MonacoMike
Well-Known Member
- Sep 15, 2009
- 14,721
- Boat Info
- 2000 Cruisers 3870
8.2 Mercs
- Engines
- 85 Sea Ray Monaco 197
260hp Alpha 1
The 70% argument is a pain. It is the shill argument that people against any sort of progressive taxation tend to make. Mostly because it involves numbers and a little thought, the people whom this argument works against, don’t understand it, and you suddenly have fairly low income people fighting for the very well off! First, of course the top earners will pay the most total gov’t tax receipts, provided that there is a decent pool of top earners. Secondly, this is the oddest argument for fairness of taxation when, thanks to years of tax rate cuts for top earners, they tend to pay lower net effective tax RATES, but still pay the most DOLLARS.
So, let’s simplify.
The population has two taxpayers. Rich makes $300,000 a year and pays 10% taxes, or $30,000, and has $270,000 to live on. He is doing very well, indeed. Poor makes $30,000 a year, pays 10% taxes of $3,000, and has $27,000 to live on. The government is has a strict Constitutionalist policy of just providing for the common defense, and promoting the general welfare (from the Preamble of our Constitution, and this does NOT mean food stamps for baby makers, it means in this case building roads for common use by Rich and Poor). And, in my world a constitutional amendment has been passed that the Federal budget must be balanced.
The total tax pool from Rich and Poor is $33,000. Rich has paid a whopping 90.9% of all taxes!!! The Federal budget is $40,000. $20,000 to fix the road and $20,000 to fix an Air Force plane. THERE IS A $7,000 DEFICIT THAT MUST BE MADE UP. WHO WILL PAY?????
Well, since Rich has already paid over 90% of the total tax receipts, OF COURSE IT IS NOT FAIR TO ASK HIM FOR MORE! Poor must make up the entire $7,000 deficit. His taxes balloon to $10,000, or 33% of his income. He has just $20,000 to live on. After all, he is still only paying $10,000 in taxes, and just 25% of total Federal receipts, and Rich is still paying 75% of the total taxes. (And folks, this is the world we are starting to live in.)
In a Progressive taxation system, which has been around for many years, and tested against our Constitution many times, we would ask Rich to pay 20% of his income. So, he pays $60,000, leaving $240,000 to live on (handsome, indeed) and Poor still pays $3,000. With total tax receipts of $63,000, the gov’t is floating in cash, and has the ability to make repairs to the Capital building next year.
So, the next time you hear “THE TOP PAY 70% OF ALL TAXES,” think about the above for a little bit.
And, the hits on Warren Buffett in some posts are interesting. He advocated both CAP GAINS tax increases, and INCOME tax increases for top earners. As he put it, CAP GAINS were much higher 40 years ago, and people still made investments when they were sensible. And Mr. Buffett was a case in point, and practiced what he preached in the 1970’s. So, he has not advocated for taxes that put him at advantage because he is heavy on cap gains over income. And heck, I get most of my news from Fox News and the Wall Street Journal, and I still figured this one out!!
The problem with all the hokey pokey is, it is just wrong. The examples do not real world compute. One of the big issues is not only the total percentage the top earners pay but also the percentage they earn. This chart shows what was earned compared to what was paid. The top 10% earned 44% of the income and paid 68% of the taxes in 04.
MM