For the greater good of all, redistribution is the ignorant approach, as it will decrease the size of the pie. It looks easy, but that is superficial. Attack the actual problem: Upskilling to knowledge work where there is value, which will produce more highly productive citizens and contribute more to all.
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NECESSARY PERSPECTIVE: WEALTH OF ALL MILLIONAIRES COMPARED TO US DEBT
0 10 20 30 40 50 60 70 80 90 100
Wealth of millionaires combined ($12 tr) xxxx
US debt owed to public ($15 tr) xxxxx
US debt and unfunded liabilities ($100 tr) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx See Actual total debt
Million-dollar earners total income: $726 billion (Total deficit is $1.4 trillion)
10% extra tax on millionaires = 5% of the deficit
All earning above $200,00 (single), $250,000 (joint) = $2.4 trillion average over next decade
Projected federal taxes .7 trillion average over next decade
10% extra tax on their income .24 trillion (17% of the deficit)
BOTTOMLINE
The undeniable math
There is an INSUFFICIENT NUMBER OF PEOPLE AND NOT ENOUGH INCOME FROM HIGHER EARNERS (above $200/250,000) TO TAX TO COVER THE DEFICIT. It is preposterous to propose that taxing only those people is enough to solve the problem!! (See the statistics above.)
Therefore, there will have to be higher taxes on those below that level - do not be fooled into thinking somehow this will all be covered. And there will be a huge dent in the growth of the economy.
Think, for a moment. Is this off target and failing to address the big issue? Is it allowing politics to rise in
importance over actual results? Think about it. (Don't be fooled.) Do you want a President who will
spend energy on this minor item for ideological purposes or on the big issues???
It is not true that the rich pay less taxes over the years. The top 1% have 19% of the income but pay 37% of the taxes (see below). Opposite of what people think: The rich paid a greater percentage of total taxes paid in the US after the "Bush Tax Cut"
Restoring tax rates back to pre-Bush: $70 billion from above $250,000 income (5% of deficit)
$200 billion from below $200,000 (15% of deficit)
More taxes are forced for the middle class plus future generations, since taxing the rich cannot possibly solve the problem. Overspending has to be paid for at some time. There is no free lunch in the long term.
It is not true that the poor are getting poorer. Everyone got richer. It is just that the rich got richer because of "compounding" and investing. The fact that the share of total income for the poor dropped doesn't mean they got poorer.
Global competition drives down lower skill wages; knowledge workers do fine; education is key. Inequality
A tax cut cannot be given to someone who is not paying taxes. 47% of Americans pay no income taxes - and many get paid a negative tax by the Federal Government .
Bush tax cuts: the rich are now actually paying a higher proportion of income taxes - Per IRS
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Usual effect of lowering taxes: More investment --> more hiring by businesses, and a stronger stock market.
EFFECT OF BUSH TAX CUTS
The total income tax rate on someone making $1,000,000 fell 11% from the Bush tax cuts. The total income tax rate on someone making $100,000 fell 15.3%.
(Percentages are for the total for the US.)
Top 1% Top 10% Top 25% Bottom 50%
Portion before Bush 31% 63% 82%
Portion of total taxes after 37% 68% 85% 3% (smaller)
Portion of total income 19% 44% 66% 13%
Ratio taxes over income 2 times 1.5 X 1.3X 0.23%
[1980 - Ratio taxes/income 2.25]
COMPARED TO THE WORLD
Corporate taxes: 2nd highest in world
Individual income taxes 27.3% of GDP, lower than our possible competing developed countries.
Based on this, one might reasonably conclude that the corporate tax rates should be lower so that we can compete and produce more jobs for Americans.
However, on individual income tax rates, it appears that we could, if we had to, increase rates somewhat and still not drive people to leave the country. But we probably do not have to lower them to be competitive.
Total tax effect of letting Bush tax cuts expire, not including positive economic effects
If the Bush tax cuts were not extended for anyone, only 16% of the deficit would be covered.
Capital gains tax revenue Lower rates could have been the cause of higher revenues
2002 47B
2003 51B
2004 74B
2005 97B
2006 110B
2007 134B
What is fair?
What is fair? Who is the judge of that? Is it answerable?
Should people pay for the benefits they receive?
Of course, those unable to contribute cannot pay.
The lower income people receive many more benefits than they pay for. The higher income people are providing for them and giving them benefits for which they could be grateful - or they could continue to resent that the rich don't pay more.
What is practical?
The real question is what is practical.
The answer is to grow the pie, not to kill the goose to get the golden egg (= redistribute, which lowers economic growth).
Upgrade value of people from low skill to higher knowledge workers, raising wages, and getting out of the unwinnable competition with cheaper foreign workers. (This means increase education as rapidly as possible.)
Why do the rich get richer faster than others?
This is hardly surprising. Someone that is rich is going to have more extra money that they can invest which, in turn, creates more money.
Claim: Tax cuts benefit the rich
Well, duh!
Of course, tax cuts do not directly benefit those who don't pay taxes. What is true is that "tax cuts benefit those who pay taxes." The rich pay more taxes, so they benefit more.
But so what?
People are saying that is not fair, but they all benefit from good tax policy that encourages investment and growth.
HOW ARE WE ACTUALLY DOING RELATIVE TO BEFORE?
From 1979 to 2007, real (inflation-adjusted) average household income, measured after government transfers and federal taxes, grew by 62 percent.
If we are so much better off and we still feel not so well off, might that not be our expectations and growing appetites for more and more. We seem not to appreciate how well off we are!
BASIC ECONOMICS OF REDISTRIBUTION
"That principle is that economic growth provides vastly greater benefits for working people and the poor than redistribution. It is economic growth that is the key to prosperity and the good life for the middle class, working people, and the poor."
"The problem with socialism is that eventually you run out of other people's money."
When looking for the reasons, ask specific questions:
“What shifts in demand, shifts in supply, and/or changes in wage setting institutions are responsible for
the observed trend?”
Note that there is a growing wage gap between high school graduates and college graduates” - That reflects the growing trend to higher value skills paying off (of course, they are "higher value", which equates to higher pay!). But the cause of the lower skill wages not going up is that global competition has increased so much that the lower wages in other countries cause our lower skilled wages to be lower. That's simple supply and demand: if you have an increased supply, then the price per unit will decline.
The solution should relate to the cause:
Take our workers out of competition with low skill workers in other countries by training and education so that they "upskill" to more valuable knowledge work.
Reeducation, at an intense pace, is the solution.
Redistribution effect
Redistribution is the "less informed", simplistic approach and what will make us all worse off over time.
WHAT IS THE GOLDEN GOOSE AND HOW MANY EGGS CAN WE GET
Naturally, we want more and we want someone else to provide it, so that we don't have to work so hard. But if we consume our capital, by taking more away from those who invest in the companies we need in order to have jobs, we will run low on capital and there will be less to consume and then we'll all be worse off.
MILLION DOLLAR EARNERS
2009 IRS figures:
235,413 million dollar earners = 0.1 percent of all 140 million tax returns filed in 2009. (8,274 over $10 mil)
Total income = $726.9 billion dollars
If you taxed billionaires an extra 50%, that would provide 25% of the deficit, while hurting the capital supply and the economy, which would lower the prosperity of all people and cause slow growth.
An extra 10% tax would provide only 5% of the deficit.
Clearly, taxing million dollar earnings cannot possibly solve the problem. 1/1000 in number compared to the population cannot solve the other 999/1000's problem!
It is so preposterous as a practical solution that one wonders, other than scoring political points, why we are wasting our time when we could do something that would actually solve the problems. Is this something we can accept in a President????
Notes for later integration
Historically:
Top 1%
Total
Income Income Taxes
1990 14% 25%
2000 21% 37%
2005 21% 39%
Also side note, in 1980, when the top tax rate was 70% (now 35%), the top 1% payed only 19% of the total income tax.
The Wall Street Journal editorial page states that taxes paid by millionaire households more than doubled from $136 billion in 2003 to $274 billion in 2006.
without evidence that tax cuts would pay for themselves - no proof
increase value...
1979 2007: For the 20 percent of the population with the lowest income, the growth in average real after-tax household income was about 18 percent.
For the top 1% of the population, average inflation-adjusted household income grew by 275%. The rest of wealthiest fifth of the population, not including the top 1%, saw household income grow by 65% during that time, faster than the rest of the population, but "not nearly as fast as for the top 1%."
Congressional Budget office is a good source of data
Moreover, historically, for the American economy, the deeper the recession the stronger the recovery.
Real per capita consumption in the U.S. nearly doubled from 1973 to 2004, or about 30 years. American living standards measured in this way grew by more than 5 times from 1935 to 2004, about 70 years.
In fact, such redistribution would actually slash economic growth, and even reverse it, as we have seen in extreme socialist and communist countries around the world.
"So organization matters enormously, and that has an implication for inequality because businesses and the affluent tend to be a lot more organized than anybody else."
