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Your Take: Should High Earners Pay Higher Tax Rates?

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One of the big political stories this week was the “revelation” that Republican Presidential nominee hopeful Mitt Romney paid an effective tax rate of around 15%. I put quotes around it because it probably comes as absolutely no surprise to anyone that his effective tax rate is lower than his marginal tax rate. After this was released, there was once again talk about how the wealthy should be taxed at higher rates. 15% isn’t “enough.”

I think there are tax loopholes that should be closed, like “carried interest” being taxed at 15% when it’s more like income (it’s closer to income than dividends or long term capital gains in a company stock), but I think the argument that people who earn more should pay a greater percentage of their income is unfair. They certainly pay more in taxes, 15% of Romney’s income is greater than 100% of mine (without knowing his tax liability… I’m pretty sure I can still make that claim safely), but does that mean he should pay a larger percentage? In the end, we don’t count percentages when we talk tax revenue, we count actual dollars.

We can also make the case that long term capital gains should be taxed higher than 15%. Should there be more than two tiers – 0% and 15%? It might make more sense to have your long term capital gains be 10% lower than your marginal tax rate (what it is if you’re in the 25% tax bracket), rather than having the top rate be 15%. Maybe someone with millions in capital gains should probably pay more than someone who has a few hundred or a few thousand in the same (according to this, most people in that second camp had capital losses). Either way, I think a discussion is in order.

Finally, by arguing that we should increase the tax rates of high earners, aren’t we arguing that we should be penalizing success? That’s the part that concerns me. In the end, it’s one issue to argue that a top rate of 35% is unfair, or that 15% for long term capital gains is too low, but to use it as part of a “eat the rich” movement reminds me crab mentality.

What do you think?

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79 Responses to “Your Take: Should High Earners Pay Higher Tax Rates?”

  1. Erica says:

    I am someone who has always made no more than 35k. While that’s not the case now, it has ALWAYS been my opinion that people shouldn’t have to pay a higher percentage in taxes.

    It IS penalizing for success.
    It IS unfair.
    At the end of the day, a person with greater income IS paying more money. That’s why it’s a percentage and not a flat rate.

    So, no, I absolutely do not think people in higher tax brackets should have to pay more.

    • Sun says:

      Why are you equating higher I come with success? There are those that choose to not get paid, receive a lower paid position… I would categorize some individuls are more successful than someone else that makes more.

      • Jim says:

        I think the argument isn’t that people who are paid less are less successful, but typically people who are paid more are seen as more successful because money is a barometer.

    • JXZ says:

      With the current tax system:

      A person making 50k in captical gain income pays at 15% tax rate and 0% payroll tax.

      A person earning 50k in wage income pays 17% effective tax rate plus payroll tax.

      How is that fair? The fairness question today isn’t whether higher income people should be paying HIGHER rates. The fairness question today is whether higher income people should be paying LOWER rates. As the top 1% today, like Romney, pays most of their income at the 15% cap. gain flat rate.

      • Texas Wahoo says:

        But that has nothing to do with whether they’re “higher income.” As your scenario points out, the retoric about “higher income” is misplaced if people are worried about capital gains.

        • JXZ says:

          No, that wasn’t the point that I was making. Let me clarify it. Erica is equating higher income with higher success, so if I follow her logic, two people with the same income, whether capital gain or earned wage, are equally successful. But the cap. gain income gets taxed much less, so the talk about punishing success just makes no sense.

          Back to your concern, capital gain comes into the fairness question because the top 1% derive most of their income from capital gain, and therefore gets taxed at a LOWER tax rate than wage earners. Even when the top earners gets paid in wages, people like Romney gets to declare his earnings at the VC as captical gain instead of wage (a known tax loophole).

          So forget about taxing high-earners at higher rates, they are taxed at lower tax rates than wage earners. They should at least be taxed at the same rate, if not higher.

          • Texas Wahoo says:

            But the problem is we’re conflating two separate issues that are related. If we’re worried about high earners paying less because of capital gains, then we should raise capital gains raates, not income tax rates. As someone who would be affected by raising the top tax bracket, but who has very little capital gains, it annoys me when people talk about high earners paying too little in taxes and use that to justify raising the top tax bracket.

          • shckr7 says:

            One of the main reasons the dividend tax rate was lowered, is because this money, paid by corporations, has already been taxed to the owner (in this case the receiver/shareholder). So the actual tax rate on this money is not really 15%, but rather ~35% at a corporate level and then an additional 15% at a personal level. It used to be even more obscene when it was taxed as normal income….. Now the actual tax rate is down to around 50%…….not including state income tax (around 10% where i live). Doesnt seem so low now, does it?

          • JXZ says:

            @texaswahoo, this whole discussion is about the captical gain tax, not marginal tax rate of earned income. Btw, even that is extremely low when compared to, say, the 1960s:

            http://visualizingeconomics.com/2007/11/03/nytimes-historical-tax-rates-by-income-group/

          • shckr7 says:

            One of the main reasons the dividend tax rate was lowered, is because this money, paid by corporations, has already been taxed to the owner (in this case the receiver/shareholder). So the actual tax rate on this money is not really 15%, but rather ~35% at a corporate level and then an additional 15% at a personal level. It used to be even more obscene when it was taxed as normal income….. Now the actual tax rate is down to around 50%…….not including state income tax (around 10% where i live). Doesnt seem so low now, does it?

    • jim says:

      Erica,
      Me too!

  2. Wil says:

    I don’t think there is anything wrong with capital gains being taxed at 15%, or so. Unfortunately, too much is made of “fair share” of taxes being paid by the high earners. With the number of people who pay no income taxes at all approaching 50% of the population, the “fair share” mantra rings hollow to me.

    I pay twice as much in taxes now than I thought I would ever EARN when I was high school. It is hard to say that I am happy to pay it. I’m not. I am, however, glad to live in a country that affords me the opportunity to do as well as I have been able to do.

    All the political hoopla about the “rich” vs the 99% just makes my head hurt.

    • Ruth T says:

      I am sure that slightly less than 50% who pay no taxes would love to be able to pay income tax. They are either not paying income tax due to 1. becoming disabled and living on SSI ($625 per month), or have been unemployed and no longer get unemployment benefits which are taxable) or some other situation that puts their total income at below poverty. I would love to have medical research find a cure for my congestive heart failure and a way to fix my fractured vertebrae. THEN I could go back to work and paying taxes. The “RICH” have had 300% or more increases in their incomes… the other 99% have had their incomes decrease.

  3. Sun says:

    Tax capital gains as if it was income. Np special taxation provisions for capital gains.

    • Strebkr says:

      Then why would anyone invest in anything? Without investment, business dries up.

      • Courtney says:

        People invest to make money. Taxing capital gains as regular income doesn’t change the fact that they’ve still gained something. Write off the losses as a normal deductible expense (or cap the amount that is given preferential treatment under the current system).

        • Jim says:

          Ahhh but losses can only be deducted against any gains you have (plus $3000 of your own income). Any additional losses are pushed into future years.

          • Courtney says:

            Right, but that’s under the current capital gains rules. I was talking about making capital losses a deductible expense in a system where they’re treated as ordinary income. OR keeping the current system, but capping the amount of capital gains that can be taxed at the 15% level. Two different scenarios.

      • freeby50 says:

        You mean if people were taxed more than >15% then they would stop investing their money?

        People are taxed more than 15% for working. So why does anyone work?
        People invest in gold and it is taxed at 28% right now.

        • Jim says:

          They wouldn’t stop investing, but I suspect it would decrease the amount of investment.

          • cubiclegeoff says:

            I doubt that since if you have the money to invest, it generally makes more sense in investing than letting your money sit there doing nothing, or earning little ins savings.

        • Grr says:

          people work for 28% tax rate because its guaranteed. I can take a second job and make the contracted wage matter what.

          if I could invest and get a guaranteed return, then tax on.

      • cubiclegeoff says:

        As others have said, investment will always continue because it’s a good way to make a lot of money, no matter what the tax rate is. A low tax rate is just a bonus.

        • Jim says:

          When I decide what to invest in, I do take into account what that tax rate is. While a lower rate is nice, the amount of risk I’m willing to take is dependent on how much of the potential gains I’m able to retain. If taxes increase, maybe I opt to hold cash instead of invest because the risk isn’t worth the return after taxes.

          • Courtney says:

            So we wouldn’t have people investing in CDOs and credit swaps that are leveraged 30-to-1 or more and slapped with an arbitrary label from a ratings organization…and this is a bad thing? Seems like history has shown that when higher tax rates (income OR cap gains) aren’t a large enough component of the risk equation, people do stupid things with money.

          • cubiclegeoff says:

            I think few people think about taxes in this situation. I think it’s more likely they think about the return versus the risk, regardless of taxes. The return will need to be adjusted for riskier investments (which happens anyway). This could cause some to take fewer risks, but that isn’t necessarily bad. And it would leave a hole for those that like to take risks because they can see even a larger gain, especially when someone that needs money has few options, they will be forced to give a higher percentage of the return.

  4. I agree that we should not have a tax break for capital gains. Also agree that we should not tax the wealthy any more than the rest of us. I like the sliding scale up to a cap. No need to penalize the success of the few.

  5. Robert Martin says:

    No,

    Higher earners should not have to pay a higher rate. The Government should spend less money and stop getting us deeper in debt. Could you imaging a corporation doing to it’s shareholders what our government is doing to its’ shareholders (tax-payers)? Talk about congressional hearings!! Criminal Activity!!

    That being said, the tax rate should be flat for everyone.

    Lastly, people rail against the rich (or perceived wealthy) as greedy. The last time I checked, Poor people did not create any jobs for others but sometimes lived off of the taxes paid by the wealthy.

    People willing to take risks, invest their money at the “chance” to make more, in doing so, they provide Jobs, benefits etc.. The media and government have painted the rich as these mean, greedy people who take advantage of the middle and lower class to their advantage. Yes, that does happen from time to time, but business owners (rich people) are typically hard working, and care for and about the people that work for them. It is really the Government that is guilty of this great hypocrisy when it comes to class ware-fare. Greed is actually more common among poor people.

    A culture has been created that we are owed good-paying jobs, free education and such. And when we provide it, it is not enough. What people need is the training to say “If it is to be, it will be because of me”. Get the proper mind-set and you can achieve whatever you want to in life. YOU have to make it happen.

    The greatest tragedy of the welfare and entitlement mentality, is that these people will NEVER reach their potential as human beings. That is truly sad..

    • JXZ says:

      Since when does it make sense to compare corporations to governments? They have completely different goals in mind. Corporations are interested to maximize return on their shareholders. Governments are interested in providing universal services, grow economy, fairness to even the poorest citizen, increasing social mobility, etc.

      And what is this nonesense that poor people did not create jobs? Do they not buy groceries, raise their children, and get haircuts?

      When you take away money for public education, community services to the poor neighborhoods in the name of shrinking the government, you are ensuring that the poor will always stay poor, and the rich will always be rich. And that’s essentially taking advantages of them, because you are taking away their fair chance to getting higher in the social ladder.

    • cubiclegeoff says:

      Since our economy is highly dependent on consumption and the poor and middle classes spend more of their income on consumption that the rich, one could argue that the poor and middle class actually create more jobs and provide more to the economy than the rich.

  6. Dave says:

    We live in an amazing country that has a better opportunity to strike it rich than anywhere else in the world, and that doesn’t come for free. Whether you love or hate individual policies, the truth is that we (America) have collectively built a great place to get rich. Why shouldn’t those that received the most from our great country contribute the most back to it? Our roads move their goods, our schools teach their workers language and math, our armies protect their interests and freedoms — I don’t see why the struggling family down the street should have to shoulder a heavier burden to pay for these things than the millionaire across town.

    • cubiclegeoff says:

      Basically how I think of it as well. No one here gets rich on their own. And often times, it’s at the expense of others.

    • zapeta says:

      Exactly. Lets not pretend that the rich got there all by themselves.

      • shckr7 says:

        The top 1% of wage earners paid almost 40% of taxes in 2008.. 50% of Americans paid less than 3%. So, i guess the good news is that i believe it is presently working the way you would like it to – the rich are paving the way for the rest of us….. :)

    • shckr7 says:

      The top 1% pay almost 40% of the taxes paid (2008). 50% of tax payers pay less than 3%. So, I guess the rich are presently paving the way for the rest of us….. :)

  7. David says:

    Greater than what? What they are paying now, or what everyone else (including, as Warren Buffet said of his secretary) is paying (35%, 25%)? I would rephrase your question and ask, should they pay the same rate everyone else is? I would say yes.

    Also, your article lacks context- for example, that many at the top have historically been taxed at much, much higher rates (at times of greater economic growth, to boot), or that capital gains mainly go to those at the top (http://jaredbernsteinblog.com/some-prominent-rich-people-have-lots-of-money-and-face-low-tax-rates/), and that for many of them it is their main source of income. Never mind that there enough tax loopholes to make their effective tax rate much less.

    • Strebkr says:

      Warren Buffet is subject to the same tax brackets that everyone is. The only difference between him and some of the people that complain about the rich is that he is able to take advantage of certain deductions and credits because he does things the government wants. They use tax breaks as a way to get people to do a certain activity. For example, there are tax breaks for people buying hybrids and electric cars because the gvt wants more of them on the road to lessen our dependence on oil. For Warren Buffet they want him to invest his billions into more businesses to create more jobs, which in turn pay way more in taxes then if he would have not made the investment and just been taxed on it.

      I have no problem with his effective tax rate. It just means he does a better job with his money then someone else does.

      • JXZ says:

        @Strebkr that’s a common misconception about deduction. When you are making billions each year, there is not enough tax deductions that can change your effective tax rate. Vast majority of Buffet’s income is in the form of capital gain, therefore he’s taxed in a lower rate than his secretary.

        Buffet will continue to invest whether the capital gain is 15% or more. He didn’t start investing only after Bush cuts the capital gain to 15%. He started long ago when capital gain was much higher.

        • Courtney says:

          Quite right, the capital gains tax rate was 20% or higher until 2003 (close to 30% during the boom of the 90s) and dividends used to be taxed as regular income. Somehow business investment still thrived.

        • Strebkr says:

          Yes, most of his money is in the form of capital gains, but it didn’t start that way. He used his own earned income to invest slowly in the beginning. It all snowballed from there.

          The snowball doesn’t always happen for the small business owner. They often times have to keep reinvesting their profits back into the business to keep it going.

          The bottom line is the IRS taxes capital gains at such a low rate because they know the impact that investments have on the economy.

          Look at what happened a few years ago when the credit market dried up. There wasn’t enough money to borrow or have invested and the economy as a whole tanked.

          • Courtney says:

            Actually, the IRS taxes capital gains at such a low rate because Clinton cut a deal with the Republicans in 1997 that lowered the capital gains tax from 30% to 21% in exchange for expanding the EITC. And then Bush II further lowered it to 15% as part of the 2003 tax reform bill (which only passed the senate by Cheney’s tie-breaking vote) and was set to expire along with the rest of the Bush tax credits in 2010.

            Don’t kid yourself into thinking it was anything but politics as usual.

          • JXZ says:

            @Strebkr I don’t know enough about how Buffet started but that’s really besides the point.

            IRS doesn’t decide how much to tax cap. gains, the congress decides that. And the congress didn’t lower the cap. gain tax because it would help the economy, they did it because the wallstreet firms had persuaded them so with lots of lobbying money.

            And your example of the credit market doesn’t make any sense. When the economy tanked because credit market dried up, it showed exactly how little influence the cap. gain tax rate has over investment. Credit market dried up because every bank was scrambling and holding on to their cash to weather the storm, not because the tax rate was favorable or unfavorable.

  8. JasonRabbit75 says:

    One classic argument against a flat tax is “how much does it hurt”: typically the more income someone makes, the lower percentage of it needs to be spent on absolute necessities like basic food, shelter, and health. So paying their flat tax “hurts” people with lower income more than it “hurts” people with higher incomes.

    Another classic argument against a flat tax is “no man is an island”, which is well-explained by Dave above. I’ll also quote L.T. Hobhouse from On Liberalism in 1911 here: “The prosperous business man who thinks that he has made his fortune entirely by self help does not pause to consider what single step he could have taken on the road to his success but for the ordered tranquility which has made commercial development possible, the security by road, and rail, and sea, the masses of skilled labour, and the sum of intelligence which civilization has placed at his disposal, the very demand for the goods which he produces which the general progress of the world has created, the inventions which he uses as a matter of course and which have been built up by the collective effort of generations of men of science and organizers of industry. If he dug to the foundations of his fortune he would recognize that, as it is society that maintains and guarantees his possessions, so also it is society which is an indispensable partner in its original creation.” As such, the argument goes that someone with a higher income typically owes more of their wealth to societal causes than someone with a lower income.

    Finally, the utilitarian argument against the flat tax is that due to things like compound interest and inheritances, wealth begets more wealth. As such, inequality can inevitably increase to an unsustainable level, which can be bad for the economy, and also has a tendency throughout history to correct itself in a revolutionary and painful way. A progressive tax is seen as a relatively painless inequality-pressure-release-valve. That argument is a more pragmatic, so you rarely see it stated openly by politicians.

  9. Rick says:

    I have read this site for a long time and I am a little shocked that so many people are for increased taxes of any kind. Yes, America is great, yes no one gets “rich” on their own, but we do not have a tax problem, we have a spend problem. Also, I look at capital gains taxes and taxes on dividends differently – I make a good income and pay my fair share of payroll taxes, I use much of my after tax (yeah right) income to invest in dividend producing stocks which I also get to pay tax on, and now people are complaining I only have to pay 15%! Those invested dollars have already been taxed! When does it end? How many times does every dollar I earn have to be taxed? Its getting ridiculous, earn income, taxed twice (personal and business) invest the little left over, actually make money, tax it again, die and try to pass on to heirs, tax it again. Every year I look at all the taxes I have paid and it is staggering, that is capital I could have re-invested in my business, but instead goes into the government sink hole. I am seriously getting close to moving my businesses out of this country (and the jobs that go with them and all those payroll taxes dollars) to some where more sane.

    • shckr7 says:

      Well saod, Rick. I love when people say tax rates dont affect whether someone will invest. Not sure what rock they have been living under. My company (i dont own it, just work there) moved a significant piece of our business to Singapore due to tax reasons….. Sure, tax rates dont affect investments……OK…….

      Btw, that dividend income you earn and are taxed on at 15%…..it has also been taxed at 28-35% for the corporation. Your divdend would have been much higher, but we needed to fill the sink hole.

      I used to work for the goverment. We used to pay $16k-$20k per computer, even though Bestbuy sold them for $2k (at that time)……… I heard the language, almost weekly of “if we dont spend the money, our budget next year will be reduced.”

    • Courtney says:

      How do you have businessES and not understand a fundamental concept like cost basis? I don’t own a business or have any business degree and even I get that you’ve paid taxes on your invested dollars but not on your gains.

      • shckr7 says:

        Actually, in the case of the dividend income, he, as the shareholder/owner of the business, HAS already paid taxes on the gains – at the corporate level. When he takes these taxed gains and places them from his left hand to his right (ie. He distibutes those taxed gains in the form of a dividend), then he gets taxed again. So the actual tax rate on dividends is actualy WAY higher than 15%.

        I believe a better system would be to tax dividends as regular income for the individua (ie. The more you earn, the higher your tax rate – given our present tax system)l and make the corporate tax rate 0% on income distributed in the form of dividends. Income retained by the corporation, should be taxed at the entity’s coporate rate.

        • Courtney says:

          We as a country tax money when it is transferred as income. The fact that I have already been taxed on the dollars I use to pay my plumber does not absolve him from also paying taxes on that money which he receives as income. The fact that a corporation has paid taxes (we hope, anyways) on the dollars they use to distribute dividends to their shareholders does not absolve the shareholders from also paying taxes on that money which they receive as income.

      • shckr7 says:

        Actually, he HAS already paid taxes on the gains. As the owner/shareholder, that income has already been taxed at the corporate level. When tries to take that money from his left hand and put it in his right (ie distribute a dividend), then he is taxed again.

        I think a better solution would be to make the corporate tax rate 0% for income paid out as dividends. Then tax the dividend received by the investor as regular income (ie. The more you make the higher your tax rate – given the present tax ystem). Income retained by the corporation, should be taxed at the entities tax rate.

        • Courtney says:

          Why do you keep posting all your comments twice?

        • Strebkr says:

          Companies that are incorporated get taxed on their own because they are their own legal entity. Partnerships, some LLC, etc on the other hand are legal entities but they are only an extension of the owner. These types of entities don’t pay any income tax. The income “flows through” to their owners returns.

          So these companies have a 0% rate, but the owner is then on the hook for the tax liability at their own rate.

          • shckr7 says:

            Strebkr, that is 100% correct. So, my proposal is to make dividend income more in line with the LLC method, except that I wouldn’t give Corporations a pass thru ability on losses, like you would get on an LLC.

            So again, I think we should make the tax rate 0% at the corporate level for income paid in the form of dividends and then tax the individual at their marginal rate. So, if you make $1M a year in dividends then you would certainly not be taxed at the 15%. Additionally, it would be much more transparent to everyone, just how much tax the shareholder is really paying…

    • Steve says:

      The post is not about whether the government should generate more tax revenue, it’s about how high and low earners contribute to the tax revenue.

      Whether taxes should be lower or higher overall is a different issue.

      For example, Milton Friedman who is a pretty free markets guy, proposed a flat tax with a NIT (negative income tax) a an alternative to current systems of progressive tax rate, welfare, and minimum wage. In theory I think such a system would be great, assuming lots of tax breaks/deductions/loopholes are closed. Right now it feels like we have the worst of all worlds.

  10. Steve says:

    Closing tax loopholes is the #1 priority IMO. I’m okay with paying somewhat higher rate than those with lower incomes, simply because I have more dollars to go towards hopefully bettering our country as a whole. Don’t get me wrong- I try to deduct everything I can when I do my taxes, and there are philosophical/ethical arguments either way on this. But pragmatically speaking it doesn’t bother me that lower income earners pay a lower tax rate than me.

    The long-term capital gains tax rate seems unnecessary, I say this even having benefited from it a few years back.

  11. zapeta says:

    Yes, they should pay higher rates for the reasons outlined by Dave and JasonRabbit75.

    It’s always interesting to watch people on these posts argue against their self interests. Given the small percentage of the US population that make enough to be taxed at the highest tax bracket, I doubt we have very many commenters who fit in the top bracket. Yet the majority of commenters argue for the rich to pay less tax. This truly makes no sense. Do you want to pay more tax, because if the rich pay less the burden has to go somewhere. Further, are you arguing that the rich should pay less just in case you get rich? In all likelihood, you aren’t going to join the top 1%. They aren’t going to argue for lower taxes for you, why would you argue for lower taxes for them?

    • cubiclegeoff says:

      There is also a mentality that “I will be that rich some day and won’t want to pay those taxes” which is ridiculous really, as most people will never be that rich. There is a certain sector of politics that has done an excellent job and fooling people into protecting the rich at the expense of themselves.

    • Texas Wahoo says:

      Maybe they believe that paying an equal percentage is fair and are not tied to their own self-interest alone?

      If everyone supported only what was in their own personal self interest, this country would be a very different place.

      • shckr7 says:

        Well said, Texas Wahoo. The thinking of “make him pay, because he is not me” simply doesnt resonate with me.

      • shckr7 says:

        Well said, Texas Wahoo. I do not subscribe to “he should pay, becuse he is not me.”

  12. Guy In San Antonio says:

    Be very careful of coveting someone else’s success. You would never suggest that a rich person pay $15 to see a movie while you only have to pay $10.

    When it really comes down to “fair”, a rich guy should pay $1,000 of tax if the poor guy pays that. But the next step in fairness, if the poor guy pays 15% in tax, that should be the limit on the rich guy. I am not rich, but i see our current tax code as barriers to me becoming wealthy.

  13. Mike says:

    Real unemployment is closer to 15% if you count those that gave up looking for work during President Obama’s term. The government can’t really create more jobs without raising taxes and revenue. Even then most of the revenue they gain would go to pay entitlements like Medicare, Social Security, etc. I’d rather encourage the Gov’t to help high earners invest their wealth into businesses that help create more jobs for the unemployed.

    • freeby50 says:

      No its not 15%. The unemployment rate plus the ‘discouraged workers’ is only 9.1%. There are always discouraged workers.

      Unemployment peaked at 10.1% so you wouldn’t end up with 15% including people who gave up working anyway.

      You’re probably confusing the larger sum that includes the ‘underemployed’ which is the people working part time who would prefer full time. Again this sum is always larger than the % of unemployed in good and bad times. It was 14% when Bush left office.

      • Mike says:

        Yes I do mean the U-6. I believe that this is a more accurate representation of the economic picture. The reason the Republicans lost in 2008 was because real unemployment was dismal (14% as you say). So far, nothing has changed and real unemployment is still (15.2%).

        • Mike says:

          It was actually 12.5% when the Republicans lost the election in Nov 2008.

          • Ruth T says:

            What was it when Bush left office? Plus, in the year which felt the effects of Bush’s economics how many companies reduced personnel on American soil either via downsizing or outsourcing? Those unemployment statistics were not, could not have been, a result of anything Obama did. btw – What was the effect on the incomes of the corporate owners/executives then – and now?

    • Ruth T says:

      The government has done just that – government is not in the ‘business’ to create jobs – but the major Corporations that government has given tax breaks/tax write-offs etc to have “invested” the jobs created in foreign lands. Are you aware that if a product is created in a foreign land, and sold from there, it does not need to be reported as revenue earned by those corporations?

      And – I spend my working career of over 40 years paying into Social Security. I also at this time need the section 8 housing and IHSS services I receive. It would be impossible to exist without them on what SSI Federal pays. AND I PAID both Federal and State taxes from age 16 to age 58 when I became disabled. I do not consider that I am receiving anything other than what I paid for ahead of time.

  14. Tyler S. says:

    Plain and simple: No. We’ve fought wars and had riots trying to make sure everyone is treated equally, but when someone is more successful than me, they should be taxed at a higher rate? I don’t think so.
    Without the investment capital provided by those who earn more, many of us closer to the bottom wouldn’t even have jobs.

  15. daenyll says:

    I’d rather see reduced government spending be the main route to reducing deficit, lets not worry about changing tax rates for different income levels and fix the underlying problem of wasted and/or excessive spending.

  16. GZ says:

    Yes spending is too much, especially entitlements, health care, and the military.
    Everybody has a comfort level as to how much they will pay. Above that, one will find any loophole, or cheat, and not pay. We have to set realistic levels on taxation.
    If memory serves, the first debt commission suggested rates of 7% on those making less than 70k, 11% on 70-210K, and 14% above that. At those levels, most would probably be more compliant.
    It seems very unfair to pay a lower rate on unearned income versus earned income, so lets keep it at 15-20%, if we ever adopt the” progressive flat rates”.
    All of this is a moot point regarding flat rates because we cannot displace the thousands who have trained and educated themselves in taxation. It would be the only “fair” way to tax, but I don’t see it ever happening.

  17. bloodbath says:

    The government will collect MORE if every earner – including businesses corporations and religious organizations – pay the same fixed percentage of net income and all should have the same loopholes available to them.
    BUT, no earner should get away with using loopholes to pay less than 98% of the fixed percentage no or taxes at all.
    This is the fairest scheme.

  18. This is a question of social and economic justice. Those in a position to contribute more to the good of society are morally obligated to do so, and those less fortunate should be required to contribute less. While we treasure individual rights, there are also duties to society as a whole that must be observed for the success of the individual is always due in large part to society at large.

    A progressive tax system is the manifestation of the coercive power of law that recognises the needs of individuals to contribute to society in an equitable manner based on each person or household’s ability. Without such a system, income mobility is dampened and society breaks down.

    For the staunch individualists in the room, would you really want to live in a society that doesn’t help the poor, the needy, those least able?

  19. Tony says:

    This issue comes down to this: A society needs Labor and Capital to prosper. We are currently taxing Labor (earned income) at higher rates than Capital (investment income). This tax scheme discourages labor, everybody wants to be a trader/investor to be taxed at that magic 15%. This system is not healthy long term. We should go back to taxing both labor and capital at the same rates for the same income levels. It’s not fair that a physician magin $400K a year pays an effective tax rate of around 25% when a hedge fund manager making the same money will only be taxed at %15 because his income is considered carried interest. As a society we need to ask ourselves: Do we need more Physicians or more Hedge-Fund managers?

  20. Margaret says:

    I want to commend the people who commented on this subject.

    I am impressed by the thoughtful, intelligent responses that were made.

    So often, responders attack one another & become immature & mean spirited.

    You have all made some valid points.

    It’s obviously a complex issue.

    If congress & other branches of our government could have an intelligent, civil discourse such as this, perhaps we could make some progress.

  21. dave says:

    Everyone should be able keep all the money that they earned through labor which mean all taxes should be zero. If stealing is illegal then so are taxes

  22. Jessica says:

    One HUGE flaw is that your tax burden %wise is different every year. You could make 6 million one year and be taxed out the wahoo and then earn $0 the next year and get money back from the government. Such a strange way to do it when you think about it.

    I would be highly in favor of a strict flat tax system with strict no loopholes at, say… %15 or even 20% with one caveat of a fairly high “standard deduction” equal to the poverty level, which I don’t know what it is but say for argument’s sake, is $15000. This would help the truly poor and I think everyone would feel it was fair. The standard deduction would be the same for married or single (because I don’t think you should get preferential treatment for being married or single), children or not (coming from someone WITH children). Having children is a choice and not giving deductions for children would discourage people who couldn’t afford it to hold off on having them (IMO). You’d only be taxed on income over that $15000 (per EARNER) so it’d still have an element of progressive-ness and break down like this approaching the magical 15% (or whatever) flat tax rate:

    Income Tax ($) Effective Rate 5000 0 0
    15000 0 0
    20000 750 4%
    25000 1500 6%
    30000 2250 7.5%
    40000 3750 9.38%
    50000 5250 10.5%
    75000 9000 12%
    100000 13500 12.86%
    150000 20250 13.5%
    200000 27750 13.88%
    300000 42750 14.25%
    500000 72750 14.59%
    1mil 147750 14.78%

    Congress would never go for this though because it’s too transparent and they couldn’t persuade people to do what they want with frivolous tax deductions on random things (like tax deductions for buying electric cars and other non-sense).

    • Courtney says:

      This is not a flat tax. It’s a progressive tax with no deductions. Also, totally separate issue but given that half of all pregnancies are unintended I really don’t think that having to pay tax on an extra $4000 of income is currently a driving factor in deciding to have children or not.

    • shckr7 says:

      This is great. I had never done the calculations to realize that a flat tax with a high standard deduction actually still looks like a progressive tax. It makes sense, after thinking about it.

      Something to think about….thanks!

    • Tom says:

      Why 15%? That’s not going to even match the current revenues, which are not enough. Make the flat tax 30%, and $100k deduction. With no other deductions, not for mortgage interest, not for charity, no other deductions. No reduced rate for capital gains, of course. Simple to calculate.


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