Thread: Tax discrimination

Originally Posted by Gemini_Fyre

Progressive taxation seems like a penalty for success. When you penalize the successful they lose their incentive to produce, innovate, invest, and so on...

That isn't consistent with reality. The wealthy do not face effective marginal rates of tax above 100%. That's the poor! A progressive tax is actually required to maximise work incentives

Originally Posted by Reiver

That isn't consistent with reality. The wealthy do not face effective marginal rates of tax above 100%. That's the poor! A progressive tax is actually required to maximise work incentives

You're going to have to define some of these terms so this makes any sense, because as it stands this is pure gibberish to any free thinking person who can do basic math, or has ever worked a job.

Originally Posted by Gemini_Fyre

You're going to have to define some of these terms so this makes any sense, because as it stands this is pure gibberish to any free thinking person who can do basic math, or has ever worked a job.

You're on a tax thread about discrimination and you don't even know what an effective marginal tax rate is? Golly gosh!

Originally Posted by Reiver

You're on a tax thread about discrimination and you don't even know what an effective marginal tax rate is? Golly gosh!

Than by all means, feel free to educate me so long as you are willing to learn yourself.

Originally Posted by Gemini_Fyre

Than by all means, feel free to educate me so long as you are willing to learn yourself.

Not interested in teaching from first principles. I'd have joined the teaching profession if I was. I just find it interesting that you have such strong opinions but don't know the tax basics. Other than that happy to end the conversation

Originally Posted by Anikdote

People who oppose progressive taxation are typically the same people who understand very little economics. Progressive taxation is acceptable for various reasons, but primarily efficiency. The labor supply curve is backward bending, so higher taxes at upper incomes is less likely to result in work disincentives. Also because there is a marginal disutility of income, in other words each dollar earned provides less and less utility to the person earning.

so discrimination can be justified ?

Originally Posted by Taxpayer

Translation: because we can get away with it.

Well, that does make it possible, but more importantly it's done because it's more efficient and equitable.

No one want's to have less benefits and we can get away with taking more from those who provide more value -- so we do.

The entitlement programs we have now are completely unsustainable, but frankly tangential to the topic.

Originally Posted by PatrickT

It's even more effecient just to take everything and give people what you want them to have.

Not at all, the transactions costs associated with finding the people/person who you wish to give said things to necessitates an intermediary. Private charity is wonderful, but insufficient.

Originally Posted by squidward

so discrimination can be justified ?

Silly question. This is analogous to saying that tax breaks on dividends is discriminatory... and frankly since you nor the OP is applying the term in any valid context, it's just moral blathering.

Progressive taxation because it increases equitability by definition reduces discrimination.

Originally Posted by Anikdote

Well, that does make it possible, but more importantly it's done because it's more efficient and equitable.

Not sure how efficient applies, but having one in twenty citizens pick up the bill for the other nineteen (half of whom are paying nothing at all for the federal services income tax provides)... you think that's equal? You can argue that it's necessary, constitutional or kind but it's hardly impartial or without favoritism. It's neither fair nor equal.

eq·ui·ta·ble adj \ˈe-kwə-tə-bəl\
Definition of EQUITABLE

: dealing fairly and equally with all concerned

Originally Posted by Taxpayer

Not sure how efficient applies

The upper end of the labor supply curve is backward bending, in other words there are no work disincentives at the top, thereby meeting efficiency criteria. In short, no production is lost as a result, unlike the converse.

It's neither fair nor equal.

Depends on how we look at it, from a % of total income then you can make this argument. If however we consider the impact then we cannot.

Since you've been very civil, I'll try to explain a bit further.
Just to toss out some hypothetical numbers. Let's assume a flat tax @ 10%

Person A makes 100,000 and so pays 10,000.
Person B makes 15,000 and pays 1,500.

If we remove for the basic necessities and various fixed costs, the 1.5k accounts for a greater % of person B's income and will invariably have a greater affect on him because he has significantly less disposable income. This is why "flat" taxes aren't equitable.

If you can get the full text of: http://oep.oxfordjournals.org/content/25/2/145.extract I'd read it, really helps to extrapolate over what my laymen words don't do justice.

Originally Posted by Anikdote

The upper end of the labor supply curve is backward bending, in other words there are no work disincentives at the top, thereby meeting efficiency criteria. In short, no production is lost as a result, unlike the converse.

Economic efficiency; I think I understand why you mentioned it now.

Originally Posted by Anikdote

Depends on how we look at it, from a % of total income then you can make this argument. If however we consider the impact then we cannot. Since you've been very civil, I'll try to explain a bit further. ... If we remove for the basic necessities and various fixed costs, the 1.5k accounts for a greater % of person B's income and will invariably have a greater affect on him because he has significantly less disposable income. This is why "flat" taxes aren't equitable.

I believe I understand the basic argument of marginal utility (although I appreciate the link, I'm book marking it for reading when I have more time).

I don't think a flat tax is all that more fair than a progressive one -- no tax using income as a basis will be fair or equal, because our incomes are not equal. While we're spending $3.6T to give 300 million people equal rights and privileges the only fair tax would be to either meter services or drop a $12,000 per person bill on each family. I realize that isn't practical... few families can handle that bill. So we do what we have to and ask the few of us who can still afford it to foot the bill for all our neighbors.

It's ugly, but worse: we're dishonest about it. We use tricks like marginal utility or even a flat tax based on income to argue each of us is paying his fair share, when we know most of us aren't even coming close. We do that to keep folks invested emotionally in our government and promote feelings of unity and equality in the nation. It reduces the risk of revolution, keeps folks smiling, and keeps the wheels turning (efficiently).

But the problem with that dishonesty is it tricks folks into a feeling of satisfaction with their meager or non-existent contributions, so they don't do more. And it creates an attitude of unreasonable entitlement that causes people to demand things they think they're paying for (but are not).

It's like Dad taking little Timmy with him when he buys a new car. Timmy wants to help so he puts up half his allowance. Dad is proud of his 8 year old and puts in the rest of the money. Well everyone feels good about it because each felt an equal impact, each paid according to the "affect" of the cost. But things get a little dicey when Timmy, having paid his fair share, wants equal rights to drive the darn thing or feels entitled to an equal vote on whether the family buys another new car next year.

Dad can always put his foot down and remind Timmy that he didn't really pay an equal amount. That Dad is the one actually picking up the bill and Dad will make the decisions about what 'we' spend next year. But America doesn't have that option. We've got a nation of almost 300 million spoiled brats with equal votes and no fatherly authority to reign them in when they want to buy a new healthcare entitlement or recognize everyone's "right" to own a home.

We need to stop playing games with the idea that folks in this nation are paying their 'fair share' for the rights and privileges of U.S. citizenship and take a good hard look at what it's really costing us and who is providing it.