Did NYC Just Get a Double Whammy

one more thing. you say:

But it's not wrong to say "I'm paying 50% taxes and I don't think it's all going to a good place." I am sure most people if it could be shown to them that every tax dollar was being used on feeding hungry kids, welfare to the truly needy, healthcare, education, highways - they could be convinced to pay more in taxes. But so much of our tax dollars are NOT going to these things.

no one is ever going to agree that every single dollar paid in taxes goes to a cause he supports. we are a society--we have the right to express our views through our votes, and then we abide by the decisions made by the representatives of the public will--governed by law, of course. i was vehemently opposed to the war in iraq from day 1. i object to subsidies for tobacco farmers. i am opposed to federal subsidies to religious groups. but we are a society and it isn't all up to me.

Oh come on now, I think freedom of conscience is unimportant because your comment about Hong Kong is completely bunk?

You do realize that Hong Kong & Mainland China are one country, two systems right? Hong Kong has its own representative Government that has never felt shy about speaking out against the mainland.

the chief executive of hong kong is chosen by beijing. the hong kong assembly has as much authority as beijing choses to grant it--and it has changed that authority several times. you think political freedom is as protected in hong kong as it is in the united states?

Happyrenter. You have obviously lived a charmed life. Good for you. I agree with Kspeak. It is difficult for the many two income families in this country who make more than 250k (but not lots more)to be faced with a tax hike. Many of these two income families may have education loans. Even if they are not sending their children to private high school, they are facing college tuition. They may be helping to support or take care of aging parents. For the truly wealthy, taxes are probably no big deal but for the working well-to-do, tax hikes can feel unfair. My solution is this, I think there should be a 100% inheritance tax. I say tax the dead and leave the working living alone.

Chiming in here. We'll be affected by the tax hike and I'm GLAD for it. I've lived in & visited low tax-regimes and I see the need for a social safety net. I'd rather make do with weekly cleaning help rather than have half a dozen live-in servants, thank you very much. HK & Singapore have reasonable social safety nets but a lot of that has to do with the huge reserves that both have accrued over the years. Towards the end, the Brits were reasonable colonial masters (except for various issues) and didn't spend down too much of the reserves.

If you're interested, you should google "HDB housing" and Singapore to see how Singapore has solved the problem of affordable housing for the working class.

Estate taxes should definitely be raised, no question, even though the truly wealthy have all kinds of trusts set up to evade this.

I'm no fan of Karl Marx, nor have I read his stuff, but I'm told that he (or his friends) spell out an understanding of the underpinnings of capitalism that no matter how much you have and consume, you feel like it's not enough and you need to get to the next level -- bigger house, cook to go with the nanny, etc. Not to mention keeping up with the Joneses, a related but different phenomenon. And that's all probably a good thing(s) in many ways. But it also goes a long way towards explaining why $250K seems insufficient.

That said, blossom16, I agree 100% with the inheritance tax (except the rate you propose!!!). When we're done with propagandistic terms like "death tax" and the three-card monte approach known as "estate tax" ["don't look at that undeserving adult child who's done nothing to deserve a windfall and you want to exempt the first umpzillion dollars, even though when money is actually earned it gets taxed on each person who earns it, then the person who earns it when the previous person spends his money; look instead at the guy who's worked all his life and paid taxes on his earnings but has chosen not to take it with him in the afterlife . . . poor dead guy"] it is what it is: an inheritance tax, which should be no lower than the tax the same recipient would pay if he worked and were paying income tax, etc.

i totally support a 100% inheritance tax--or i would support it if i thought it would work. as a matter of equity, i think it would be a GREAT idea to have 100% inheritance tax. as a matter of policy i just don't think it would work--there would be such an incentive for the exceptionally wealthy to expatriate and hide wealth. so 60-70% may be the highest we can get it for practical reasons. but as a question of ethics 100% would be great.

i just want to add: i do not claim that things are easy for the 'working well-to-do' as you call them. not at all. all tax policy requires a balancing of different interests. my only point is that a couple like kspeak's that earns 500k per year (not the 250k you mention) has less dire financial concerns than a couple earning 20k per year. so when we need to increase revenues to pay for the functioning of our government, isn't it more fair to turn to the working rich rather than to the working poor?

one other thing: my life is not charmed. my economic life, yes. and things are great now. but believe me, i've been through the ringer.

happyrenter- good arguments dude. seriously, no facetiousness.

"if you think hong kong is heaven then you must care a lot about money and very little about freedom."

boy, happyrenter, saying stuff like that really makes it obvious how little you understand about the world. have you ever been to hong kong before? or for that matter asia? you think 100% inheritance tax is sympomatic of a free society? that reeks of socialism at its worst. you are what i would term a limousine liberal - there are a lot of them here in the city. why don't we just take away any incentive for anyone to make any money through hard work and initiative and then distribute the wealth to everyone. that's utopia! oh, er.. wait, cuba.

anyways, to my point about hong kong - its about as capitalist and free-wheeling as they come. virtually nothing changed when the british handed over the territory to china. they have as much liberty there as i've seen anywhere else in the world. for you to make that statement, you are basically saying everyone in HK is a greedy gold-digger who cares nothing about civil liberties. that couldn't be further from the truth and i just had to call you out on it.

what are you talking about?!?! i never said the people of hong kong were greedy golddiggers. dude, they are a part of the people's republic of china. they have no rights. as of now they enjoy certain privileges granted to them by beijing, but a privilege is not a right. it's not the fault of the people of hong kong, or the people of china, that they have no rights and live under a dictatorship and i certainly never said anything disparaging about the chinese people whether in hong kong or on the mainland.

if you would trade your liberty for a lower estate tax then all i can say is i am glad james madison was the primary author of our constitution rather than you.

"i totally support a 100% inheritance tax--or i would support it if i thought it would work. as a matter of equity, i think it would be a GREAT idea to have 100% inheritance tax. as a matter of policy i just don't think it would work--there would be such an incentive for the exceptionally wealthy to expatriate and hide wealth. so 60-70% may be the highest we can get it for practical reasons. but as a question of ethics 100% would be great."

i can see that you write this from the perspective of someone who works in finance in nyc. i can actually understand where you're coming from but this is just plain misguided. fine, so with a 100% inheritance tax, you prevent lloyd blankfein from giving his vast wealth to his kids. but what about the middle-class father who died too young and gives his modest home that he worked his whole life for to his children so they can have a place to live, or money so he can ease the burden they have raising their own children? and remember, that money (for the most part) has already been taxed. history has shown time and time again that government is inefficient with capital allocation and redistribution. and yet you want everyone to give their money to the gov't when they die?

i'd like to see how you look at this situation if and when you eventually have children of your own.

and as i said before, i've spent a lot of time in hong kong, and in asia in general for that matter. i absolutely love hong kong, wonderful city. but i'm happy to be a citizen of a nation in which i have rights, not simply privileges.

special k,

again, you are either quite ignorant or purposefully misunderstanding the discussion. the RATE of the estate tax (50%, 60%, 100%) has absolutely no impact whatsoever on the tax paid by middle class estates. middle class estates are covered by the exemption. even before george bush started raising it by leaps and bounds the exemption was $1 million--that is, $1 million could be passed on to heirs tax free. now it is significantly higher than that. the question we are discussing is not the exemption level but the rate--that is, what tax rate should apply to the taxable estate. as a matter of equity i'd have no problem with 100% estate taxes but as i said before, as a matter of policy i think 60% or 70% is probably optimal.

You tithe.
I'm impressed.
Before or after tax?

You make a lot of sense and sound like me in my 20's before I had children.

However, you are prodding me to do more in terms of mentoring, extra giving on top of tithing, volunteering.

The estate tax should be abolished. It amounts to double taxation plain and simple. When you earn it, you pay taxes on it. No reason the government should get a second cut when you die.

And frankly, the government is a horrible allocator of resources. Higher tax rates generally just lead to more waste. The government needs to provide those things that free markets won't or can't do. National military for example. However, I don't need to pay taxes so the ex-GS guy can give $300B in lottery money to the idiots that financed the country into the ground who then pass it out as bonuses.

Spare me with the "pay more taxes for the starving children". If you want to save starving children, take yourself to a shelter every Saturday and volunteer. On your way out the door, drop a $1k check on them. Then you could get real crazy and not take the tax deduction. But in the meantime, stop telling me how to allocate my resources.

Higher marginal tax rates will simply drive the capitalists out of the country.

I recall the great exodus of capitalists during the Clinton era. They all came back when Bush lowered taxes.

you are right dawase, of course! there was no capitalism in this country during the 1950s, was there? IBM, ATT, the television industry, panamerica, general electric--just a mirage. marginal tax rates in the 1950s were often double

again, you miss the point entirely. it's not that i 'want' to save starving children. i mean, i do. but that isn't the point. the point is that our society as a collective entity sets certain priorities. we express or set of priorities through the ballot. and we fund our priorities with taxes. the fact that you personally don't like the way 'your' tax dollars are spent is irrelevant. the government is not telling you how to allocate 'your' resources. that's the point of a tax. once it is levied the resources are not yours. they belong to the nation. if you want to argue for lower taxes please do so, and do so vociferously. there are plenty of legitimate arguments for low taxes.

but don't do it on the grounds that 'your' resources are being misallocated. that's simply a false argument. unless you want the state abolished, you have to acknowledge that it has the right to tax. and when it spends tax money, it isn't spending 'your' resources but rather the resources of the nation.

that should read:
marginal tax rates in the 1950s were often double what they are today.

"The estate tax should be abolished. It amounts to double taxation plain and simple. When you earn it, you pay taxes on it. No reason the government should get a second cut when you die."

This is the Party line, and it's the most ridiculous thing I've ever heard. If you pay taxes on it, then you spend it to buy a slice of pizza, Joe the Pizza Man pays the "second cut" on it. If you die, and you choose not to take it with you to the afterlife, whoever gets it (you can even bequeath it to Joe the Pizza Man) should pay taxes when he "earns". The exception should be when you leave it to charity.

There's no double taxation.

happyrenter, on the estate tax, i concede your point on the exemption. i probably didn't read the rest of the thread that carefully and didn't realize you were talking about a rate on top of the exemption. still, i disagree with you on the 100% even with an exemption and even in a theoretical discussion. but i agree that it's far more palatable for the average person. would still like to see your opinion on the subject in 60 years when you have kids and grandkids though. =)

anyways, on the hong kong thing, i'm really not sure what you mean when you say people there have privileges but not rights. hong kong is NOTHING like china. i agree that in china there are certainly some human rights issues. perhaps the largest one being the "one child" policy. there is no such policy in hong kong. i could go on and on but i won't because i don't want to belabor the point.

and let's not forget: we get double-taxed all the time. in fact the entire concept of double taxation is pretty ridiculous. i earn money working at ibm, and pay income tax. i use that money to buy a house, and then i pay real estate tax. and then i sell the house, and pay capital gains tax. and then i buy a new house, and have to pay 1% tax on the transaction because it is over $1 million. as money moves through the economy it is taxed. that is how most government revenue is collected. the alternative model is the real estate tax model--a tax on assets. for various reasons we tend not to do that.

special_k:

here is the difference between a right and a privilege. in the united states, the president, say, may want to pass a law limiting the number of children i can have. but he cannot. i have the RIGHT to privacy. now, it is conceivable that he push for a constitutional amendment to eliminate the right to privacy, but that process is arduous and requires the consent of thousands of elected officials across the country over a long period of time. in our society we have rights.

in hong kong, the chinese government has granted the citizens the privilege to have as many children as they want. but the dictatorship in beijing can change its mind at any time and for any reason. that is, if Hu and Jiang decide that people in HK should only have one child, then so be it. if they decide to move all the residents of hong kong into a slave labor camp, nothing the hong kongese can do about it.

in a dictatorship the law is simply what the government says it is. it grants you privileges to its people, but it can revoke those privileges at any time and for any reason. you can't say "hong kong is NOTHING like china" since hong kong is part of china. life there is very different from the mainland, no question about it. but it is still part of that society and under that government, and as such the privileges enjoyed by the hong kongese are nothing if not precarious. why do you think most of the wealthy hong kongese got themselves citizenship in western countries before the turnover to china?

The estate tax is withoiut a doubt double taxation. There is an exemption in 2009 of $3.5mm. Currently there is no estate tax at all in 2010. As things currently stand, in 2011, all the tax cuts 'sunset". The estate tax comes back with an exemption of $1mm. The tax code as it now stands provides substantial incentives for people to die in 2010. Your heirs will be mighty happy if you do not make it to 2011. In fact people very well may be offing themselves in late December 2010. This is America?

HR, ask the family farmers in Bridghampton if the estate tax is double taxation. Why do so many of them need to sell their farms to developers? Why do so many family businesses not make the crossover to the next generation? Why did Joe Robbie's heirs have to sell the Miami Dolphins?

And yes I agree we are double taxed all the time. That does not justify it or make it the right economic policy. And dawase's view on how tax dollars should be allocated is relevant just as your view is relevant. In fact, one of the reasons for fighting the War for Independence was no "Taxation Without Representation". Remember? 3rd grade I think HR. :)

"if they decide to move all the residents of hong kong into a slave labor camp, nothing the hong kongese can do about it."

oh boy, how do i even begin? china and hong kong are not cuba. they are not zimbabwe. they are not north korea. NO ONE rules with an iron fist there. those days are long gone. all central officials, believe it or not are elected. sure, the election process is dubious and the communist party just happens to win all the time. but that is in large part because the party has changed with the times. what does it matter if its called the communist party? we have a two party political system here that is supposed to cover all ideologies. so they have one, big deal. they have given up many of their legacy socialist policies in favor of heavily capitalistic ones. the reason we don't have a one-child policy is because we as a nation are not on the brink of mass starvation and overpopulation. there is NFW that the president of china could say, i'm enslaving all of HK! i repeat, NFW!!

anyways, my original point is valid even despite this whole discussion - that is, for just about everyone but U.S. citizens. you see, you can be a french or british national, move to HK, and enjoy their wonderful tax policies without being a citizen there. the US is one of the few countries in the world that taxes you globally. you get a deduction for being overseas, but that's it. you pay US taxes even if you are in HK... there's freedom for you!

wait--you actually believe that the communnist party officials always win 'election' 'in large part because the party has changed with the times'? you know full well that is a complete load of crap. the communist party wins every election for one reason: because it is a ONE PARTY STATE. you may consider it a benevolent dictatorship, that's fine. in many ways it is benevolent. but it is still a dictatorship and in a dictatorship, by the very definition of dictatorship, there are no rights. hence the distinction between rights and privileges that you seem unable to grasp. you can put as many exclamation points behind it as you want, but what would stop the beijing government from doing whatever it pleased to whichever of its people it pleased to do it to?

as for us tax policy, i don't consider the so-called freedom to expatriate to avoid taxes any freedom at all. that's simply giving people a way to shirk responsibility. if you want to enjoy the benefits of american citizenship--and those benefits accrue to you when you live abroad--you should have to pay your taxes no matter where you live.

and you do have the freedom to renounce your us citizenship.

"Why do so many family businesses not make the crossover to the next generation?" Because they're not viable businesses; because we don't take a dynastic approach that guarantees crossover to the next generation; because crossover to the next generation interferes with optimal allocation of business resources. Especially if you've been growing potatoes or christmas trees instead of $5 million houses.

Special_K: it's "anyway", not "anyways", unless you crack gum before and after you say it.

jake,

all taxes cause economic pain of one sort or another--who would deny that? i am sure it is painful for the heirs of a billionaire to have to sell a football team. it's sad. but we have to way their economic pain against the economic pain that would be required to make up the revenue that would be lost without that tax. so instead of the heirs of a billionaire being forced to sell their team, we could increase taxes on waitresses and mailmen, or on medical researchers and doctors, teachers, plumbers, etc. etc. personally, i think the economic pain of increased taxes on actual workers struggling to get by would be greater than the economic pain of billionaire heirs selling a football team. but that's just me.

as for farmers, again, if they own land debt free that is worth more than 3.5 million they will have to pay taxes to pass it on to their heirs. i'm sure that's painful. but the exact same balancing comes into play. the fact is we need revenue to fund our government. you can advocate reducing government spending--and i think a lot of government spending should be eliminated. but no matter how lean you want the state to become, it is going to require tax revenue. simply stating that taxation causes economic pain is irrelevant. the question is which pain is worse.

so tell me who the dictator is in china? give me the name...

special_k, no offense, but you need to learn the basics of political philosophy and political science to engage in this conversation in an intelligent way. the definition of dictatorship is not rule by one person. here is webster's dictionary:

autocratic rule, control, or leadership
a: a form of government in which absolute power is concentrated in a dictator or a small clique b: a government organization or group in which absolute power is so concentrated c: a despotic state

the dictatorship in china is no longer of the one person variety as it was under mao and arguable under deng. it is now of the small clique variety. in a democracy, sovereignty rests with all eligible citizens, an is equally distributed among them. in china sovereignty rests with a very small group of elites who control the communist party and with it the apparatus of the state. it is a classic dictatorship.

HR,

Wrong. We could simply spend less.

We could focus our tax policy on increasing productivity and growing the economy. Tax receipts grow when the economy grows. When you over tax productivity guess what? you get less productivity. If nothing else understand that America is te greatest country in the world because Americans respond to the incentives provided to them.

And understand that the heirs of those farms cannot pay taxes. They have no cash. They have to sell the farm, business, enterprise thier livelihood to pay the tax man. The IRS only takes cash.

You want more tax revenue? How about getting rid of the mortgage interest deduction? Why should someone who is rich enough to own a house get a dedcution, essentially a subsidy for the shelter costs, but a waitress or mailman who rents not get a tax deduction for their shelter costs?

jake,

did you read my thread? i specifically stated the option to spend less. that's obvious. the point is that no matter how little we spend we will still need tax revenue and that tax revenue will always cause economic pain.

as for the mortgage deduction i totally agree with you. it should be abolished.

ok, i just can't do this anymore. happy, you can believe what you want, it really doesn't matter to me at all. we can talk again if you ever get to know some people who grew up in china and know what it's like there and how far they've come as a country and as a people. until then, peace out.

and HR,
since this is supposed to be about real estate, what are the implications of your ideas on Manhattan real estate prices. Take them individually:

1) 100% estate tax
2) higher income taxes on higher incomes (presumably so the government can take your money and give it to others so that they can buy stuff they don't need)
3) abolishing the mortgage interest deduction

The implications for Manhattan real estate prices are?

Rhetorical question Farley. Set of 10!

jake-

first, i believe that abolishing the mortgage interest deduction was your idea, not mine. but i agree with it. i think the implications for ny real estate of a higher estate tax and higher marginal tax rates for high earners are quite obvious and would be quite negative, possibly even disastrous. i don't really think that increasing the value of apartments in manhattan should be the top priority of our society, or even any priority at all. but yes, it would be negative.

special_k,

you don't understand the basic concepts of political philosophy and political science, so yes, it is a good idea for the conversation to end. for what it's worth, i know an awful lot about china and i know an awful lot of chinese people--including the mother of my long-time girlfriend. there are some strong arguments that the communist party dictatorship has been good for china. it certainly has accomplished many good things. that does not change the fact that it is a dictatorship--ever heard the term 'benign dictatorship'? personally, i don't consider it so benign, but that's another debate. it is unquestionably a dictatorship.

I agree with happyrenter. The tax hikes will destroy NYC by driving wealth, talented people, and jobs away from the city. The exodus is already happening.

rufus, you got a personal email? Looks like my employer has the same idea that you do...

>>> i just want to add: i do not claim that things are easy for the 'working well-to-do' as you call them. not at all. all tax policy requires a balancing of different interests. my only point is that a couple like kspeak's that earns 500k per year (not the 250k you mention) has less dire financial concerns than a couple earning 20k per year. so when we need to increase revenues to pay for the functioning of our government, isn't it more fair to turn to the working rich rather than to the working poor?

I grant that the couple making $500k per year is better off than the family making $20k per year.

Nor do I bedrudge you for being liberal and succesful - I myself fall into this camp, but am more of a Centrist than a tax-and-spend without question. It's also true you'll never support everything the government spends money on.

I just find the presumption that the hypothetical couple I mentioned should not even QUESTION why their taxes are being raised somewhat unfair. The point is it is not always a matter of feeding starving children or higher taxes. There is a tremendous amount of wasteful government spending. I tutor underprivleged high school kids, most of whose parents are on some time of assistance - yet most of these kids have i pods and fancy sneakers (this is something even Oprah noted when she was criticized for building a school in South Africa instead of in the U.S.). My mother in law lives in Maine; she works 60 hours a week in her 60s, and everything thanksgiving she has her siblings over, 3 of 4 siblings of which are government assistance. She wonders outloud all of the time why she pays such high property taxes when half the state doesn't work. Why is the woman in California allowed to go thru IVF and have 8 kids + her 6 kids when she can't een support them. And yes, some of the "TARP" money is being spent badly too. I could go on and on ...

I am not pretending that all government spending is wasteful. I agree that when push comes to shove, it's better to tax the rich than the poor. But every time there is a hole to fill, it's fair to look at BOTH sides of the equation: the spending and the source.

As for why you need a nanny when your kids are in school - meet a family with 2 parents who have demaning jobs. First, school gets out 3-5 hours before most people's jobs do. So you'd still have to hire a part-time nanny 20 hours a week. Add to that: sick days (little kids get sick all the time and sick kids can't go to school/day care), summer vacations and breaks, travel, etc. and by the time you pay for the "extras" on top of the part-time nanny, you might as well have a full time nanny.

What do people with lesser means do? Well, let's acknowledge childcare is EXTREMELY difficult for any work parent regardless of class. It's not harder on professional parents per se. It's just that professional jobs tend to have longer hours (you will jump all over me for this, but this on average is true, there have been all kinds of articles on this). Worse, they tend to me less predictable and one is always on call. My assistant - who is terrific - lives in New Jersey and has two young kids who she put in daycare. First, daycare is much cheaper in NJ than NYC. Second, whenever one of the kids is sick (which is about once a month), she calls in sick. Unless their child is truly sick, this is not a reality for most professionals - not when you have board meetings, new business meetings, etc. I travel 1-3 days a week, not always overnight, but often have 6 am planes and arrive back at 8 pm; my assistant never travels. It's not that my assistant has it easier than a pair of working professionals; it's that day care is a more realitic option because her schedule is predictable and she can call in sick when she needs to.

The point isn't that the "rich" have it hard. The point is just that taxation decisions are never easy. To me, any increase in tax should also come with a hard look at spending.

kspeak,

now we are on very different territory, and here i largely agree with you--i mean, the anecdote about maine and ivf treatments aside as i don't know enough to have an opinion. there is lots of wasteful spending, and i agree that society needs to be judicious and thrifty in spending its resources. i also agree that things are not necessarily easy for people making 500k per year--just that, economically speaking, they are obviously far easier than they are for people earning 20k per year. i don't begrudge you your nanny, and i don't think you should begrudge poor children new sneakers or an ipod. let's let people make their own decisions. and i totally agree that people should ALWAYS question government actions. i would never suggest that anyone should simply say 'yeah, i pay taxes, i don't care how high they go, and i don't care what the government spends tax revenue on.' that's irresponsible citizenship.

my point is this: once we decide what resources we need in order to keep society functioning, we need revenue. any increase in taxation causes economic pain to someone. but we have to be equitable in distributing that pain. people who are already in severe economic distress ought not be the people to shoulder an increased tax burden. the people who are doing well, who have nannies and take vacations and can choose to send their kids to private school: these are the people who are going to have to shoulder an increased burden. if it were up to me, i would make all income for a family of 4 up to 50k tax free, and i would increase taxes on the affluent to make up for it. wes clark proposed this when he ran for president in 2004 and i wish it had been done.

HR,

We covered this on another thread. It's pretty simple. People who don't make a lot of money don't pay a lot of taxes. The top 1% of earners pay 40% of the taxes. The top 10% of earners pay 70% of the taxes. The top 40% of earners pay 99.4% of the taxes. The bottom 40% of earners pay -3.8%. Yes that's right, the bottom 40% of income earners receive money from the income tax system.

BTW, federal income taxes on a family of 4 making $50,000 a year are not zero but pretty close. The effective tax rate would be in the range of 4-8%.

jake,

4-8 percent is not zero, and is not close to zero. it is 4-8 percent. but your numbers are way off because you don't use the right terms. you say 'taxes' when you mean 'income taxes.' when payroll tax, property tax, sales tax, and other taxes are taken into account the numbers are far different.

but let's look at those numbers for a moment. the top 1% of earners earned above 25% of the national income last year. that means that those of us in the top 1% on average earned 25x the average income, and more like 35x the median income. it is kind of hard to complain about your financial straits when you earn 25x as much as the average person in this country (let's not even talk about the situation internationally). so the top 1% of earners are gobbling up 25% of the national income and paying 40% of the national income tax. when other taxes are taken into account it flattens out dramatically. but even this is deceiving, because the wealth gap in this country is actually much larger than the income gap. so that top 1% may gobble up 25% of the national income but it controls closer to 40% of the national wealth.

HR,

No. My numbers are not way off. The maximum federal amount of taxes paid by a family of 4 earning $50,000 is 8%. And in fact, with deductions and exemptions it is quite possible that this family pays $0 in federal income taxes.

To be in the top 1% of earners you need to make $388,000 or more. To be in the top 10% of earners you need to make more than $108,000. The median family income in New York City is about $70,000 and nationwide its about $50,000. Incomes for the top 1% earners in New York start at 5.5x median. Not 25x as you wrongly suggest. Incomes for the top 10% of earners are 1.5X to 5.5X the median. Seems about right to me. If you earn 25x or 35x the median amount, well, good on ya. That's $2mm. well done. go buy an apartment and some furnishings and start helping this economy.

But what in your mind is fair? you chimed in that tax rate on estates should be 100%. Should the tax rate on income above your threshold be 100% too? The top 10% of earners pay 70% of the taxes? Appratently you don't think that's fair? Does that 10% use 70% of the government's services? Should they pay 90%? What would make you happy?

history has shown time and time again that government is inefficient with capital allocation and redistribution.

of course capital markets have proven to do a great job.

why do people think that government and private corporations are 2 separate entities because they have 2 name? it is the same group of idiots running different b.s. operations against the population and passing hot potatoes when necessary

jake,

there is so much wrong with your post that you can't be serious.

first, you use this very vague term 'federal taxes.' are you referring to federal personal income tax, all federal income tax (including corporate income), all taxes collected by the federal government (including import duties, etc), all federal taxes collected from individuals (including payroll taxes) or what? you need to get your terms right. it is certainly not true that the total maximum amount of taxes paid to the federal government by a family earning 50k per year cannot exceed 8%. have you heard of payroll taxes?

second, you use a nationwide number to calculate the top 1% of earners, but then compare it to a new york city number to calculate the median. you have to compare apples to apples. either look at the top 1% in nyc compared with the median in nyc, or the top 1% nationally compared with the median nationally. obviously the cut-off for the top 1% of earners in nyc is much higher than the national cut-off. last time i checked nyc was part of the united states, though, so i think it is more appropriate to use the national numbers in both cases. you always have the right to move.

third, i was referring to the average of the top 1%, not the cut-off for the top 1%--again, you are comparing apples to oranges. given that the top 1% earns 25% of the income, by definition they earn, on average, 25x the mean income of the country. that's a mathematical truism. the mean income is significantly higher than the median income, so they earn, on average, more like 35x the median income. this is just simple mathematics. your numbers point out something important, however: even within the top 1% there is enormous inequality, such that the cut-off to be in that group is 350k per year, whereas the mean is more like $3.5 million. just shows how shockingly concentrated wealth and income are in this country.

fourth, you mix up two issues: tax equity, and tax policy. personally i think it would be entirely fair to tax incomes above, say, $1 million a year at 80 or 90% as we have done in our history. that is a matter of equity. as a matter of policy i don't think that would work well and i would simply advocate a step-by-step process of undoing the changes to the tax code in recent decades that have taken us away from the strong progressive system we once had.

HR,

The bottom 40% of earners receiving 3.8% of the taxes and the top 10% paying 70% of the taxes. And the cut off to be in the top 10% is $108,000. How strong progressive do you want to go?

strong like 1980?

"Any discussion of reforming America’s federal tax system should begin with the recognition that it is already highly progressive. According to the latest Internal Revenue Service (IRS) data, the top 1 percent of income earners paid nearly 40 percent of federal individual income taxes in 2006, compared to roughly 19 percent in 1980. Between 1980 and 2006, the share of federal income taxes paid by the top 5 percent jumped from under 37 percent to over 60 percent. During that same period, the share paid by the top 10 percent went from around 49 percent to almost 71 percent."

strong progressive like 2000?

"The CBO estimates that in 2005, the share of all federal taxes paid by the top quintile was 2 percentage points higher than it had been in 2000 (Bill Clinton’s last full year in the White House). Between 2000 and 2005, the share of all federal taxes paid by the top 10 percent increased by 2.5 percentage points, the share paid by the top 5 percent increased by 2.4 percentage points, and the share paid by the top 1 percent increased by 2 percentage points."

Maybe you should think about moving to Sweden.

jake,

you are going to brush right past all of your factual errors without an acknowledgement? ok, i will take that as tacit acceptance that all the criticism i made was correct.

you cannot simply look at the share of taxes paid by the top 1% or the top 10%. you have to look at their share of the national income. and what you will find is that the share of the national income earned by the top 1% and the top 10% grew up master than their share of the tax burden. is that too complicated for you to understand? that is why the tax system is far less progressive now than it was in 1980 or in 2000.

Sure I could understand it. But it's not true. What I am having trouble understanding is you. You started this by talking about the need for those who have an income to pay the taxes necessary to cover the cost of running the government. Your argument has morphed. In addition to arguing about the inequity of the progressiveness of the tax code you are now arguing about the inequity of some people making more money than others. In addition to Sweden, you may also want to consider a mopve to Missouri so you can vote for Claire McCaskill.

Discussions abt total taxes paid should include sources other than income, i.e. capital gains, dividend income. These are taxed differently than W-2 income and typically affect the higher earners more than lower, and there's a behavioural/investment component to them.

Also, consider small business owners who file income taxes quarterly and, I believe - can deduct business-realted expenses.

The argument isn't whether it's right for people to pay taxes. It's whether subjecting the highest earners to higher rates during an economic downturn is the best way to go. In theory it may seem to make sense as a short-term fix but in reality it can backfire, as tax increases are rarely rolled back.

just stop fighting! can't we just get along and start a war with Iran or something? At least it'll get Geithner off the TV set.. .he does look like Keebler... can i get a cookie?

happyrenter: Stop wasting your time. He doesn't want to accept facts or even think about the issue. Go move to Sweden is always the last gasp of a wingnut with no leg to stand on.

but w67th, he started it.

I don't really entirely buy "trickle-down economics" (yes, wealthy people having less taxes means they will spend more, but it's much more direct to tax people who make less money at a lower rate) but I do believe strongly in three things things :

1) Low capital gains tax rates, although I do not believe private equity/hedge fund "carry" for managers is a capital gain. If you are putting your own capital at risk to start a business (or invest in somebody elses) that employs people and stimulates the broader economy, you need to have the upside. If your best case is that you keep 50% of the gain you make, and the worst case is that you lose all of it (yes, you get a deduction, but there are all sort of limits about how this can be applied if you don't have offsetting gains). However, private equity/hedge fund managers piece of the carry does not involved investing their own money.

2) Sales tax on non-essentials. I would not tax groceries at the store, gas, bus fare, etc. But Americans over-consume and undersave, so anything that discourages this is good. In the short-term, overconsumption is good, but not long term.

3) Moderate corporate income taxes, simply to keep companies in the U.S. Of course, there are all these tax shelter and other BS instruments that means some U.S. companies pay no taxes and others pay a lot, forcing the honest ones overseas.

let me check... yes jake... you may continue :) HR... 30 sec time out in naughty corner....

jake just smile and let them tax you... and then go find every loop hole in the Book.... that's what I do:), gym, car, boat, trips, nannies, "office rent", cable (gotta watch CNBC), laptops, "massages" gotta unwind... just make sure your YE net income is $0.

Ya think maybe Oprah's trips are all tax ded? F'n Daschle didn't realize $500K worth of car service wasn't income.... Nanny tax? Nah not for me... make them "office workers".. they drop off my mail once in awhile.....

DON't you get it? The system is corrupt... it is so hard to decipher and makes each one of us hate each other.... THIS whole tax system is full of poop and inefficiencies... just go to a "consumption" tax excluding food/medicine.... and if the rich eat 500lbs of caviar to give the poor a middle finger... so be it... I'll take that than having all these "lifer" politicians an over-bloated IRS and an entire industry trying to mediate between the IRS and us, citizens. PEACE OUT!

malthus, i was thinking the same thing. go move to sweden, hehe.

last point and then i am out. jake, you claim you understand the point i made, and then your comment shows you do not. i am not arguing about income inequality. i am pointing out that increasing income inequality can increase the percentage of tax receipts that come from the top 10% even while the tax code becomes less progressive.

let me demonstrate with a simple math problem. a society is composed of ten people. In year 1, person A earns $10 and pays 50% in taxes, while persons B-J each earn $4 and pay 25% taxes. This means that person A pays $5 in taxes while the others each pay $1 in taxes. Total income in our society is $46, of which person A earns approximately 23%. Total tax receipts are are $14, or which person A pays $5 or nearly 30%.

fast forward ten years. now person A earns $100 and pays 30% taxes. persons B-J each earn $8 and pay the same rate of 25%. The tax rate has become far less progressive. Yet lets look at the actual dollars paid in taxes. Person A now pays $30 in taxes, while persons B-J each pay $2 in taxes. Total tax receipts are $48, or which person A pays $30--nearly 63% of all tax receipts come form person A. do you understand this? the tax code became far less progressive, and yet the share of taxes paid by person A nearly doubled.

this is what has happened in the united states. simply quoting the rising percentage of taxes paid by the top 10% says nothing about the progressiveness of the tax code.

sorry, the math problem should read "total tax receipts are $14 of which person A pays $5 or slightly more than 1/3.

sorry for the typos i'm multitasking. but the point should be pretty clear.

kspeak,

couple of things. 1. the capital gains tax rate is exceptionally low. the long term rate is 15%. i think this is absolutely preposterous--a guy trying to find an AIDS vaccine gets taxed at 33% but Warren Buffett gets taxed at 15% (warren buffett finds it preposterous as well and advocates higher capital gains taxes, fyi). but let's at least acknowledge that capital gains taxes are already very low.

2. sales taxes are extremely regressive for the obvious reason that the poor need to spend nearly all of their income just to get by. if you exclude essentials (food, clothing up to a certain price) that makes it better but it would still be highly regressive to replace income taxes with consumption taxes.

3. corporate taxes are already quite moderate.

Ok HR.

Can we agree that U.S. tax code is progressive? It sounds like we can. You seem to be saying that the U.S. tax code should be more progressive than it currently is and that it has been more progressive in the past. That's a point I think we can agree to disagree on.

You seem to think the degree of progressiveness is a function of how much each income group is allowed to keep. That is, what is the penalty the tax code charges for success. I, on the other hand, think the degree of progressiveness is a function of how much tax each income group is required to pay as a percentage of the total. You want to focus on theory where I would focus on the result.

I understand your made up example. How about you understand that your example is, well, a made up example. Why don't we use the real data??

From 1980 to 2006 the share of taxes paid by the top 10% of earners grew from 49% to 71%. The share of income earned by the top 10% rose from 32% to 47%. So the share of taxes from this group rose by 22% and the share of income rose by 15%. That is an increasingly progressive result.

What is truly stunning is that top end marginal tax rates were coming down pretty much throughout the entire period. That is, the share of taxes contributed by higher earners was going up at the same time marginal tax rates, especially at the top end, were coming down. Lower tax rates have made the tax code more progressive not less.

You can have the last word.

no need. you made my point for me "what is trul stunning is that top end marginal tax rate were coming down throughout that entire period." end of story.

Jake, a disproportionate amount of taxes are paid by those in the top 25% or so, not counting the top 1%. Vast amounts of the gains in income have gone to the top 1% over the last 10 or so years. The number is staggering, and skews the results.

happy, have you ever considered that all your ultra progressive tax policies have a large negative impact on economic growth and proper incentivization? maybe someone who makes $15k per year was lazy, didn't ever want to study, dropped out of school, and then got into drugs of their own volition, spent what money they did make foolishly, and then got fired from job to job. and someone making $1mm/year, did everything the opposite and worked very hard to improve his/her station and that of their family. so let's make the person who earned more subsidize the laziness of the less wealthy person. sure, in principal most can agree to some progressiveness, but you're bordering on socialism here.

your views on 100% inheritance tax are just plain silly. the problem with limousine liberals is that they equate re-distribution of wealth with fairness. just because i make more is not for you or anyone else to say i should give more. did you earn my money?? there's another term for your ideology and cuba tried it. you can see where it's gotten them.

I don't really have a dog in this fight, I have too many other things I care more about wasting my time on. But, I never have really understood the idea of imposing a financial penalty on someone who wants to make MORE money. 2 examples: both true. my dad. He worked two jobs as long as I can remember as a kid, for the sole purpose of trying to save some money so my sisters and I could go to college. But every additional dollar he made, the lower percent he kept. Me, I give away all of my money beyond a certain amount I keep for myself every year. Now I hear stories of NY and the Feds planning on increasing taxes on top earners. If this moves too much, say beyond 50% total. I will work less, and my charitable grants will be less. And the economy will have less growth by a fraction. Not complaining, middle of the road kind of guy, but I really just don't get what the point is.