How about a flat 20% tax on all income over $30K a year with no deductions?
I use $30K as an arbitrary number but you could easily index that number to inflation and/or the poverty level. This would quickly counter the "poor single mom" argument.
If you think $30k a year is a living wage for a single mother, you're not doing your research. Especially since post taxes they'd be actually earning $24k even if it was the only tax they were paying. Again the percent may seem even across the board, but as Rym, Scott, Joe and several others pointed out, a flat 20% (or any percent) hurts people who earn less money far more since they end up proportionally worse off.
How about a flat 20% tax on all income over $30K a year with no deductions?
I use $30K as an arbitrary number but you could easily index that number to inflation and/or the poverty level. This would quickly counter the "poor single mom" argument.
The problem with a flat tax is that it's independent of cost of living. If two people make the same amount annually but one lives in New York city and the other lives on a farm in Idaho, they are essentially taxed unequally due to the massive difference in cost of living.
Isn't the current progressive tax system also independent of cost of living?
If you think $30k a year is a living wage for a single mother, you're not doing your research. Especially since post taxes they'd be actually earning $24k even if it was the only tax they were paying. Again the percent may seem even across the board, but as Rym, Scott, Joe and several others pointed out, a flat 20% (or any percent) hurts people who earn less money far more since they end up proportionally worse off.
In my example she would earn the full $30K not $24K.
What's wrong with believing you shouldn't be penalized for success?
You don't seem that one dollar is not always one dollar. For a homeless bum, a dollar is going to get him some hobo wine. For Bill Gates, $1 is one incredibly tiny fraction of a Porsche. If you tax the hobo who makes $5 at 20%, that's an entire dollar he loses! That's a huge hurt. If you tax a millionare %20 they still have $800,000. The percentage might be the same, the numbers on paper might seem fair, but the actual burden is not equal. It's because the actual value of $1 changes based on how many you have, where you are, and how you live, and a bunch of other factors.
In the US a few hundred dollars gets you a video game console. In really poor rural areas of the world, a few hundred dollars can get you a water buffalo that will change your entire life.
A truly fair tax system takes as many of these factors into account as possible. Not everyone will be taxed the same percentage. The numbers will be all over the place. However, everyone will feel the same "hurt" from taxation. If person A has twice as much money as person B, and they live in the same place, person B will still have twice the lifestyle of person A. Relative wealth will be unchanged. Rich will still be richer, and poor will still be poorer. Just because numbers on paper don't seem fair, doesn't mean they aren't fair.
There's another reason. Let me give you an example from a board game, Railroad Tycoon. In Railroad Tycoon the goal of the game is to get the most victory points. Your current score on any given turn is directly tied to your income. So if you have 7 victory points, your income is $9. If you have 10 victory points, your income is $10. There's a scale.
This scale obviously creates a system of momentum. Whoever gets ahead early in the game gets more money earlier in the game. Having more money earlier in the game allows them to get ahead, and get more money. If this scale continued, there would be no point in playing the entire game. Whoever got ahead early on in the game would win.
It's a good thing the scale does not continue. After a certain point in the game, your income starts to decrease. You still need more victory points to win, but as your victory points go up, your income goes down. The reason they do this is to increase the difficulty of getting more victory points. If they didn't do it, your income would be so high, that getting many more victory points would be trivially easy. They want to make it hard to get more victory points, even when you have lots of money rolling in. Victory point 100 should be hard to get. If you had an insane income, victory point 100 would be trivially easy compared to victory point 1.
And this is a perfect metaphor for our economic society. When you have money, it is trivially easy to get more of it. The less you have, the less difficult it is. In other words, the difficulty of earning a dollar is inversely proportional to the number of dollars you already have. If you only have $100, you're going to have to work for an entire hour to get another $7. If you have million of dollars, you can push some buttons, and instantly and trivially get more money by investing, or using any interest-bearing instrument. Even a simple savings account will bring in the dough, with no work whatsoever.
Let's say you made a graph. On the Y axis you have "difficulty of earning one more dollar". On the X axis you have "number of dollars currently owned". What would this graph look like in an idea society? In our current society the graph looks like y=1/(x^2). If you have no dollars, getting some is nearly impossible. If you have a bunch of dollars, getting more is easy as pie. Ideally the graph would be either a straight line like y=1 or a linear relation y=x. I haven't decided which is better. Regardless, both have their merits, and both are extremely preferable to the y=1/(x^2) we have now. The only way to achieve either of these relations without heavy economic regulation, which I'm sure you also despise, is to have progressive taxation.
Another thing is that in Railroad Tycoon, a player only has so many actions per turn. Even if you had infinity money, you could only spend so much of it because of the limits on the actions you can take. Early on in the game, money is a very limiting factor. Players are forced to sell shares to get enough money to build up their railroads. Given too much money, players will just end up having piles of money with nothing to spend it on.
Our economy relies on money moving around. The more that moves, and the faster it moves, the better. You've noticed that recently there are problems with credit markets "freezing". It's not because people don't have money. It's because due to the conditions, people are much less willing to lend it out.
A rich person doesn't spend most of their money. They usually have most of their money saved, vested, etc. They can afford to let their money just sit around. A less rich person has to spend their money. If they had a significant amount of savings, it would have a direct impact on their standard of living. Thus, if people with less money are taxed less, they spend more. By progressive taxation, you maximize the velocity of money. The government takes money from rich, that isn't moving, and spends it. Poorer people are taxed less, thus they spend more as well. That rising tide raises all boats, including those of the rich. It's good for rich people to be taxed more.
Yes, that's right. If you are rich, it is hard for you to keep all of your money moving quickly. If the government takes it from you, and spends it, then it moves around more. That greater velocity makes the entire economy better, increasing the value of your investments. In other words, progressive taxation is actually better for rich people than a tax cut. Believe it!
I don't know what it is about you Scott, but you have this gift of explaining these taxation ideas in a way that makes me go, "oooooooo, I guess I'm ok with that."
Come back sooner. Every time there's a dissenter, it forces people to reevalute their positions and figure out whether they're spewing bullshit. You learn just as much being on the winning side of an argument as you do being on the losing side.
I'll try, but I really need to buckle down and work or I'm not going to graduate. I have paper due in 2 hours that I haven't started. The practical part of my brain is going, "GET THE FUCK OFF THIS FORUM YOU IDIOT!!!!!!," but my ADHD is saying, "hey, did they respond yet?"
Another point that seems to be missed is that income tax only taxes income. If someone is already rich you can't tax their money.
If Bill Gates decided tomorrow to stop making money he would never pay another cent in income tax.
One of my concerns with raising the capital gains tax is that the "wealthy" can sell enough of their stocks before this year ends to have enough money on hand to last them the next five years and pay no capital gains taxes at all for the next five years. Us working stiffs do not have that option.
As for Scott's idea of the government taking money to keep it moving around well... I'd much rather see private citizens invest their money and have it move around. Putting your money in the bank does not stop it from moving around nor does that money stop moving around when you buy stocks. The only time money stops moving around is when you stuff it in your mattress or bury it in mason jars in your back yard.
Come back sooner. Every time there's a dissenter, it forces people to reevalute their positions and figure out whether they're spewing bullshit. You learn just as much being on the winning side of an argument as you do being on the losing side.
Agreed. You've actually put forward some good points in your arguments, and you have brought forward some excellent well-thought-out arguments. You have done so without being a forum troll or getting into name-calling matches like some members I could point out. And most importantly, you are willing to discuss things and are open to the possibility of changing your mind, as we ALL should be.
School is definitely more important than discussion on a forum, so if you need to take a break to do well, then do it. Still, I think it's fair to say you are welcome if/when you chose to come back. Everyone here is a hardass and is going to press you for justifications. But that's not just you...they do it to everybody.
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If Bill Gates decided tomorrow to stop making money he would never pay another cent in income tax.
One of my concerns with raising the capital gains tax is that the "wealthy" can sell enough of their stocks before this year ends to have enough money on hand to last them the next five years and pay no capital gains taxes at all for the next five years. Us working stiffs do not have that option.
As for Scott's idea of the government taking money to keep it moving around well... I'd much rather see private citizens invest their money and have it move around. Putting your money in the bank does not stop it from moving around nor does that money stop moving around when you buy stocks. The only time money stops moving around is when you stuff it in your mattress or bury it in mason jars in your back yard.
School is definitely more important than discussion on a forum, so if you need to take a break to do well, then do it. Still, I think it's fair to say you are welcome if/when you chose to come back. Everyone here is a hardass and is going to press you for justifications. But that's not just you...they do it to everybody.