I just read somewhere that the top 2% is as wealthy as the bottom 98%. Is this true? Also is it true that the rich pay less taxes than the poor? Obviously they pay more money, but do they pay a smaller percentage of what they have?
This is the interesting question! Since the percentage of America owned by the very top is increasing while the percentage of America owned by the bottom 90% is decreasing it is probably fair to assume that the rich pay a much lower percentage of their total wealth. I am not going to look it up but if I remember correctly there is actually a very high percentage of America that actually has no net wealth. A truly fair tax in my opinion would be a wealth tax where your annual tax is based on your total wealth.
Well, considering that most Americans are in the top 1% worldwide, clearly we should take Americans' wealth and give it to poor people in other countries.
It really depends on how you calculate it. And THAT depends on what side you want to argue. If you took the top 2% and averaged their effective federal income tax rates, and compared that to the effective federal income tax rates of the bottom 98%, I bet you you'll find they are very close. That's because 50% of the bottom 98% pay NO federal income tax at all, and of those who do, it's not until you're making over $74,000 per year (for a married couple) that you pay a higher rate than the rich guy pays in capital gains taxes. The rich guy who reports W2 income of over $457,000/yr pays a MUCH HIGHER rate (39.6%) He will take his $500,000 in earnings and write a fat check to the feds for $198,000 on April 15th. The 'smaller percentage' argument stems from capital gains tax. Rich folks are the ones who typically hold investments (stocks, bonds, etc) and presumably derive a large percentage of their capital from those investments. When they take a profit from those investments, that profit, or "capital gain", is taxed at a lower rate than regular earned income is. Whether or not HIS rate is lower than YOUR rate is determined by the amount of income that YOU report on your tax return. It is not a lower rate than most poor people pay, because most poor people pay little or nothing in the form of income tax. For instance, a married couple making up to $73,800 per year will pay the same rate as the rich guy paying capital gains tax. Only when you get beyond there does the rich guy get a better deal, and then only for the portion of his earnings that are derived from capital gains. He still pays a higher rate on his W2 earnings. The married couple is not required to even file a tax return until they earn in excess of $20,300 (though there are good reasons to do so anyway)
Who knows, but if one thinks that taking money from wealthy Americans and giving to less wealthy Americans is smart, why not take money from all Americans and give it to actually poor people?
But the wealthy make their money from the less wealthy, and the very wealthy have more money than any one person could need.
The quibble in the discussion is the definition of income. As a simplistic example my net wealth can increase by ten percent a year through investing in stocks or real estate and I will pay no taxes unless the assets are sold. And if my pay as an executive is largely composed of stock options my actual earnings from work will be taxed at a lower rate. And of course before I die the assets will be placed in a trust to avoid the taxes on those capital gains if my estate is above the exemption limits. If it is not then the assets will go to my heirs at the stepped up basis avoiding capital gains taxes totallly. Just as a note of interest 80% of all stocks are owned by the top 20% and if I remember correctly something like 40% of all stocks are owned by the top 1%.
That's a very general statement, and I'm not quite sure how to take it. I'll have to assume here, but feel free to correct me if I'm mistaken. I assume that you are referring to the Marxian concept of the labor theory of value. This is basically the idea that the workers create the value of the products, and the capitalists make their profits by paying the workers less than the value they create and keeping the difference. This has been disproved in the field of economics and virtually no one accepts this idea anymore. If you want a detailed explanation I can give it to you, but the short answer is that the capitalists provide the capital assets--the tools, computers, factory space, machines etc.--that drastically enhance the workers' productivity. Their profits are the return on investment in the capital assets, not taking the workers' labor. The problem with this statement is tied in to my answer to your first statement. You are only thinking of consumption, and of course if that were the case, then yes, they aren't in risk of going hungry any time soon. But the wealthy don't usually consume all their wealth. They use it to invest in capital assets--the machines, factories, computers, tools, vehicles etc.--that make workers more productive. In that case, they definitely do need that wealth, and we need them to have it in order to create jobs. If they don't have the capital to buy factories and machines, then they can't hire you to work in those factories. Of course there is the moral point that a person's wealth is their private property, and if it was earned without initiating violence or through fraud, then it is their rightful property to do with as they please. What right do any of us have to dictate to another person what to do with their property or how much they should be "allowed" to own? None.
Well, you can't really call it 'income' until you receive the proceeds, can you? If you own a house, and it appreciates in value, you don't call that appreciation 'income' until you actually sell the house and collect the proceeds. So, yes, your net "on paper" wealth fluctuates with the current value of your holdings. Even though your holdings may be worth a million bucks at 9:30am, they may well be worth only $850k at 4pm, (or they may just as easily be worth $1.2MM). You can't rationally tax it until it's liquified and taken. All those other tax-avoidance gyrations you mention are a product of the overly-complex tax code. If they're legal, I got no problem with people using them. Whether they SHOULD be legal is another topic entirely. If our tax code were to be fixed, all those loopholes could be addressed. The tax code should fit on two pages of legal sized paper, and be readable without use of a magnifying glass or a lawyer.
And the irony is that those who complain the loudest about who pays what in taxes (politicians) are the very ones responsible for the system that allows people and corporations to avoid those taxes. Yet we listen to them as if they really want to change the system, knowing full well they never try because they can just use it as a talking point and people follow along blindly when they hear it. How to get easy votes = demonize those who have stuff and promise more stuff to those without. Boom....votes.
All very true. The division tactic works very well to generate votes. Racism is another example; they will not ever let racism heal for the exact same reason. Create and agitate a division, then demonize one side against another to generate outrage votes. Sexism will be the division tactic of the upcoming election season, just in time for Hillary Godiva Clinton to ride in, naked and glistening, on her white unicorn and save the day. My prediction: There will never be meaningful tax code reform. The reason is simple... power. Those politicians who are charged with overhauling the tax system have no incentive to do so unless it gives them MORE power, not less. They wield the tax code over our heads like a big ass billy-club. It is the #1 weapon they can use to reach out and punish groups/corps/individuals that they don't like, and to shower gifts and rewards upon their cronies. They will not ever give this power up willingly, and The People don't seem to have the political will to force them to do so.
That must be only because the word Marxian is a loaded word. If economists do not buy into it, they have been educated to the point of idiocy. I am a retired business owner. I retired after 42 years of owning a small manufacturing company. So, what I am about to say is the REAL WORLD, not some theoretical world. There is an industry average for wages in my sector in my area when it comes to wages. It was not even a living wage. Yet when I looked at my competitors, these guys were clearly well off, with their multimillion dollar homes, the new cars each year, their kids driving new cars, in other words, they were living high, and had all of the status symbols that tells others, "I am successful, I have made it." So when I went into business, to become one of their competitors. I started my workers out, at the industry average in wages, and other benefits, which were small. Within 5 years my own bank account and assets showed me that I could share the income created by my workers, for me, much more fairly. So, I raised all up to a living wage, with much better benefits than my competitors were willing to sacrifice, at a cost to their personal income. And of course the word got out, to my competitors, and it was war. It got dirty, with rumors drifting about to my customers that I was a homosexual, when I clearly was not, and had my own wife and family. I ran my business for another 37 years, sharing the income pie fairly, keeping less for myself, as I was seen as a fool by my competitors. When I lost one employee, I had a list of their best workers in my back pocket for over the years many of their employees had come to me wanting a job, wanting the better pay and treatment. I hired a foreman from one of my competitors although I didn't need a foreman, and he was happy to become a production worker, for my pay rate was higher, with more benefits than he was making at his other job. With the way I treated my employees, no one ever missed work hardly ever, no turnover, no training costs and my waste was the lowest in the industry. And the quality of my products were never surpassed by my competitors low wage workers. I took away some of their customers. Which was great growth for me and my employees. They shared in that growth, monetarily. So, those economists are idiots, and obviously never owned a business like I owned. I do not have the net worth today of my competitors who paid less to keep more for themselves. But I am comfortable. And my conscience is clear. And if no one accepts Marxian common sense, then one has to question their basic intelligence, and wonder how anyone could ever negate it. I think it must be right wing economists who are lying. For as you know, economists are left or right, that is just he nature of that field. I never listen to them. For they are disconnected many times from reality, caused by either left or right, ideological beliefs. So for you to buy into what those economists say, tells me you have never owned a successful business. For the real world is where the facts are to be found, and not in theory, not in a book, not something from the mouth of ideological driven economists. Like lawyers, they should all be killed. LOL So, I was upper middle class, my workers, middle middle class. My competitors were in the upper 1 percent, their employees in the working poor. That is the fact. Their foremans were lower middle class. So this is a choice made by the greedy owners, and always has been. And Marx was absolutely right.
I've said it many times here, and you lived it to prove my point. Business leaders are taught and held to standards that require them to maximize profit, not to pay above market wages for the good of all. In doing so, they get efficient in every aspect of the business, and when that happens the only other "efficiency" to improve is costs, which means if materials and overhead are maximized, you only can go after wages and benefits. This country's biggest businesses have done so, and even so far as to can people here to send jobs overseas for additional savings, and to the detriment of the working class. Wages are flat because companies don't run like yours does. Competitors want the riches for themselves, and with more workers than jobs its economically sound to push wages downward, regardless of the impact on real people. I think somewhere between profit and ridiculous profit is the middle ground where wages should naturally increase at some pace relative to a business or industry profitability level. You did that and your workers, customers and suppliers probably appreciated it. But in the business world others look at you like you're crazy. I bet you slept really well at night and so too did all those employees, knowing the boss truly did care enough to share the fruits of your combined efforts. There's no way to fix the way things work, and the flaw in it all is that businesses are cutting their own sustainability because those very employees who do not receive wage increases as profitability increases are the ones who can no longer sustain demand for the products those companies need to sell to retain their profit levels. It is a serious catch-22 and the entire capitalist system ignores it. It's self consuming and the globe is seeing how it impacts growth when the working class can no longer sustain demand levels because their income doesn't grow over time. And the easy argument is to point to pre 1970s wage growth and economic growth, compare it to today, and then wonder if wages aren't a major player, along with technological advances that have replaced workers and shrunk entire industries.
Yep, you nailed it, IMO. Yet convincing people who do not believe it, will forever be the problem. And its even these well educated economists who have made such a complexity out of it, that they seem to confuse themselves but worse, others who believe in them. What I did was just basic common sense, once that I saw that my business could do that. And it came from me growing up when the my dad's friends, who were businessmen were doing exactly what I did. To go to see their homes, which were modest, when they owned these large factories, is not something typical today. I just really followed their lead, for I actually cared about the people who worked along side of me, instead of for me, for we were in this together. To provide a quality product, at a competitive price, and for all of us to benefit from doing that. This created something that made the business prosper, and the people who worked with me, were my best advertisers for our products. For they knew the better this business did, the more they would benefit, and it just worked out wonderfully. And I slept very well at night. Every quarter they were involved a meeting where we looked and talked about the P and L. I involved them completely, and they were concerned, and learned about what the P and L was showing. I started this when I raised up their wages. But I had good people, and perhaps was very lucky. But luck doesn't run for 42 years. I would do it all over again, if I were a young man, but alas, my run is just about over. I feel good about how I did it. I think it is the moral way, and I never saw business as amoral, as is the common way to think about it today. For what is more important, than your fellow human being? With many today, it is of course, how much money they can keep, and really could not care less about the people that do the work. If one leaves in this labor market, they can be easily replaced. They are just a number, faceless, of no importance at all. That is a helluva way to live. Yet we justify it, by calling it....good business sense. LOL
Sorry, but the real world actually was what disproved Marx the most. You see, if the labor theory of value was correct, then the more labor intensive an industry was, the more profits it should make since there was more labor to "exploit" by the capitalists. The real world proved that this did not happen. In the real world, labor-intensive and capital-intensive industries make the same rate of profit. For Marx to be right, that shouldn't be possible. And to dismiss economists just because you don't like the results is rather silly. It was economists who came up with the idea in the first place, so all you are doing is picking and choosing who you like to believe. It was not Marx who came up with that theory, but actually Adam Smith. Marx was just taking Smith's ideas to their natural conclusion. Adam Smith was trying to solve the Water/Diamond paradox: why is it that water is so important and useful to our lives but so cheap, and diamonds so non-essential but so expensive? Adam Smith thought the reason was that the price is determined by the amount of labor that goes into producing something. Hence Saffron, which is very labor-intensive to collect, is expensive. This was shown to be false by the Subjective Theory of Value, which shows that the value of something is in its marginal utility, that is to say, the least valuable want that the item is used to satisfy. Additionally, your example does not prove what you think it proves. You actually helped a small minority of people at the expense of everyone else. Instead of lowering your prices and helping out ALL of society by increasing their purchasing power, you instead only helped a tiny minority of people at the expense of everyone else. By lowering prices you would have put your competitors out of business, but instead you actually helped those fat-cats you despise by keeping your prices as high as theirs.
When I said the wealthy make their money from the less wealthy, I just meant that there's no possible way for a business owner to become successful without other people getting involved. Workers are necesarry to manufacture the product and consumers are necesarry to buy the product. You also have to keep a few things in mind. Many of the jobs created by business owners are sent overseas and don't end up benefiting the U.S. much at all, most wealthy people have large amounts of money saved that isn't being circulated to benefit the economy, even with higher tax rates the wealthy will be far wealthier than the average person, and many wealthy people agree that they have too much money. The two wealthiest people in the Untied States, Bill Gates, and Warren Buffet support higher taxes for the rich.
First of all, it's a myth that businesses overseas don't benefit the US. That's like saying that businesses in California don't benefit people in New York. It's the division of labor that makes our society so wealthy. Some people are carpenters, others doctors, others accountants etc. We all produce different products and services and then trade on the market. Whether you're trading with someone down the street or across the world, it's beneficial to you and everyone else because specialization increases productivity and overall wealth. Second, money being circulated doesn't matter to the economy. Money is just a placeholder for the wealth that is produced and exchanged. If money is taken out of circulation, the goods and services it represents aren't taken out of circulation, they just trade at an adjusted price. Third, I already addressed this concept of the wealthy having "too much money." Your reassertion of that line does not rebut my points and they still stand. Fourth, I don't care what Gates and Buffet say. They can write a check to the government if they want to donate more. Obviously they don't, so you really shouldn't care what they say either.
You're some random guy on the internet using a personal anecdote (that cannot be verified) as an argument, and you\re calling someone else an idiot. You're embarrassing yourself. Post the financial statements, if still available, so we can actually analyze the quality of this business.
I would argue that if the value of your assets goes up you have reviewed the proceeds. As a simplistic example if the value of your house goes up lenders recognize that you are more wealthy and will be willing to lend you more money.
For purposes of income taxes? That makes no sense. You receive no "income" until you sell the property and receive the proceeds. On the other hand, property values are regularly re-assessed and property taxes adjusted based on their new valuations already.
Blacks law dictionary defines it as such, though tax law is not so broad: "INCOME: The return in money from one’s business, labor, or capital invested; gains,profit, or private revenue." Based upon the current definition of 'Income', you cannot assess income tax on appreciation of assets until those assets are liquidated and the proceeds taken, as I have said. But that is precicely what property taxes already do. If you are to consider appreciation of assets to be income, then you will have to give up assessing property taxes. What you seem to be proposing is a "wealth tax"; for one's net worth to be assessed each year, and taxes imposed based on that assessment.
My personal friends range from $10/hour workers to $500 million wealth. Each one of them approach the economy differently from hourly work to business owner to investor to professional work, etc. All of them have different personal interests, different capabilities, different potential, different perceived needs. The key word in all of this is 'different'...we are all different and therefore the decisions we make and how we lead our life and where we place our emphasis, etc. will vary. Logically, for those ONLY concerned with income and wealth, some will earn $10/hour while others earn $500 million. It is not practical or possible or even good for all of my friends to have the same incomes and wealth! Politicians and idiots want to redistribute wealth through government taxation! This is like saying me and my friends should gather once each year, and the wealthier ones should give their wealth to the poorer ones until all of us have the same wealth? Similarly, it's like all the wealthier ones forking over some of their wealth to all the friends in the bottom wealth quintile? Except when the government is involved, the wealthier ones fork over more money to government, then government takes a huge portion of this money for other endeavors, then government provides a few dollars to the poorer people. This is precisely why giving more money to government has never solved the poor versus rich perception! There are reasons why some are wealthy and why some are poor and only the idiots will ignore these reasons! Those who desire more need to observe those who have more and make different decisions in life how to achieve more...it is this simple! Instead of all the poor-me whining, why isn't anyone on a diatribe about the federal government spending $4 trillion per year?! Why isn't anyone looking at the spending trends in federal government on programs which directly benefit those in need versus all other government spending? What percentage of the poor-me are voting in every election to force change?
