Top Republican Tax Writer Chooses A Bigger Deficit Over Tax Increases For The Rich

[Obama 2012 1,714]

Let us not pretend that any tax rate cut results in higher tax recipts or vice versa. If either was true, we'd maxime recipts with either a 0% rate or a 100% rate. Obviously, neither is the case. There is a rate at which tax receipts are maximized - that's the equilibrium. If you're north of that equilibrium, then lowering the rate towards the equilibrium will raise tax receipts. If you're south of it, then lowering the rate will result in lower receipts while raising it will result in higher receipts. It's not a horribly hard concept to grasp. The question is where the current tax rates are. I'd argue that 15% is likely on the south side of the equilibrium. Consider that capital gains tax receipts in 2007 (the all time peak of the stock market) were lower than they were in 2000 (a previous peak of the stock market. The difference? The capital gains tax rate which was at 20% in 2000 but at only 15% in 2007. Odd, ain't it?

Well, it's irresponsible also to pretend that taxes alone control the market. There are several factors that go along with that, especially when your economy is played on a global scale.

One has to question the lowering of the capital gaines tax in 1996 I think it was when the economy was on the rise. It was lowered to 20% from 28%. Investments weren't slowing, so why did Clinton agree to lower the tax rate? We'll never know whether that helped receipts to increase or if the market would have dropped out without that decrease in the rate.

Now the 2003 lowering of the tax rate proved to be a beneficial one as the market stirred immediately after and grew up until the burst thanks to the derivatives market. One wonders where we'd be today if Brooksley Born had gotten her way and people like Henry Paulson and Alan Greenspan hadn't put a stop to her and wanting to regulate that part of the market.

There has never been a decrease in receipts after the lowering of the tax. Revenues have always gone up for a couple of years after the fact. The question is the timing of raisig and lowering of the tax and the effects it may or may not have. We've seen that growth in receipts happens when lowering it in recent history. We have no idea in modern time what would happen if we were to increase the tax.

[slim 1,525]

Warren Buffet, for example, pays taxes at an effective rate of 17% rather than near 35% despite taking home tens of millions of dollars in income annually.

Why should anyone give the government more money than someone else?

Saying the rich should pay more taxes is sooo lame, its like a kid wanting his parents to buy everything. If anything we should be withholding MORE from the people on the public dole, since they are the burden.

It's my personal opinion that there should be no public dole at all. I'd be willing to bet if the "rich" were able to use their money the way they saw fit they'd create opportunity for those in need and/or donate a bunch of it to help those who truly needed help.

Personally, I want to see Governments demonstrate discipline in cutting budgets first before I agree to tax hikes.

If my wife went to the mall every weekend and came home broke I wouldn't solve the problem by giving her more money every week.

Suppose you have a family of 4 and make 50K/year.

Why would you have two kids if you only bring in 50K/year?

That's part of the problem in America. People think they have the right to have kids even if they can't afford to take care of them. It's not my job to take care of poeples' kids.

You pay no income taxes, for sure. But you pay FICA = 4K. Property taxes: 2K. Health insurance: 15K. So, there you pay 21K or 42% of your income for just these three items. Add 7% sales tax on your remaining 29K to the mix (another 2K) and all of a sudden, 45% is a good deal. And that says nothing about other fees and co-pays you still owe.

Are property taxes federal? Is sales tax federal?

Is health insurance even necessary? There are a bunch of things that can be done to better budget any family's income and the federal government should have no part in that.

[mawilson 2,133]

Well, we can argue hypotheticals. The fact remains, though, that large swaths of income on the upper end comes from sources that aren't subject to the 35% marginal rate. This is why Warren Buffet, for example, pays taxes at an effective rate of 17% rather than near 35% despite taking home tens of millions of dollars in income annually. Don't pretend you don't know that.

I do, but we are talking about *income* taxes, not capital gains and other taxes subject to a lower rate.

[Mr. Big Dog 10,747]

Are property taxes federal? Is sales tax federal?

Is health insurance even necessary? There are a bunch of things that can be done to better budget any family's income and the federal government should have no part in that.

The tax rates quoted for Denmark are combined rates for various levels of government and for several services covered publicly in that country. The point of my post was not to debate the wisdom of large public sectors but to put into perspective the cost of that public sector vs the services it offers. It's dishonest to complain about a 45% tax rate while ignoring the simple truth that you pay more here for the very same services. Not in taxes but you pay for it all the same.

As for the 50K family, I didn't make that up. It may be tough to swallow but the reality is that this figure represents the median household income in this country - i.e. half of the households make more and half makes less. According to you, half of the country shouldn't have any kids. Good to know.

[Mr. Big Dog 10,747]

I do, but we are talking about *income* taxes, not capital gains and other taxes subject to a lower rate.

So we want to pretend just for the argument's sake that those in the upper income brackets don't make a significant chunk of their income from capital gains and dividends which are taxed at lower rates? What's the value of the argument if it doesn't start with a premise that based on reality?

[mawilson 2,133]

Suppose you have a family of 4 and make 50K/year. You pay no income taxes, for sure. But you pay FICA = 4K. Property taxes: 2K. Health insurance: 15K. So, there you pay 21K or 42% of your income for just these three items. Add 7% sales tax on your remaining 29K to the mix (another 2K) and all of a sudden, 45% is a good deal. And that says nothing about other fees and co-pays you still owe.

Not really. It's not like Danes don't pay other taxes, like property taxes (0.5-2.5% depending on location) or VAT (25%).

[mawilson 2,133]

So we want to pretend just for the argument's sake that those in the upper income brackets don't make a significant chunk of their income from capital gains and dividends which are taxed at lower rates? What's the value of the argument if it doesn't start with a premise that based on reality?

Capital gains taxes are lower in Denmark as well.

"Share dividends and realized capital gains on shares are charged 28% to individuals of

gains up to DKK 48,300 (2011-level, adjusted annually), and at 42% of gains above that.

Carryforward of realized losses on shares is allowed."

Source: http://www.skat.dk/SKAT.aspx?oId=1549830

[Ban Hammer 13,352]

Not really. It's not like Danes don't pay other taxes, like property taxes (0.5-2.5% depending on location) or VAT (25%).

i wonder what the tax is on a gallon of gas there......

[Mr. Big Dog 10,747]

Not really. It's not like Danes don't pay other taxes, like property taxes (0.5-2.5% depending on location) or VAT (25%).

True, but the Danes at the equivalent income level of $50K US do not pay 45% in income taxes either. In fact, I just did a quick calculation and found that a Dane making DKK 375K will owe DKK 133K in income taxes which includes municipality, UI, Health Insurance, etc. That's a bit over a third of the income but not even close to 45%. And it's an income twice the median - equivalent to $100K here. If you take a median income, the tax rate stands at about 25%. As I showed earlier, to have the same benefits that your average Joe in Denmark has, you'd be looking at a much bigger bite out your paycheck.

[slim 1,525]

The tax rates quoted for Denmark

I could care less about the rest of the world's tax rates. They mean absolutely zero to me.

The point of my post was not to debate the wisdom of large public sectors

There is no wisdom in large public sectors.

but to put into perspective the cost of that public sector vs the services it offers.

Let's do just that.

You have entire groups of people who pay ZERO money to the federal government each year then groups of folks who pay a few thousand bucks. Meanwhile, you have a few folks who pay, literally, millions of dollars a year. Please, please, please try to put that into perspective for me.

It's dishonest to complain about a 45% tax rate while ignoring the simple truth that you pay more here for the very same services. Not in taxes but you pay for it all the same.

It's dishonest to take money from people at a disproportionate rate.

And paying for services isn't straight across the board either. Some Americans pay nothing at all their whole lives. Others pay millions and millions of dollars. The folks in the middle pay pennies on the dollar for their services.

And it's not like everyone uses, needs or wants all the services they're required to pay for.

As for the 50K family, I didn't make that up. It may be tough to swallow but the reality is that this figure represents the median household income in this country - i.e. half of the households make more and half makes less. According to you, half of the country shouldn't have any kids. Good to know.

Probably more than half the country shouldn't have kids. If you can't afford to take care of your kids... stop reproducing. Pretty simple, really. But, then again, I don't expect them to be able to understand that concept since congress can't understand it either.

[B_J 2,752]

Probably more than half the country shouldn't have kids. If you can't afford to take care of your kids... stop reproducing. Pretty simple, really. But, then again, I don't expect them to be able to understand that concept since congress can't understand it either.

I work with a person who makes the same as me (around 50K) and he has, I think, 5 kids. I made the mistake of having this conversation with him before I knew how many kids he had. I voiced my opinion about people having kids they can't afford; and he told me of his situation and that I was wrong because "children are a blessing". My response was that I don't want to have to pay for his blessing.

We don't talk very much any more.

[Mr. Big Dog 10,747]

I could care less about the rest of the world's tax rates. They mean absolutely zero to me.

Okay, then why are you arguing about it? Leave it alone as an item of non-interest to you. You may have missed it but it wasn't me that brought Denmark into the debate. All I'm saying is that tax rates - either here or there - do not exist in a vacuum. I can sit here and talk about lower taxes in the US all I want when, in turn, basic necessities cost an arm and a leg where that doesn't need to be the case. I know that as a true American, you cannot fathom that many things we produce in the least efficient and least desirable way could be had at the same or better overall quality at a faction of the cost. Your inability to see and realize that doesn't take away from that reality, however.

[웃 910]

and don't pretend that the government doesn't make more money on capital gains taxes when that tax rate is lowered, not raised. So you can play the warren buffet game all you want, but at the end of the day he and you are free to send an extra check to the IRS each year if you wish to help pay down the debt.

This chart strongly disagrees with you:

[Obama 2012 1,714]

This chart strongly disagrees with you:

dude, you might want to re-check what chart you are using.

It has nothing to do with what's being talked about here....

this one does however....

Edited June 28, 2011 by DJ Kyo

[웃 910]

dude, you might want to re-check what chart you are using.

It has nothing to do with what's being talked about here....

this one does however....

And you might want to check what happened during those up and down points? Off the top of my head Clinton tripled stock market prices in his time in office. So obviously 1995 to 2000 you are having massive amounts of cap gains (because gains happen when stock markets are booming).

2000 was the dot com bubble.

And I'd just have to take a wild guess here but from 2007 to 2009 you will probably see an incredible crash if the chart was extended....There is more of a correlation between stock market going up and cap gains receipts up than stock market going up because of a tax decrease. Don't you think?

Edited June 28, 2011 by Lord Infamous