Class Warfare Blog

April 17, 2018

Taxing the Rich: A Good Idea or Not?

To those whom much is given, much is required.

The standard narratives regarding not taxing the rich are quite bankrupt but are still used, much like the tired old arguments of religious apologists (there is always a new audience to whom these arguments make sense). The usual thing touted is that the rich are the job creators and if you tax them (at all?) they won’t take risks and start new companies which hire workers and we all suffer thereby.

As a counter narrative consider the story of Toys R Us, a huge entrepreneurial success story, which ended in a financial meltdown. The company, however, made its owner rich when individual and corporate taxes were ever so much higher and met its demise in a time when those taxes became ever so much lower.

Read this fascinating story here.

The “standard narrative” of the rich about the rich is they made their money “themselves,” so they “deserve” the rewards. But in reality, does anyone make it themselves? Or is it like personal gifts one is born with and developed, in which we deserve some credit for the development but much of what happens to us and because of us depends upon things like genetics, luck, externalities (like available electricity and good roads provided to all), circumstances of birth (being born into a rich family is a strong marker for “becoming” rich)?

19 Comments »

  1. I don’t know the answer, as the two ideas that stay to the forefront are extreme and unfair. Some financially, and others mentally. I have a good friend in Norway, and their system has even developed a new word that is quite popular. “Janteloven”. It means “why try, or why bother ” but she and her family are addicted to the social safety net, but overall very unhappy with life. All we hear is how great it is over in the Scandinavian countries, but .. not so much. The system is breeding flat living and less entrepreneurs and happiness. Somewhere in the middle has to be found. While I agree our system is unfair and broken, the other extreme is just as damaging. She has some great ideas, but will never bring them to market because the king and his cronies in parliament, and the rest of the country reap the rewards before they ever will.

    Liked by 2 people

    Comment by jim- — April 17, 2018 @ 9:30 am | Reply

  2. A rich man who hides all of his money in the ground won’t create any jobs, at least not any more jobs than a poor person. A rich man who mostly invests in stocks is only marginally better as he needs a part-time broker and a part-time accountant. A rich man who spends most of his money on yachts and mansions and strippers does create jobs – but the man will likely travel and spend a lot of money abroad, or pay a lot of highly-paid people who’ll save a significant portion of what they’re paid. And a thousand poor people who combined spend as much as the previous rich man will spend almost all of their incomes, almost all here in the US, and almost all on basic necessities that carry lower profit margins than yachts and keep more people employed.
    So maybe we’re doing the tax thing all wrong. Maybe we should tax the money that is earned (whether by work or by rental/investment income) but not spent domestically and exempt domestic spending from tax, or tax domestic spending using a lower rate VAT and a higher rate for all money made beyond domestic spending.

    Liked by 1 person

    Comment by List of X — April 17, 2018 @ 12:56 pm | Reply

    • I agree with you that we need to do things differently. We used to differentiate between earned and unearned income and earned income (wages and company earning from good sold, etc.) was taxed less. Taxes on earnings from investments were taxed higher because of the amount of effort was less. Sweat of the brow wages should be taxed less … up to a point. I remember Willie Mays being the highest paid baseball player when he made $100,000 per year. Today, that (even corrected for inflation) wouldn’t make a minimum MLB salary. I do not argue that professional athletes do not work hard or have limited careers, but I worked for 40 years and made $2M. These guys can sit on the bench and earn that in one year. So, sweat of the brow wages need to be taxed less but there is no reason to cut off tax brackets at $250K per year when there are people pulling down many, many times that amount.

      On Tue, Apr 17, 2018 at 12:56 PM, Class Warfare Blog wrote:

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      Liked by 1 person

      Comment by Steve Ruis — April 17, 2018 @ 1:10 pm | Reply

      • And we still differentiate between earned and unearned income, only the other way around. Personally, I think that all income should be taxed the same, sweat of the brow or not: capital gains, W2, Social Security, etc.: income is income, after all. A burger would cost the same number of dollars whether these dollars were made by selling an Apple share or by shoveling horse manure.
        But the tax code certainly shouldn’t be punishing working as opposed to collecting rents from the capital.

        Liked by 1 person

        Comment by List of X — April 17, 2018 @ 1:46 pm | Reply

        • But that is the whole point. earnings are not earnings per se. Say a very rich man sets up a trust fund for each of his kids. The investments in those trusts provides each child with a comfortable income so they do not have to work if they choose not to. How is it that they “earned” their income. They did not. Their father earned it for them or their fund managers or … they just clip coupons, as it were.

          I know this goes down a slippery slope of the “morality” of one’s income, but I didn’t create the ideas, someone else did and initially taxes, when finally leveled on income, used to tax unearned income higher than earned. This might reflect a societal WASPishness, I do not know.

          On Tue, Apr 17, 2018 at 1:46 PM, Class Warfare Blog wrote:

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          Liked by 1 person

          Comment by Steve Ruis — April 17, 2018 @ 2:21 pm | Reply

          • They indeed did not, and I would still tax the trust fund income as all other income. These trust fund kids would still receive some of that money tax-free, because incomes aren’t taxed below a certain amount, which would basically work like an estate tax exemption we have today.

            Liked by 1 person

            Comment by List of X — April 17, 2018 @ 5:00 pm | Reply

          • There’s a problem in that equation because, for example, the rental income I receive is based on the work it took to have the money to buy properties and also the running/administration of those properties. So people presume I’m receiving money for “nothing”, when in reality a whole lot is part of the process.

            Liked by 1 person

            Comment by The Pink Agendist — April 17, 2018 @ 5:37 pm | Reply

            • So Pink, shouldn’t that mean the rental income should be taxed as earned income? Which is the whole point I think. Why is earned income taxed higher than other incomes? Hugs

              Liked by 1 person

              Comment by Scottie — April 17, 2018 @ 5:40 pm | Reply

              • In France rentals are taxed higher than earned income because there are “social charges” on top of the regular income tax. Personally, I’m not complaining. The French system makes sense to me.

                Liked by 1 person

                Comment by The Pink Agendist — April 17, 2018 @ 5:43 pm | Reply

                • I wish the US system made sense. Warren Buffett was famous for complaining the tax code made the income his secretary made taxed at more than the investment income he made. He often stated it was wrong but he paid a much less rate than she did. He has tried to fix it, but even as wealthy as he is he can not get the tax code made more fair. Hugs

                  Liked by 1 person

                  Comment by Scottie — April 18, 2018 @ 6:18 am | Reply

                  • The reason it makes no sense is the same reason that the US Tax Code is a 2600 pages long. (If you have heard 70,000+ pages, that number has been pumped up by adding in all of the commentary, IRS Regulations, past laws that are no longer relevant, etc.)

                    How many of those 2600 pages are needed to cover individual tax payers? It is a small fraction of the total. The rest covers businesses, which are much more complicated and have, through bribery, gotten laws passed that specifically address only their business, often just their company. So, why is the Tax Code so bloated? The simple answer is tax perks for businesses and the wealthy.

                    In this way it does make sense as Republicans, once again, want it both ways. They say the tax code is too complicated; they want it simplified, but the reason it is complicated is because of benefits they added for themselves.

                    On Wed, Apr 18, 2018 at 6:18 AM, Class Warfare Blog wrote:

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                    Liked by 1 person

                    Comment by Steve Ruis — April 18, 2018 @ 6:58 am | Reply

                    • Thank you Steve. How do we fix it now? Hugs

                      Like

                      Comment by Scottie — April 18, 2018 @ 7:06 am

                    • Yeah, like I am an expert! :o)

                      The biggest fix I can see is to fix the corruption problem in Congress and get them back to doing the people’s business rather than their donor’s business.

                      On Wed, Apr 18, 2018 at 7:06 AM, Class Warfare Blog wrote:

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                      Liked by 2 people

                      Comment by Steve Ruis — April 18, 2018 @ 11:22 am

            • I tried to differentiate “rentier” income from rental income. Renting a home to someone provides value to the renter. That is *earned *income, my friend, same as baking cookies and selling them. The “rentier” class are those who buy and trade stocks and bonds and such (for example), creating nothing of value for others.

              On Tue, Apr 17, 2018 at 5:37 PM, Class Warfare Blog wrote:

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              Liked by 1 person

              Comment by Steve Ruis — April 17, 2018 @ 9:42 pm | Reply

              • That’s a good distinction; unfortunately that line often gets blurred. At least in France that’s often the case.

                Like

                Comment by The Pink Agendist — April 18, 2018 @ 3:30 am | Reply

  3. I think history has shown us the country had better economic shape when the wealthy and corporations paid more, and the lower incomes had more disposable income to spend. Money circulating in an economy produces a strong healthy situation to base an economy on. That only happens when the mass majority can afford to spend. That in our country is the lower income base. A wealthy man can only buy so many pairs of pants or tee shirts or cars so the money doesn’t flow, products are not sold, and the manufactures close or move overseas. However if the mass population can afford the cars, refrigerators , vacations, homes, then the money creates the jobs because someone needs to make the product, sell the product, move the product, and so much more. The real job creators are the people who can afford to and in some cases have to , spend the money to buy the products. In our country that has been taken away from the mass majority of the population and concentrated at the small portion at the top. Give the wealthy money they don’t need and they will save it / invest it limiting the good it can do for the economy. Give the poor that same amount of money and they will pend it putting it into the economy to create jobs. Hugs

    Like

    Comment by Scottie — April 17, 2018 @ 1:54 pm | Reply

    • The first I ever heard of Elizabeth Warren was a book she and a co-author wrote about the housing market in the U.S. Basically they made the point that a 1950’s household had more disposable income (after rents, taxes, etc.) than a 2000’s household, even when there were tow wage earners now and only one then.

      I see this now as one of a number of schemes/scams by the oligarchs to make money of of rents (in the economic sense, not housing rentals). The housing booms of the 1970’s drove houses up to astronomical values. The tax deduction for mortgage interest, with no cap on it, facilitated this. So, while the rule in the 1950’s was to not pay over 20% of your income for housing, Now people spend over 50% of their household income for housing and there has been no commensurate increase in quality of housing. Basically the money just got sucked up into “the market.” My first house in California cost all of $62K, now a fixer-upper in the same area is $350-400K. That ain’t due to inflation.

      The same thing has happened to college tuition.

      So, with the oligarchs getting tax breaks for their corporations, and tax cuts for themselves, the income tax burden has been thrown onto the upper middle class.

      President Eisenhower thought a 91% top marginal tax rate was just fine and the country ran well with plenty of innovation. Now, the definition of being “wealthy” has been jacked up to great heights so that simple millionaires feel slighted.

      On Tue, Apr 17, 2018 at 1:54 PM, Class Warfare Blog wrote:

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      Liked by 1 person

      Comment by Steve Ruis — April 17, 2018 @ 2:30 pm | Reply

      • Yes, when I got out of the service in 1986 I got a good job, bought a new top of the line 14 X 70 mobile home, and a new top of the line pick up truck. I still had money left over for a few luxuries.
        Now today the young man we took in 7 years ago is struggling to move out in to the world. He and his girlfriend have to have a third person to afford rent. they both have inexpensive cars and they won’t have any real disposable income. They both work full time. I not only don’t understand why it has to be this way, I am angered by it. I did not have the opportunities the generation before me had with defined retirement plans and health costs paid for by employers. Now these young people have even less a chance than we had. Something has to change. We are a country of haves lords and have not surfs. I am lucky there are many my age in my area who do not even have the securities I have. I simply do not know how they make it today. Hugs

        Liked by 1 person

        Comment by Scottie — April 17, 2018 @ 2:39 pm | Reply

        • Couldn’t agree more, Scottie … and cool new photo!

          On Tue, Apr 17, 2018 at 2:39 PM, Class Warfare Blog wrote:

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          Liked by 1 person

          Comment by Steve Ruis — April 17, 2018 @ 9:40 pm | Reply


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