Sunday, March 21, 2010
“Why should the rich pay a higher percentage of taxes?” or “We should have a flat tax.”
-->Note: If you weren’t linked specifically to this post and you don’t want to deal with V&N material (politics, for non-SoSHers who don't know what "V&N" is), by all means feel free to skip this post and check out the rest of the blog’s counterarguments.
I’m a fiscal liberal who feels the rich should pay a higher percentage in taxes than the poor or middle class.
When the country has a deficit, it’s not rocket science to figure out which income bracket has the most potential to pay to reduce the deficit. The more money that gets paid in taxes, the more money that can be paid against the deficit even though I’m well aware it’s not dollar for dollar. From whom better to get the money than the people who have the most of it?
In a flat tax, the rich don’t pay the same percentage of taxes as the poor because of tax loopholes. To use an extreme example for the sake of supporting my point, a married childless couple making $1,000,000 a year combined is likely to have a lot more money invested in tax-deferred and/or municipal investments than a widowed parent of 4 making $19,000 a year.
Even if a rich married childless couple doesn't invest in tax-deferred and/or municipal investments, 20% of $1,000,000 a year means a lot less to that couple than the same 20% of $19,000 a year means to the widowed parent of 4. Even though the rich couple would pay a higher flat amount, after taxes are paid it’s a lot easier to live on $800,000 a year as a married childless couple than it is to live on $15,200 a year as a widowed parent of 4.
Most fiscal conservatives will say having the rich pay a higher percentage of taxes is punishing people for being rich. Besides what I’ve already said, my response is that although you can’t please everyone, in my opinion having the rich pay a higher percentage of taxes has the most positive effect on the most people overall.
For those who feel I’m not qualified to talk about this subject because I’m no expert in finance or economics, feel free to read this from Warren Buffett.
For those who are curious, although I’m living comfortably I don’t make 6 figures. I can honestly say that if I did make 6 figures I’d be willing to pay a higher percentage in taxes and vote in that manner, primarily because of the impact it could make towards worthy causes if the higher percentage was applied to everyone in my income bracket.
If you’re fiscally conservative, I don’t expect this post or Warren Buffett to change your mind. I’m simply explaining why I feel the way I do. The argument has been discussed to death in V&N, and I don’t feel it’s best to revisit it.
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3 comments:
another argument why the rich should pay higher taxes, for statheads:
As a society we care about income inequality- the width of the distribution of incomes. Why? In the past thirty years increases in wealth in the US have gone only to the top of the distribution, but do we believe that only executives did anything to make the economy better for thirty years? Also, if an investment banker makes 30x more than a plumber, did they work 30x harder? Were they 30x more productive?
in other words, there is a transformation between how hard you work and your contribution, and your financial compensation. People who like Ayn Rand want that function to be monotonically increasing and the rich want it additionally to be as steep as possible. (taking that to it's logical extreme- why not pay the ceo of the largest us company $1 trillion and everyone else the median income?)
Government policies allow us some room to choose that function. High taxes on the rich make it less steep. That's why higher taxes on the rich can be good, as Buffett says.
I do not believe in the flat tax, mostly for the reasons you mention. But I have a problem with who is called "rich." I am not taking about the Warren Buffets of the world - hard-working entrepreneurs (like my family) have NO LOOPHOLES AT ALL. If fact, even basic loopholes like deductions for kids etc. are phased out. So we pay over $100,000 a year in taxes, even though we create jobs for 20 people as well as a number of part-timers. The money we pay THEM keeps the economy running, lets them pay their mortgages and taxes, and put their kids through college. The money we pay in TAXES (when something like 50% of Americans pay nothing at all, and hence have no stake in the government) covers other people's medicare, welfare, defense, and everything else.
We are fine with paying this high rate, though we feel it is confiscatory and punitive. But if it goes up any more, it will not help the deficit. Fiscals liberals ALWAYS leave out unintended consequences. In order to keep the business running, we have a Plan B (and C, and D) for tax increases. They ALL involve letting people go - not because we are greedy, but because we cannot run the business and take care of our families for less.
Every single entrepreneur we know personally says they will do EXACTLY THE SAME THING. This is why the facts show that tax increases do not in fact increase the US coffers they way people imagine they would. They do not take into account people losing their jobs, being cut down to part-time, etc.
Finally, if the tax rate gets to high we will simply except less business. It is not worth out time to work the hours we do for another $100 if the government (including state and local) will take 60-70% of it.
This is not being mean, greedy, or anything else- just stating the facts and unintended consequences.
Sorry for the typos above. I obviously meant we'd "accept" less business, not "except," and there are others. Too tired to write!
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