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If a well-dressed stranger walks up to you at the mall and asks for a dollar, with no reason given, you're unlikely to hand it over. But if the same person asks for a dollar and gives a specific reason, such as "...because my wallet was stolen and I need gas to get home," you're far more likely to hand over your money. (See the book Influence: The Psychology of Persuasion, by Cialdini.)

After the U.S. midterm election, the question of raising taxes on the rich, or allowing the so-called Bush tax breaks for the rich to expire naturally, will be hotly debated. You might think this sort of tax law would easily pass, given that 98% of the voters are not rich.  But it won't work that way. The people who pay the most taxes also have the most control of the government. So in my imaginary role as president, I fantasize about how I could convince the rich to accept higher taxes on themselves. I think the key is in how specific the president gets about the purpose for the new taxes.

As it stands, Obama's likely proposition is that the rich will pay more taxes and the money will be distributed in some hard-to-fathom way across numerous budget categories, many of which the rich believe to be overfunded. Or maybe the tax revenue will be put toward reducing the deficit, which is a debatable and intangible benefit. Those are hard propositions to sell: "Give me a dollar and I will use it for miscellaneous."

Now imagine that instead of proposing to spray the new taxes into the general budget miasma, the President cleverly ties the new tax revenue to one specific category, such as national infrastructure. That funding would be a clear boon to employment, at least in the long run, and no one can argue against the need to improve our infrastructure.  And arguably, the rich would benefit disproportionately from any infrastructure improvements.

But here's the best part, from a psychology perspective. Imagine that anyone rich enough to qualify for this Infrastructure Tax gets to use all roads and bridges without paying a toll for the following tax year. Each rich taxpayer family gets two of those little transmitters that go on your windshield to automatically signal toll booths that they are paid up. (We have those toll transmitters in California. I assume they will be everywhere soon.)

Obviously the rich will pay far more in taxes than they will save on bridge and road tolls, but people like any sense of privilege. I think it would make the tax increase go down easier. Every time the rich crossed a bridge they would feel special. That is clearly illogical, but psychology isn't about logic.

Society has accepted the notion that the rich can be taxed at a different rate than other people. I think we should consider the idea that the rich should be taxed in a different fashion than everyone else too, as a purely practical matter.
 
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Nov 6, 2010
Free toll roads may be attractive in some areas, but I can think of two more perks to add that would make the Infrastructure Tax totally acceptable:

1. Free pass to drive in the HOV lane.

2. GO TO THE FRONT OF THE SECURITY LINE AT THE AIRPORT!!!
 
 
Oct 25, 2010
"You and your friends are not good at math or have very specific tax considerations. With a progressive scale, if you earn X over your current highest bracket then only X is taxed at the higher rate not your full earnings. Your average taxation rate is higher than if you had not, but you do take home more money. In order for what you said to be true then the bracket would have to be over 100%.

Of course, there's various other exemptions and nuances and I'm not a tax expert so I won't say that in every case that is not true. But the progressive scale is not what would cause that to happen and it would be very rare. "

It happens.
Mostly when it happens it's because you end up not just in a higher tax bracket but also loose a lot of benefits (rent subsidy, subsidised healthcare, etc. etc.) and/or have to pay other taxes because you're now "rich" (as Scott would have us do...).
It's not as rare as you think, a lot of people just don't do the math for their entire income/expense situation beforehand and only notice they've got less money in the bank on average at the end of the month than they used to have before their raise.

And in some countries the tax on the highest bracket has in times indeed been more than 100%, especially in socialist paradises like Sweden (which of course causes a lot of people who are about to enter that tax bracket to leave the country, something already happening today in the US where you're very far from reaching that level of taxation).
 
 
+1 Rank Up Rank Down
Oct 20, 2010
"people know that their tax dollars will probably end up within a few !$%*! of where they live"

Why does this blog censor units of measurement?
 
 
Oct 20, 2010
BY the way, have to agree with Veti when he says that we fight tax increases for the rich because we hope to be rich ourselves someday. Earlier this year, I made a good guess on a stock move and made several thousand dollars. My first thought after getting this unexpected windfall, was how annoying it was that the Gumming was going to take about 1/3 of my "hard-earned" money.

Helm
 
 
Oct 20, 2010
Your example is similar to a recent experience my program manager had a while ago. A well-dressed middle aged woman came to him as he was walking to work from the metro, and said that she had lost the keys to her BMW. Not only did she persuade him to lend her $20 for a cab so she could go home for her spare keys, she turned around and said, oh, she would also need money for a cab back. So he gave her another $20.

She never called or E-mailed back; and the E-mail address she gave him was bogus.

He said that the item which gave her story the ring of truth was that she lost the keys to her *BMW*. The feeling -- illogical, as he later realized -- was, if she were lying, how could she afford a BMW?

I seem to have noticed an uptick in the number of well-dressed people who hit me up for money. Like the mixed group of teenagers who were walking by in the parking lot chatting with each other; one of them asked me, almost offhand, whether she could have five dollars because she had run out of gas. I saw that they all had cell phones, and suggested they use one to call their parents if they were really in trouble.

Helm
 
 
-2 Rank Up Rank Down
Oct 20, 2010
I would argue that a regressive tax is fair, because the poor are the ones most likely to benefit from the spending. I know, I know, in an age of corporate bailouts, it is fair to argue that the rich benefit from government enough to justify progressive taxation. However, this is largely untrue during business as usual. I would argue that they day to day benefactor of the US government is the middle class. I love how the middle class believe that they've achieved something by becoming middle class, when they in no way pay enough in taxes to justify the support they receive in terms of public education for their children (10K per child per year!), public roads, and government jobs (most government jobs go to the middle class, as the poor are not educated enough, and the rich already have high paying jobs or don't need them). I believe that the level of taxation should be based on the benefit that somebody expects to receive from the government.

True, DOnald Trump rides in a limo on public roads, but the amount that he pays in taxes is millions of dollars. I drive on the same public roads and I pay only a couple of thousand.
 
 
+2 Rank Up Rank Down
Oct 20, 2010
How did I get so many thumbs up? Wow.

Back to business:

"I have to refer you to sweden, i'm not swedish but they're the best counter example... They tax a lot, they have the lowest disparity of wealth anywhere (http://en.wikipedia.org/wiki/Gini_coefficient). They are everything you are told to fear about taxes, about the rich not getting their way... and how are things in sweden? Survey their people and they're one of the happiest countries in the world. "

Apparently you missed the rest of wikipedia's article on Sweden. Basically, Sweden's economic growth is largely credited to the fact that they have been deregulating much of their economy, and for a couple of decades, the overall tax rate has been falling. In fact, they are no longer the most heavily taxed economy in the world. Also, their PPP adjusted per capita income is quite a bit lower than our own here in the US. NOt to mention that we are talking about a country with the population smaller than NYC, so it's not exactly like we can extrapolate their example to a society of 300 million people.

Yes, smaller countries are often able to get away with a much higher tax rate, and I believe that is largely due to the fact that people know that their tax dollars will probably end up within a few !$%*! of where they live rather than hundreds or thousands of !$%*! away as is the case in the US. It is also easier for a small, homogeneous population living in close proximity to each other to agree on things. Even with that being the case, they owe much of their current growth to deregulation and lower tax rates.
 
 
Oct 20, 2010
Wasn't the income tax an attempt to tax the rich and look how that turned out. Additionally, the Alternative Minimum Tax was an attempt to do the same.

Be careful what you ask for because in a few years those taxes on the rich will become taxes on the middle class. The 50% who do not pay income taxes vote for those politicians who want to tax only the rich because they want to have the benefits of government without paying for it.

"In general the art of government consists in taking as much money as possible from one class of citizens to give to the other." [Voltaire]
 
 
0 Rank Up Rank Down
Oct 19, 2010
You ARE the rich!
 
 
Oct 19, 2010
We have those window things in Kansas, so by definition they must be everywhere...
 
 
Oct 18, 2010

Came across an old "Wizard of Id" comic strip today.

The King, the diminutive tyrant, is giving a tearful speech from his balcony.

King: "My loyal subjects, sadly I must raise taxes again."

Crowd: "Boo, Hoo, Wail...."

King: "But the Good news is - the Rich will pay the Most"

Crowd:"Yes! Yes! Yeehaw! Woopie!
Rip the Rich! Yes! Rip the Rich!"

King whilst leaving the balcony: "They're so easy."
 
 
+1 Rank Up Rank Down
Oct 18, 2010
"A regressive tax is one where the lower income wage earners pay more (as a percentage of income) than people who makes a larger income. The label is absolute bunk because then by the same notion we should say some folks earn a "regressive" versus a "progressive" income. "

The tax progresses or regresses as compared to income or wealth. What are you suggesting a "regressive" income would regress compared to?

"If we transfered this notion to other situations then we could end up with perhaps a burger at the same restaurant costing $1 for low income, $2.50 for a middle income, and $10 for a high income customers. Is there anyone out there that thinks this would make sense?"

Is there anyone out there who suggested such a thing?

"Also, if one earns $1 million in salary versus someone who earns $20K and both pays a 17% flat tax, is the 17% really a "regressive" tax even though the first person pays $170,000 versus the second person who only pays $3,400 and both are paying the same percentage? Is the flat tax truly "regressive"?""

Yes, it is. You can refer to that definition you gave above for an explanation on why that is regressive.

"Who is bearing the bigger burden of payments?"

In absolute terms, the more wealthy. In relative terms, the less wealthy.

"The liberals throw around these terms simply to disguise their "social equality" (i.e. communism) agendas. "

If you have no problem with regressive taxation, then just say so. But don't try to pretend 10% of gross income has the same impact to someone making $25K a year as it does to Warren Buffet.
 
 
Oct 18, 2010
<jwenting>
"progressive taxation" works, punishes people who're entering higher tax brackets with lower income for more work. I've known people who turned down promotions and associated raises because their income after tax would decrease despite their income before tax going up.
</jwenting>

You and your friends are not good at math or have very specific tax considerations. With a progressive scale, if you earn X over your current highest bracket then only X is taxed at the higher rate not your full earnings. Your average taxation rate is higher than if you had not, but you do take home more money. In order for what you said to be true then the bracket would have to be over 100%.

Of course, there's various other exemptions and nuances and I'm not a tax expert so I won't say that in every case that is not true. But the progressive scale is not what would cause that to happen and it would be very rare.
 
 
+1 Rank Up Rank Down
Oct 18, 2010
As an economics major, I find the notion of labeling taxes as regressive or progressive to be so very misleading and quite often misused and misunderstood by the general public. A regressive tax is one where the lower income wage earners pay more (as a percentage of income) than people who makes a larger income. The label is absolute bunk because then by the same notion we should say some folks earn a "regressive" versus a "progressive" income. The fact is people get paid differently based upon education, experience, difficulty of work, etc. If we transfered this notion to other situations then we could end up with perhaps a burger at the same restaurant costing $1 for low income, $2.50 for a middle income, and $10 for a high income customers. Is there anyone out there that thinks this would make sense? Also, if one earns $1 million in salary versus someone who earns $20K and both pays a 17% flat tax, is the 17% really a "regressive" tax even though the first person pays $170,000 versus the second person who only pays $3,400 and both are paying the same percentage? Is the flat tax truly "regressive"? Who is bearing the bigger burden of payments? The liberals throw around these terms simply to disguise their "social equality" (i.e. communism) agendas.
 
 
+1 Rank Up Rank Down
Oct 18, 2010
"The solution is simple: tax consumption, not production (labor). "

The only problem with that is it's a regressive tax.
 
 
0 Rank Up Rank Down
Oct 18, 2010
The solution is simple: tax consumption, not production (labor).

It is morally wrong to forcibly take ANY amount of money from a person's income if it is produced by their labor (physical or mental). The 16th amendment may exist, but slavery was codified in the Constitution at one point too. Actually, since the income tax is in there, a partial slavery is STILL codified in it, in a way: the fruits of your labor are taken by someone else and appropriated as they see fit.

Now - there really IS no such thing as a "fair" distribution of ownership of natural resources, because the world population is constantly growing and thus a perfectly equal ("fair") distribution would result in a constantly smaller proportion for everyone as they age, despite their contributions to society or the variety of personal preferences that people would still have. So the fairest thing to do, it would seem, is to require people to pay for access to the resources that THEY want to use, rather than let the government take a "house cut" and arbitrarily limit peoples' choices.

This is a fair system AND it gives people a huge incentive to be conservationists - the more eco-friendly you are, the lower your effective tax rate would be.
 
 
Oct 18, 2010
Hey, does anybody remember how bad it was in the U.S. back before the Bush tax cuts? Do you remember how bad the economy was back in the Clinton era? There were no rich people at all back then because the government had taxed us all to equality. There was no reason to work hard to succeed so there were no big houses and no big boats and no big luxurious cars like we have now. And there were no jobs back then because there was no incentive to invest and create them. The economy was in the biggest slump since the great depression. I'm sure glad they fixed all that!

(I'm glad they got rid of those pesky dragons and unicorns, too. They were a pain!)
 
 
-2 Rank Up Rank Down
Oct 18, 2010
[I didn't say I should pay more taxes. But I would favor a tax on poor reading comprehension. -- Scott]

Interesting. What I see with this blog post and associated comments is:

[Pointed Haired Boss] Blah, blah, blah. Tax the rich. Blah, blah.
[Large Portion of tech-weenie blog readers] Blah, blah. Tax the rich is bogus. Blah, blah, blah, blah.
[PHB] You don't read good.

Almost like I drank too much coffee and got caffeine-warped into the cartoon as Wally or Asok. Still can't quite figure out how Dilbert's alter-ego (primary ego?) morphed into PHB. Boss-for-a-day random drawing?

And continuing with the caffeine-driven stream of consciousness: What happens when a nice normal tech-weenie stumbles, through no fault of his/her own, into a management job? Is the transformation inevitable - like a vampire bite? Does that mean Mordac is half-way to full-blown PHB-hood? Or is Mordac stuck halfway because he was once technically competent? Never to be fully admitted to the hallowed halls of obscenely rich stock-options; alas never to be allowed back into the employee break room? Thus he smites ALL with his devious smother-management of productivity tools.

While some all too real people regard crises as opportunities to foist progressive legislation upon the masses, Mordac uses technical problems to devise hardware/software policies such as - in the age of dirt cheap storage - arbitrarily limiting the amount of email an executive can store in the email system: forcing the exec to have an admin print and file thousands of emails. No doubt the IT policy made sense - in the cloistered IT environment. And no doubt having those emails in an accessible archive made sense to the exec, possibly beyond CYA reasons into real legal need. The intersection is where it lost sanity. And the company probably has some green mission statement as well. Ha!
 
 
Oct 18, 2010
Let's see, the socialist (yes, socialist, who'd have thought) party in the Netherlands during the elections 4 years ago proposed a tax hike on "the rich" for the purpose of levelling the budget.
They got voted in, got the ministery of finance, and implemented this tax hike.
Turned out their idea of "rich" was everyone (yes, everyone) with an income higher than social security.
They went ahead full steam, and threatened to increase taxes further to match any wage increase given to employees to alleviate the increased tax burden (while at the same time voting themselves a 30% pay increase for members of parliament, and not voting themselves a 30% tax increase for members of parliament to counter that).

With peoples' buying power slashed, the economy slumped, unemployment skyrocketed, companies no longer invest.
There's the result of "taxing the rich because they're leeches on society and can easily afford it".

Another example of "taxing the rich". My dad was CEO of a company, employing over 1000 staff (CEO, not owner), worked 100 hour weeks on average.
His pre-tax income was well over that of my niece, who's a nurse in a retirement home working part time.
By law here both get a 12% vacation allowance on top of their gross pay (as does everyone else). Because of the progressive taxation however, my niece after taxes had a higher vacation allowance than did my father.
Is that fair?
 
 
Oct 18, 2010
"Can someone please explain how raising ones taxes makes them work less? I am not being facetious, I just never got a good explanation."

Simple:
If I earn $50k after taxes doing a job that requires 40 hour weeks and doesn't pay for the 20 hours overtime a week, why would I not take a job that offers me $50k after taxes doing a job that requires 20 hour weeks without overtime?
And that's what you get if you tax someone heavier depending on his gross income, because that person working effectively 60 hour weeks gets $100k before taxes (so pays $50k taxes "because he's rich") while the person working 20 hour weeks gets $50k and pays no taxes.

While a bit of an exageration, that's essentially how "progressive taxation" works, punishes people who're entering higher tax brackets with lower income for more work.
I've known people who turned down promotions and associated raises because their income after tax would decrease despite their income before tax going up.

Similarly, if I have a company employing 1 person and I can expand my business by hiring another, but doing so would increase my tax burden so much my net profits would go down, I'm not going to do that.
And that's the situation in the US today, after the first round of Obama's taxes on small businesses.
 
 
 
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