Thus the indictment of cheat is thin. The reason lawmakers approved these tax breaks ostensibly has its basis in a useful and beneficial public rationale. Encouraging risk capital to flow thus and so has it basis in the logic that the synergies will generate a public good AND greater leveraged economic activity in and around the area of favored focus. The social mathematics make it unlikely that Congress and local lawmakers will give up this prerogative is unlikely. Making it seem as if the 'cheaters' have bought all of these unfair advantages is a tougher sale than some of us think.

- jacko

June 6, 2012 at 8:49am

Having had the opportunity to reread my offering finds me exploring whether or not I should fire my editor. I'll keep in mind that he was just waking up and hadn't established a requisite quota of coffee to qualify proper permissions to operate this not so heavy machinery. Apologies to anyone who found themselves in a ditch or suffering pothole damage.

- jacko

June 6, 2012 at 9:38am

SeattleEng There is no deduction for losing your residence. You don't avoid tax for it burning down. You realize that under current Bush era tax laws, a married couple who makes $85,000.00 of capital gains and dividends pays no tax, while a next door neighbor who works and earns that amount pays about $16,000.00. So somone married who inherited $2 million and sits around with their funds invested in stock making 4% pays zero tax. Can you defend that result? Romney wants to raise it to $200,000.00. (Please Send money to Romney's kids by voting Republican.)

- Nusholtz

June 6, 2012 at 11:23am

Nutz, if uninsured, the the person certainly does get to write off the value of their house. The person who earns $85K of cap gains has already paid taxes on the money when he earned it. And likely that person already saw his gains substantially muted by corp taxes. If you want to tax cap gains at normal rates, then get rid of corp taxes. But we can't have the highest corp taxes in the world AND treat cap gains as regular income. It risk of the market wont' justify the return. The person that saw $85K in income pays 6% in federal tax, or $5100. Not the $16K you note. And, FWIW, the person who earned $85K in cap gains likely had $1.4M in investment income. And to get that $1.4M in investment income, he probably paid $300K in taxes, and each year his return on that $1.4M sees corp taxes of 25+% before he see a dime. That is, they would have received $113K, except corp taxes took that down to $85K. ANYONE CAN ENJOY CAP GAINS! JUST SAVE YOUR MONEY! A $85K earner working for 30 years has amassed $1.3M in savings via SS. Kind of sucks the government can't give you the sweet deals on all that money that the regular saver gets, doesn't it? And you want to give them more?

- seattleeng

June 6, 2012 at 12:16pm

At least you acknowledge that the investor isn't being re-taxed on money they didn't earn, that $1.4M you mention. I don't buy the double taxation argument, though. A terribly lame excuse. So what if the corporation paid corporate tax on their income before doling out money to their investors? Income is income, no matter the source. If any income should be treated better, income from sweat equity should be taxed lower because the cost is so much higher.

- GSpinks

June 6, 2012 at 12:40pm

GSpinks, investment income isn't normal income. Every government recognizes this. The challenge for a government is this: When someone earns money, the worst thing they can do is stuff it under a mattress. How do you induce the person that has saved money to put that money to work? By work, I mean put it into a larger pool with other investors that does wonderful things like start businesses, expand businesses, invent new things, etc. The government does this by selling bonds. An older company like IBM says "Hey, this is a good idea, we can do this too" and they offer a rate of return slightly higher than the government rate to induce you to buy their stock. The company is very set in their ways, staid, and safe. Not as safe as the government, but still very safe. A new upstart like Google comes along and says "We could also use some money to fund an expansion. We'll sell stocks and aim for a higher rate of return than IBM, but with a bit more risk..." And an even newer upstart comes along and promises even more return but with even greater risk. But the basic idea is the same here: Sitting on savings is very bad for government and society. That money has to be put to work to do good. To get people to put it to work, you have to make the returns worth the risk. Raising taxes on investment income reduces the returns, while keeping the risk the same. This, in turn, reduces the amount of money in the market. Which is bad for all of us. We've seen the reports about companies hoarding cash. Sitting on $3T stockpiles at a time when the country needs it most. Keeping money overseas because they don't want to re-patriot it and pay the taxes. It's the same thing. If you want people to put money to work, then you need to make the return worth the risk. If the return isn't worth the risk, be it a lemonade stand or Apple, then the money just sits there.

- seattleeng

June 6, 2012 at 2:07pm

PS. Search on "corporations sitting on cash" and you'll see countless progressive sites lamenting that corporations are just sitting on their money at a time when we need them to be investing. How ironic. Government sets policy that makes it enticing (or not) for companies to invest. The fact that companies are sitting on money is a byproduct of policies that made companies think investing was too risky. "Too risky" simply means the return doesn't justify the risk. But these progressive sites probably applaud the policies that increased the risk and/or reduced the reward. And then they moan over the result. Odd. Example #1: ACA increases the cost to employ someone. Result: Fewer people are employed. Example #2: Higher corp taxes reduce the return of stock investments. Result: Fewer people invest. More sit on cash. Simple cause and effect.

- seattleeng

June 6, 2012 at 2:15pm

What a joke. You left out the baseline levels before and after taxation where people stuff money under their mattress regardless of taxation. More importantly, you haven't explained why we have the most desirable economic policies, according to your standards, since the Great Depression, and yet we have the worst economic conditions since the Great Depression. How can you not appreciate the irony you so conveniently pointed out?

At the end of the day, the government has another role, to ensure the economy keeps moving. To that end, it is nothing short of irresponsibility to not raise taxes (progressively, of course) and invest that money itself to generate jobs where the free market has not.

Example #1: We repeal the laws put in place to protect our economy from another Great Depression. Result: tax payers watch their hard-earned tax dollars funneled into the bastion of the free market, aka Wall Street, in order to prevent a new Great Depression. Example #2: Higher corporate taxes result in higher revenues for the Federal Government. Result: a balance budget.

- GSpinks

June 6, 2012 at 3:43pm

Gspinks, we do not have the most desirable economic policies just now. The cost to hire is higher than ever thanks to ACA. Corp tax rates are now the highest in the world. On which group do you want to raise taxes? The wealthy? That will not come close to balancing the budget. That is just $70B. The middle class? Repealing Bush tax cuts on everyone (rich to poor) raises $300B a year. We are short $1.5T over each of the the last 3 years. Clinton understood better than any other progressive: let the wealthy thrive and then we'll all do well. Try to hammer the wealthy and we all suffer.

- seattleeng

June 6, 2012 at 9:49pm

"DSimon, did they do it legally?" Yes, absolutely 100% legally. Some income was tax-free. Some investment income fell under the exemption that would otherwise go to earned income. Then there are things like the home mortgage interest deduction and other deductions that are wasted on those at those income levels. "Clinton understood better than any other progressive: let the wealthy thrive and then we'll all do well. Try to hammer the wealthy and we all suffer." That's the opposite of what actually happened. Clinton raised taxes more on the wealthy than anyone else, and we all did well. No group suffered. But reality has a well-known bias, I suppose.

- dsimon

June 8, 2012 at 12:55am

seatleeng: "A $85K earner working for 30 years has amassed $1.3M in savings via SS." What does that mean? SS taxes don't accrue to the individual. They go out as benefits to today's retirees. There are no "savings via SS." SS is an intergenerational compact. (Really, I don't know how many times we have to go over this.) "The wealthy? That will not come close to balancing the budget. That is just $70B." So that means we shouldn't do it? That's like saying we shouldn't do any tort reform because it alone accounts for only a small portion of health care costs. No one measure alone will come close to balancing the budget. Health care reform alone won't do it. Defense cuts alone won't do it. Eliminating the home mortgage interest deduction alone won't do it, or agriculture subsides, or oil and gas subsidies. So by that logic, we shouldn't do any of them. Consequently, taking any action is hopeless! Except of course that it isn't. $70 billion a year is a fair chunk of change. And, as has been discussed time and time again, there are fairness considerations regardless of bugetary impact. If we had a tax system that did balance the budget but seemed manifestly unfair, we'd still want to change it.

- dsimon

June 8, 2012 at 1:44am