Too Reliant On The Few?

[Arkolon]

With the way the British economy (doesn't) work due to decades of slash and burn economic policy, money is increasingly concentrated in the hands of the few, geographically concentrated in London and structurally in the finance sector. With a concentrated distribution of wealth, the "burden" of financing the services that it's politically unacceptable to abolish will naturally fall increasingly on those at the top.

So this is all some lizardman conspiracy-plan to make everyone in the London commuter belt richer than anyone who lives to the north of Lincolnshire, yet Westminster still taxes these people the most?

[Arkolon]

35 years ago was closer to the 80s than to the rest of the 70s, and the 80s were a time when income inequality grew at a much faster rate than before. In 1979, the Gini index in the US was around 0.36, but sure.

Thank you for helping to prove my point.

Doesn't really put me off-balance, though. It's a fuddled statistic, sure, but it's there and it proves a point.

[The Liberated Territories]

Fun fact: the state of New Hampshire has no income or sales tax. Not only that, but it is one of the wealthiest states in the States.

No wonder it's often known for it's high amount of libertarians.

[Avenio]

Doesn't really put me off-balance, though.

Sure it does. Kind of hard to make the point that the rich are being victimized by taxation when their incomes are climbing several times faster than the rate of taxation does.

It's a fuddled statistic, sure, but it's there and it proves a point.

Quite so. That point being that the rich are not at all being inconvenienced by using their vastly disproportionate wealth to conduct public work.

[Galloism]

A zero percent tax rate would leave us without courts, military, police, fire, safe food, medical care for the elderly and poor, unemployment benefits, and all the other things necessary for our first world economy to thrive.

Calling a 0% tax rate "ideal" must mean you are from a universe totally different from ours where there's no such thing as an externiality.

Guess what? We had courts, police, and military years before the income tax. Try again.

That's true. We financed the Fed with tariffs.

Which we can no longer do. Because we signed a treaty.

[The Liberated Territories]

You know, if those Libertarian Islands for the Super-Rich ever become a thing, they could really collapse multiple economies, judging by these numbers.

I don't believe we are overly reliant on the top levels of wealth, since we are still able to get away with having such massive amounts of our budgets reliant on the top 1% without major repercussions. Until said repercussions appear (IF they appear), then that's when we cut back - but for now the benefits of high taxation of the top percentages of wealth far outweigh the drawbacks.

Even with half the world having tariffs?

[Galloism]

Fun fact: the state of New Hampshire has no income or sales tax. Not only that, but it is one of the wealthiest states in the States.

No wonder it's often known for it's high amount of libertarians.

It has extremely high real estate taxes, though.

[The Liberated Territories]

Fun fact: the state of New Hampshire has no income or sales tax. Not only that, but it is one of the wealthiest states in the States.

No wonder it's often known for it's high amount of libertarians.

It has extremely high real estate taxes, though.

Except overall it has a lower tax burden then most of the states, even with the high property tax to compensate.

Plus I live in New Jersey. It would still be less then mine.

[Insaeldor]

If we're talking taxes here I'll give my opinion at least as far as the US goes. Obvious taxes are a needed thing as per (my understanding) the social contract. I personally don't mind chipping in a little more in order to help find services that I find convenient and helpful. On the other hand that's not always the case and typically taxes get put into bull shit that doesn't go anywhere so my idea is not that we need fewer taxes but we need to better manage how taxes are used. As for the progressive tax I believe that the good out weights the bad in this case but I do think some taxes (income tax and Corpret tax) should be lowered in order to encourage consumer confidence and to encourage businesses to stay and grow within the US and that we should try to supplement the reduction in income with more use of natural resources such as making it cheaper and easier for companies to drill for oil (within reason obviously) and to invest in other such things to help bring in more income to the government. Just my though I'm no economic genius or anything but it's just what I think might work as seen through observation.

[Insaeldor]

It has extremely high real estate taxes, though.

Except overall it has a lower tax burden then most of the states, even with the high property tax to compensate.

Plus I live in New Jersey. It would still be less then mine.

I don't know the whole tax cut thing done by Brownback here in Kansas hasn't worked all that well. We have a pretty stagnant and unproductive.

[Avenio]

Fun fact: the state of New Hampshire has no income or sales tax. Not only that, but it is one of the wealthiest states in the States.

Who would have thought that a tax haven would attract people interested in squirrelling away their wealth?

[Dumb Ideologies]

With the way the British economy (doesn't) work due to decades of slash and burn economic policy, money is increasingly concentrated in the hands of the few, geographically concentrated in London and structurally in the finance sector. With a concentrated distribution of wealth, the "burden" of financing the services that it's politically unacceptable to abolish will naturally fall increasingly on those at the top.

So this is all some lizardman conspiracy-plan to make everyone in the London commuter belt richer than anyone who lives to the north of Lincolnshire, yet Westminster still taxes these people the most?

I don't recall saying anything about lizards or a conspiracy, but I suppose if facile strawmen are the level of debate you're going to work at I'm sure someone can photoshop together a picture of you teabagging some proles while cannon-firing people who can't afford treatment out of hospital straight into debtors prison.

[The Liberated Territories]

If we're talking taxes here I'll give my opinion at least as far as the US goes. Obvious taxes are a needed thing as per (my understanding) the social contract. I personally don't mind chipping in a little more in order to help find services that I find convenient and helpful. On the other hand that's not always the case and typically taxes get put into bull shit that doesn't go anywhere so my idea is not that we need fewer taxes but we need to better manage how taxes are used. As for the progressive tax I believe that the good out weights the bad in this case but I do think some taxes (income tax and Corpret tax) should be lowered in order to encourage consumer confidence and to encourage businesses to stay and grow within the US and that we should try to supplement the reduction in income with more use of natural resources such as making it cheaper and easier for companies to drill for oil (within reason obviously) and to invest in other such things to help bring in more income to the government. Just my though I'm no economic genius or anything but it's just what I think might work as seen through observation.

First off, the social contract is a terrible defense of taxation, and if you really want to defend the latter, use the typical utilitarian defense.

Otherwise yes, corporate taxes are perhaps the most damaging taxes to the economy. Ideally, I'd have corporate taxes at 5%-10%, and allow for property) deductions based on annual profit and current property tax levels in that area.. What would really benefit the US is instead of going after tax havens and laying down the law there (while overextending our reach based on bs residency laws), we should instead help the economy kick back by encouraging investment back here, on American soil. Taxes wouldn't even have to be increased in other areas to compensate.

[The Liberated Territories]

Except overall it has a lower tax burden then most of the states, even with the high property tax to compensate.

Plus I live in New Jersey. It would still be less then mine.

I don't know the whole tax cut thing done by Brownback here in Kansas hasn't worked all that well. We have a pretty stagnant and unproductive.

Nah, that's because you are in #Kansas.

[Arkolon]

A bracket where anyone making under a certain amount with a tax rate of 0% makes the tax system functionally progressive, even if everyone above that mark is taxed at the same, flat rate. Some sort of NIT/expanded EITC would also be an apt substitute to an exponentially-progressive tax system.

It's insufficient to maintain our needs.

Not if it's big enough. Try a $27,500 threshold with a 65% rebate rate. If you make $15,000 a year, your effective income would be $23,125, and if you are unemployed your effective income would be $17,875. Not enough to live comfortably, but surely enough for the bare necessities.

Wouldn't a VAT on luxuries be a better alternative, then, too? Someone making $35,000 would spend, say, about $12,000 on rent, $10,000 on necessities and the rest on affordable luxuries: the $13,000 with a 30% VAT would correspond to be a functional 11% tax on income, which is somewhat acceptable, no?

No, because not all disposable income is spent on luxuries. Some is used to create more disposable income. Which then is then used to create more disposable income. This is not a bad thing. However, without an income tax, this is a tax free wealth collection.

I didn't say all disposable income is spent on luxuries. In fact, I only estimated that about 37% of disposable income was used on luxuries. The rest was all consumed without a dime used up as tax.

Many luxuries are also purchased internationally. For instance, if I make a million dollars and buy a mansion in Aruba, I effectively bought a huge luxury tax free.

If you make a million dollars and put it all in Aruba, your money will be in Aruba, never mind what the tax rate in the US is. Tax havens will always be a problem if you're trying to make your state resemble the all-encompassing welfare state, but if you can't beat them, join them. Ireland is ideal for big American corporations because they pay a 12.5% tax over there compared to the US's +/- 35% tax. If the US set its tax rate to, say, 12% or 11%, do you think corporate tax inversions and first-class plane trips to Dublin would be as big a problem to the US budget as they are today? Of course not; the problem would be totally eliminated, and would bring countries around the world into the US as well. Not one single serious economist will ever even pretend that taxing for the sake of taxing is good for anyone.

[Atlanticatia]

Well, a few things need to be considered. Each country will be able to have a differently sized tax base. Some countries will be able to rely on the wealthy more than others.

We have to consider how wealthy the top income earners are.
In the United States, there's so much income at the top that we have the ability to balance our income tax base more heavily on the wealthy. However, we are beginning to approach a plateau here where it'll be harder to raise more income tax revenues without raising rates/lowering top rate thresholds or broadening the tax base.
The 39.6% top tax rate in the US only encompasses the top 1%. 99% of the population is paying taxes at marginal rates below 33%.

However, we must remember social security taxes. The 6.2% social security tax (12.4% if you include employer contributions) is paid on all incomes - no tax free threshold - up to about $100k. So it's a regressive tax, because your effective tax rate decreases as income increases.
The individual income tax brings in about $1.39 trillion, while the social security tax brings in about $630bn. If you include social security/medicare tax rates for a single person, total income tax rates almost become something like this (the income tax rates w/out social security are in parenthesis):

(10) 17.65% $0 – $8,925
(15) 22.65% $8,926 – $36,250
(25) 32.65% $36,251 – $87,850
(28) 35.65% $87,851 – $183,250
(33) 34.45% $183,251 – $398,350
(35) 36.45% $398,351 – $400,000
(39.6) 41.05% $400,001+

So overall, there isn't a lot of progressivity in the overall direct personal taxation. In fact, the tax rate is less for someone earning $183-398k than it is for someone earns $87-183k.

Now, I believe that we need to have a broad tax base, but the income tax should also be progressive.
We should increase the tax-free threshold, and decrease top rate thresholds. We should make overall direct personal taxation more progressive (income tax incl. social security).
However, we also need more indirect taxation, like a value added tax. In the UK, while the first £10k is free from income tax and national insurance, there is a 20% VAT meaning the poor will pay (proportionally).

Making the income tax more progressive and simpler with a larger tax-free threshold, accompanied by a rebalancing of the overall tax base towards indirect taxation (i.e. a 10% VAT) would be a good way to reform the tax system to ensure that things are both progressive and broad based.
We should also begin taxing people individually (rather than, say, married filing jointly) and make top tax rates apply at lower incomes. The income tax should be heaviest on the top 1%, yes, but it should also be spread more throughout the top 20%, with the bottom 20% taken out of paying gross income tax completely.

I think the problem is that we rely too much on the tax system for reducing inequality. Yes, that's part of it, but a lot of tax revenues are needed for a welfare state, and relying solely on 1% of the population and direct taxation won't be able to raise a huge amount of revenues.

[Arkolon]

You know, if those Libertarian Islands for the Super-Rich ever become a thing, they could really collapse multiple economies, judging by these numbers.

I don't believe we are overly reliant on the top levels of wealth, since we are still able to get away with having such massive amounts of our budgets reliant on the top 1% without major repercussions. Until said repercussions appear (IF they appear), then that's when we cut back - but for now the benefits of high taxation of the top percentages of wealth far outweigh the drawbacks.

There have been repercussions: notice how the British budget shrinks when bankers' bonuses do, too. Such a high reliance on the very few makes budgets extremely volatile to what they should be at normal, flatter levels.

[Arkolon]

A 0% income tax. The word "income" seems to be what you're missing, here.

A sales tax or VAT has a higher negative effect on economies than income tax, as it decreases effective purchasing power more directly.

No, it doesn't. Effective taxation remains the same, and if you apply a VAT to only certain products (luxuries, mainly), then the tax system will be progressive. Poor people don't buy as many private jets as rich people do, I'm sure you realise that.

[Atlanticatia]

The US relies far too heavily on direct taxation.

Personal direct taxation should remain as progressive as possible, but we need to ensure that there's more of a balance towards indirect taxation to keep the tax base broad based. It'll be hard to get beyond 20% taxation as a % of GDP without more indirect taxation.
This is why I support a VAT. I want a generous and progressive welfare state, but income taxes on 1% of the population can't finance that alone.

[Arkolon]

Doesn't really put me off-balance, though.

Sure it does. Kind of hard to make the point that the rich are being victimized by taxation when their incomes are climbing several times faster than the rate of taxation does.

That was never the point of the statistic, though. I could tell you now that bankers buy less sports cars than they use to. It's a useless statistic, never mind how true it is (imagine I didn't make it up), and it doesn't necessarily prove any point around it.

It's a fuddled statistic, sure, but it's there and it proves a point.

Quite so. That point being that the rich are not at all being inconvenienced by using their vastly disproportionate wealth to conduct public work.

Wait, what?

You .. did read the OP, right?

[Galloism]

It's insufficient to maintain our needs.

Not if it's big enough. Try a $27,500 threshold with a 65% rebate rate. If you make $15,000 a year, your effective income would be $23,125, and if you are unemployed your effective income would be $17,875. Not enough to live comfortably, but surely enough for the bare necessities.

So, if I'm a married couple with two kids, and each of us make $15,000, and the kids make nothing, household income would be $82,000.

I think that's a higher tax burden than we can really bear. All things in moderation.

No, because not all disposable income is spent on luxuries. Some is used to create more disposable income. Which then is then used to create more disposable income. This is not a bad thing. However, without an income tax, this is a tax free wealth collection.

I didn't say all disposable income is spent on luxuries. In fact, I only estimated that about 37% of disposable income was used on luxuries. The rest was all consumed without a dime used up as tax.

Many luxuries are also purchased internationally. For instance, if I make a million dollars and buy a mansion in Aruba, I effectively bought a huge luxury tax free.

If you make a million dollars and put it all in Aruba, your money will be in Aruba, never mind what the tax rate in the US is. Tax havens will always be a problem if you're trying to make your state resemble the all-encompassing welfare state, but if you can't beat them, join them. Ireland is ideal for big American corporations because they pay a 12.5% tax over there compared to the US's +/- 35% tax. If the US set its tax rate to, say, 12% or 11%, do you think corporate tax inversions and first-class plane trips to Dublin would be as big a problem to the US budget as they are today? Of course not; the problem would be totally eliminated, and would bring countries around the world into the US as well. Not one single serious economist will ever even pretend that taxing for the sake of taxing is good for anyone.

I'm not talking about corporation evasion - I'm talking about personal wealth.

Here's the thing, if the million dollars was made here using the economic systems and protections provided by the United States government, it shouldn't be tax free because I bought my vacation home in Aruba instead. It should be taxed (generally) in the location to which the money was earned, as that's the place that the government protections protected those earnings.

[Arkolon]

Guess what? We had courts, police, and military years before the income tax. Try again.

That's true. We financed the Fed with tariffs.

Which we can no longer do. Because we signed a treaty.

Suddenly, the income tax, which has only been around for about a hundred years, is the only tax that can ever be put into place, ever, and cannot ever, ever, be replaced by any other tax, ever.

[Galloism]

A sales tax or VAT has a higher negative effect on economies than income tax, as it decreases effective purchasing power more directly.

No, it doesn't. Effective taxation remains the same, and if you apply a VAT to only certain products (luxuries, mainly), then the tax system will be progressive. Poor people don't buy as many private jets as rich people do, I'm sure you realise that.

Rich people also buy private jets in other countries that don't have a VAT, and leave them registered there flying that country's flag.

[Arkolon]

So this is all some lizardman conspiracy-plan to make everyone in the London commuter belt richer than anyone who lives to the north of Lincolnshire, yet Westminster still taxes these people the most?

I don't recall saying anything about lizards or a conspiracy, but I suppose if facile strawmen are the level of debate you're going to work at I'm sure someone can photoshop together a picture of you teabagging some proles while cannon-firing people who can't afford treatment out of hospital straight into debtors prison.

I ... would like to see that materialised. Hey, you made me smile, so why not.

[Atlanticatia]

http://www.washingtonpost.com/blogs/won ... have-a-47/

I recommend you all read this article. Progressivity of direct personal taxation is important, but it's not a means to an end. Progressives can support indirect taxation that may be deemed 'regressive'. The ultimate goal is to have the overall system be progressive, and reduce inequality.

But let's face it - the role of tax cannot be just to redistribute income, it has to be to, well, raise revenues.