The Mitt-Lefty Paradox of taxation

[bUU]

Taxing someone who has to actually work for their income more than taxing someone who just sits back and lets it roll in (dividends) is not fair. If both examples, like the golfer and Mitt in the OP example, both make 1,000,000, why should the golfer have to pay a higher tax rate than Mitt, who doesn't have to swing a club, or shovel, or 'hash' to 'earn' his income?

Unfortunately, this is a matter of morality, something that each person can decide to set aside for themselves, to rationalize that which advantages themselves at the expense of those more in need of such advantages, if they so choose. To truly appreciate what you're saying, it requires placing one's self as a member of the whole, rather than conceptualizing one's self as superior to "the little people". All someone needs to do to side-step the implications of a moral definition of fairness is define themselves in this latter way, and shape their world-view around some image that rationalizes the promotion of one's own desires while marginalizing the abject needs of others. Such a corruption of the relative primacy of "desires" versus "needs" could readily justify, for example, the transgressor's dogs eating better than other humans in their community, though that's admittedly an extreme example.

Talking about 'double taxation' is a diversion.

Perhaps. I think of it and similar rhetoric as a rationalization for refusing to internalize and acknowledge the ramifications on others of one system versus the other. I think a diversion must be conscious, but most of the time such rationalizations aren't, and, rather, are crafted because their absence would invariably tarnish the self-image of those who support the more regressive system.

A progressive system leaves more people able to pay for their own abject needs. A regressive system leaves more wealth in the hands of the wealthy, and leaves more poor people without the means of surviving without additional assistance. A progressive system, which most definitions of morality define as fairer, supports best that idea of a society of citizens working together at all levels of society to move society forward as a whole. A regressive system supports best that idea of a society of puppet master using lesser humans to figuratively turn the cranks of the machine that lifts the puppet masters higher and higher. If you are inclined to advancing your own desires regardless of the impact on the ability of others to afford their own survival, then you'll adopt a rationalization to justify your choice.

Romney paid 13% tax on his income, only after he fiddled it to pay a higher rate, as it turns out, and the golfer paid more. Much more. I'm pretty sure if Romney were to release the past 10 years of tax returns we would see just how little he actually pays, (which, of course, is why he refused to release those forms)

I think this is a myth. The best indications I have seen indicate to me that Romney only sought to shield one year's tax forms from publication, 2009. My evidence of this is that Mitt Romney ran for President in 2008, and if he had been nominated would have had to reveal at least a couple of years worth of taxes, 2007, 2006, ... The 2009 tax forms would have showed whether the Romneys shielded themselves from prosecution for tax evasion through an amnesty offered that one tax year.

The American people see through this BS, which is why Romney lost....

Sorry peggy, but I think this is wishful thinking, as stated. 47% of the American voters voted for Romney. A great number of them almost surely did not see through the BS, and (either through being manipulated or through self-deception) have and will continue to shield themselves from the understanding that would pierce the BS. And while it is invariably true that many others did see through the BS, they still voted for Romney because the see themselves exploiting the advantages that reactionary world-view affords those with wealth, and rely on rationalization as I indicated above to side-step the negative aspect of supporting a system that feeds their own discretionary desires at the expense of the abject needs of others. The point is that it isn't enough to point out the manipulations, deceptions, rationalizations and diversions; there may very well be enough people who's definition of morality is such that the impact of anything on people other than themselves and their own family and friends is of no significant importance.

And there is every indication that that trend is accelerating. One of the most insidious aspects of reactionary perspective is that it rewards doubling-down on itself. The more such things make it more difficult for more people to follow-along with those benefiting from society's prosperity, the more those who are facing that increasing difficulty are motivated to rationalize the measures they support that they see will foster their own comfort and luxury even at the expense of others' abject needs. For example, when management makes competition more cut-throat in the office, such as by doing away with team incentives and replacing them with individual incentives, the most aggressive self-promoters increase their rationalization of offensive actions against others, stealing each other's leads, throwing each other under the bus at status meetings, etc. And going back to what I said about rationalizations, there are many who tout the benefits of such a system, by hardening themselves against having to face and internalize the negative ramifications of such a system on people. If you have a chance to hear someone defend such a system, watch how deftly they avoid humanizing those harmed by the system.

[Gregg]

You tax income. Period. If that income comes from dividends, or from digging ditches, you tax it at the same rate. Period. Income is income.

But that experiment has already failed peggy. By taxing the wrong thing (income aka work) the heaviest burden is placed on the people who can least afford it. And you can't tax "wealth" because the only way to accomplish that is through de facto confiscation. I also think the tax RATE of individuals is a red herring. The progressive rate is an attempt to move the burden up the scale, but it doesn't work because the working poor can't even afford the lowest rates and the heaviest burden is placed on those who are producing at a high level. Whether you like high earners or not we need that kind of production to maintain our society's lifestyle.

The notion of taxing spending, rather than earning, is interesting. Sure, the top of the food chain could figure out a way to purchase their BBJ's in Mexico to avoid it, but overall there could be a lot of benefits from this kind of shift. It might be worth a closer look.

[LDAHL]

You tax income. Period. If that income comes from dividends, or from digging ditches, you tax it at the same rate. Period. Income is income.

Pretending you don't know what people are talking about when they talk of fair taxation just makes a person look dense, and totally clueless. Kind of like Romney. who lost. Largely because of his cluelessness, and clumsiness in understanding how the world works.

Now Alan, do you really not understand this very basic, and incredibly simple principal? Really?

So I take it, based on this very basic and incredibly simple principal, you'd be in favor of abolishing estate, excise and property taxes?

[Rogar]

I am hardly the tax expert, but one difference I see between the likes of Romney and Lefty is income from wages earned and income from dividends and capital gains. While the income from wages is indeed progressive, the conservatives actually won a huge victory with the new tax laws which made the bush tax cuts on dividends and capital gains permanent. I see this system as indeed favoring the wealthy. The average mid-class American is only marginally invested in stocks and business ventures that would give lower taxed dividend and capital gain income relative to the wealthy. The conservatives, including Mitt, proposed closing some of these tax loopholes to increase revenue but unfortunately never came up with the specifics that might have expedited this.

The concept that progressive personal income tax rates stifles economic prosperity just doesn't fly with me. The rates on higher incomes are at historic lows and times of higher tax rates for the wealthy have gone hand in hand with times of economic prosperity. What does stifle growth is the burgeoning federal debt and the interest burden on that debt. The only practical way I see to reduce debt and balance the budget in the balanced approach of spending reductions and tax increases. This would help to preserve the integrity of SS and medicare, and also provide income for infrastructure improvements and sustainable energy development. While the concepts of a flat tax and huge military cuts are enticing concepts, practically speaking I just don't see these happening. What seems more likely to me is the closing of tax loopholes that mostly favor the wealthy.

Actually, Lefty is from California, where they recently achieved a balanced budget. And state tax increases were a big part of that.

[peggy]

But that experiment has already failed peggy. By taxing the wrong thing (income aka work) the heaviest burden is placed on the people who can least afford it. And you can't tax "wealth" because the only way to accomplish that is through de facto confiscation. I also think the tax RATE of individuals is a red herring. The progressive rate is an attempt to move the burden up the scale, but it doesn't work because the working poor can't even afford the lowest rates and the heaviest burden is placed on those who are producing at a high level. Whether you like high earners or not we need that kind of production to maintain our society's lifestyle.

The notion of taxing spending, rather than earning, is interesting. Sure, the top of the food chain could figure out a way to purchase their BBJ's in Mexico to avoid it, but overall there could be a lot of benefits from this kind of shift. It might be worth a closer look.

First of all Gregg, you are trying to deflect and misdirect again by saying 'taxing wealth'. No one is talking about confiscation, and you know that. Please don't pretend ignorance. Income is income. Whether that income comes from investments, or flipping burgers, it is still income (that which you did not have at the start of the year and has come into your possession during the year---does that make it more understandable? Do I REALLY need to explain what income is?)

bUU is right about that. Some seem to see themselves, and their income different. Kind of like gifts from god, or their personal right, and not income, really (a dirty word!) therefore they are above the whole tax/income thing. That's for the little people.

You say the tax system we have has failed because the poorer pay more percentage wise. Well, duh! That's the problem. If it were to actually work, you know, ALL income taxed in a progressive way, then it would work. Close the loopholes, which to be honest, is exploited more by the ones who can afford accountants and lawyers to dedicate themselves to this. You could even put Romney in charge since he has worked every loophole and tax avoidance scheme out there!

As far as taxing spending alone, that is but another way to get the 'little people' to pay more tax and let the wealthy get off. It's just re-wrapping the same old crap. It does away with capitol gains, inheritance tax, and gives corporations (and their owners) more gifting in how that tax (or lack of) structure works.
And the average worker, who doesn't get their income from the above but rather works for it and largely spends it on the necessities, pays tax on just about every dollar they earn (spend). A few dollars more on that superyacht isn't going to faze the wealthy, but a few dollars more on food, clothing, rent, fuel, and small 'luxuries' (dinner out, movies, ballgame) would have a huge impact on people with limited income. People who maybe didn't pay much in federal taxes (because their income is so low) are suddenly paying way more in taxes as they go about daily living.

[peggy]

So I take it, based on this very basic and incredibly simple principal, you'd be in favor of abolishing estate, excise and property taxes?

We are talking about income tax here.

And, by the way, estate taxes ARE taxing income. (if someone dies and you inherit 5,000,000 then that sure is income even if you didn't have to lift a finger to 'earn' it) And no, they don't affect the average person, and they don't even affect the wealthy unless they decide to 'sell the farm' or 'split up' the large, wealthy estate.

[LDAHL]

We are talking about income tax here.

And, by the way, estate taxes ARE taxing income. (if someone dies and you inherit 5,000,000 then that sure is income even if you didn't have to lift a finger to 'earn' it) And no, they don't affect the average person, and they don't even affect the wealthy unless they decide to 'sell the farm' or 'split up' the large, wealthy estate.

So you tax income, period; and all wealth is the result of income. Therefore all wealth is taxable?

[bUU]

If it were to actually work, you know, ALL income taxed in a progressive way, then it would work.

The problem others have pointed out is that if you try to tax all income as income, you really will motivate hording of wealth to avoid taxation. By the same token, there are ways to tax wealth, without confiscation, that effectively addresses economic inequity of the past, and avoids these pitfalls others have highlighted, but it requires far more moral will than all the moral people in the US have, collectively. One maverick example of this would be to re-conceptualize "unrealized gains" and "unrealized losses", as taxable and deductible, respectively. Effectively, it would be like having everyone sell everything they have on December 31, and re-buying it on January 1 (for tax purposes only, of course). Of course, there are pitfalls with this approach as well. For example, it will devalue the "buy and hold" advice typically relied on to drive people to invest in their own retirement. Of course, given recent statistics, that motivation is impotent anyway, so probably no great loss. However, that's why there wouldn't be enough will to make something like that real: Those wealthy folks who would benefit from the status quo and the wanna-bes would cite implications as pitfalls, without any regard to how things are in actuality.

As far as taxing spending alone, that is but another way to get the 'little people' to pay more tax and let the wealthy get off.

Typically true, but it doesn't have to be. It would be a trivial exercise to craft a sales tax system that doesn't tax anything that people "need". There would be loads of political wrangling about what is "need" and what is "want", but a line could be drawn, and taxation could then be a flat rate for anything about the line. And if the line is drawn responsibly (a big "if"), then it's a very clean, neat, progressive, and fair system.

[bUU]

So you tax income, period; and all wealth is the result of income. Therefore all wealth is taxable?

She said income. Not wealth. Income is wealth that comes in, not wealth that is already there. When someone inherits, their benefactors wealth leaves the benefactor's estate and comes in to the beneficiary's assets.

Read it again. You'll see that it is talking about "money that moves".

[Gregg]

First of all Gregg, you are trying to deflect and misdirect again by saying 'taxing wealth'. No one is talking about confiscation, and you know that. Please don't pretend ignorance. Income is income. Whether that income comes from investments, or flipping burgers, it is still income (that which you did not have at the start of the year and has come into your possession during the year---does that make it more understandable? Do I REALLY need to explain what income is?)

Do I REALLY need to explain to you how the experiment failed? If it worked this conversation wouldn't be happening, would it?

You say the tax system we have has failed because the poorer pay more percentage wise. Well, duh!

That's not even close to what I said, now is it peggy? Time to wake up and smell the bacon. Percentages on the progressive tax scale have nothing to do with it. It's nothing but a political talking point to snag the low information voters. If you REALLY want to get into it you will realize that the EFFECTIVE tax rate is what matters. To everyone. Besides, the working poor don't pay higher percentages than I do or than you probably do. What hurts them is that they don't have enough money left over to achieve a better life. It doesn't make the slightest bit of difference what percentage is taken out of their checks when they can't afford to have ANYTHING taken out.

As far as taxing spending alone, that is but another way to get the 'little people' to pay more tax and let the wealthy get off.

It is EASY to get around that, isn't it peggy? Like bUU said, it's simple to eliminate taxes on necessities. Here in Nebraska there is no sales tax on food. Zero. Poor people spend a much higher percentage of their income on food than rich people do so it is the working poor who derive the most benefit from that approach. It's that simple. And it's pretty much a given that rich people spend more on non-necessities than poor people and so would pay more tax on those categories of goods. It is elegant in it's simplicity unless your tripping point is that eliminating sales tax on ramen noodles means you would have to eliminate it on foie gras as well...