As you know, fairness is a concept that was invented so that children and idiots could participate in arguments. I was reminded of this when thinking about taxes. According to one source, the people in the top 1% of incomes pay more federal taxes now than at any time since 1979:


The reason the top 1% are paying more taxes is because they are earning far more money than before. So while the rich are paying a lower percentage than during Clinton's time in office, they are paying more in dollars under Bush.

In other words, each rich person is subsidizing more poor people than ever. Still, each rich person has more left over for himself than ever. If you are on the side that says that isn't fair, what percent of a rich person's income do you think should be distributed by threat of force to those in need?




Keep in mind that a person making ten million a year can get by on one million a year. So is there any good reason not to take 90%? Think about all the people it would help.

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0 Rank Up Rank Down
Jul 10, 2008
Fair taxes assumes there is actually a way to accomplish it.

My favorite is a flat number such as 10% and absolutely no deductions would apply to this.
A regressive tax, with deductions added for this and that are aimed at allowing income to drift around any kind of rational taxing method. The regressive tax rate is supposed to attack higher income levels, but the deductions/exemptions worked directly against that idea. The result is the higher income levels tend to be able to afford more tax help/professional tax consultants, resulting in paying less tax. Unfortunately going to a simple tax method would eliminate an industry that now thrives on the confusion which congress has created.
+3 Rank Up Rank Down
Jul 10, 2008
Same issue here in Canada. Government plays the role of Robin Hood. Damn socialism. I don't believe in mandatory charity myself. Abolish income tax. Consumption tax is the way to go.
Jul 10, 2008
There's a simple answer to Scott's question - If I have what it takes to make lots of money, whether through funny comics, selling flat-pack furniture or software, then I earned my salary. I worked for it and through intelligence/luck/other people's stupidity I made the money. Other people didn't so they do not _deserve_, or have a right to, a single cent of it.

If I am the type to be generous (Bill Gates anyone?), I can plough some/all of my money into charitable causes and I may even want to choose who or what should get the money I distribute. Starving people? Homeless? Stressed out dogs? It's my choice.

If a person, on the other hand, is not intelligent/lucky enough to make enough money to survive, that's God's way of telling you that you're surplus to requirements.
Jul 10, 2008
Jul 10, 2008
Comment from 'it's Dave': "The great tragedy in the brain of Scott Adams -- indeed, in all far-lefties "
Scott? Far-lefty? WTF?
Jul 10, 2008
A lot of REALLY wealthy people with a whole lot of assets can sidestep a lot of the income tax anyway. It just gets dumped on middle and upper middle class people; people with income checks rather than assets.

Here's a question; why would rich politicians tax themselves?
Jul 10, 2008
Deal only in cash or kind. Dump the banks. Dump the plastics and paper currency. One person one family at a time. 90% of the population can do this as their total life's earnings don't fit into a wardrobe.

So stop getting herded. Its not safer. You have always known it. Convert to cash or kind.

You can't get taxed if you are not in the books. Its not a right of the government. Let the government beg for money as it must by definition. Send the smart asses back to Harvard.

Turn the logic on its head. Let 10% of the super rich run on its own gas and government.

We deal in cash. Period.
Jul 9, 2008
We let people make enough money to make capitalism work. Scott's drive to make money is a perfect example of how this works. He gets to be rich, and we get Dilbert strips and blog posts, and some of his money gets taxed, and everyone is happy. But a high tax rate isn't necessarily bad. Doesn't Sweden have something like 95%? They have state-subsidized just about everything. I personally don't care whether I pay for something (like healthcare) out of my pocket or the government takes my money and then buys it for me, as long as it gets done.
-2 Rank Up Rank Down
Jul 9, 2008
Look at it this way. A rich person takes what is left of their earnings - and invests in companies, or secures the national debt, or runs a business. The part he loses to taxes gets spent by the government. The US Government is notorious for wasting more than half the money collected. That is, maybe $0.40 of each dollar gets spent, the other $0.60 funds the bureaucracies that administer programs, audit programs, or report on program waste.

Taxed dollars feed some people. Untaxed income creates jobs. Which create more income, shopping, etc. Increasing tax collection does *not* seem more effective to me.

When Republican President Ronald Reagan pushed through his economic plan, to counter Democratic President Carter's runaway double digit inflation - he cut taxes. Criticized at the time as 'voodoo economics', his trickle down theory worked for decades, right up until Clinton began dismantling the Reagan plan a the end of his Presidency, to repay political debts.

President Bush's tax cuts staved off worse economic performance. Congress' 'economic stimulus' pissed away a chunk of additional national debt (thereby increasing the portion of the economy consumed in servicing the National Debt.

In a real sense, the smartest thing to do would be to tax anyone that isn't an employer or corporation. Companies don't pay taxes, they collect them - costing the economy. Employers provide jobs. That would be where an economic stimulus might help something. Do tax stock dividends, etc., just not the company itself. A lower overall tax rate might well generate more tax revenue.
+10 Rank Up Rank Down
Jul 9, 2008
Just to give you the Indian experience....

A few decades ago, India's peak income tax rate was 90%. Add to that some wealth tax and there were people who's effective rate of taxation was over 100%.
The effect:
a) killed all initiative and enterprise in the economy
b) created a vibrant thriving black market in currency.

For decades since the fifties to the nineties, India languished with a GDP growth of 2 to 2.5, known derisively as the Hindu rate of growth.

Since the mid-nineties, taxation rates have come down to a peak rate of 30%. The government is collecting more money in tax than it ever did before, and GDP rates are above 8%.

The fastest way (or maybe not the fastest, but the surest) to kill an economy is to have a 90% rate of taxation.
Jul 9, 2008
First think about HOW each rich person got richer under Bush than Clinton (or really, how they got so rich at all) -- more and more people working minimum wage, and more jobs being shipped overseas.

Now how much is fair to take?
+3 Rank Up Rank Down
Jul 9, 2008
Why should my contribution to society be based on how much I earn? I believe that what I make is between my employer and me. It's no business to anyone else, including the government.

Why can't "fair" be defined based on consumption? How about the more you spend, the more you pay? Wouldn't this also tax the "undocumented workers" dwelling in our great nation who are currently dodging income taxes? Wouldn't the rich still pay far more (a 10% sales tax on a $3 million home is far more than 10% on $100,000)?

As a bonus, people would actually have an incentive to save money - it's tax free right up until you spend it!

Funding our government doesn't have to be tied to income, it's just that it always has been.

To set the record straight, the income tax was instituted to pay for the Civil War, not to fund the duties of Congress (or whatever some other commenter said). The constitutionality of the income tax was not made clear until Congress decided to amend the Constitution with the 16th amendment.
+10 Rank Up Rank Down
Jul 9, 2008
The following is something I was emailed - it deals with tax cuts, but at the heart of it is "fairness"...

Tax Cuts - A Simple Lesson In Economics

This is how the cookie crumbles. Please read it carefully. Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh $7.
The eighth $12.
The ninth $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20."

So, now dinner for the ten only cost $80. The group still wanted to pay their bill the way we pay our taxes.

So, the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his 'fair share'?

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being 'PAID' to eat their meal.

So, the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
The fifth man, like the first four, now paid nothing (100%savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now paid $5 instead of $7 (28% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man "but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than me!"

"That's true!!" shouted the seventh man. "Why should he get $10 back when I got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!" The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. There are lots of good restaurants in Europe and the Caribbean.
+7 Rank Up Rank Down
Jul 9, 2008
Wow, Scott, you bait a tasty hook. Look at all the suckers on the line.

For those of you who don't understand how much we should tax the rich, please look up the economic theory of deadweight loss.

If you want to understand fat CEO salaries, look up the tournament theory in economics.

The fairest tax of all is the one that tries to "legislate" the least. Whenever preference is shown in tax law to one group over another with substantially equal incomes, the tax becomes more unfair. A flat tax hits harder on people at the bottom of the income range, since each dollar of income is more precious for purchasing basic life necessities. There is nothing inherently unfair about a progressive tax. The lawmakers just need to be smart enough to stay away taxing above the deadweight loss range for the topmost earners.

The current U.S tax code is incredibly unfair due to legislative meddling to show favor to pet groups. It is also stupid in the taxation rates on business and long term investments. If you want to see the U.S. economy turn into a tiger like the world has never seen, drop the corporate tax rate so low that it can be paid out of petty cash. Drop all taxes on long term capital gains too why you are at it.

To prevent these low-taxed corporations from becoming personal cash cows to the well-connected few, add the market values of all perks and benefits to the individual's pay statement. Everyone should then be taxed with a smoothly progressive tax rate that includes no deductions. Imagine how hard our congress will have to work to curry the ordinary citizen's favor when it no longer has the keys to the tax treasure chest to entice the bigwig's favors. That should raise their approval rating above single digits.
Jul 9, 2008
Blast. I know it's a flame-bait blog entry , but I still have to comment. Blast.

Apart from all the good arguments about removing incentives, there are a number of good reasons that everyone can agree on to not tax at 90%.

1. People will leave. Lots of people in your target demographic will change jurisdictions to a less punitive location. Even with the Draconian US laws, which tax US citizens on all their world-wide income, where ever they live. If you are aggressive enough, rich people will renounce their citizenship and move.

2. "Profit" per taxable dollar will drop. As the rates go up voluntary compliance goes down, meaning either a larger black market or increased compliance costs. Probably both.

3. Incomes will go down. People will find other ways to get satisfaction. Personal incomes will decrease as they transfer their earning power to produce other results than increased personal wealth. Perhaps this would benefit the poor, maybe not.

4. Tax avoidance (and evasion, but I already listed that) will become even more popular. The more money that the government takes the more money people will be willing to spend to stop them. One of the ironies of high taxation is the amount of intellectual horsepower that is essentially wasted avoiding it. Those people could be doing something productive.

5. Special interest groups will try to make the government treat things in tax-beneficial ways. Oh, that happens anyway, but the stakes will be higher.

6. It is likely this will result in lower GDP growth, which reduces the size of the pie, which makes the whole thing less effective.

The bottom line is you can't just keep increasing tax rates and get more. It is an inelastic system, and at some point returns go down. So even if you'd like to tax the rich at 90% and solve all your problems, you just can't. Sadly I heard a rumour that one of the US Presidential candidates would like to tax the rich more, even if that meant less Federal money, just because that would be "fairer". Only for tax lawyers. :-)

Stupid flame bait post.
+2 Rank Up Rank Down
Jul 9, 2008
I'm as liberal as they come, though I'm not against the way republicans handle money just for the sake of being against it. However, as said liberal, there is a point where maybe you're taxing the rich too much. On top of the principle of fairness (it really sucks when your 10 million becomes just a million, and trying so strongly to democratize money is like communism), there's also the fact that there is nothing that stops these rich guys from moving to another country where they can avoid paying American taxes.

It is like this: taxes should be used as a mechanism to fund important government activities, not to try to equalize the economic strata. As soon as taking money away is used to redefine the classes, that economy will fail. I speak of course not as an economist.

Instead, you need to go after the cause, not the effect. The way it works (again, I'm not an expert) is that the closer you are to oil or war industry, or said another way, the more evil (or, said another way, ruthless) you are as a company, the higher your profits. The whole dynamic will change when the next president takes office, but those who aren't ruthless by accident will find a way to take advantage of how the new game is defined.
Jul 9, 2008
Exactly, and I mean Exactly the same percentage every other tax payer pays. If you make more money then you deserve to posses more money. It is however slightly unfair if the man with a million dollars easily pays the same tax that a poor man must struggle on the burden of (the situation a flat tax would bring) but the method of fixing this is the percentage system. The rich pay more because they have more, but they shouldn't have to pay more of a percentage than any other man. That would be discrimination.
Jul 9, 2008
Scott, I think the government is already taking too much of your money - money that could be spent improving the user experience of this site. (You never get tired of hearing these comments, do you?)

The "fair" term is being used politically to get votes. I think we'd be better off taking income taxes out of the equation (http://fairtax.org). Of course, I don't know what the candidates would then do to differentiate themselves. You'll also recall from your economics background that you can change behavior through taxes and subsidies. Just what types of behaviors will be encouraged and discouraged through raising taxes on the high earners?

To share my own experience, I decided to "retire" 2 years ago to take care of my newborn son. My wife has better earning potential (it's good to marry up), and we figured I was only going to "net" about 20% of my income after expenses (federal income tax, state income tax, local income tax, property tax, day care, auto, etc). It's kind of demoralizing to put in long hours for that kind of return. I am enjoying my full time job as a parent, and while we could use that extra $15K, it's not worth it to our family. As you increase the tax burden on the high earners, they may decide to find better use for their time and talents.

Now let me get back to reading "Atlas Shrugged."
+2 Rank Up Rank Down
Jul 9, 2008
I had been tax payer of 3 countries at different times.

1) India
2) USA
3) Hong Kong (SAR - China)

Hong kong is by far easiest and best tax mechanism i could see.
It goes in one line - total income erned by sources in hk for which no taxes paid abroad - dependent cut - housing loan cut and pay amazingly low taxes on entire income. No shortcuts no tricks. Almost everyone will come up with same figire.

Rich do not pay far too much tax either.. however when they use there money they end up paying taxes you buy lomber... you pay bigger amount on it. Transport is good but not subsidized. Basically no free stuff....you pay for what you spend. put in bank you don't make much of interest.

India: Take average amount from everyones pocket and spend it on beurocracy and try to make poor people happy since each one has same weightage on vote...sometimes waste money in doing so...
companies cut taxes directly at income and doing retrun is easy and cheap besides i do not think anyone care much about it unless you are celibrity or rich and famous..

USA I thought was most complicated tax system. You just can't do a math on the fly for farely complex income and every other tax guy will come up with new number.. separate state taxes screw thing even more. if you stay in more than one state in an year then you have to do lotsa mumbo jumbo.

B y the way if 90% in scotts math would make USA a china..poverty makes people think crazy things..I thought US was still going strong...
0 Rank Up Rank Down
Jul 9, 2008
I am constantly in awe of the liberals and their ability to bypass the Golden Goose story and revert to Robin Hood for their solutions. Why not just let people earning below $300,000 come into wealthy people's homes and take 90% of their possessions every year. That would allow re-distribution of the wealth. We would see how long "wealthy" people would purchase things. We would see the multiplier impact in reverse. And it's doubtful in year 2 there's as much trick-or-treat available for redistribution. In France, they have a wealth tax and a very high marginal rate (57%). So Geneva and Monte Carlo can attribute their success to these brilliant high-marginal taxes.

The focus should be on making the pie bigger, and making sure the ground rules are fair so that anyone can get rich. An example would be stock options for everyone in a company. Monitored so that abuse doesn't happen, but done to provide wealth creation for everyone. Figuring out ways to split the same size pie into more slices is not the right game plan. But unless you let the people building the new pies keep a healthy share, it's doubtful they will take the initiative.
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