Bush Tax Plan for Second-Term: Fuck You Working People

pissing off accountants and tax lawyers isn't a very smart long-term political strategy, either.

some say they're banking on 'terra' to take care of the mushy voters

"Rich people" spend at whatever level of comfort they want to. Rich people do not worry about reaching their limits of spending...

.. And if conservatives get their way, dividends, interest and capital gains will not be taxed as income.. only wages will be taxed.. So better to get them as they buy a new boat, car, etc..

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I haven't seen the spot, but my guess would be (in light of Kerry's speech last week) that the middle class tax cuts from GWB would not be rolled back, but the tax cuts for the upper 1% (or was it 3%?) would be rolled back in order to pay for a national health care system.

Part of the point of the progressive income tax is to counter the concentration of wealth and power. Granted, a 35 or 37 percent top marginal tax rate is only so effective to that end, but that's what 20 years of Reaganomics gets you. And yes, the income tax needs to complemented by dividend, estate and capital gains taxes, which have -- shocking coincidence -- likewise been under the knife in the same period.

But a VAT is hardly a substitute. For one thing, we already have sales taxes, which are already the most regressive taxes in the country (and are therefore easier to raise at the state level than income taxes). A nationwide VAT would just expand on that. Sure, rich people spend more than poor people, so they'd pay more VAT. But as a percentage of revenue raised, the wealthy person's share of VAT would be much smaller than their share of income/dividend/capital gains/estate taxes.

So a VAT makes sense if you think wealthy people shouldn't pay any more, proportionately, than anyone else. On the other hand, here's Teddy Roosevelt:

The absence of effective State, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power. The prime need is to change the conditions which enable these men to accumulate power which it is not for the general welfare that they should hold or exercise. We grudge no man a fortune which represents his own power and sagacity, when exercised with entire regard to the welfare of his fellows. ... We grudge no man a fortune in civil life if it is honorably obtained and well used. It is not even enough that it should have been gained without doing damage to the community. We should permit it to be gained only so long as the gaining represents benefit to the community. This, I know, implies a policy of a far more active governmental interference with social and economic conditions in this country than we have yet had, but I think we have got to face the fact that such an increase in governmental control is now necessary.

No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar's worth of service rendered-not gambling in stocks, but service rendered. The really big fortune, the swollen fortune, by the mere fact of its size acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and in another tax which is far more easily collected and far more effective-a graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate.

otherwise I will avoid any comments so that i don't sound like an alt-indie-libertarian or some ugly thing like that.

First of all, those arguments had not been made in the thread yet. No one had even come close to substantiating a reason for being against a sales tax.

Secondly, it's not a VAT.. Goods would only be taxed on the consumer level - not at every stage of production & sale.

Also - Measures can be added to make it a progressive tax, rather than regressive - such as giving a tax credit (i.e. refund check) equal to (or greater than) the poverty level times the tax rate. This would be automatic.

This would also greatly reduce the cost of tax compliance to businesses and individuals. Most people would not have to file for taxes. And most companies would not need to track payroll taxes & all the administration that goes with it.

A worthwhile article from the CATO Institute (which calls itself Libertarian/Jeffersonian):
http://www.cato.org/pubs/pas/pa-272.html

But as a percentage of revenue raised, the wealthy person's share of VAT would be much smaller than their share of income/dividend/capital gains/estate taxes.
Over a lifetime, rather than over a single year, the tax becomes equitable.

you're beating your head into the wall on this issue, at least in this forum. I've brought it up multiple times, including April 15th, 2004. It's nearly impossible to get past the hubris of regressive taxation, let alone intelligently debate the effects of the tax code on monetary or fiscal policy. As Eisbar pointed out, the system will never change.

and y'all know that the 1996-97 hearings about IRS "abuses" were all a steaming crock'o'elephant poo, yes?

Maybe they were, but some of us have personal experience in dealing with IRS abuses. Some of us have seen the bullshit up close and personal. You put this statement out there like abuses never happened, Eisbar. Some of us know that they have.

Question to milo--do you favor regressive pricing? In other words, should "the rich" pay more than "the poor" for food or other necessities? Or should the nature of regressive taxes in effect capture the lack of regressiveness in the open market?

it would make more sense to put 'open market' in quotes since it doesn't exist in modern monoploy capitalism.

I'm sincerely asking for some reasonable cons to an NST.. Or even a link to an article.. I'm willing to listen - I'm in discovery mode, not the mode of defending an NST. But no one has really backed up his position yet ...

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why do you put the rich and the poor in quote-marks
I put "Rich people" in quotes because "Rich people" has not really been defined in this forum. I define rich as being at the level where disposable income exceeds wants.

(I think don posted "Working people" as a sarcastic response ...)

The idea itself is enthralling, but expecting revolution in Washington is like thinking you can wake up tomorrow morning with 4 more inches of man-meat. It ain't gonna happen.

Example:
Mail room clerk gets stock options from his company as an employee. Stock rises sharply in one year, he exercises the shares for stock and makes $500K on paper. He owes $200K in taxes at the end of the year - but the stock price has plummeted. He must sell all of his stock and reach into savings in order to pay the tax liability. Sound contrived? This happened to thousands of people the year that the dot-coms blew...

Vice president exercises shares for cash and buys a new house. VP and mailroom clerk are both in the highest tax bracket that year. Both are considered rich.

Under an NST, mailroom clerk gets to keep the stock, free & clear (it's up to him whether to sell/gamble on its price..) and owes no taxes. VP pays taxes on the purchase of the house & everything else he buys.

Seems like the naysayers' argument is that they don't like the idea that people who make a lot of money should get to keep it. I know that sounds Republican of me - (and I'm more of a Democrat actually) - But that's capitalism. I'm more of a capitalist than a socialist. Some people will do the right thing with their money, and some will be greedy. But it's up to them.

Frankly anyone who is on TEN TIMES THAT and grumbles about taxation deserves to be hauled up by the ankles and shaken a la psychotic nanny until every bit of loose change falls out of their pockets.

Dave, the other difference between a VP and a mailroom guy is that the VP will have much better financial advice as a result of his position.

From this I don't think you know what 'socialism' means. It isn't a kind of moralistic attack on the rich simply for having money. Socialists don't necessarily have a problem with pleasure/consumption in themselves; but with inequality and exploitation. It's the system of exploitation that creates equality that they have a problem with, not individuals' behaviour within that.

Super rich to me is having fuck-you money--households earning $319K are very well off, but hardly gilded. More than 1.5 million households brought in more than $250K last year.

wait... don't most men wake up in the morning with around 4 more inches of man-meat than the night before?

However VAT like here on luxury goods would be fine - BLING TAX AHOY!

Speaking of unexamined mantras, this Limbaugh/Gingrich chestnut is a radical distortion and simplification of wealth creation, which is a complex phenomenon that involves an awful lot more than individual initiative. Wealth creation is the product of societies as much as individuals -- of social, political and economic systems, of infrastructure, of natural resources, and of many other factors including the tax system. A tax system can help or hinder wealth creation, but its effects are way more complicated than this idea of Bill Gates or Thomas Edison saying, "If I have to pay taxes, I'm not gonna invent a goddamn thing."

Again, one point of a progressive and multi-layered system of taxation is to counter the tendency of wealth to concentrate in larger amounts and fewer hands. If you're not bothered by the idea of ever more massive concentrations of wealth at the pinnacle of the social earnings ladder, then I guess a national sales tax or flat tax or something makes sense. But you hardly have to be a socialist to think that wealth concentration has a lot of negative (and economically stifling) effects -- all you have to be is mildly attentive to how the world works.

Wealth concentration among individuals does have pronounced negative effects depending on the culture it exists. And wealth concentration among business and governmental entities does too. It's interesting that our focus on regressiveness is generally limited to individuals, though it's appropriate in the US given our cultural dimensions.

What about all of the illegal activity that occurs .. drug trafficking, etc .. that isn't taxed..? I'm not sure that it really amounts to much, or maybe it is .. Of course, the drugs themselves won't be taxed when the sale is illegal .. but the dealer who buys a mansion und a yacht will at least pay taxes on those purchases. Again, this may not amount to much, I don't know.

There's an anti-NST article here:
http://www.washingtonmonthly.com/archives/individual/2004_08/004436.php
But it doesn't convince me...

..And the proposal is to tax purchases starting at 18% and projected to be reduced to 15% - with an automatic refund on the first ~$20,000 in income ... The tax is better off for lower-incomes... (Or what am I missing ?) Unless you're spending above your means, taxes appear to be lower.

Assuming someone is at the top of the 15% bracket (where the *amount* of taxes would be highest)
-They're paying 15% on $21,400 + $700 = $3910.00
-Under NST where the first $20K is exempt they're paying 18% on $8,400 = $1512.00

At $68,800, they're paying $14,010 now -vs- $8784.00 NST
At $311K, $90,514 -vs- $34,380

So the part that seems inequitable is that the high brackets will be paying much less than they are now. People seem to have a problem with that. But remember that with all of the current deductions and loopholes, they pay less than the $90K already. (how much less, I have no idea..)

Please, honestly, I'm looking for the other side of the argument....

Also, in addition to all of the other things previously cited, under those NST estimates you just quoted (which I think are off, because there are a lot of tax credits and other things at the lower end that would probably reduce the burden on that $21,400), that's a hell of a lot less money coming into the coffers. Which translates into less money for schools, health care, roads, and other forms of civic infrastructure that help open opportunities for everyone. So an 18 percent rate might not do it.

They may very well be skewed or overly optimistic...

Some people think that people who have individually prospered in a society that was largely built and paid for and maintained by others have a hefty obligation to further that society's maintainance and expand its opportunities.

I can accept that opinion ..

Thanks... Those are reasonable points. I shall keep reading & searching ...

I think the rate of taxation should be equal for everyone earning more than 100k in salary. Tax bands would be very clear-cut.

Also the sales tax thing, in these stupefyingly cynical 'patriot' times, would underpin all sorts of I spend the most, money talks, bullshit walks, you're just a hater and a bad Merkin-type CRAP which we are all heartily sick of.

I think the rate of taxation should be equal for everyone earning more than 100k in salary. Tax bands would be very clear-cut.
That sounds completely arbitrary. Like you resent anyone who earns more than that. Someone who makes $95K is treated differently from someone who makes $101K - but s/he is treated the same as someone who makes $50million..?

BTW - I'm not trying to stick up for rich people any more than I'm sticking up for poor people. I'm only interested in a reasonable debate about equitable taxation. I'm middle-class, and I have no allegiance to the wealthy nor the Republicans. But I'm interested in fair process.

Unless you have my tax returns to hand I don't think you should speculate on my income, as it's a) inappropriate on these boards and b) makes you sound prejudicial despite any subsequent qualifications designed to make you look like a nicer, more reasonable guy less prone to passive-aggressive 'I'm not saying...' gambits when that's exactly what you have done.

I don't hate rich people AT ALL. It's the ones who like trickle-down economics and complain about immigrants that make me angry. $100k is an executive salary in my industry (it's £60k converted); all I'm saying is that there will have to be a cutoff point but I can't imagine that the difference in percentages would be that significant - otherwise the policy would be left open to criticisms that its makers resented rich people (duh). There are a lot of rich people I know that are happy to pay the percentage they owe. Also, I'm working on the principle of gradation, where the person on 99k would not be significantly better off than 101k since the higher rate would only apply to $1000 of that $101k.

I think a person on 50 million that did not pay the same percentage as his or her counterpart on 100k is a bigger leech on whatever system than those welfare mothers people keep complaining about.

So tell me more.. Are you advocating a progressively-tiered tax, without deductions/loopholes? Sort of like a cross between a flat tax and the current system? I might be able to get behind that, but I'm not sure that it isn't without problems too .. I haven't thought about it long enough to say ..

haha, i wonder if anyone on these boards earns $100k+!

Now, to deal with the revenue shortage, you either have to increase taxes on the lower end of the spectrum, who already spend their entire income (no $20k offset) or cut services across the spectrum (which, incidentally, means cutting services to that same low end of the spectrum).

The only people for whom a national sales tax or flat tax proposal benefits are the already-wealthy (and despite Don's statements to the contrary, refusing to consider the top 1% of earners 'rich' is fucking insane).

Which works right up until someone decides they really don't have to stop at four-way intersections and no one can make them.

European (or, at least, UK) VAT is effectively only taxed on the consumer level too, though. People that charge VAT (ie, businesses, or self-employed people with over £X of turnover) only have to pay Customs and Excise the difference between the VAT they have charged their customers and the VAT they have paid their suppliers.

http://www.cato.org/pubs/pas/pa-289.html

Much of the regressivity of the tax reform is eliminated when examining a lifetime income analysis. Table 4 presents the results. The variation in changes in tax liabilities across lifetime income deciles falls markedly relative to the annual income analysis. The reform is still more regressive than the current income tax, with the lowest 70 percent of the income distribution facing tax increases while the top 30 percent enjoy tax decreases. The differences are not nearly as large, however, as when measured using annual income to rank households.

I'd question the relevance of "lifetime income analysis" given that the lower, say, third of incomes have to spend everything they earn in order to simply live. The fact that it's really regressive this year, but when looking at it over fifty years not so much doesn't help pay rent.

I disagree with this completely. How many people realize that $200k is the top ~2% - I had some vague idea of the numbers, but I wasn't sure. $200k sounds realistic, not really that much money (a lot of people are used to hearing about athletes signing multi-million dollar contracts) and sort of innocuous. Top 1% or top 2% gets the point across.

Likewise, I'm not sure if polls bear out the old "Americans all think they're upper-crust" chestnut. I suspect the tendency is to inflate class in smaller ways - working-class say 'middle-class', middle say upper-middle, etc. And people in the upper-middle class might downgrade their economic situation. ("I only make $90k, surely I'm not upper-middle")

Much of the regressivity of the tax reform is eliminated

.. If you keep reading (and maybe it was in a different article on the same site, which I referenced farther upthread) yes, it admits that the tax structure can be regressive, but that it can be adjusted via taqx refunds, to make it into a progressive tax.

However, I'm just repeating what I read...

Far better to spend time and effort reforming the tax system or, far better, rebuilding it from scratch; stripping out years and years of social engineering in the tax system. You want to make the tax system fair charge everyone the same rate on each band of income; no credits, no allowances, no little breaks for this or that. Let charities reclaim the tax on contributions (as happens in the UK) rather than giving a write off to the individual.

Just one number on the tax form.

So how is the lower tier any better off in your scenario? They're still paying taxes either way. And now you've taken away child care credit, etc ...? At least under the NST proposal, they don't start paying any taxes (by way of refund) until they've gotten past the poverty level.

You balance in so the least well off end up paying very little. Credits are an expensive way of giving with one hand and taking away with the other. Give actual benefits where benefits are needed but don't hide it in the tax system as a political expediency.

A tiered tax system with "no loopholes" seems to be a good idea .. until you start asking what is considered income.. And you know damn well that advocates for the rich will make the case that "dividends were taxed as company earnings, so taxing the individual is double taxation." etc .. so once again, tax evasion by the super-rich (people who make their money from investing, rather than from wages) will be an issue.

as far as income goes. Any money comeing in counts as income. No if's no but's that's it.

I see what you are getting at. Of course there have to be pages of rules but the point is we just layer new rules on top of the tax code without ever really having a thorough clear out.